Gen Z is Opting Out of the American Dream



“Soft” retirement means “I’ll never have enough money to retire or buy a house, so why bother.”

As someone who has been writing about retirement since the late 1970s, I can safely say that I have never written a positive story in about 50 years that says older Americans will be more financially secure in their retirement.

If anything, the decades-long downward trend shows that retirement will be more financially insecure for more Americans than ever in the years ahead.

Numerous studies show the following:

  • The long-term trend is that Americans are saving less for retirement than in previous years;
  • Americans score low in financial and political literacy tests, so they are not making the right decisions to prepare for retirement;
  • Despite meager efforts by employers to educate employees about their 401(k) retirement plans, many employees continue to over-trade their accounts, which decreases their values.
  • Even for employees who are diligent about saving for retirement, inflation and other life events (divorce, COVID, automation, student loan repayments, inflation, reduced hours) are causing them to withdraw (loans) from their retirement accounts. This further reduces long-term returns.
  • The 20-year trend of replacing employer pension plans with self-directed 401(k) plans results in smaller retirement accounts and amateurs making lousy investment decisions. All of this only increases financial insecurity.
  • Federal efforts to make future retirees more secure have been limited and are built on offering tax benefits to contributors. Still, too often, these benefits only affect those with the disposable income to make retirement plan contributions.
  • Republicans have systematically eroded agencies and programs that help average consumers and investors. This includes efforts to defund the Consumer Finance Protection Board and cut the SEC, CFTC, IRS, and DOL budgets.

The Wealth Gap Widens

What the investment industry cannot confront is that the wealth gap between rich and poor has only increased in the past few decades.

This has raised questions about how well the capitalist system works, the role of money in politics, and how long an oligopoly can dominate American society before the democratic experiments accelerate its descent.

Recent developments have also shown how unregulated capitalism works against average investors, eroding job security and even the quality of life through real estate overdevelopment.

The reason why the financial services industry (banks, investment firms, fund companies, insurance firms, derivatives, hedge funds, private equity, and real estate firms) cannot address the fundamental issues that affect the ability of Americans to have a secure financial future stems from a few reasons:

  • The financial industry is bifurcated; select firms only want wealthy clients (those with investments of at least $2 million), while other advisory services are aimed at the masses.
  • Since it would antagonize their ultra-wealth management departments, the investment industry does not want to address the wealth gap and the need for higher taxes on the wealthy (their most profitable clients. The financial services industry uses fees taken from their small account investors. It uses that money to support lobbying groups pushing for regulations and legislation, making average Americans poorer and more disadvantaged.  In short, the financial services industry lobbies against its customers.  This is done through about 20 major lobbying groups, including the Securities Industry and Financial Markets Association, American Bankers Association, Bond Dealers of America, Financial Services Institute, Financial Services Roundtable, and the Investment Company Institute.  Right-wing think tanks about push for more deregulation.
  • Financial literacy programs have fallen short of improving the ability of average investors to make positive, long-term investment decisions. The market is too complicated; advice from the media and social media sources are tainted, short-term, and come from non-qualified sources.  This is why Americans rank low in global financial and political literacy studies.
  • American minorities are facing an unrelenting inability to close the wealth gap with white citizens. According to the Institute for Policy Studies, “If average Black family wealth continues to grow at the same pace it has over the past three decades, it would take Black families 228 years to amass the same amount of wealth White families [had in 2013].  That’s just 17 years shorter than the 245-year span of slavery in this country.  For the average Latino family, it would take 84 years to amass the same amount of wealth White families [had in 2013]—that’s the year 2097.
  • The financial services industry has an untenable PR problem: it advertises that it wants to help average investors plan for their financial future. However, its lobbying efforts have the exact opposite effect.  The net result is total gridlock of economic reform. This includes the ERISA conflict-of-interest regulations, which the industry opposed in a multi-million lobbying campaign for about a decade.  The industry’s opposition to any federal or state agency that protects consumers from predatory financial practices is also evident.

In short, well-meaning, naïve small investors are being victimized by the lobbying groups of their investment firms, insurance companies, and mutual fund companies.

Younger People Want a Different Financial Future

With these trends clearly evident, younger Americans have seen the writing on the wall and do not like it.  They are adopting a new investment planning outlook.

This outlook means they are jumping off the Puritanical “save for the future” treadmill and opting for “soft savings.”

In a new study by Intuit, “soft savings” is being done by people aged ages 18 to 25 (so-called Generation Z) who “embrace comfort and low stress, prioritizing personal growth and mental wellness.”  Every report tries to create its jargon to be a little different, and in this one, “soft savings” has a subtext to it that young investors are questioning the future of the American Dream. 

The study omits that this age group has realized that they will probably never have enough money for retirement or possibly to buy a house in the near future, so they better put their delayed gratification off of the delay mode and enjoy life today.  This means more money spent on bobbies and travel, the study found, even though most Gen Zers live within their means.

The report said “soft savings” found that 75%of this group would rather have a better life today than money in the bank.

The report quotes people from significant investment firms (Fidelity, Blackrock).  Still, as expected, they never address the widening wealth gap situation or any of the political factors that have reshaped the ability of younger people to save.  Instead, the study found that Gen Z people want to invest in Environmental, Social, and Governance (ESG) types of ETFs and mutual funds, which is what the sponsors of the study offer.

Like scores of other financial studies sponsored by the industry, this study has a very myopic scope.  It does not address any political-economy issues that are the driving force behind this change in attitude by Gen Z. It does not address the widening wealth gap, tax loopholes, gig economy risks, and the inability of Gen Z to become homeowners realistically.  This last action—buying a home—is the most significant contributor to long-term wealth creation in American life, but it is not mentioned as a significant reason for financial insecurity among younger investors.

The Bottom Line: Nothing Has Changed

The more it changes, the more it’s the same as an old saying, which is true for the new “soft savings” behavior.

Gen Z has recognized, and this study does not include, that elected officials, top investment management, and industry lobbyists control the investing industry.  It’s a system geared to the wealthy.

Average, small account investors are the small fish in the water.  They will have increased access to their smaller accounts via chatbots, AI, and robotic investment analysis for portfolio allocations.  These are adequate for smaller accounts, but they do not address the larger political and economic decisions that can erode annual gains and the ability to accumulate wealth over time via unfavorable tax rates, job insecurity, and less regulation.


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