When it comes to retirement, Millennials and Gen Z want to switch it up — no more 'work till you're 65 and then enjoy your golden years' — they want out of the rat race ASAP.

In fact, according to a study from Real Research Media, when asked what age they wish to retire, the majority of Gen Z and Millenials (41%) said under age 45, while just 14% said over 61. But unfortunately for many, whether they want to retire early or not, they may face a challenging wave of automation, AI, and ageism that push them out of the workforce sooner than they plan.

And combined with the ongoing effects of high inflation, lower forecasted stock market returns, and stagnant wages, achieving a secure early retirement could be more challenging than ever before.

Here Are 3 Major Challenges Millennials and Gen Z Face

The #1 Top Major Challenge that Millennials and Gen Z Face: AI And Automation

AI and automation are taking over jobs at an unprecedented rate. 

It’s estimated that up to 47% of current US jobs could be automated and replaced by machines in the near future. Unfortunately, this means it could become increasingly difficult for younger workers to stay employed long enough to amass a retirement nest egg. 

What Is the Impact of Automation and AI On the Workforce?

Automation and AI are constantly competing with and displacing human workers.

But this is not a new phenomenon; machines started replacing humans as early as the 1700s during the English Industrial Revolution when thousands of hand weavers and other craftspeople lost their jobs to machines. Fortunately, the effects have usually been minor, as workers can retrain or reskill, and many machines simply create the need for new or different jobs.

But many are worried that this time could be different as artificial intelligence can do more than just physical tasks and can take on complex cognitive and intellectual tasks as well, creating further competition between machines and humans in the workplace.

The fear is that as AI and automation continue to become more advanced, humans may be unable to keep up with them and will be pushed out of the workforce faster than ever.

And many workers are already feeling the impact of these technologies, with routine or low-skilled jobs becoming increasingly scarce and wages staying stagnantly low.

But, it's not just routine or low-skilled jobs that are on the chopping block — it's white-collar jobs as well, like computer programmers, financial analysts, paralegals, and journalists. As AI continues to permeate our lives, likely, these trends will only continue and make human labor less necessary.

And while this technological revolution has the potential to improve efficiency, reduce costs, and create new job opportunities, it also carries risks, such as increased unemployment and the displacement of workers due to automation. So as Millenials and Gen Z prepare for retirement, they’ll need to take a hard look at how long they can count on having an income and may need to consult a financial advisor to help them plan for career changes or years of low or no income.

Ultimately, if AI and automation are displacing entire professions, this could lead many into a forced early retirement situation.

The #2 Top Major Challenge that Millennials and Gen Z Face: Ageism

Ageism is another major challenge that Millennials and Gen Z could face in the future.

Ageism can manifest itself in job market discrimination, with employers becoming less likely to hire or retain workers over 50 due to their perceived lack of technological skills or outdated knowledge.

What Is The Impact Of Ageism On The Workforce?

Ageism, or discrimination based on age, is a significant problem in today’s workforce.

This type of discrimination can take different forms: from employers not hiring older workers because they are seen as too expensive or "out-of-touch" to employees being treated differently due to their age.

The impact of ageism on older workers is far-reaching. It can lead to fewer job opportunities, lower wages, and sometimes even a forced retirement for those who are perceived as being unable to compete with their younger counterparts. This is why it can be much more dangerous to get laid off in your 50s than when you are younger.

“Most people might not even consider thinking about getting laid off when they are older as a variable to consider when it comes to their own financial planning,” says Leonard Kim of AdvisorCheck. “However, if you take a look at the data, you can see that countless amounts of people who are in their late 50s are no longer working. That means that they have to depend on their spouses, children, or their retirement funds to cover their expenses while they look for work. In some instances, it takes almost a decade to find work again. In other instances, like for my mother, they may never see another job after the age of 58, then have to move in with their children.”

And unfortunately, the situation is only likely to worsen as automation and AI continue to advance; older workers may find themselves increasingly unable to compete with machines when it comes to speed, accuracy, and cost. This could lead to an even greater wave of forced early retirement for those who cannot keep up with the latest technology.

Ultimately, ageism in the workforce is a serious issue that can significantly impact older workers. Combined with the acceleration of automation and AI, a forced early retirement could become the norm for upcoming generations.

The #3 Top Major Challenge that Millennials and Gen Z Face: Financial Instability

Millennials and Gen Z have experienced many financial challenges, including:

1. High Student Loan Debt: Many Millennials and Gen Z are burdened by student loan debt, making it difficult to save for other financial goals, such as preparing for retirement. The total US student loan debt is around $1.75 trillion for 43 million borrowers. It is a significant financial burden for many Millennials and Gen Z, who hold an estimated 36.8% of all student loan debt.

2. High Housing Costs: The rising cost of housing has made it difficult for younger generations to save for a down payment on a home or to afford rent in some areas.

3. Stagnant Wages: Despite being more educated than previous generations, Millennials and Gen Z have seen relatively stagnant wage growth. This can make it challenging to keep up with living expenses and save for the future. This is especially challenging as we are experiencing above-average inflation, driving the cost of goods and services up faster than before. 

This is another area where it can be wise to consult a financial professional as you estimate how much your lifestyle will actually cost during retirement due to the impact of inflation.

4. Economic Downturns: Millennials have faced economic challenges such as the Great Recession and the COVID-19 pandemic, which have impacted their job security and overall financial stability. And unfortunately, this should be expected to continue as recessions occur on average every 3 to 4 years in the United States since 1857. 

5. Rising Healthcare Costs: Healthcare costs have risen steadily in recent years, and younger generations can expect that trend to continue and will need to plan accordingly for retirement, as healthcare costs later in life can be one of the most significant expenses people face.

What Can Millennials And Gen Z Do To Prepare Themselves For The Possibility Of A Forced Early Retirement Due To AI, Automation, And Ageism?

To prepare for the potential of a forced early retirement due to AI, automation, and ageism, Millennials and Gen Z should take a proactive approach. 

Here are some critical steps they can take:

1. Learn New Skills: Taking courses, picking up new hobbies, or learning about new technology can help you gain the skills you need to stay competitive in the job market. For example, while many coding and writing jobs are at risk of being displaced by AI, there will be a new wave of demand for AI-related jobs, such as developing and managing AI projects and helping to integrate AI into existing systems.

2. Financial Planning: It's essential to start saving and investing early to safeguard yourself against potential income loss due to a forced early retirement. Financial planning involves a comprehensive look at your financial picture, including creating a budget, understanding your investments and risk management, and developing a strategy for retirement. In addition, it includes the more complex and nuanced topics of tax and estate planning. Again, there is no need to go on this journey alone, and it may be wise to hire a trusted financial planner to give you the peace of mind that your plan is on track.

3. Invest For Early Retirement: Building a retirement fund should be a priority even if you don't plan on retiring immediately; this will ensure you have the funds available when you eventually retire. Remember, it's better to be ready for early retirement and not need it than to need it and not be ready. One of the best ways to do this is to save early and often — frontloading your investments — to help take advantage of the powerful force of compounding returns over time. Compounding returns is when you make money on your investments, generating more money because those funds are re-invested.

And frontloading retirement savings may be especially critical for Millenials and Gen Z if they face a forced early retirement due to AI, automation, or ageism, as they could miss out on some of their critical earning and saving years. This is even more true as inflation continues to impact the amount you need to save for retirement. For example, if you spend $60,000 per year, standard advice would say that you need a portfolio of around $1.5 million to support that spending using a 4% safe withdrawal rate. However, if inflation continues at 3% for the next 30 years, instead of needing $1.5 million, you’ll actually need more like $3.64 million to get you the same level of purchasing power in the future. That’s why it’s critical to get started today saving and investing for a healthy and successful retirement. 

4. Build An Emergency Fund: An emergency fund can help provide financial stability in case of an unexpected life event like a job loss or medical issue that requires costly treatments. Most financial advisors recommend having at least 3-6 months of expenses in emergency funds.

5. Consult A Trusted Financial Professional:  Finally, speaking with a financial professional is critical to ensuring you take the proper steps to prepare for retirement. They can provide advice and guidance on investments, budgeting, and other topics that may help you prepare for a forced early retirement.

If you don’t have a financial advisor yet, we urge you to take advantage of our free AdvisorCheck membership. Our experts have done the research for you, and our proprietary system will give you access to the most relevant information and resources you need to find the right financial advisor for your needs.

With your free membership, you will not only give you the best financial resources possible to make sure you are on track, but you can also search for a CERTIFIED FINANCIAL PLANNER™ professional (CFP®) in your area who takes a holistic approach to personal finance with our database of over 1 million US Financial Advisors. This will put you on the path toward securing your financial security now and in the future.

Ultimately, by taking the steps outlined above, Millennials and Gen Z can be better prepared for a potential forced early retirement due to AI, automation, and ageism. This will allow them to transition smoothly into early or traditional retirement without worrying about financial instability. 

Remember, it’s never too late to start planning for retirement; the earlier you do so, the better off you will be. So don’t wait; begin taking these steps to secure your future, and consider finding a financial professional to help you as you plan.

Written by Anders Skagerberg, CFP

Fact checked by Billy Quirk

Reviewed by KJ Kim

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