Sometimes I get accused of beating up on young people too much. Particularly when it comes to their views on financial matters. However, a recent study conducted by Northwestern Mutual gives at least a little justification for my attacks on them.

According to the survey, among all generations polled, Gen Z is the most confident they will be fully prepared for retirement when the time comes. In fact, 65% of Gen Z individuals say they will be financially ready, compared to only 45% of Gen X members.

Part of the reason for this confidence (or false confidence) is the fact they believe they will only need to save 1.2 million despite expecting to retire at age 60 and living to 100. Interestingly, Gen Z also has the lowest expectations for what portion of their retirement will be covered by Social Security at only 15%.

As I read this study, I will admit I chuckled to myself just a little. The idea of living 40 years on 1.2 million dollars is a bit naïve even in today’s dollars. Living on that amount after adjusting for 30 additional years of inflation is simply ridiculous. Here’s the article, FYI,-According-to-Northwestern-Mutual-Planning-Progress-Study

A generally accepted standard held by many financial advisors is that a person can safely take 4% per year out of retirement without running out of money before they die. In today’s dollars, that would equate to someone taking out roughly $48k per year. While the budget might be tight, it is a doable retirement income for many today.

However, based on a modest 2.5% inflation rate that $48k will be the equivalent of about $20k in 35 years. Can you imagine someone having a comfortable retirement today earning $20k a year in income? Neither can I. When you then factor in how much longer a person is likely to live by that time, the amount someone can safely anticipate withdrawing each year will likely go down to closer to 3%.

With the math so clearly being against them, you may be asking why Gen Z is so much more confident in their future than other groups. I think the answer is more cultural than anything else. It’s a problem that, unfortunately, I believe is doing more than just financial harm to the entire generation.

That challenge is Gen Z, more than any other in recent history, place emphasis on feelings over facts. What I believe we are seeing is a resurgence of the romanticism movement which gained in popularity in the early 19th century. The movement emphasized intense emotions as the greatest source of truth and was a repudiation of the age of enlightenment that came before it as part of the scientific revolution.

I believe this rejection of the harsh realities of this world and abject truth are a direct result of the culture today’s 20-somethings have been raised in. A culture where the individual’s self-esteem is of paramount importance and truth is whatever you believe it to be.

Too many young people have grown up receiving praise regardless of performance, and are told their failures are a direct result of an unfair and oppressive system, not their lack of effort or skills. As a result, too many young people have a greater sense of self-worth than their accomplishments should maybe justify.

You know the old saying ignorance is bliss? I believe it is true…for a while. Unfortunately, as we attain more information and life experience, we often get a dose of reality. The more ignorant we are, the harsher the reality is when it sets in. That’s why I think its important to give our young people the wake up call they desperately need while there is still time for a course correction. After all, wouldn’t allowing them to remain living in blissful ignorance be far more harmful to them ultimately?

(Past performance is no guarantee of future results. The advice is general in nature and not intended for specific situations)