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The Retired Investor: Gen Z prefers stocks rather than houses to build wealth
Priced out of the housing markets, younger generations must look further afield to save for retirement. While the barriers to entry in the housing market keep rising, access to financial markets has gotten cheaper.
This is a vastly different attitude and behavior from previous generations. It has been a tradition here in America that the way to build wealth and enjoy it was to buy a home.
As a result, homeownership is today the most valuable asset for the average American and accounts for nearly half of their accumulated wealth. In just about any study today, rising home equity accounts for the lion's share of net worth.
Unfortunately, as I wrote in my last column, most Gen Zers cannot even afford the down payment on a home or the monthly payments. However, while many have found that they cannot afford a down payment on a house, they can open an account at Robinhood for next to nothing.
Participating in the financial markets has never been easier. No credit checks, brokers, paperwork, or down payments, just pick up your phone and place a trade. Encouraging this trend, Gen Z has much broader access to a long list of retirement plans thanks to employers and the government. The truth is, when I was that age, there were no government-sponsored retirement plans.
Most credit the arrival of the Covid pandemic for launching Gen Z's love affair with the markets. Trapped at home with a large government paycheck in hand, the meme-stock mania enticed many to take a chance. As the stock prices of companies like GameStop and AMC soared higher daily, social media exploded with stories about finance and investing. Crypto soon joined the party, and it was off to the races as a generation of young Americans hit the buy button.
Of course, over time, the meme craze petered out, but by then Gen Zers realized there is no mystery in the financial markets. Thanks to an ever-increasing knowledge base fueled by an expanding stream of finance, how-to, and new, easier investment products, Gen Z has matured over the past five years.
As more youngsters joined the workforce, they showed little hesitation in opening IRAs, 401 (K)s, or equivalent tax-deferred accounts at their companies. Today, automatic enrollment is even available, as I discussed in a recent column. And investing early is increasingly important to this generation.
One of these new innovations is a personal finance app called Acorns. It is an app that lets you invest your spare change and other funds in diversified portfolios of EFs. According to a report by Acorns, published by the New York Times, 72 percent of Zers aged 18 to 35 believe they'll need to rely entirely on themselves for retirement. More than half of the same group believe Social Security may be gone by the time they are eligible to collect.
One reader's son, Michael, believes 'investing' is the wrong word for many Gen Z participants in the stock market. "Gambling is a far more accurate term," according to him. "Retail investors, (people using apps like Robin Hood) are taking highly leveraged positions that expire within days or months to try and ride 'hyper waves' that are being pushed by young financial influencers and subreddits."
He says that younger traders do not believe that a mere 7-10 percent annualized gain in stocks will result in financial security by the time they retire. Michael feels that the traditional methods of building wealth are inaccessible to most of his age group and views the entire phenomenon as an indictment of our society and a red flag regarding the headspace and hopelessness his generation feels. Many GenZers I talk to echo these sentiments.
As a result, trading by retail investors has grown exponentially over the last 15 years and, on any given day, accounts for more than 25 percent of trading volume. If you count trading in zero date options (ODTE), they represent more than 60 percent of all S&P 500 index options volume. Roughly one-third of 25-year-olds have investment accounts. That is six times the number ten years ago.
I am sure this all sounds like an advertisement for more participation by young readers, but there are a large caveat and warning. Home prices have historically remained strong, though they have declined during periods such as the Financial Crisis of 2008-2009. In most periods, housing and the stock market tend to move together. Have a low level of correlation. It is the turtle, while the stock market represents the hare, and therein lies the problem.
Stocks, on the other hand, can be volatile. Since COVID, this new generation has bought every dip and been rewarded mightily for doing so. At some point, that won't work, if history is any guide. Depending on how deep and long a correction might take, the risk is that Gen Zers panic and sell at the bottom, as so many investors did during the Financial Crisis. That could not only devastate their hard-earned retirement savings but also rock their belief in the market as a vehicle for retirement savings.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
The Retired Investor: Gen Z Facing Hard Times Despite Growing Economy
The college-age generation is grappling with inflation, increasing housing prices, climate change, and now mass corporate layoffs. In a world where geopolitical turmoil is increasing, the ground beneath their feet is shifting. Many believe their future is bleak.
My nephew, Joey, just got married. His wife lives with her parents, and he lives with his. While he makes good money as a pharmacy manager at a national chain drugstore, neither he nor his wife can afford even a down payment on a house in Long Island. They are moving in with the wife's parents. Joey's sister is also married, with two children. They also live with their parents. Welcome to the American dream turned nightmare for almost 70 million young Americans.
The typical age range of Gen Z is 1997 to 2012. They are the demographic cohort succeeding Millennials and preceding Generation Alpha. They are the most racially and ethnically diverse generation in America, with 48 percent being non-white.
Almost all of this generation is highly active on social media. Almost 60 percent are planning to pursue a college education. They are just as likely to identify as Republicans, Democrats, or independents. As such, the present populist upheaval the U.S. is undergoing takes an inordinate toll on them. It may be why 91 percent of Gen Zers report experiencing symptoms of stress and anxiety.
While Wall Street opened the year celebrating the promise of a bright future, thanks to AI. Opinion leaders predict that artificial intelligence, robots, and space, among other technological breakthroughs, will dramatically reshape the way the world works. For college grads, all they see is a no-fire, no-hire labor market where unemployment among workers ages 20 to 24 continues to rise. It is now to 5.3 percent and even worse for those younger than that.
The National Association of Colleges and Employers predict the entry-level hiring crisis will worsen this year, rating job prospects as poor or at best fair. At a recent gathering of employers at the Yale School of Management, 66 percent admitted they planned to cut jobs or freeze hiring.
With an economy that is expected to grow by 3 percent in 2026, one would have expected the opposite reaction, but then you would not be reckoning with the impact of artificial intelligence on the job market. Potential employers are concerned and uncertain about how AI might reshape the workforce over the next few years, and rightfully so.
Most analysts believe that many white-collar positions, especially at the entry level, will be replaced by technological advancement. Underscoring that concern, many corporate giants, including Amazon, UPS, Target, and Google, announced layoffs affecting more than 60,000 jobs. And to many, that is just the tip of the iceberg.
Faced with taking fast-food jobs at minimum wage and lacking work experience in their hoped-for professions, 3 in 5 Gen Z workers are looking elsewhere for a job with some kind of reasonable future. Almost half of these young workers believe the blue-collar jobs may offer better long-term security than corporate work in the technology fields. The top sectors pursued by Gen Z include plumbing, automotive repair, construction, and electrical work.
I happen to agree with that belief, but unfortunately, Gen Z applicants face the same barrier to entry in their white-collar arena — lack of experience. Many job applicants, regardless of industry, are now required to have at least three years of experience and up to five years before being considered.
The lure of six-figure salaries in the blue-collar area is attracting more Gen Zs to vocational schools. However, what many conveniently forget is that earning that kind of take-home pay requires years of experience, a substantial investment in personal tools and equipment, and serious wear and tear on the body.
As I write this, in the next room, a 65-year-old builder I'll call Scott, who is going in for his second knee replacement next month, is building another room in our condo. Assisting him is a young Gen Zer. There is a constant stream of chatter as Scott talks through his drywalling process. His helper listens intently. They seem eager to learn and ask questions as they work. He did the same when he placed the struts and erected the wall.
For several years, Scott has been involved in a local high school program that teaches vocational school grads his business, while they gain on-the-job experience and a paycheck. Scott and others like him are providing a solution one day at a time. He is one answer to the dilemma facing this struggling generation. This country needs more Scotts to hire and teach a young workforce in need.
Next week, I will highlight one area where many Gen Xers have found an alternative to home ownership. It holds risks but doesn't cost an arm and a leg to get involved.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
The Retired Investor: Social Security Recipients Get a Raise and a Tax Deduction
For elderly Americans suffering through this affordability crisis, every little bit helps. Inflation and tariffs have made everything more expensive, so a boost to your Social Security monthly checks is welcome, but it's no cure for what ails us.
Given that inflation is "officially" hovering around 3 percent per year, a 2.8 percent boost in cost-of-living adjustment (COLA) for 2026 is good news. This follows a 2.5 percent increase in 2025. The Social Security Administration estimates that the average retirement benefit will jump by $56 a month, from $2,015 to $2,071, starting this month.
From my point of view (and I am sure yours), this raise will in no way cover the spike in consumer prices we are feeling. But before you can even count the money, remember that the standard monthly premium for Medicare Part B is going to hit you with a 9.7 percent increase. That means you need to subtract this additional $17.90 from the COLA benefit, so the cost to cover doctor visits and other outpatient care will climb in January from $185 to $202.90.
What could help retirees even more will be the 2026 federal senior "bonus" deduction. For the coming year (returns filed in 2027), seniors aged 65 and older can claim a new but temporary tax break. The deduction you can claim for individual filers is up to $6,000 and $12,000 for married couples filing jointly. However, there are income limits on this deduction.
For a married couple, your Modified Adjusted Gross Income can be no higher than $150,000; for single filers, $75,000. If you exceed those levels, there is a phase-out scheme in which benefits are reduced until an Individual earns $175,000 and $250,000 for couples. These benefits can be claimed whether you itemize or take the standard deduction on your taxes.
In addition to the new $6,000 bonus, standard deduction amounts have also increased for 2026. What that means is that if you are filing separately, you can deduct $16,100 from your taxes, up from $15,759 in 2025. For married couples filing jointly, the new amount is $32,200. There is also an additional senior deduction for anyone over 65. If you file as a single, singles receive an extra $2,50, while married taxpayers or surviving spouses receive $1,650 each.
As an example, a married couple over 65 taking the standard deduction could potentially shield up to $47,500 from federal income tax ($32,200 standard deduction plus $3,300 additional senior deduction plus $12,000 from the "bonus" payment.)
The affordability crisis has affected seniors in many ways. Over one-third of seniors 65 and older were struggling with housing affordability. Over 12 million households were paying more than 30 percent of their income on housing, according to a Harvard University joint study.
The bottom 20 percent of Americans aged 60 and older have no assets, and many of them are in debt. Almost half have an average income below what they need to cover basic needs. Failing health is a constant fear for 60 percent of all older adults. Most cannot afford two years of in-home, long-term services and support. Over 80 percent do not have the resources to pay for long-term care or be able to weather financial emergencies.
The affordability gap has just gotten worse. And as we enter 2026, 22 million Americans, many of them seniors, especially early retirees who are not yet eligible for Medicare, are facing the end of the enhanced premium subsidies under the Affordable Care Act. Some face a doubling of health-care coverage costs as a result.
All in all, most seniors are facing dire straits in this country. Legislators seem to be oblivious to their predicament. Even their scant remedies are temporary at best, like the "bonus" credit to Social Security that expires in 2028. The majority in Congress wants to get rid of Obamacare but has no alternative to the out-of-control costs of our failing health system.
They say we can’t afford Social Security or Medicare but are at a loss for a workable alternative. Will anything change in 2026? I doubt it.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
The Retired Investor: Auto IRAs Can Help Workers Save More Money for Retirement
In 2025, more than 1 million workers saved $2 billion-plus toward retirement through state-sponsored automated savings plans. Now, legislation introduced by a Massachusetts congressman would expand this program nationwide. Could this help solve the American savings crisis?
It is well known that American workers are not saving enough for retirement. Almost half of Americans have no retirement savings at all, according to recent surveys by AARP and Gallup. Low-income and older households are most at risk. Dependence on a bankrupt Social Security system is not the answer.
Congressman Richard Neal, a Democrat and a ranking member of the Ways and Means Committee, reintroduced the Automatic IRA Act. If passed, it could become a key way for nearly half of the private-sector workforce to begin saving for retirement. The concept is simple, and it works.
Neal, representing Western Mass and the Berkshires, was taking a leaf from the book of the 12 states that have already introduced some kind of automatic IRA worker deduction. Although state programs vary in detail, the basic premise is that they generally require employers to enroll employees in a state-facilitated IRA at a preset savings rate. Typically, workers have 3-5 percent of their paychecks automatically deducted and invested in a Roth IRA. In some cases, contributions are increased each year until they reach 10 percent of earnings.
The programs are typically available to individuals who don't receive employer-sponsored retirement benefits. Neal's new bill would require employers with more than 10 employees who do not sponsor a retirement plan to automatically enroll their employees in an IRA or another tax-deferred plan, such as a 401(k).
Oregon established the first such account back in 2017. Since then, the notion has caught on with saver and employer participation numbers steadily increasing. It took state programs six years to reach the billion-dollar mark, but just 18 months to double it. It helped that the market performance has been stellar. The record stock market rise spurred a 25 percent increase in savings accounts and higher average savings rates.
Many small business owners don't offer retirement benefits. Only about seven out of 10 workers in the U.S. have access to either a defined contribution or defined benefit pension plan, according to the Congressional Research Service. That means that 56 million workers can't take advantage of tax-deferred benefits at work.
The auto IRAs solve this problem. Small businesses that employ service and other workers in high-turnover industries such as leisure and hospitality have struggled to provide retirement benefits to their employees. The automatic IRA program, at least on the state level, provides a no-cost option for employers without the resources or time to offer a private retirement savings plan. The congressional plan would likewise offer small-business employers an auto tax credit, making its implementation cost-free.
Sounds good, doesn't it, but instilling the desire to save for retirement among workers is a daunting task. Many employees who do have access to plans don't take advantage of them. Only 56 percent of all workers and 53 percent of private sector workers participate in a plan. From my experience, many of those workers chose to spend their paychecks and not worry about the future, especially among those in younger generations. Others don't want to be bothered or suffer from inertia or confusion.
However, research shows that people are far more likely to save for retirement if they can set aside money automatically, through payroll deductions. I often urged new clients with an employee savings plan to contribute a set amount automatically. Sort of a set-and-forget-it approach.
"But what if I can't live on what's left?" they would say. "Give it three months," I would answer. By then, most workers found that they could adjust quite easily to the 3-5 percent deduction. What's more, after making a little money from their investments, the protests quieted down.
In this Congress, some may say there are bigger fish to fry, but that is, in my opinion, short-sighted. Anything that encourages Americans to save more is truly a gift, and something politicians on both sides should be able to agree upon.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
The Retired Investor: Fed's $40 Billion-per-Month Purchase of Treasuries Is Important
Last week's half-point interest rate cut by the Federal Open Market Committee, overshadowed what I believe is an even more important development. The Fed has kicked off a series of what they called "reserve management purchases" by committing to buy $40 billion per month in short-term Treasury bills and notes.
In essence, the Fed is expanding its balance sheet by buying these securities. They were quick to point out that this was not the beginning of a quantitative easing program, which is aimed at explicitly stimulating economic activity, although it has the same impact on financial markets. In essence, the Fed is providing a steady stream of additional liquidity to markets.
Why is that so important? More liquidity means banks, corporations, stock and bond market participants, even Mom and Pop to some extent, can borrow more, buy more, and invest more. It will also influence the direction of interest rates on the short end of the yield curve.
The Fed's reserve balances (the amount they own in Treasuries and the like) are huge but have declined over the past three years, now totaling $2.8 trillion. Low bank reserves can sometimes cause short-term funding pressures in the financial system, but it's hard for me to believe that with that much money sloshing around the system, there should be any difficulty at all in the credit markets.
Some economists say what the Fed is doing makes sense because if they expect additional economic growth in 2026, demand for reserves will need to grow as well. The Fed's action will also benefit bond yields across the board. Short-term yields dropped immediately after the announcement, but over time, even longer-dated bonds such as the U.S. 10-year Treasury bond may also decline. Investors believe the odds of another Fed interest rate cut in the first half of next year are low, at least until the new Federal Reserve Chairman takes office. However, I'm guessing the continued monthly injections of funds by the Fed will have a similar easing impact on the economy as another rate cut.
The additional liquidity should also contribute to the traditional Santa Claus Rally that occurs in the last few weeks of the holiday season. It is a time when bonuses are paid, contributions are made to savings accounts, and central banks provide additional liquidity. Some of those cash flows end up in the equity markets.
Given that I am not an economist nor a monetary expert, forgive me if I go out on a limb here. Our national debt is off the charts, at more than $39 trillion. Accepted wisdom holds that to reduce debt, a combination of spending cuts, tax reforms, and economic growth strategies is essential.
The last time I looked, this government is increasing spending and reducing taxes. And while the administration is attempting to increase growth, it is still nowhere near the rate necessary to impact our debt. That leaves either default or monetizing government debt. A U.S. default would bring down the world's financial system, so I don't think that is a viable option, which leaves monetization.
Monetization is the permanent increase in the monetary base to fund the government. Any government that issues its currency can create money without limit. Monetization occurs when a central bank buys interest-bearing debt with non-interest-bearing money. It is a permanent exchange of debt for cash.
For a simpleton like me, what I see is this: The U.S. Treasury auctions off billions in short-term debt each month to fund our debt. As of Dec. 12, the U.S. central bank is now purchasing those same securities in the open market. The net result is that the interest rates the U.S. will pay for these new obligations will be lower. The government will be selling short-term paper while simultaneously buying it back. Are we seeing the first trial balloon of things to come?
The only difference between what the Fed is doing now, and monetization is the question of permanency. The Fed has not given the markets any indication of how long its government purchases will continue. And no one has even mentioned the "M" word. That is understandable given that fears of money printing would trigger a collapse in the dollar and skyrocketing gold.
I will be curious to see how and what the new Fed chief and his committee will do in May 2026. Will they extend this program or even increase its purchases. Will the U.S. Treasury continue to only auction short-term paper now that they have found a ready buyer? Questions aplenty, to keep me watching and writing.
Bill Schmick is the founding partner of Onota Partners, Inc., in the Berkshires. His forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies or specific investments discussed are employed, bought, sold, or held by OPI. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected, or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.
