BUSINESS NEWS - Nobody gets a retirement seminar in their twenties.

You are usually too busy figuring out rent, wondering where your airtime disappeared to, and deciding whether “building your career” counts as a personality trait. 

Retirement belongs to a future version of you – one who, frankly, sounds like they have their life together far more than you do right now.

For the past two years, we have been watching how South Africans have responded to the two-pot retirement system. What the data reveals is a useful reflection of how financial pressure can show up at different stages of life – and it is holding that mirror up to Gen Z earlier than expected.

Momentum Corporate’s latest two-pot behavioural data offers Gen Z something valuable: a glimpse into their potential financial future, several years before they reach the life stages where many of today's financial pressures may become more familiar.

The lesson is simple, but easy to overlook: knowing what you should do with your money and being able to stick to that plan when real life happens are two very different skills.

The generational two-pot show-and-tell

When we look at the different generations accessing their two-pot savings, the story is not necessarily about which generation has more financial discipline. It is also about the financial pressures each generation is facing right now.

Millennials are the most likely group to withdraw, and the most likely to withdraw more than once. They are deep in the mid-career pressure zone, where bond repayments, school fees, debt and rising living costs can all compete for the same income.

Gen X appears more cautious. They will access their savings when necessary, but are less likely to make withdrawals repeatedly.

Baby Boomers are more protective of their retirement savings. With retirement closer, preserving savings and allowing compound growth to continue can become a higher priority.

And Gen Z? At present, it is the generation least likely to make a withdrawal.

Part of that is simply mathematics. Younger workers generally have smaller retirement balances, meaning there is less available to access. 

But there may be another factor at play: Momentum's data shows that only 48% of Gen Z respondents feel they understand how the two-pot retirement system works.

Why millennials are dipping into their savings

Millennial withdrawal rates should not automatically be viewed as evidence of poor financial planning or impulsive spending. They can also reflect a generation experiencing significant financial pressure and using the resources available to them to manage immediate needs.

Among those who provided reasons for withdrawing, 44% cited debt repayment, 23% said everyday living expenses and 20% cited education costs.

The data suggests that many withdrawals are being used to address financial pressures rather than discretionary spending.

Even among members who understood that accessing their retirement savings could affect their future retirement position, between 50% and 60% still made withdrawals.

That highlights the difficult trade-off many people face: immediate financial needs can feel more urgent than a retirement that may be decades away.

Future you has just entered the chat

For Gen Z, watching this unfold offers a useful preview.

The financial pressures currently affecting millennials are not necessarily generation-specific. Debt, housing costs, education expenses and unexpected financial shocks can affect people at different stages of adulthood.

There is also a less obvious lesson: the cost of accessing retirement savings is not limited to the amount withdrawn.

Consider a hypothetical R15 000 withdrawal at age 24. The money that leaves your retirement savings today also loses the opportunity to grow over the decades that follow.

That is where compound growth becomes important. The earlier money remains invested, the more time it has to potentially grow.

The immediate financial relief from a withdrawal can therefore be relatively easy to see, while the longer-term opportunity cost is much harder to appreciate.

Momentum's research indicates that members who accessed their savings component could initially feel positive about the decision, with the impact becoming clearer later as tax and the potential loss of future growth became apparent.

For Gen Z, the opportunity is to learn that lesson before facing the same financial pressures.

One of the biggest advantages young workers have is time. Compound growth needs time to work, and that is an advantage that becomes increasingly difficult to recreate later in life.

So, while that window is still wide open, there are a few practical steps worth considering:

• Build a separate short-term savings buffer. Having accessible savings outside your retirement fund can provide a financial cushion when unexpected expenses arise.
• Start small, but start early. Consistent saving, even in relatively small amounts, can establish a habit that can adapt as income and circumstances change.
• Understand the two-pot system. Know the rules, tax implications and potential long-term impact of accessing your savings component before making a withdrawal.

The one thing you can be reasonably certain of is that adulthood will eventually deliver a financial curveball you did not see coming.

What is negotiable is what you leave for the future version of yourself: a safety net, or an apology.

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