Will Gen Z be the first generation to retire on ETFs?

There is a growing possibility that Gen Z could be the first generation to retire primarily using exchange-traded funds (ETFs). This is closely linked to how they interact with technology, information, and financial products.

In the US, millennials and Gen Zs are currently the most likely generational groups to hold ETFs in their retirement accounts, at 81% and 75% respectively, according to Nasdaq research. Locally, Satrix data shows that around 90%^ of Gen Z investors on the SatrixNOW platform have ETFs in their portfolios.

Gen Z are digital natives. They’re used to apps, instant access, and low-cost services. That’s their default. So, when they come across ETFs, they don’t have to work hard to understand them. It already fits how they move through the world.

This familiarity contributes to earlier investment behaviour. They may well start investing in their late teens or early twenties. And just imagine how powerful that is. Starting early with small amounts to capture compounding is the key. For them, it’s not about trying to pick the right stocks. It’s about being invested and letting time do the work.

Globally, ETF inflows continue to grow. In the US, ETFs attracted a record-breaking $900 billion in inflows in 2024. In South Africa, the total AUM (assets under management) for ETFs was R224 billion at 30 September, representing 20.5% growth since the beginning of the year, with Satrix taking nearly 40%^^ market share.

What’s making ETFs so appealing?

When you invest in an ETF, you gain exposure to a diversified basket of securities in one transaction. Diversification reduces risk, transparency allows investors to see exactly what they hold, and affordability ensures money stays invested. ETFs generally carry lower fees – fees also compound, so lower fees eat less into returns over time.

There’s also a vast range of ETF options to suit evolving life needs. Investment needs will naturally shift across a lifetime. When you’re younger, you’re looking at growth-oriented strategies. As you get older, you move toward income-generating dividend ETFs and capital protection. Gen Z also likes being able to monitor and adjust their portfolios, so the accessibility and switching flexibility of ETFs align well with that.

Ongoing innovation is supporting this evolution. ETFs remain accessible. Minimums have come down. Platforms are becoming more intuitive. This will continue. It’s getting easier and easier to participate.

Education remains the critical unlock. While ETFs are increasingly accessible, the knowledge required to use them confidently often comes too late. Most of us only learn about compounding when we’re already working, and by then we’ve lost time. Imagine if this were taught in high school. Not a once-off presentation, but an actual curriculum on long-term investing, compounding, and how to use a platform. These are the foundations for how to build generational wealth.

The underlying principles that Gen Zs need to know are simple: start early, stay consistent, think long-term, and avoid reacting to short-term noise. If Gen Z continues the way they’ve started, their retirement outcomes could look very different from what we’ve seen before. In a nation where just 6% of people can currently afford to retire with dignity, we need to support Gen Zs to invest now in the life they want later. ETFs can be a robust part of that plan.

*Mxenge is the head of business and market development at Satrix.

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