New research from advice firm Findex has found that a third (32 per cent) of Millennials expect they will need to financially support their elderly parents in their retirement, while a further 22 per cent will also be helping their children, leading to what Findex called the “generational squeeze”.
Looking at the wider Australian population, two-fifths (43 per cent) see themselves using their retirement funds to help their children (22 per cent), elderly parents (20 per cent), siblings (15 per cent) and even grandchildren (10 per cent), on top of funding their own retirement.
This phenomenon, the firm explained, describes a situation where a particular age group is caught between two cohorts of financial dependents.
Despite wanting to provide assistance to family members, one in five Millennials still said they are not particularly or not at all confident in their ability to support dependents in retirement.
Baby Boomers are likewise concerned about their prospects in this regard, with two in five (42 per cent) noting a lack of confidence in their ability to deliver support.
While the intentions behind this are commendable, the reality is that Australians still have major concerns regarding the longevity of their finances in retirement, with more than half (54 per cent) noting the possibility of running out of money as a major concern for the future.
The timing of retirement is a major factor to consider regarding financial longevity as well, however, Findex found that only one in four Gen X and Baby Boomers believe it’s likely they will retire at their preferred age, while just a third (35 per cent) believe it’s unlikely they will be able to afford to live comfortably in retirement until the average life expectancy age.
Findex co-chief executive Matt Games explained that providing financial support for family members in retirement is a sort of “hidden cost” that often isn’t accounted for when clients plan for retirement.
“While the ASFA Retirement Standard outlines $73,011 per annum for couples and $51,805 per annum for singles to live comfortably in retirement, it’s crucial to note these figures do not factor in having to support dependents,” Games said.
“It is vital for Australians to not only have a strong understanding of their own financial position and potential spending in retirement but to also engage early on in transparent conversations with their own parents and older kids to understand how their wider family unit will require monetary support so they can navigate the potential pressures of the ‘generational squeeze’.”
Notably, generations are taking different approaches to meeting their retirement goals that reflect their unique stage of life.
For example, Gen X and Baby Boomers are looking at lifestyle sacrifices that could make their retirement financially easier, including postponing their retirement (46 per cent) to boost savings, scaling back on big-ticket purchases (34 per cent), and potentially downsizing their homes (24 per cent).
In the middle bracket are Millennials who are looking to proactively increase their wealth generation by creating additional income streams (47 per cent) or taking on a second job (24 per cent).
This demographic also noted the value of professional financial advice (42 per cent) to help ensure a comfortable retirement, a feeling that is supported by advised Australians being considerably more likely to think they will be able to retire at their desired age, 76 per cent compared with 58 per cent.
The youngest of the bunch, Gen Z, are still in their teens and twenties and as such are looking at how big life decisions could reduce their future retirement costs by opting to have fewer children (27 per cent) or even none at all (17 per cent).
While each stage of life fosters a different way of thinking about retirement planning, Games suggested that approaching planning proactively will increase their ability to reach their retirement goals, with advisers being a valuable tool to get there.
“For Gen X and Baby Boomers who are in or approaching pre-retirement at pace, working with a financial adviser can help supercharge your savings. For Millennials, professional advice means alleviating worries and building a financially secure runway for potential retirement circumstances,” he said.
So not much has changed since Gen X.