Home ownership dream slipping through fingers: AMP

The second phase of research commissioned by AMP into attitudes around intergenerational wealth transfer has confirmed a “clear desire” for under 40s to achieve financial independence but raised concerns over a lack of communication with parents on wealth in retirement.

The latest report indicated that those aged under 40 years believe home ownership to be the main contributor to wealth in retirement (40 per cent), with savings (23 per cent), superannuation (18 per cent), investment property (15 per cent) and shares (five per cent) following suit.

However, respondents cited the current challenges posed by the property market as an obstacle to ever owning a home, with 80 per cent of those under 40 years old who currently don’t own a property believing it will be out of reach and also believing that not owning a property will be “detrimental” to their long-term wealth in retirement.

The research also showed that with an estimated $3.5 trillion to be transferred by Australians aged 60 and over within the next two decades, it is concerning that less than 60 per cent of survey respondents have not spoken to their parents about what the wealth transfer may look like.

The research found that 50 per cent of respondents under the age of 40 expect to support their parents financially as they edge closer to retirement age, while 80 per cent said they have not asked their parents for financial support back. Only 20 per cent are currently depending on their parents for financial assistance and a future inheritance.

“This latest research reveals an interesting dynamic within families, including a lack of communication between the generations on wealth matters” AMP Director of Retirement, Ben Hillier, said.

“It’s also evident that while many Australians under 40 are concerned about housing unaffordability and its impact on their long-term wealth and retirement, they are reluctant to ask for financial support from their parents, with many actually believing they will need to
financially support their parents as they age.

“It’s worth considering these findings with the knowledge that many Australian retirees are fearful their savings won’t last – a fear which prevents spending and impacts their quality of life. It’s also very possible these concerns are inadvertently conveyed to their children and
hinder open dialogue on wealth matters.”

This latest research follows an initial release earlier this year, which found “Australian retirees feel the housing crisis has forced them to make a choice between supporting their children or continuing their retirement lifestyle”.

“While over 80 per cent of Australians aged 65 years and over who participated in the survey in February said they believe their children are facing similar or worse financial challenges than they did and want to support them, 70 per cent said they were ‘unwilling to compromise their retirement lifestyle to provide financial assistance’.”

According to the second round of research, 60 per cent of those aged under 40 years believe their generation is suffering more financially than their parents’ generation; over 70 per cent of those aged under 29 years agreed.

“We have a significant opportunity in Australia to help more retirees build their financial confidence, empowering them to fully enjoy their post-working years. This can be achieved through better access to lifetime income solutions and financial advice, improved financial
literacy at all ages, and a simplified retirement system,” Hillier said.

“Most importantly this confidence could improve their quality of life in retirement, but it could also be a catalyst to open the lines of communication with their children on important wealth matters, such as inheritance and estate planning. It may even empower them to support their children financially, which we know from AMP’s previous research they’re keen to do.

“Importantly, the sharing of knowledge and insights could help build greater collective financial literacy and confidence within the family unit.”