Millennial Aussies face significant financial vulnerability in retirement

Millennials, a cohort rapidly approaching middle age, are set to experience an unprecedented “generational squeeze” – being caught between two cohorts of financial dependents – leaving them among the most exposed age groups to financial vulnerability, new research has found.

The research, conducted by financial advisory and account firm Findex of more than 1,000 Australians, found that a majority of Millennials (51%) – those currently aged between 29 and 44 years of age – felt an obligation to support extended family members in retirement.

This includes around one third (32%) of Millennials who predict they will be financially supporting elderly parents, alongside a further 22% also supporting their children.

Despite the likelihood of this ‘generational squeeze’ affecting Gen Ys, around one in five expressed a lack of confidence in their ability to support dependents in retirement.

More broadly across the wider Australian population, around 43% of those surveyed expressed their need to use their retirement funds to support dependents, including to help their children (22%), elderly parents (20%), siblings (15%), and even grandchildren (10%), alongside supporting their own retirement.

To support their financial needs in retirement, Millennials appear to be taking a more proactive approach to wealth generation. This includes those seeking additional income streams (47%) as well as around a quarter (24%) taking on a second job.

This cohort also acknowledges the advantage of professional financial advice, with around half (42%) believing that a wealth adviser would serve a role in supporting their goal of a comfortable retirement.

For Gen X and Baby Boomers showed a greater focus towards lifestyle sacrifices to meet financial needs in retirement.

Close to half (46%) said they would consider postponing retirement and working beyond the average retirement age of 65 to boost savings, around a third (34%) would scale back on big-ticket purchases and a quarter (24%) would consider downsizing their primary residence earlier in life.

Findex co-chief executive Matt Games noted the often “hidden cost” of providing financial support to dependents in retirement.

He further noted that the ASFA Retirement Standard guidelines, which outline a $73,011 per annum income for couples and a $51,805 per annum income for singles to live comfortably in retirement, these figures do not factor in having to support dependents.

Retirement aspirations going unmet

More than a third of Millennials (37%) expressed their desire to retire between 60-64, while Gen X and Baby Boomers foresee a later retirement at 65-69. Gen Zs ideally want to retire before they turn 60.

However, many respondents expressed concerns over the ability to meet this aspiration.

Of those surveyed, most expressed a fear of ‘running out of money’ (54%), while ‘physical and mental deterioration’ (50%) and ‘unexpected expenses’ (44%) were also foremost concerns.

What is more, just one in four Gen Xs and Baby Boomers believe they will retire at their preferred age, with 35% believing it is unlikely they will be able to retire and afford to live comfortably until the average life expectancy age (currently 81.1 years for men and 85.1 for women, according to ABS figures).

Younger generations appeared to have a more positive outlook on retiring at their desired age, with two-thirds of Gen Z (74%) believing they would do so, closely followed by Millennials (69%).

This, Findex suggested, points to ‘concern creep’ becoming more apparent for cohorts closer to the retirement stage of life where the financial realities set in.