Retirees struggle to balance conflicting priorities: AMP

New research by AMP exploring the attitudes of Australian retirees regarding the transfer of wealth to their children found that four in five Australians aged 65 and over believe their children face similar or harder financial challenges than they did growing up, at least partly due to the rising cost of housing In Australia.

As the cost of rent and purchasing a home continues to rise, AMP found that many retirees are battling the desire to offer financial assistance to their children while also wanting to maintain their lifestyle throughout retirement.

The research revealed that despite three in four Australians, aged 65 and older, believing it is important to pass wealth on to their children, seven in 10 said they were unwilling to compromise their retirement lifestyle to do so.

Additionally, while three in four Australians aged 65 and over believe it is important to pass wealth on to their children, the research showed that retirees hold a strong attachment to their family home and despite their desire to help, four in five aren’t prepared to sell up and downsize to release funds to their children.

To combat this, close to half of those aged 50 and over would consider passing home equity value to their children if they could stay in the family home.

When considering what retirees would consider doing to help financially support their children, the top response was to provide living accommodation for them, followed by paying bills for them and reducing lifestyle costs.

This desire to assist their children with housing costs has now led to more generations living under one roof, with Melbourne Institute research indicating half of Australians aged 18 to 29 are still living at home.

Commenting on the findings, AMP director, retirement Ben Hillier highlighted the need for improved financial literacy for retirees to improve their retirement.

“As housing unaffordability and cost-of-living pressures rise, Australia’s burgeoning retiree population faces a growing dilemma – how do they help their kids financially, while also fully enjoying their retirement years,” Hillier said.

“Unlocking different options for financial support, beyond accommodation, starts with older Australians having greater comfort with their own finances. We know, for example, far too many retirees are unnecessarily fearful their savings won’t last their lifetime.”

Hillier further explained the value of financial advice and education to give retirees the freedom and knowledge to spend their money confidently.

“Providing retirees with the financial confidence that their savings will last will not only help them live life to the fullest but also give greater clarity with how they can help their kids,” he said.

“This confidence can be built in a number of ways, including increasing financial literacy and knowledge through education resources and financial advice and through the use of solutions that provide greater assurance on lifetime income.

“Given retirees’ attachment to the family home, it’s also clear that as an industry, we need to explore new ways to help retirees unlock capital from their home, without the need to downsize or compromise their long-term wellbeing.”