Younger generations need more than $1.5m to retire

Gens X, Y, and Z think they’ll need to a have a savings (excluding assets) between $1.5m and $1.74m each in order to retire, according to the new cross-generation research released by ING.

The amount is more than twice what the Association of Superannuation Funds of Australian (ASFA) recommends for a standard couple that owns a home.

The research, conducted last July quizzed more than 2,000 participants aged 16 to 64 and also revealed that Gen X and Gen Y don’t believe they will be able to retire when they want.

Gen X doubt they’ll be financially prepared to retire until they’re 72 despite a desire to retire at 63. Gen Y would like to retire at 61, but doubt they’ll have enough savings to do so until they’re 68. Gen Z had more optimism, with a desire to retire at 62 and being ready at 65.

ING head of adviser sales Tim Hewson, told MPA that Gen X and Y probably haven’t sat down to work out a retirement plan, or how much they need to fund their retirement.

“Aussies by nature are very aspirational and will want to maintain or improve their lifestyle when they hit retirement. With a higher life expectancy, they’re probably thinking they’ll need to enjoy their retirement more than the generations before them,” Hewson said.

The research found that less than half of Gen X say making a retirement plan is something they’re considering, while 64% of Gen Y and 79% of Gen Z admit to not having a retirement plan at all.

According to ING head of retail banking Melanie Evans, while Gen X, Y, and Z are clearly aware that one cannot retire anytime without adequate savings, they seem reluctant to make plans – most likely because they’re uncertain where to go for help.

In fact 35% of Gen X, Y, and Z are concerned about their retirement fund just don’t know where to start, and 25% of them choose to “hope for the best”. 

Hewson believes the reason isn’t lack of information or help. For him, there’s just “too much information out there that they probably don’t know where to start, or how to make sense of it all.”

“Gens Y and Z, in particular, have grown up in the digital age and there’s a real possibility these generations are paralysed by information overload,” he said.

According to the research, Aussies generally begin to take their retirement seriously at 45. However, Hewson said that they’re seeing around one third of Gen X, Y, and Z have a retirement plan, and a very clear picture of how they want their retirement to look. 

“It’s not until they have a handle on their mortgage and cash flow, and possibly a little money in the bank, that they start to shift gears to think about retirement. So until age 45, having a retirement plan is simply not a priority for most,” he said.

Where to seek advice
While the research paints a picture of confusion for consumers, it is good news for financial professionals: more than half of Gens X, Y and Z trust financial advisers.

Gen X turns to advisers to help them manage their finances, while Gens Y and Z prefer assistance with longer-term goals such as family planning, purchasing a home, and retirement.

For an annual strategic financial plan given via face-to-face consultation, each generation expects to shell out these average amounts: Baby boomers: $315, Gen X: $232, Gen Y: $316, and Gen Z: $394.

Gens Y and Z also expect higher fees for automated online advice tools compared to baby boomers and Gen X expects to pay less than $85, while Gens Y and Z are prepared to pay more than $195. 

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