Imagine reaching retirement age only to realise your savings aren’t just for you—but also for your elderly parents and adult children. This is the emerging reality for many Australians, particularly Millennials, who find themselves trapped in a ‘Generational Squeeze.’ New research from Findex reveals a growing number of Australians facing the financial pressures of simultaneously supporting ageing parents and dependent children, threatening to derail their retirement plans. With retirement landscapes rapidly shifting, Millennials stand at the forefront of this new financial challenge, raising important questions about readiness, financial planning, and family responsibilities in later life.
The ‘Generational Squeeze’ occurs when individuals find themselves financially supporting both their ageing parents and their dependent children during retirement. Our latest research shows a striking 51% of Australian Millennials expect to face this situation, with a substantial 32% anticipating supporting elderly parents and another 22% preparing to support their children. Extending across the broader Australian population, nearly half (43%) expect similar pressures, helping not only their children (22%) and elderly parents (20%) but also siblings (15%) and grandchildren (10%).
Though family obligations are not unusual, the financial impact on retirement planning can be significant. Typically, Australians set their retirement goals based on personal lifestyle expectations and standardised estimates, such as the ASFA Retirement Standard, which currently suggests $73,011 annually for couples and $51,805 for singles. However, these figures do not factor in the added cost of financially supporting dependents.
For Millennials and Gen Z, who are already facing considerable financial pressures from rising housing costs and cost-of-living expenses, the additional burden of the Generational Squeeze could substantially reduce their ability to achieve financial freedom.
One of my own clients, whom I'll call Steve and Maria, perfectly illustrates the financial and emotional complexities of the Generational Squeeze. Steve recently retired and Maria is nearing retirement, still working part-time to help balance their finances. They planned carefully for their retirement, envisioning travel and enjoying a stress-free lifestyle. However, reality has been more challenging.
Their adult son recently returned home after losing his job and struggling with escalating living costs in the city, while their daughter now occupies a rental property that Steve and Maria had planned to sell to boost their retirement savings. Instead, they're now juggling a mortgage to support their daughter's aspiration to buy her own home. Additionally, Steve has ongoing health concerns, adding further complexity and urgency to their financial planning.
Working together, we reassessed their financial strategies, incorporating detailed scenarios that accounted for the added financial responsibility of supporting their children. By restructuring their asset management and establishing contingency plans, we've strengthened their financial resilience and provided clarity around their future. This example highlights just how crucial holistic financial planning can be to effectively manage these layered family obligations without derailing retirement plans.
Despite widespread anticipation of family support responsibilities, there is a significant gap in confidence regarding the financial ability to manage these obligations in retirement. About one in five Millennials admit they are "not particularly confident" or "not confident at all" in their ability to financially support dependents. This confidence further erodes for those closer to retirement age, with nearly half (42%) of Gen X and Baby Boomers reporting doubts about their financial capacity.
While aspirations for retirement remain high, there is growing awareness among Australians that their financial reality might not match their dreams. The top retirement goals identified in our research include establishing passive income streams (46%), extensive travel (44%), and improving overall living standards (40%).
But concerns loom large—54% of Australians fear running out of money, half worry about physical and mental deterioration, and 44% fret over unexpected expenses.
These concerns are even more acute for those approaching retirement. Only 25% of Gen X and Baby Boomers confidently believe they will retire at their preferred age. In fact, over a third (35%) doubt they can afford to live comfortably through to average life expectancy (currently 81.1 years for men and 85.1 years for women).
Our research indicates clear generational differences in strategies to combat these financial pressures. Gen X and Baby Boomers, feeling the pinch of imminent retirement, are considering lifestyle sacrifices, with 46% prepared to work beyond the standard retirement age of 65, and a further 34% considering scaling back on major purchases to bolster their savings.
Millennials, by contrast, are proactively seeking additional income streams (47%), and nearly half (42%) acknowledge the critical role professional financial advice plays in securing retirement comfort. Even Gen Z, the youngest cohort surveyed, shows forward-thinking attitudes, with significant numbers willing to make life-altering decisions like opting to have fewer or no children (27% and 14% respectively) to manage future financial obligations.
Our research has consistently highlighted that individuals who engage with professional financial advice feel significantly more prepared and confident about their retirement prospects. A striking 76% of advised Australians believe they will retire at their preferred age, compared to only 58% of those without professional advice. Furthermore, advised individuals demonstrate greater financial literacy and preparedness, vital traits for managing the multi-dimensional challenges of the Generational Squeeze.
For clients like Steve and Maria, tailored financial advice means evaluating the financial implications of supporting family members, creating clear strategies to manage their property assets effectively, and ensuring they are financially secure despite unexpected challenges like health concerns.
The key to mitigating the impacts of the Generational Squeeze lies in proactive financial planning and open, transparent conversations within families about potential financial obligations. Early dialogue about parents' financial security and realistic expectations for supporting adult children can significantly alleviate later stress and financial strain.
Practical strategies to prepare for the Generational Squeeze include:
Budget realistically: Consider inserting a “family support” line item in your retirement plan, even if it’s only a contingency.
Explore flexible investment strategies: Maintain some liquid assets or a small emergency fund to accommodate unplanned medical or educational costs.
Seek professional advice: Work with a financial advisor who specialises in wealth management for families and can help with some structured guidance to help ensure assets are allocated efficiently and potential hidden costs are flagged early.
Every Australian’s financial situation is unique, yet one thing remains consistent: proactive financial planning significantly improves retirement outcomes. The Generational Squeeze may be an inevitable reality for many, but with strategic preparation and the right advice, Australians can protect their retirement goals and maintain financial comfort.
Download our comprehensive research report to gain deeper insights into these challenges and discover actionable strategies to secure your retirement future in the face of growing family financial pressures.
*Names and specific details have been changed to protect client anonymity.
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