Under 45s are much more comfortable with the concept of debt in older age than those over 45, a trend that could ease the future retirement savings gap, Retirement Advantage has found.
National consumer research found that just 5% of property owners over 55 agree that it is normal to take on new debt to fund retirement, with 71% disagreeing. Those aged 45-54 were split 11% in favour and 60% against.
However, property owners under 45 were more open to the idea, with 29% of 35-44 year-olds in favour and 35% against. Those aged 25-34 view taking on debt in retirement as even more normal, with 39% in favour and just 31% against.
Alice Watson, head of product and marketing at Retirement Advantage, said: “Future generations are increasingly at ease with the idea that debt and property wealth will be sources of retirement income.
“The fact that younger people today are buying homes later, and taking on more student and mortgage debt than previous generations, may explain why.
“A mix of sluggish savings rates, poor wage growth and the switch from defined benefit to defined contribution pensions, means that we face the prospect of a sizeable retirement savings gap in generations to come.
“It is, therefore, an inevitability that using property wealth to try and plug that gap will become the norm. Property is typically the most valuable asset people own, and it bodes well that future generations of retirees seem comfortable with the idea of using it in a holistic way.”
Additionally, there is also a generational split between those who expect property in particular to support them financially in retirement. Some 45% of over 55s agreed that it will, compared with 62% of 25-34s year-olds.
Greater dialogue between generations could help to give comfort around taking on debt in retirement.
Nearly one in five over 55s (18%) said that they wouldn’t use options that release property value in retirement such as equity release because they don’t want to take on new debt. However, only one in seven (14%) over 55s currently discuss their retirement finance plans with their children.
Watson added: “While options such as equity release won’t be right for everything, consulting family members and seeking professional advice will at least help most retirees to properly assess whether using property wealth could be an option available to them.”