The transfer of wealth and financial support from older Australians to their children and grandchildren is becoming a hot topic for families around the country.
Australians over 60 are set to transfer an estimated $3.5 trillion over the next two decades1.
And new AMP research highlights the challenges older Australians are facing about the best way to help the next generation2.
Older Australians have worked hard their whole lives to build up their retirement nest egg. However, the growth in Boomers’ wealth has outpaced other generations, which has increased the wealth gap. This is largely down to a decline in interest rates as well as good luck with asset prices appreciating over the last 40 years like the family home, says AMP Deputy Chief Economist Diana Mousina.
So on one side of the wealth gap you have younger Australians trying to get a foot on the housing ladder as house prices and interest rates rise. Diana says it used to take 6 years to save for a 20% deposit whereas now it takes nearly 11. This increasing inequality is an issue because if it dampens living standards across generations it can cause resentment and social instability.
And on the other side you have older Australians who know the challenges younger family members are facing. And they’re keen to help. But they’re not confident enough about their retirement income to downsize, preferring to wait and transfer wealth in the form of an inheritance when they pass away – 90% of all intergenerational wealth transfer occurs through death inheritance3.
When we asked retired Australians how they might support their children financially, the most popular response (20%) was providing a place to live in the family home.
Source: AMP commissioned research
Not surprisingly, this is leading to more generations living under one roof, with Melbourne Institute4 research indicating half of Australians aged 18 to 29 are still living at home.
When it comes to reducing the wealth gap, Government has a big role to play, says Diana. “What can be solved by policy is an improvement in housing affordability (and) the main policy solution to improve affordability is to increase housing supply.”
The financial services industry can also help, says AMP Director, Retirement Ben Hillier, by “providing retirees with the financial confidence that their savings will last, not only to help them live life to the fullest, but also give greater clarity with how they can help their kids.”
Ben adds, “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”.
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1,3 Wealth transfers and their economic effects. Australian Government Productivity Commission, 7 December 2021.
2 AMP commissioned Dynata in February 2024 to conduct a survey of 2000 Australians aged 50 years and over and 30 years and under in relation to their attitudes to retirement and intergenerational wealth transferral.
4 More Australian adult children and living with their parents longer. Melbourne Institute, Hilda Survey.
Source: AMP June 2024
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