For many older Australians, their retirement years are not only a time to enjoy the fruits of their lifelong labour, but also to think about how they can pass on their wealth to the next generation.

Around $3.5 trillion is expected to be transferred from those aged 60+ over the next 20 years – almost the size of our current super system.

Intergenerational wealth transfer, or the process of transferring assets from one generation to the next, is a looming challenge for many Australians who want to ensure their children and grandchildren have a secure financial future.

Many retirees have competing financial goals and needs, such as maintaining their lifestyle, preserving their capital, supporting their children and planning for aged care.

Facing up to FORO – the fear of running out

Older Australians recognise it hasn’t been easy for younger generations coming through. According to latest research by AMP:

• 4 in 5 Australians aged 65 and over believe their children face harder or similar financial challenges now compared with them at the same age.
• And 3 in 4 believe it’s important to pass wealth onto their children.

But many lack financial confidence in retirement and are unnecessarily fearful their savings won’t last as long as they do.

• 3 in 5 are more concerned about having enough money in retirement now than they were 10 years ago.
• Close to 3 in 5 anticipate needing to compromise on their quality of life in retirement.
• 7 in 10 say being comfortable in retirement or having no outstanding mortgage debt is most important to them.

And while they want to help their kids, they see the family home as sacred.

• 4 in 5 are not prepared to downsize to release funds to their children.
• And 7 in 10 are unlikely to adjust their lifestyles in order to pass wealth onto their children.

Because of their fear of running out, many older Australians are grappling with the challenge of wanting to provide financial support to their kids but not being able to do so.

How financial advice can help

Financial advice can help retirees navigate the intergenerational wealth challenge with tailored strategies and solutions that suit their personal circumstances.

Advisers can clarify options like gifting assets now or leaving them as inheritance and using home equity. This can boost confidence, ensuring a secure retirement while supporting children financially. This confidence can be built through solutions that provide income options in retirement.

Contact us to see how we can help build income options for your retirement journey.

Current as at August 2024