Are you ready for the economic tsunami?

No More Practice Education has commissioned an exclusive report from McCrindle Research about the impending intergenerational wealth transfer and what this will mean for your practice:
 
  • $3.5 trillion to be spent or passed down by baby boomers over the next 20 years
  • Averaging $326,000 for each child who inherits
  • If spent, this wealth is likely to be eroded in two years
  • If managed correctly, it could help Gen X and Y fund their own retirements

To view the full, exclusive Wealth Transfer Report from McCrindle Research commissioned by No More Practice Education, please enter your details here. You will be emailed the report within 24 hours.

 

 

WEALTH TRANSFER REPORT

Over the next 20 years, there will be $3.5 trillion (AUD) either passed on to the emerging generations or spent. This is the largest and most significant intergenerational wealth transfer Australia has ever seen, and it presents a unique opportunity or alternatively a wasted chance for the next generations to significantly shape our nation’s future.

This demographic ‘future-case’ summary report provides an overview of the factors and trends shaping Australia economically and socially. This data has been collated through demographic analysis and economic modelling of the accumulation of wealth by older Australians, and the wealth transfers from them to the following generations.

 

THE OPPORTUNITY COST

With rising living costs, longer in retirement to fund and less government support for aged Australians in the future, Generation X will have to fund their own retirement, and will require more funds to do so than any previous generation.

Not only would the $3.5 trillion intergenerational wealth transfer be the only realistic way that most in this generation could fund their own retirement, but as shown, if this inheritance was effectively invested, it would grow to be the means of funding their own children’s future as well.

To put the size of this accumulation into perspective, the total national GDP is currently $1.7 trillion so the amount of accumulated wealth to be spent, invested or passed on over the next 20 years is twice the size of the Australian economy.

The unprecedented wealth accumulation of today’s retirees provides a similarly unprecedented wealth transfer opportunity, but a massive intergenerational opportunity cost if the money is spent rather than invested.

Should Generation X spend their inheritance, this would be a waste of a potential $15.1 trillion being added to the Australian economy

 

GRANNY FLATS OR GREATEST RETIREMENT EVER

At an individual level, the costs of this missed opportunity are also profound. If little to none of the accumulated wealth of today’s retirees was passed on to their children, the investment opportunity, which will be key to funding future retirements, would be lost. Just as housing relative to earnings has increased, so retirement and aged care accommodation relative to average earnings has also increased. In a time of an ageing population, the demand for retirement housing is outstripping supply and so prices will continue to rise.

The calculated inheritance in this report will make the difference for a significant proportion of future retirees between being able to downsize into more appropriate accommodation or ageing in place with higher maintenance and opportunity costs, and for many, moving in with families. In the span of a generation we have seen the retirement ambition lurch markedly from saving to spending, and from a social value respecting the passing on of an inheritance to the championing of “spending the kids’ inheritance”.

The response to this once in a generation opportunity facing retirees in this Lucky Country will determine whether they retire with longevity, lifestyle and social inclusion at a level never before seen, or whether we see the return of the granny flat in great numbers- not to accommodate young people starting out in life, but as the final abode of older Australians who have simply run out of money.

 

The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice or its related entities. All content is intended for a professional financial adviser audience only and does not constitute financial advice. To view our full terms and conditions, click here.

Binesh Seetanah

16/08/17

It would be a great read

Gary Hasler

16/08/17

thanks

Geoff Whiddon

16/08/17

This is of significant interest to me.

Meghan Weekes

16/08/17

Thanks

Les McGuire

16/08/17

Please provide the report

Peter Nonnenmacher

20/08/17

Very relevant to our industry

Leave a comment /

Related content /

26 June, 2017

Mark McCrindle,founder,McCrindle Research

Australia’s generations by wealth and income

Although generation y may be income rich, their net worth remains modest, whereas the retiring baby boomers control more than half of the nation’....

Read now

23 August, 2017

No More Practice

The great retirement challenge

Over the past 30 years, the percentage of living expenses the age pension covers has dropped from 90 per cent to 37 per cent.

Read now

23 August, 2017

Vanessa Stoykov,creator,No More Practice

The best interview I’ve done all year

Every once in a while, you get the opportunity to be part of something bigger. Vanessa writes about how her recent experience as p....

Read now