The greatest wealth transfer in history

November 11th 2024 | Categories: Advice Space | Retirement |

We are currently on the brink of an unprecedented worldwide financial event, what does that mean for you?

A big shift is set to reshape Australia’s financial landscape, impacting housing, investments, and ultimately – general spending habits. The term “Great Wealth Transfer” refers to the passing of assets from one generation to the next. This transfer isn’t just about cold hard cash-hitting bank accounts; it also includes property, superannuation, investment portfolios, businesses, and other valuable assets.  

Introducing the key players  

Silent Generation (Born 1928-1945): Sometimes called the “Traditionalists” or “Builders,” this generation grew up during or just after the Great Depression and World War II. They are known for their strong work ethic, loyalty, and value for stability.  

Baby Boomers (Born 1946-1964): Following World War II, this generation experienced a population boom. Baby Boomers witnessed significant social changes, including the civil rights movement, the women’s liberation movement, and major advancements in tech and travel.  

Gen X (Born 1965-1980): Also referred to as the “MTV Generation” or “Latchkey Kids,” Gen X grew up in a period of shifting societal norms and economic uncertainty. They are known for their independence, adaptability, and skepticism.  

Millennials (Born 1981-1996): Also known as “Generation Y,” Millennials came of age during the rise of the internet, social media, and mobile technology. They value work-life balance, purpose-driven careers, and are often associated with the ‘gig economy’.  

Gen Z (Born 1997-2012): The first generation to grow up under the influence of smartphones and social media being part of everyday life from a young age. Gen Z is known for its tech-savviness, focus on inclusivity, and advocacy for social and environmental issues.  

The impending wealth transfer is largely signified by baby boomers entering retirement. Throughout their working lifetime, we’ve seen property prices soar and the development of a well-established superannuation system, leading to the significant impact of this wealth transfer. For the generations that follow, understanding how to manage this transfer will be critical in shaping their financial security and futures.  

Let’s talk numbers  

Over the next two decades it’s expected that $100 trillion in assets world-wide will be transferred through generations, with $3.5 trillion to be transferred in Australia by 2050.  

2027 will be the year that the early baby boomers will reach their statistical age of death, 81 years for men, and 85 for women. We can expect the youngest boomers will mostly exit the workforce into retirement by the following year, in 2028.  

With superannuation balances starting to deflate out of the system through retirement years and then through the inheritance process, here are three key areas where we can expect significant effects:  

Housing market shifts  

The influx of inherited wealth could be the golden ticket in making it easier for younger family members to enter the housing market. This could potentially increase demand for property, something we haven’t had a shortage of in recent years. Additionally, as older Australians downsize (or rightsize!), more homes may become available, possibly leading to more balanced housing prices.  

Investment trends  

While baby boomers may have focused on traditional assets like real estate and shares to build net worth, it’s seemingly becoming more out of reach for younger generations. This shift in capital allocation could significantly impact various sectors, with a rise in green energy investments and tech startups.  

Changing spending patterns  

It’s no secret that millennials and gen Z have different spending habits than their parents. A generational wealth transfer may serve as a boost to sectors like travel, digital services, and eco-friendly products.  

How to prepare  

For many families, planning for the transfer of wealth is essential to ensure a smooth and efficient transition. Here are some key steps to consider:  

Estate planning  

Without proper estate planning in place, a significant portion of family wealth could be lost to tax implications or potential legal disputes. Families should update their wills, set up trusts, and engage in tax-efficient planning to protect their hard-earned assets. Working with an experienced financial adviser can help you establish a strategy that meets your family’s unique needs.  

Start the conversation early  

Openly discussing wealth and inheritance plans can help reduce confusion or disputes down the line. Families should be clear about their financial goals and values, allowing each generation to align on shared objectives and expectations.  

Educate the next gen on financial literacy  

Encouraging a vested interest in fostering financial knowledge from a young age will help your younger family members make informed decisions, grow their wealth, and avoid some common money mistakes. Consider involving them in meetings with your financial adviser or setting up resources for ongoing learning.  

How we can help  

Managing an inheritance or planning an estate involves complexities that can be difficult to navigate alone. Our financial advisers will help uncover your unique financial circumstances and long-term goals and develop strategies that empower you and your family to live their best possible lives. Whether it’s investing an inheritance, setting up tax-efficient structures, or navigating legal considerations, seeking expert advice could mean the world of difference in making the process smoother and more beneficial for everyone involved.  

With the greatest wealth transfer in history upon us, Australian’s are presented with both opportunities and complex challenges ahead. With proper planning and a holistic financial advice strategy in place, families can ensure that their wealth is preserved and will live on to serve the purpose of supporting future generations. Whether you’re a baby boomer planning your estate or a millennial or gen Z preparing to receive an inheritance, taking proactive steps can help secure your financial future. 

Ready to prepare for the Great Wealth Transfer? Book an appointment to start planning. 

Not sure where to start? Why don’t you try our complimentary 15-minute discovery call. The first step in gaining clarity on your financial journey. Book here.   

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What you need to know: This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.