A recent survey, conducted by AMP, a banking and superannuation company in Australia, has illuminated the predicament faced by many baby boomers. Despite recognizing the financial challenges of their children, they are hesitant to sacrifice their retirement lifestyle to provide them with financial aid.
The survey revealed that a significant majority of Australians over the age of 65 believe that their children are grappling with tougher financial challenges than they did at the same age. Additionally, three in four of the respondents expressed the importance of passing on their wealth to their children, indicating a sincere desire to support their offspring during difficult times.
Ben Hillier, AMP’s director of retirement, has drawn attention to the conflicting sentiments that many older individuals are grappling with. While they acknowledge the hardships faced by their children and express a willingness to help them, they are also anxious about jeopardising their own retirement comfort and stability.
According to Hillier, a significant portion of the surveyed older Australians indicated a willingness to assist their children if they could still maintain their current living arrangements. This could involve options such as taking out a “reverse mortgage” or releasing equity from their homes, allowing the older generation to stay in their familiar and supportive environment while simultaneously providing financial assistance to their children.
One of the key findings of the survey is the revelation that approximately 90% of intergenerational wealth is transferred as inheritance, often to individuals over the age of 50. Hillier emphasized the importance of providing assistance to the younger generation at a time when it would be most beneficial, such as during the phase of raising children or entering the housing market. However, the current systems and regulations present obstacles to this ideal scenario.
The survey identified various barriers and disincentives that deter older Australians from passing on their wealth to their children, such as stamp duty and transaction costs related to downsizing or selling the family home, as well as implications on aged pension means-testing and penalties related to large financial gifts when releasing equity from the home.
In light of these challenges, Hillier called for a re-evaluation of government legislation to facilitate a smoother transfer of wealth from older generations to their descendants. This would require addressing the existing financial implications and disincentives that currently hinder such intergenerational support.
The survey results provide valuable insights into the complex dynamics surrounding financial assistance and inheritance among Australian families. They underscore the genuine concern that many baby boomers have for their children’s financial well-being, while also highlighting the practical obstacles that impede their ability to provide meaningful support without compromising their own retirement security. As the population continues to age, finding effective solutions to this dilemma becomes increasingly pertinent.