David Koch says older Australians need to make sure they’re ok before passing on any wealth to their kids or grandkids. (Source: David Koch/Facebook)
We all want our kids to have a better life than the one we enjoyed. That’s why housing affordability has become a real worry for aging parents.
Nobody wants to see their children struggle. But I’m a little concerned that guilt ridden Baby Boomer parents could end up putting their retirement lifestyles at risk, by digging a little too deep.
Billions of dollars will be passed down to younger generations in the years ahead. Compare the Market’s Household Budget Barometer shows that around 76% of Australians aged 59+ have done some inheritance planning, such as creating a will.
More than half (62%) of those people expect to leave at least one property to their children – a further 14% hope to pass on two or more.
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It’s extremely generous, but personally I don’t think you owe your kids any sort of inheritance.
You owe your kids a good education, a stable family life and a good upbringing. You shouldn’t feel obliged to pass on money before you die – especially if it affects your retirement life.
Because here’s the thing: in a lot of cases, Millennials and Gen Z and future generations are probably going to retire with way more money than you!
And it’s all thanks to compulsory superannuation.
When we Baby Boomers started, it was set as a miserly 3%. Then it went to 4%, then 6%, but it took ages to get to the levels we now enjoy today.
Young people today are going to benefit from contribution rates now set at 12% their entire working life. If your kids have good jobs and keep working, they could retire with triple the amount you have.
So don’t compromise your retirement and your life just because your kids are putting pressure on you to help them build their own! You have got to let them work it out.
We are heading into the greatest intergenerational wealth transfer in Australian history.(Source: Getty)
While this generation does face a bigger challenge getting into the property market, there have always been struggles.
I was envious of my parent’s lifestyle when I bought my first home because it was a real slog with much higher interest rates.
At times we hardly left the house. We couldn’t afford to eat out at restaurants when our repayments were so big.
Now the tables have turned, and my kids are envious of me! It is a bit of a cycle – and I reckon we need a little more faith in the process.
Around $4.9 trillion could be passed on from Baby Boomers to their children, grandchildren and charitable benefactors over the next decade according to research from CoreData.