Navigating the complexities of retirement planning and intergenerational wealth transfer is increasingly important for Australian families. As the ‘Bank of Mum and Dad’ (BoMaD) plays a more prominent role in assisting younger generations, understanding the implications for both retirees and their heirs becomes essential.
Intergenerational wealth transition
Australia is on the cusp of its largest wealth transfer in history, with an estimated $3.5 trillion expected to pass from Baby Boomers to younger generations over the next two decades (Productivity Commission, 2021). However, studies suggest that without proper planning, a significant portion of this wealth may be lost by the second generation, and even more by the third. Implementing clear succession plans and fostering open family discussions about wealth management can help preserve and effectively transfer assets.
Managing superannuation for retirement and legacy
Superannuation is primarily designed to provide income in retirement, but it can also play a role in estate planning. Retirees can use strategies such as Account-Based Pensions to generate a steady income while managing their remaining super for future beneficiaries. Staying informed about legislative changes and considering strategies such as Binding Death Benefit Nominations (BDBNs) can help ensure assets are distributed according to one’s wishes.