Will you spend the kids’ inheritance?

With many Australians looking at a retirement of 30 years or more, you mightn't have a choice.

With Australia boasting one of the highest life expectancies in the world, more people need to consider funding a longer retirement, meaning fewer may be in a position to leave an inheritance.

We look at some of the expectations, and the reality around leaving something behind.

Expectations around inheritance

According to a national study published earlier this year1:

  • More than 75% of Australians under age 65 consider it a possibility that they will inherit property, cash or other types of assets
  • The expectation of receiving property or cash was highest among 25 to 34 year olds, with 23% indicating it was a sure thing and 57% indicating it was either very likely or fairly likely
  • Almost 40% said they strongly agree that older people should enjoy their retirement and not worry about leaving an inheritance, with a further 39% saying they tend to agree
  • Over 25% felt to some extent older people should be careful with their money so they may be in a position to leave something behind.

Is leaving a financial legacy realistic?

Regardless of people’s expectations, the reality is that not everyone will be able to afford a comfortable retirement, let alone be able to leave an inheritance.

Reasons it may be difficult include:

Australians are funding longer retirements

Australians are living longer, so more people require a bigger pool of savings to fund additional years in retirement, with many also having to explore the possibility of working for longer.

To put it into perspective, around 40 years ago, the number of people over age 85 was 80,000 and in another 40 years that number is projected to reach around two million2.

The Age Pension alone may not be enough

June 2016 figures from the Association of Superannuation Funds of Australia show a 65-year-old couple retiring today needs an annual income of $59,160 to fund a ‘comfortable’ lifestyle in retirement, assuming both people are relatively healthy and own their home outright3.

By comparison, the maximum Age Pension rate for a couple is currently $34,382 annually4.

Baby boomers benefitted from super later than most

Baby boomers only had the benefit of compulsory super contributions toward the end of their working life and as a result haven’t had as much time to necessarily accumulate a pool of super savings big enough to self-fund their retirement.

Many adult children receive assistance earlier in life

Nearly 75% of parents are providing financial support to their adult children earlier in life, with many young people looking to the bank of mum and dad for assistance with big ticket items such as paying off their education debt, getting into the property market5 and covering wedding expenses6.

Nearly one in four people aged 20 to 34 also receive financial support by living at home, with more than half of those who have moved out returning within two years7.

Australians want to make the most of their retirement

With Australians living longer more active lives, people want to be able to have fun in retirement and for some, that could take precedence over leaving something to their children.

Figures also show for those wanting to live a comfortable lifestyle in retirement, about 28% of their weekly budget would go towards leisure and recreation8.

What more should you think about?

As a parent you may feel inclined to help your children financially, but remember not all assistance has to be financial. For example, you could help them create a workable budget, teach them new skills and ask them to identify non-financial ways to support them.

Whatever your goals and future plans happen to be, it may be worth addressing these with your family early on to avoid any surprises down the track. As part of this process it may be worth updating your will and making sure you’re across any relevant estate planning requirements.

Where to go for assistance

For further information speak to your financial adviser. If you need help finding one, call us on 131 267 or use our find an adviser tool.


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© AMP Life Limited. This provides general information and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person.