The Great Wealth Transfer

Sunday, December 8th, 2019

Over the next twenty years, a massive transfer of wealth will happen as baby boomers age and eventually pass away. This transfer will be on a scale not seen before. Net worth statistics for June 2018 put the total net worth of all New Zealanders at just over $1 trillion, of which $334 billion is owned by people over the age of 65. That’s around a third of our total wealth that will change hands over the next few decades. It’s not just New Zealand that is experiencing this trend. Researchers around the globe are coming to the same conclusion. What is being called The Great Wealth Transfer of the 21st century is expected to bring big changes to financial planning.

Of the total wealth of New Zealanders, around 39% is held in property, and the significant rises we have seen in property prices led to around an 18% increase in individual net worth between 2015 and 2018. However, talking about the transfer of wealth is a taboo subject. We are not good at talking about money, and there is still a great reluctance on the part of most Kiwis to let their children know how much they are likely to inherit. This gets in the way of good financial planning.

Of course, passing money on to the next generation doesn’t need to be done at the time of death. Many people are choosing to give early inheritances by way of helping children buy a first house or set up a business. However, thanks to increased longevity, our money has to last a lot longer in retirement and this creates uncertainty around how much can be given away to family or charities before the end of life. For baby boomers, the key to successfully transferring wealth transfer is good planning.

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