Retirement in Australia

How to Transition to Retirement in Australia

Australia is in the early stages of an enormous intergenerational wealth transfer. Baby boomers, being those born between 1946 and 1964, have started to retire and/or reaching retirement age. This poses enormous challenges for our economy, and extraordinary opportunities for advisors to those baby boomers.

These opportunities exist in intergenerational transfer within families but also in advising baby boomer business owners, professionals and executives more broadly on their retirement planning strategies.

The following statistics highlight the size of the opportunity:

  • Over 60% of Australian business owners are aged 50 years or older;
    This amounts to about 500,000 business owners;
  • Over 80% of business owners intend to retire in the next ten years;
  • Based on statistics contained in the MGI Australian Family and Private Business survey, this could involve a wealth transfer of $3.5 trillion;
  • 66% of these retiring business owners are not ready for the transition;
  • Over 70% of small business owners have the majority of their family wealth tied up in the business – emphasising the need for a successful transition; and
  • In the United States, over 70% of wealth transitions fail.

If the Australian experience is similar – and the US and Australian wealth transfer statistics are similar in many other aspects – then over $2 trillion in wealth transfer is in jeopardy. For example, if, through lack of business succession planning and proper business structures and processes, a business sells at a value of say three times profits rather than four times profits, then 25% of this wealth might simply disappear, with drastic consequences for:

  • The retirement of the business owners involved;
  • Their children’s inheritance; and
  • The economy in general.

In a recent US survey, 76% of baby boomers said they intended to keep working and earning in retirement, but will alternate periods of work and leisure. 30% of those US baby boomers will continue to work for earnings, and 67% seek continued mental stimulation and challenge. (Generational change: Gen X, Gen Y and baby boomers – hype or risk, by Malcolm Anderson published in ‘Change Drivers’). Again, anecdotal evidence, and comments in the Intergenerational report referred to later in this paper, suggest a similar trend in Australia.

From the family business perspective, the top five issues for families in business are:

  1. Communication between family members;
  2. Letting go of leadership/ownership control;
  3. Providing liquidity for family owners to exit;
  4. Securing adequate capital for growth and retirement; and
  5. Choosing a suitable ownership structure for the next generation.

Advisers to family businesses should take note of these factors when undertaking assignments for their family business clients – although this will not come as a surprise to many.

Whether you are planning for retirement, looking at transitioning out of your business or are already retired and looking at what more you can do, Transition Planning is here to assist you.

Transition Planning Australia’s retirement planning tools, information and guidance will help you make the right decisions for your life after work and for the future of your business. For more information about developing a plan for your next phase and to discuss your Retirement in Australia, speak with Transition Planning Australia today.

 

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