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Highlights
- Generation X has recently overtaken Baby Boomers in property wealth, signaling a shift in wealth distribution.
- High interest rates and economic shifts are contributing to the change in generational wealth dynamics.
- Massive wealth transfers from Baby Boomers to Millennials are anticipated in the near future.
In the ever-evolving landscape of Australian wealth, one notable shift is emerging: Generation X is surpassing Baby Boomers in property wealth, according to new data from KPMG. While the difference between the two generations is small—at $1.31 million for the average 51-year-old Gen Xer and $1.30 million for a 69-year-old Baby Boomer—it marks a significant change. Millennials and Generation Z, however, still lag far behind, holding just $750,000 and $69,000 in property assets, respectively.
This growing wealth gap can be attributed to several factors. Many Baby Boomers are beginning to transfer their assets to the younger generations, either through living bequests or estates. This has given a boost to the property assets of Generation X, which, although substantial, tend to come with more debt compared to the wealthier Baby Boomers who own property free of debt. Additionally, the investment strategies of Gen X are yielding high returns, especially as many from this generation have substantial share portfolios, with an average holding of $256,000. In contrast, Baby Boomers hold only $206,000 in shares, while Millennials and Gen Z are well behind at $51,000 and $7,000, respectively.
While older generations are turning to more conservative investments as they retire, Gen X has benefited from a more aggressive approach to share market investments both inside and outside of superannuation. As a result, this generation has gained a financial edge, ready to outpace the Boomers in total wealth in the near future.
Looking ahead, the future seems brighter for younger generations too, despite their current wealth disparity. As Baby Boomers transfer nearly US$90 trillion in wealth to Millennials in the coming decades, Australian Millennials can expect their own share of inheritance, potentially further narrowing the wealth gap. Additionally, mandatory superannuation contributions, expected to grow over time, offer Millennials and Gen Z a solid foundation for wealth-building. If managed effectively, they may enjoy a more comfortable retirement, even if their wealth remains limited during their working years.
In terms of investments, share market players like (ASX:FMG), (ASX:BHP), and (ASX:XRO) may provide valuable avenues for this generation's financial growth, creating opportunities for both growth and security.
As generational wealth transfer accelerates, there will undoubtedly be greater competition for valuable property assets, and the economic focus will shift towards strategies that ensure a more equitable financial future for all.
