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Can Millennials maintain their lifestyle as the Boomers retire?
With considerably more people exiting the workforce at age 65 than entering at age 15, younger Australians could be forced to foot the bill for retirees, an analyst has said.
Can Millennials maintain their lifestyle as the Boomers retire?
With considerably more people exiting the workforce at age 65 than entering at age 15, younger Australians could be forced to foot the bill for retirees, an analyst has said.
During an address at the Tax Summit, futurist, analyst and adviser Bernard Salt explained how Australia’s issue of an ageing population may find it in a situation where the income tax paid by working Millennials is not enough to fund the aged care pension and other benefits many Baby Boomers would need to continue funding their lifestyles.
“Yes, the Millennials are paying more tax, but yes, there are more Baby Boomers pushing into retirement with big expectations for how they think they should live,” Mr Salt said.
“We need more productivity in terms of output and more productivity in terms of tax. Or we need to import more workers, or we need to ask the Baby Boomers to moderate their spending expectations. Or all of the above, and it still ain’t gonna be enough.”
Despite the country’s success, Mr Salt believes it could lead to higher consumer demands for young Australians who might now be settled with a higher tax bill to look after older Australians.
“When you have 29 years of unbroken prosperity, you actually change consumer culture. You can max out your credit card, because every year is better than the last,” Mr Salt said.
“It leads to a rising expectation of consumption. We’re no longer happy with a caravan holiday to the Coolangatta caravan park, we want a Jetstar holiday to Bali. We have upped the ante in how we expect to live. That is where we have translated our wealth, into lifestyle.”
However, it is not all doom and gloom for Millennials who, despite facing tax pressures in as little as five years, could also benefit from their elders’ nearly three decades of uninterrupted economic growth.
“Ultimately, there’s going to be a transfer of wealth, as the Baby Boomers sadly die off and pass their wealth to the next generation, the Millennials, then in their mid-to-late 40s,” the futurist explained.
“One of the greatest wealth transfers in history, I would suggest. How that is managed and treated is something I think we’ll be debating during the 2020s.”
However, despite the challenges raised by an ageing population and a tax system in need of reform, Aussies are “in a pretty good position”.
“Even if there are challenges in the future, I wouldn’t want to be anywhere else facing those challenges,” Mr Salt concluded.
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