It’s a tough time for baby boomers
The last of the baby boomers turned 50 at the end of 2014. Often it is this milestone that starts people really thinking about saving for their retirement.
Boomers have changed each life stage they have gone through, and older boomers are redefining what it means to retire. They want to be able to enjoy the lifestyle to which many have become accustomed during their working lives.
However, there are challenges. While many have benefited from rising house prices, for many others, the size of their superannuation accounts is not big enough to afford the retirements they would like.
A survey on behalf of industry super fund REST, released early 2013, found a disconnect between what boomers expect their retirement to be like and what reality has in store.
It found 35 per cent of boomers described themselves as completely unprepared for retirement, 51 per cent as somewhat prepared and only 14 per cent as financially prepared.
In a second REST survey of over-50s, released in June last year, one quarter said they had less than $50,000 in super, with a further 12 per cent having $50,000 to $100,000 in super.
Not surprisingly, only half of over-50s say they are looking forward to retirement.
Nearly two-thirds estimate they will need to rely on the age pension to supplement their retirement income, highlighting the fact that the system came too late for some to get the maximum impact.
However, younger boomers are going to be waiting longer for the age pension and the pensioner concessions that come with it.
The Abbott government is to further increase the qualifying age for the age pension to 70 by July 1, 2035. The increase will be phased-in. The higher qualifying age will affect younger boomers more than is likely realised. The exact qualifying age will depend on actual birth date but, roughly, anyone aged about 49 or younger now will have a qualifying age of 70.
As well, it is only a matter of time before the preservation age, the age at which superannuation savings can be accessed, is increased. Like the increase in the age pension qualifying age it would be increased gradually, but could rise to age 65 to maintain the five-year gap with the new age pension qualifying age.
However don’t despair if you are in this situation – there are ways to address the issue. Firstly it is worthwhile modeling how much money you need for retirement and whether you are on track to get there. Doing this with professional advice is advisable. By reviewing your retirement nest egg and possibly making some small changes such as spending a bit less, you may be able to live better in retirement.
Though there are challenges, retirement can be exciting. It is the time you can do what you want to do. However you do need a plan and it is never too late to start.