Hard times loom for too many boomers
Date
December 29, 2014
Brisbane Times
Retire in peace: For many baby boomers retirement may not be as comfortable as they would like.
The last of the baby boomers will turn 50 by the end of the this year. Often it is the big five-o that starts people to really think about saving for their retirement.
So with all of those born in the two decades to 1964 now either retired, or galloping toward it, there are bound to be changes to the economy and society in general.
Boomers have changed each life stage they have passed, 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.
More boomers are entering retirement with debt and their adult children are staying at home for longer, which is making it harder to save.
Not enough saved
A survey on behalf of industry super fund REST, released early last year, 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 are "completely unprepared" for retirement, 51 per cent as "somewhat prepared" and only 14 per cent as financially prepared.
Universal compulsory super only started in 1992, so boomers, older ones in particular, have not had the benefit of the superannuation guarantee over their whole working lives.
In a second REST survey of over-50s, released in June this 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. It seems it is more likely to be outings in the tinnie rather than cruising down the Rhine or Loire.
"This group who started their working lives before the advent of compulsory superannuation are trapped between a rock and a hard place," says Damian Hill, the chief executive of REST.
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," he said.
Wait for age pension
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, very roughly, anyone aged about 49 or younger now will have a qualifying age of 70.
The youngest boomers (those aged about 50) will be waiting until they are 69 for the age pension. For those aged 55, it is 67 and for today's 60-year-old it is 66.
It is not just a longer wait for the pension, but starting in 2017 a couple of measures will tighten access to the pension and the fortnightly pension will be indexed to inflation, rather than to wages, which grows more quickly than inflation.
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.
Read more: http://www.brisbanetimes.com.au/money/planning/hard-times-loom-for-too-many-boomers-20141212-1266ig.html#ixzz3NJor5IzA
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