By Sharon Bradley
This article originally appeared in the Good Weekend
There are far worse places to be approaching the end of one’s working life than Australia in 2019. Baby Boomers, whose privileged, post-war generation has dramatically reshaped the terrain of just about every decade it has inhabited, are also, it seems, redefining retirement. For a start, they’re living longer than previous generations.
Life expectancy has changed but pressure mounts on affordability
Back in 1908 when our forebears formulated the old age pension, life expectancy was 55 for a man and 58 for a woman. Today, it’s 80 and 84, and climbing: by 2050, Australia will be home to 50,000 centenarians. But living longer has a dark flip side: concern that we might not be able to afford to.
“A terrific way to not worry about your retirement money is to die,” deadpans Paul Clitheroe, money expert and chairman of the federal government Financial Literacy Board. “We’re stressed because of the wonderful lifestyle that the vast number of us are leading: how will we carry on funding it when we stop working?”
Planning alleviates anxiety, he says – and it’s easy. “Write down on the back of an envelope how much you need to live for a year. How much to run your car? The house? The little tin boat you go fishing in? How often do you want to go overseas? That’s your annual budget. Multiply that figure by 17 and boom – that’s your capital target. Then have a look at how much super you’ve got.”
One-fifth of Australians aged 45-plus intend working into their 70s
According to the Association of Superannuation Funds of Australia, the yearly budget for a couple wanting to retire “comfortably” is $62,000, and $44,000 for a singleton. A “modest” allowance is $40,000 (couple) or $28,000 (singleton). Meanwhile, the average superannuation balances for retiring Australians in 2015-16 were $270,710 for a man and $157,050 for a woman. Even taking into account the built-in comfort of the Age Pension, it’s not hard to see why one-fifth of Australians aged 45-plus in the workforce who hope to retire eventually are planning on working into their 70s, while almost half – 40 per cent – still don’t know when they’ll be able to hang up their boots.
“I think for a lot of people, super just felt like another form of taxation,” says Tim Steele, head of retirement and investment solutions at MLC. “They preferred to have the cash now rather than tomorrow because the concept of deferred benefit can be tricky to grasp. But when they gain an understanding of compound interest – ‘the eighth wonder of the world’, as Einstein described it – they wish they’d put more away earlier.”
Women are starting to take responsibility for their future
Twelve years ago, three-quarters of 70-plus Australian women had never had superannuation coverage. By 2017, the situation had improved, but the trend highlights an ongoing vulnerability. The number of women aged 60-64 in the workforce has nearly doubled in a decade (now at 44 per cent), according to the Australian Institute of Health and Welfare.
“Men typically die earlier than women,” Clitheroe says. “Factor in midlife divorce and there’s every chance of an older woman finding herself alone. What we’re seeing clearly now is younger women starting to take responsibility for their own financial futures. They’re not going to rely on a bloke.”
Retirement today looks different thanks to living healthier
An overwhelmingly positive trend for retiring Boomers – and a natural consequence of living longer and more healthfully than ever – is a surge in physical activity, and, by extension, travel.
Retirement today, Clitheroe says, looks very different to the way it did 20 years ago. “It used to be the beginning of the end,” he says. “Now there are Australians seeing out their retirement living on boats in the Aegean. If we’re lucky enough to own our home, we can rent it out and live very comfortably overseas.”
Steele also sees today’s retirees doing things differently. “Our grandparents might have been happy to do the gardening three times a week and sign up for a TAFE course,” he says. “Now, downsizing and outsourcing are key trends. Retirees are selling up, buying somewhere smaller and doing a language course in France or learning how to cook in Italy. And they’re hiring someone else to do the gardening.”
It’s never too late to plan for the future. Our 30s and 40s are a time of peak expenditure, but it’s possible for our 50s and 60s to dawn blue-skied and brimming with potential – particularly if the kids are grown and the mortgage paid off, Clitheroe says.
“Now you can really start to top up your super and build an investment portfolio,” he says. “Remember, these days most Australians create most of the wealth they have in the latter part of their lives.”
Michele Levine, CEO at market research company Roy Morgan, agrees: “What’s jumping out of our data is that the wealth is very much with our older Australians.
They’re the ones who are supporting the next generation in very active ways.” Indeed. Grandparents are taking care of almost one-third of the nation’s children while their parents work, while more than half of first home buyers in 2016 entered the market with the financial help of their Boomer parents.
“These aren’t folk to be written off – at 75 or 80 or 85,” Levine says. “There’s no deadline any more. It’s all about how you feel.”
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