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Can boomers bridge the retirement planning gap

Tags Retirement Planning Retirement Savings National Savings and Debt Barometer NSDB Financial Health Barometer
Category Retire Financial Health Barometer
Retirement Savings

We’ve recently completed our 2013 National Savings & Debt Barometer, a survey that gauges Aussies’ attitudes towards the national and global economies and, perhaps more importantly, what their attitudes are towards their own financial future. Since last year’s survey, its clear Australian’s have become better at saving, but there are still concerns about how many Baby Boomers are for retirement. Writer Anthony Fensom, joins us to discuss further and share a few tips for getting your retirement plan back on track.

Many Australian baby boomers may drift off to sleep at night to visions of a comfortable retirement in a little cottage on the coast, resplendent in the time to take up new hobbies and enjoy visits from healthy grandchildren. Are those dreams being stolen? Can the nation’s “most profligate generation” still afford to retire?

The 3-million-strong post-war generation born between 1946 and 1965 has benefited from free university education, tax and super concessions and property booms. Despite – or perhaps because of – this prosperity, many have run up debts on everything from investment properties to overseas holidays and their children’s education.

According to CPA Australia, the result is that the boomers’ debts on retirement match their savings, meaning a far less comfortable retirement than many might have envisaged.

Gap or chasm?

RaboDirect’s 2013 National Savings and Debt Barometer (NSDB) found that, at an average of $180,467, the boomers’ current super savings are well short of their estimated $750,000 required to retire comfortably for 20 years.

Compared to Generations X and Y, the baby boomers have the biggest discrepancy between the super sum they expect to receive and what they believe they will actually need, with Gen X estimating around $600,000 is required compared to Gen Y’s $487,000. All three generations consider they will have approximately $300,000 upon retirement, well below forecast requirements.

Compounding the problem, 29 per cent of baby boomers who are yet to retire expect to do so with a mortgage, according to the NSDB. As a comparison, 20 per cent of Gen X, born from 1965 to 1981, expect to retire with a mortgage, above the 16 per cent of the younger and more optimistic Gen Y.

How can you act now?

It’s not all bad news. When asked to imagine losing their job tomorrow, 33 per cent of baby boomers said they could survive more than 12 months on their existing savings, compared with 15 per cent of Gen X and 11 per cent of Gen Y.

Even if that doesn’t describe you, it’s never too late to start acquiring some good savings habits. Ask your tax accountant or financial planner for advice, just as 33 per cent and 20 per cent of baby boomers do, respectively. Consider consolidating your super funds to get the most out of your money and avoid any high-risk investments.

Since there is no mandatory retirement age in Australia, you can always continue to work longer. Part-time and work-from-home options abound, especially for digitally savvy boomers.

It’s not too late though:

12 Tips that could help get your retirement plan back on track

  1. Seek professional financial advice.
  2. Consider salary sacrificing (pre-tax contributions to your super).
  3. OR build a buffer with a regular monthly savings plan.
  4. Downsize the family home.
  5. There can be savings by having your life insurance through your super fund.
  6. Compare the fees you pay on your super fund.
  7. Consistency counts: Re-access super funds based on the how they have measured of the last 3 years.
  8. Invest any windfalls from say inheritance, into super or savings.
  9. Obtaining a reverse mortgage could free up equity.
  10. Work longer or consider working part time.
  11. Pay off debt before you retire.
  12. If you haven’t already set a weekly budget – reduce expenses.

If nothing else, boomers can rest easy knowing their retirement gap woes serve as a cautionary tale for the younger generations, the need to save early to avoid paying the price later.

Sources