A boom time for sacrificing
It is often said that baby boomers are redefining what it is to retire, in the same way they have revolutionised every other stage of life they have passed through.
Whether it's anti-war protests or being at the forefront of gender equality, boomers have always left their mark.
Yet the evidence suggests boomers have not been adequately preparing themselves for retirement.
Big super funds regularly put out surveys on how people are preparing for retirement. The latest, a study of 1200 people aged over 50 by the industry super fund REST, found just 14 per cent felt "financially prepared" for retirement. Fifty-one per cent said they were "somewhat" prepared financially, and 35 per cent said they were "completely unprepared".
That's surprising, given the efforts this generation, born between 1946 and 1965, have taken to ensure they miss out on little.
There are several likely reasons for this lack of preparedness. First, boomers have not had the benefit of the superannuation guarantee for the whole of their working lives, because compulsory super only started in 1992.
Second, the younger boomers have had what economists call delayed household formation. They married or partnered later in life, had children later and took out a mortgage later. The consequence is that many boomers in their 50s still have a big mortgage and children at home.
Third, there was the GFC, which left all boomers with a smaller retirement nest egg than they were expecting and a diminishing number of years to compensate.
As to the solution, it is hard to go past salary sacrificing into super.
Each dollar of pretax pay put into super is taxed on the way in at 15 per cent instead of the investor's marginal income tax rate, though the tax is higher for those earning more than $300,000.
Yes, there is an annual limit on how much can be sacrificed of $25,000 - and this includes the 9 per cent superannuation guarantee. But the complaints about the lowering of the cap are coming from high-income earners; most people with a mortgage and kids at home will not come close to the cap.
The risk of investing inside super has to be managed. As people get closer to retirement they should lower their exposure to risky investments. Super funds have a range of diversified investment options, with a range of risk-versus-return trade-offs.
And most super funds can give members advice over the phone on appropriate asset allocation, given the members' goals and attitudes to risk.