Going out with a boom

BABY, the boomers are back! After having their retirement plans clobbered by the worst global downturn since the Great Depression, really the Great Recession, they are on the cusp of finally realising the life-after-work dream.

A staggering 46 per cent of boomers who are still toiling are doing so because of the credit crack-up, a study we conducted for the latest issue of our sister publication, Financial Review Smart Investor, has found.

But 31 per cent now expect to retire in the next five years, with almost another third in the five years after that. Their average age will be 64. To get to that point in this investment climate, though, they've had to make sacrifices beyond just delaying retirement. Twenty-eight per cent were forced to sell investments, probably at the worst time, and 18 per cent had to pull back on their lifestyle.

This is the first generation to retire with superannuation, which became compulsory in 1992, but that was too late and, thanks to the financial crisis, now far too little. A massive 78 per cent of boomers make additional contributions to redress their retirement funding shortfalls. So where will their money ultimately come from?

Sixty per cent will be from super the rest will be represented by shares and investments outside super (17 per cent), from investment property or properties (11 per cent), from downsizing their home (4 per cent) or from an inheritance (2 per cent).

The collective amount in super alone will be massive. Towers Watson estimates the average boomer will retire with $100,000 today but by the end of the 20-year generation - generally considered those born from 1946-65 - that will be more like $250,000. That means the 5.5 million boomers will eventually control an almost incomprehensible $1 trillion-plus.

And - here's the big newsflash - they're going to spend it with their ears pinned back.

Fourteen per cent of baby boomers told Smart Investor's survey they intend to blow the lot, leaving nothing to their children or family. They're going SKI-ing - Spending the Kids' Inheritance.

Only 10 per cent said they'd bequeath the most possible, compared with the 20 per cent of the previous pre-boomer generation, who indicated this was their top priority.

In fact, more of Generation X want to leave a big inheritance than do baby boomers. That too-responsible approach to money does we Gen X-ers a disservice again! But I digress.

Family does get a look-in with boomers in terms of where they want to spend their money in retirement, ranking second only behind travel. It seems they want to share their wealth in life rather than death. Third and fourth in their spending priorities are home improvement followed by entertainment and restaurants.

With the first of the powerhouse baby-boomer generation turning 65 this year, they will have a huge impact on both the sharemarket and, as they sell up, property prices.

For example, will boomers abandon growth stocks in favour of more defensive, high-yielding investments as they seek in retirement to preserve their capital and secure an income stream?

And if they all make a sea change, will that rescue the languishing beach-side property market? Similarly, what will it mean for the value of family homes in the outlying suburbs of our cities? Because it doesn't look as if that will be Gen Y's style.

There are even economic considerations. Boomers with insufficient money - or those who run out - will need to be supported by the state. Our ageing population will clearly also put a strain on hospitals and health services. And here's the irony in a nation already facing skills shortages: boomers make up the bulk of our carers, probably because wages aren't high enough to entice subsequent generations, so there'll be fewer as we need more.

Boomer or not, how, when and where they spend their money will have implications for you.

Follow this writer on Twitter @NicolePedMcK