The first of the 5.5 million-strong baby-boomer generation are in their mid-60s and moving into retirement. It should be a time of looking forward to doing the things they really want to do. But the global financial crisis, and its aftermath, which are still with us, have derailed many boomers' plans for a secure and comfortable retirement.
Government policies, living longer, higher debt levels and poor investment returns are conspiring to extend working lives well beyond those of our parents and grandparents. In fact, it's already happening. Australian Bureau of Statistics data released earlier this year showed the number of older people with jobs almost doubled during the past decade. A little less than 2 million workers aged 55 and over were employed last year, almost double the 1.1 million employed a decade earlier.
The continuing effects of the GFC on investment markets will strengthen the trend. A study of baby boomers, Ageing Baby Boomers in Australia, by the National Seniors Productive Ageing Centre and released earlier this year, examined the influence of the GFC on baby boomers' retirement decision-making, retirement expectations and their wellbeing in general.
The work is based on research by Professor Hal Kendig and colleagues at the University of Sydney. The data was collected in 2008 and 2009 and respondents were asked how they were faring following the onset of the GFC. More than 40 per cent said they were worse off, with 44 per cent saying they were not affected and 15 per cent saying they were better off. About one-third of working baby boomers said they were expecting to postpone their retirement.
It's likely that in the three years since the data was collected, a higher proportion of working boomers would be of that view now.
For younger boomers there are additional factors at play that will influence them to postpone their retirement. The age pension qualifying age is 65 but earlier for women born before January 1, 1949. However, the qualifying age will gradually increase so that by July 1, 2023, it will be 67 for men and women.
That means anyone aged younger than their mid-50s now will not be able to get the age pension until they turn 67. The rise in the pension qualifying age is a significant factor for younger boomers because about two-thirds of those in retirement now claim at least part of it. And that dependency on the age pension may even increase given that younger boomers will have to wait an extra two years to qualify for it while depleting more of their savings.
The planned rise in the compulsory 9 per cent superannuation is not going to be of much help. It does not reach 12 per cent until the end of this decade. Even the youngest boomers, who are not too far from their 50th birthdays, are likely to have only a few years in the workforce with 12 per cent of their pay going into their super accounts before they retire.
Working longer, even by a few years, can make a big difference in the level of income in retirement.
Calculations by Strategy Steps shows someone with $400,000 in super and earning $100,000 a year at the point of retirement at age 55 will have an income in retirement of $25,000 to age 90.
The income includes picking up at least a part pension after reaching the qualifying age. By continuing to work until age 65, income is increased to $36,000 a year.
The best retirement strategy of all is to maintain up-to-date work skills.
Frequently Asked Questions about this Article…
Why are many baby boomers delaying retirement?
A mix of factors is pushing boomers to work longer: the lingering effects of the Global Financial Crisis on savings and investment returns, government policy changes (including a rising age‑pension qualifying age), longer life expectancy, higher household debt and, as a result, the need to rebuild retirement buffers. A study cited in the article found about one‑third of working boomers expected to postpone retirement.
How did the Global Financial Crisis (GFC) change retirees’ plans and finances?
Research collected in 2008–2009 showed the GFC hit many boomers’ retirement plans. More than 40% of respondents said they were worse off after the GFC, 44% reported no effect and 15% said they were better off. The study also found the GFC increased the number of boomers expecting to delay retirement.
How many older Australians are still in the workforce compared with a decade ago?
ABS data cited in the article shows the number of workers aged 55 and over almost doubled over the past decade — rising from about 1.1 million to just under 2 million employed older workers.
What does the rise in the age‑pension qualifying age mean for retirement timing?
The qualifying age for the age pension is increasing from 65 to 67 (phased so it reaches 67 by 1 July 2023). That means people younger than their mid‑50s at the time of the article will likely need to wait until 67 to access the pension, which may force many to work longer or draw down more of their savings while they wait.
Will increases in the compulsory superannuation rate solve retirement shortfalls for boomers?
The article argues the planned rise in compulsory super isn’t a quick fix for boomers. The increase to 9% (and eventual 12% by the end of the decade) comes too late to materially help many boomers, because even the youngest boomers will have only a few years with the higher 12% rate before retiring.
How much difference can working longer make to retirement income?
Working longer can have a substantial impact. Using Strategy Steps’ example from the article, someone with $400,000 in super and earning $100,000 who retires at 55 would have an estimated retirement income of about $25,000 a year to age 90 (including at least a part pension). By working until 65, that estimated income rises to about $36,000 a year.
What practical action can boomers take now to improve retirement outcomes?
One clear recommendation in the article is to maintain up‑to‑date work skills so you can continue earning and delay retirement if needed. Staying employable helps preserve income, keep super contributions flowing and reduce the need to draw heavily on savings while waiting for pension eligibility.
How should everyday investors factor these trends into their retirement planning?
Plan conservatively: assume you may need to work longer, factor in the rising pension age and the possibility of weaker investment returns, and model retirement incomes under different retirement ages (as in the article’s Strategy Steps example). Prioritise staying employable, monitoring super balances and adjusting spending and saving plans to bridge any gaps.
Call 1300 880 160
Start a chat
Schedule a call
