Sign of the times

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 super contributions.

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.

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