Those now reaching retirement do not want to restrict their lifestyle, writes Zoe Fielding.
For the Baby Boomer generation – people born between 1946 and 1964, now aged 57 to 75 – retirement is clear and present.
The first of the Baby Boomers have already retired, while the remainder have less than a decade before they'll be able to access their superannuation.
The pressure is on to accumulate savings to provide for a secure and comfortable future.
Leading Australian social researcher Mark McCrindle, of McCrindle Research, says Baby Boomers have benefitted from the superannuation policy changes implemented over the past decade, with the introduction of the super guarantee, but the rising cost of living means they'll need more savings than ever to accommodate a comfortable retirement.
"The retirement lifestyles that we expect are pretty high level these days," he says. "Ensuring we don't run out of funds [altogether is the first challenge], but secondly, we don't want to run short and crimp our lifestyle."
Pursuing the good life in retirement
Baby Boomers can expect to live longer than previous generations, but they don't consider themselves old. After retirement they plan to stay active and keep spending on lifestyle pursuits, travel and going out.
"It's an age group where people have finished their key expenses," McCrindle says. "[Previous generations] would have a car and run it to the ground. That's not the case with Baby Boomers. They're retiring and buying a new car.
"They're [also] not downsizing [their homes]; they're upscaling to nicer or newer accommodation, close to the city, close to the action.
"It's a generation that's worked hard and saved hard and doesn't have the mindset of previous generations that was to leave money to their kids. They've funded children at home later, so they're happy to spend it themselves."
Despite this general trend, he adds, many Baby Boomers are looking to save a little extra so they can offer financial help to children who may be struggling.
Baby Boomers are working longer
With their longer life expectancies and young-at-heart outlook, Baby Boomers are staying in the workforce longer. Over the past decade or so the average age of retirement has risen by about four years for men and three years for women, according to the 2017 Household, Income and Labour Dynamics in Australia survey.
Only 28 per cent of men aged between 60 and 64 were retired in 2015, down from about 50 per cent in 2001, HILDA data shows. For women, the proportion dropped from 68 per cent in 2001 to 48 per cent in 2015.
Baby Boomers are also challenging the traditional concept of retirement by working part time, consulting, starting businesses, volunteering, or switching jobs to follow a passion rather than abandoning the workforce entirely.
In fact, while Millennials may have the reputation for pursuing the freelance lifestyle, Baby Boomers are the group most likely to choose freelance, casual or contract work, with 63 per cent preferring these flexible options, according to McCrindle Research.
However, not all Baby Boomers have the option of working longer. The HILDA survey revealed that while most people retire voluntarily, more than one-quarter retire as a result of poor health – their own or another person's. And between 10 per cent and 15 per cent of people retire involuntarily as a result of job loss.
Essential retirement-planning tasks for Baby Boomers
Given this picture, Baby Boomers would be wise to expect the best but prepare for the worst when it comes to their retirement. With just a few years left until they exit the workforce, they should be putting the finishing touches on plans for achieving their post-work goals.
A key priority for Baby Boomers entering retirement will be to sustainably meet daily living costs and lifestyle expenses. It is hard for the age pension alone to do this.
According to The Association of Superannuation Funds of Australia's retirement standard, a retired couple needs an annual income of around $60,264 to support a comfortable lifestyle, while a single person needs $42,953 per year.
This amount will vary according to individual preferences, age and life expectancy. It would also be prudent to set aside an emergency fund to cover unforeseen expenses such as healthcare and long-term care costs.
Integral to Baby Boomers' retirement planning should be taking advantage of strategies to maximise their superannuation fund balances. For example, those thinking of downsizing their home or relocating could take advantage of of recently introduced rules that allow retirees to contribute a lump sum from the sale of their primary home into their super fund. A couple can collectively deposit $600,000, while singles can contribute up to $300,000.
Investment returns will play a part in securing adequate income in retirement. This demands thoughtful consideration of super investment options. But careful planning is needed to ensure Baby Boomers' money lasts as long as they do. By using a range of income sources – from assets such as shares, bonds and term deposits; rental properties; freelance or consulting work; social security; an annuity; and perhaps a guaranteed pension – Baby Boomers can prepare themselves for whatever adventures lie ahead.
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