Well that’s a provocative headline. It was a question posed in a recent article in the Financial Review. The full headline was… “Baby Boomers are loaded. Why are they so stingy?” Now like most newspaper headlines they are designed to get a reaction and encourage people to read. And to be fair this article certainly didn’t make the case all baby boomers were rich, nor that they were all stingy. But it did highlight some really interesting points.
Firstly there are lots of baby boomers. And as they have been retiring this wave of boomers has major economic consequences. They are leaving the workforce depriving us of experience, skills and labour. But instead of working and building a nest egg there is also an expectation that once retired they will spend more than they earn and gradually reduce their savings. This would pump more money into the economy, potentially increasing inflation but also economic growth and the growth of wages for younger workers.
This hasn’t actually been happening. Recent evidence from around the world including Italy, Japan and the U.S.A indicates boomers are very often savers not spenders. Many die wealthier than when they retired.
There are a few reasons for this which I’ll cover now.
- Firstly, people are living longer. 150 years ago life expectancy in Australia was just 35 years. Today it is closer to 84 – a bit lower for men and a bit higher for women. And for someone already aged 67 their life expectancy is around 86. And with medical advances life expectancy could continue to increase. So your money needs to last longer and you don’t know exactly how much longer. So naturally some people will spend conservatively. Jeremy Duffield has written about this in his Retirement Made Simple series.
- It’s difficult to know how much to spend when you also don’t know for sure how much your investments will earn. Again Jeremy has written about that recently.
- It is very hard to get your head around spending your savings. This is particularly the case when you don’t have new income in the form of a salary to top it up. Having less and less each year is not the mindset many of us have.
- Covid changed many people’s behaviour. For example retirees spend less on dining out now than they did pre Covid.
- And finally there is the bequest factor. People inherit more today than they did 30-40 years ago. Whether this is because people are wealthier and just naturally have more to leave their estate or because there is a stronger bequest motivation isn’t clear. But it is clear bequests are growing.
I have written previously that it is nobody else’s business as to whether you choose to save, spend or leave everything to your estate. What I am more concerned about is people that let the uncertainties of life expectancy or investment returns stop them from enjoying their best possible retirement. So here are a couple of things that could help you think about your spending in retirement.
- Check your life expectancy. Our life expectancy calculator can help you work out not only your own and your partner’s life expectancy but also the probability at least one of you will still be alive at ages 70, 80, 90 or 100.
- Get a forecast of the impact different levels of spending will have on your remaining wealth at ages 70, 80 ,90 or 100. You can do this yourself here or else book a Retirement Forecasting appointment with one of our advisers.
So does any of this resonate with you? Are a spender or a saver? And would you prefer to be doing more of the one or the other?
I’m of the opinion us baby boomers have also come from an era of making do with what you have and saving for expensive items or going without I think it’s a case of do you NEED it or do you just want it. I think we may have over indulged our children because we dud without most of the time and operated within our income. I for one have brought my children up to work save then buy not with attitude of Want it now. I really think boomers etc have a reality of appreciating paying their own way and living within their means.
Totally agree with that coming from a large family and even going without meals , and hand me down clothes , teaches valuable lessons in life . We saved and always bought second hand furniture or appliances . Only now retired and have enough to live on and own house ( retirement village , paying fees . ). We have our little nest egg enough to cover ant unforseen happenings and a funeral fund. Holidays we missed out on are a thing of the past . Happy with what we have now .
Well said Carol, the young ones (by majority) seem to want it all now, and therefore find it hard to save and “ Live within their means”.
Most of us with relatively high super balances have got there by spending less during our working lives and either putting extra into super or acquiring other assets/investments. So I classify us as savers. Once we retire, all of a sudden we have to provide our own living expenses and so we have to determine how much we need and how much is available, some by way of pension plus drawing from our super or other monies. This is where many people can’t get their heads around how to work out what they can take out. So, being “savers” they take the conservative route. Instead of going for the maximum they prefer to go for the safer smaller amount.
One of the blockages to drawing and thus spending more is accepting that your total investments will reduce and if you use the maximum each year then around the time that you die it will be nothing. This is a difficult concept for savers.
Of course another issue can be what you actually want to spend money on. If you own your own home you usually have it furnished and don’t need to buy any new white goods and have a reasonably new car then other than normal expenses such as rates and insurance and the odd bit of maintenance your other costs are food and clothing and medical. Often retirees take holidays, the prices of which can vary dramatically. I gift relatives also. After that should one spend just to use up money? Here I am using the “loaded baby boomers” investments as my basis due to the “are baby boomers stingy” headline.
So two things, one should people just spend for the sake of spending and two can we cope with watching our super reduce to almost nothing. I confess I for one cannot not.
With respect to the lack of expertise in the workforce, I am a 73 yr. old woman with bone cancer. My husband is 75, has had bypass surgery, a stroke, asbestosis and diabetes. We own our home and are part-pensioners. I work one day weekly, a 12-hour day with travel, to keep our nose above water in a field I specialized in 20 yrs. After the allowance of a $300 a fortnight Work Bonus, I lose .50 cents to the dollar. We have a humble pension, after working in a third world country 15 years, we started late. Would it not encourage pensioners more if Australia adopted the New Zealand method, of once your pension age and continue working, your salary is exempt from the income tests? Especially if one has no other assets other than their house. We have 2 cars that are 18 & 14 yrs. old. Maintenance and medical costs chew up most of our cash. In addition, because we get a small pension from the UK that was frozen decades ago, we are part pensioners rather than full pensioners, even though the total income we get is equivalent to a full pensioner. So, the amount we would have to pay for a bit of support with a Care package makes gaining one unobtainable. We plod on with a grateful heart, but shouldn’t pensioners in their mid-70’s in similar situations be able to at least keep the salary they earn exempt of the income test? Would that not encourage more senior citizens to share their expertise and not have to live such a pressured life in their twilight years?
Totally agree Linda. I have been emailing our local Federal MP, Peter Dutton , on this exact subject for several years now. NZ have had their system in place for over 40 years. All qualify at 65 years of age. It becomes part of your taxable income, so if you continue working you will pay a relative amount back in PAYGW. No means testing required, available to all, and allows for 12 weeks out of the country if you take an overseas holiday. No enormous army of Centrelink employees checking on your means test calculations every 6 months. Lets super receivers and the Govt. plan on income/costs. Much better use of funds than $500 million on referendum, and $40million on advertising to tell us how we will “benefit” from their little tax rate reduction in July !
Very interesting use of the word “stingy”. Our youngest son of 2 has used a better choice of word and that is “thrifty”. I sure think we are.
I have worked from the age of 16, got a trade so the first four years of training I was on low wages. When I become a tradesman wages were a bit better, but when I settle down with a wife, two children and a mortgage, there was no change to save as one of our children needed medical attention, so my wife was unable to work and I had to worked two jobs just to keep our heads above water. Superannuation didn’t come in until early 80’s, which over the years companies when bust and you lost all money owing including your super. So by the time I retied (I am now 73) small amount of super under $5K, I worked up to the age of 71 and then worked for another one year one day a week, while on a pension. Now my wife and I have live separately as we can’t servile to live together.
Superannuation hasn’t always been part of the Baby boomers life.
We had to consider our future long before it was introduced, you bought house, raised a family and hopefully earn to save for retirement.
commenting on the topic ” are baby boomers stingy”.
all my working I have been responsible and careful with my spending, because we had to, to survive and have some kind of living.
Now in retirement, I own everything, have a good income stream, a modest amount in private super, and a healthy saving account.
I now advise any younger generation (if they ask) try to organise your whole working life so when you come to retiring age you are able to own everything and still have financial support to enjoy your retirement.
If this is classified as stingy well I must be guilty.
Well said Ian, I am in exact same situation, worked hard to pay off my mortgage in the last few years of employment and stack as much money as possible into my super with salary sacrifice. The last working years were tough with budgeting everything but now I can reap the rewards of that period with some pride in accomplishing my own situation. Call me stingy if you like, but I know I worked hard for my situation. Of note I now spend much more than I did when working as my disposable income now exceeds what I had in my last 5-6years of working life!
Are baby boomers well off, not a chance. We have scrimped and gone without just to make ends meet. We have been robbed by banks, shopping centers and governments all the way through our lives. Now we have just been ROBBED of two years of our taxes via the aged pension being extended to age 67. That means two years of us paying the TAX that actually PAYS for our own aged pension has been stolen by the lousy grubberment, the biggest crooks of them all. Most can’t see any problem with it. I CAN.
Peter:
Yes, many Baby Boomers may have scrimped & gone without – and that is admirable.
And many accumulated vast wealth in property & shares & Super, whilst doing so!
Most of your statements are demonstrably false:
Baby Boomers are statistically the wealthiest of all cohorts in Australia, and by some margin!
They benefited from cheap (often free!) university, cheap housing, and the resources boom AND housing boom that drove national wealth vastly higher!
Aged Pension age was increased as people are living much longer than when the Aged Pension was conceived, and many Boomers don’t qualify for an Aged Pension anyway (or only a tiny one) due to huge amounts of accumulated wealth!
I should know – I work as a financial adviser to a lot of Baby Boomers, and also know a lot of Baby Boomers outside my work!
And how exactly did the banks rob you?!
If you were a bank shareholder over the past few decades, you would have been laughing all the way to ….. the bank! (with massive capital growth & dividends over that time).
Shopping centers are an even more unusual target for your anger!……???
Peter – I’m sorry you’ve had a rough go of it.
But you would be in the minority of Baby Boomers in many parts of Australia.
I believe the robbing banks may refer to the interest rates in 1990’s which were at an eye watering 17.5 %. Unlike today’s interest rates.
I know from personal experience that without the $6.80 tea money on overtime I couldn’t afford the train ticket to go to work. I had a mortgage on my own, no car. As a female I earned under half what my male colleagues earned. So we baby boomers didn’t have it handed to us. have only just got my first mobile phone, not because I wanted or needed one. Only because of covid. It will not be updated in my life time unless the technology on it no longer works. Then I will throw it out and not get another one. I’m 65.
My dad a child during the war, was always hungry. He always told me to think twice before buying anything… do you need it? Can you live without it? Or is it just that you want it?
This was all before putting my hand in my pocket.
He also told me to buy a house…. No one can throw you out of your house, without a house you have nothing. This was the lesson of my life, and I worked hard saving every penny. No travelling, no updated new fashion phones, 100” TV’s, sound systems annually exchanged for bigger, newer, better. No pay TV. Just make do, you don’t need the trappings of newer is better.
I’m driving a 25 year old Holden, nothing in my house is newer than 15-20 years apart from my dog, groceries and bills.
We’re a generation of make do. Not following media advertising tends.
So if this makes me stingy, I’m proud at what I have managed to achieve and if that makes me stingy I’m proud to be stingy. Any of the younger generations who think this is bad should walk a mile in my shoes and mind their own business, because the grass is not necessarily greener on the other side of the fence.
I agree with Peter , SHOPPING centers YES . They charge about 6 times more than high street shops per sqm .That’s about 600 % more in rent .Who do you think pays foe that in the end ?
Must remind myself NOT to come to u for advice
have worked and paid taxes for more than 52 years. Super for women did not commence until the early 1990’s (and with very “low” income” super was minimal).
To try and ensure my retirement worked extremely long hours and travelled for almost 4 hours per day on public transport (did not have a car – could not afford. Still do not have a car).
Spent very little (saved as much as possible) and bought an “investment” property which, no thanks to the Government ( particularly Labor), was “taxed” to the extreme (punished for trying to secure my old age).
And upon selling the property – due to forced retirement (Covid Lockdowns – thanks to Daniel Andrews) WAS TAXED TO THE EXTREME (capital gains tax) leaving very little for me to live on.
Have terminal breast and lung cancer, suffered stroke and am disabled (wanted to continue working until at least 75) was taxed yet again!!!
Now the government (Labor) is punishing me further with more taxes and denying me the age pension because I am supposedly “wealthy”. What a load of crock!!!
And according to the younger generations – am stingy and should give everything I have to them!!! Have worked for everything I have and did without – the younger generations should try and to the same.
Now the cost of living (for all Australians) is adding to the pain (again as a result of Labor). Am already going without food (e.g. have not been able afford any red meat for more than 4 years. Survive on bread, fruit and vegetables (which are also becoming “unaffordable”).
Utilities such as electricity, gas, water are no longer affordable (do not watch television, rarely able to cook and cannot afford to heat).
so sick and tired of so called “experts” (like the Financial Review article) accusing us (the older generation) as being wealthy and stingy.
Hi Zdenka. I am concerned that something is not quite right. If you are not eligible for a pension I assume you exceed the asset test. Perhaps you need to have a discussion with someone (I gather this website does a free basic chat) and make sure you either do qualify for a pension or make sure your assets are earning an amount that you can live more comfortably on.
It upsets me that you cannot afford to buy red meat and struggle with electricity costs, you should not have to go cold in Australia!
I am genuinely concerned that you are not (safely) maximising your income. I am assuming you are in your late 60’s or early 70’s so maybe you can still put money into super where it is tax free.
Please make an effort to get help with this because easing your money worries will make your life less stressful.
Well, that headline sure set a cat amongst the pidgeons! I think you have identified exactly the worry most of us boomers have about our money lasting with the rising CPI and increase in medical expenses outpacing any investment returns!
At 66 I am recently retired and obviously below the aged pension threshold. My husband however, is 68 and is receiving the pension at least until I turn 67 and my superannuation converts from accumulation to pension and then we will have to see where we sit with combined assets.
Here is my beef! My husband only recieves half of a couple pension and not a single pension even though I am not earning anything. We both have paid single rate tax our whole lives however, now we are told that as a couple we can live cheaper than 2 single people. 2 single people can share a home and expenses and still recieve a full single pension however, oh no, we are married so shame on us trying to hoodwink centrelink for more than our rightful share! In my opinion every person should be treated equally regardless of marital status.
This idea that most people will live into their 80s is becoming a myth. By age 65, around 25% of my high school friends were already dead from cancer, heart disease etc. Most of them lived healthy lives. The death rate starts to rise in the 60s, takes more of an upward trajectory in the 70s and hits the big time in the 80s. The death rate in people in their 90s is low because most people are already dead.
A huge issue today is the high cost of buying anything and getting anything done, combined with lots of people who cannot be trusted to do the right thing, and a government that is too stingy to pay a decent pension. Out in the real world, older people are fuming over having their pensions cut down to matchwood using a highly punitive assets test.
We are expected to get out to work to supplement our pension, or do voluntary work. Retirement is supposed to be a time to enjoy life, not worry about whatever bad decision government will make next.
Are boomers really stingy? Not at all. They are taking care of themselves so as not to be a burden on fellow citizens. Younger people however, seem determined to get everything they can “for free”, they are the stingy ones.
Hi everyone, my 1st post here so please be kind 🙂
I’m a boomer of 1960 vintage. I seem to be thinking a little differently. I saved a lot throughout my life and did it with a little bit of aggression to get higher returns through some stocks, ETFs, and a moderate stint in property. Nothing big at all, just moderate amounts that built well over time. I’m now VERY conservative, having had the bejesus scared out of me by witnessing first hand some family and friends being cleaned out during the 2008 crash, 2020 crash and some property crashes over the years. I was fortunate enough to have some foresight and dodged those bullets completely. I shudder to think of my situation now if I’d have been hit by these. That’s why I’m strongly considering guaranteed annuities for my entire retirement fund balance. Yes, all my eggs in one basket! This flys in the face of the well-structured diversification I employed to get to this point but I’ll be damned if i will risk ANY equities and a potential 50%++ fall with the current state of the world. What all this means is I have a lump sum now that can provide me with an income stream of roughly twice the married pension rate in interest alone – from a TERM annuity – they run at about 5.2% currently. This is different to a ‘lifetime’ annuity in that after a chosen term (1,2,3,5 years) you have full access to your money again. It is guaranteed for the term regardless of market fluctuations. Is anybody else looking at annuities?
Peter
I am set up with a lifetime annuities through my defined benefits scheme, because I did not pay tax during my duration, I pay a minimum amount when I retired, and I receive a annuities rebate at tax time and I end up getting all my tax refunded.
also my benifites is also applicable to the CPI as well.
any money I have in saving account benefits from the CPI with the interest rate going up, so at the moment iam on a win,win situation.
until national interest rates start falling then I will revisit my situation.
Interesting experiences on this topic from a range of readers.
Baby Boomers seem to be the focus of a lot of attention so I am wondering if any research has been done on how Gen X, the generation after the Boomers are fairing.
Have they scrimped and saved like a lot of our generation have done, have they been savvy with their savings or are they going to have the same outcomes as us.
G’day Bill,
I might be the first Gen. X (1968) to respond and coming from very careful B/Bom. parents. (Their up bringing was really hard). I started work 1983 and apart from the first 4-6 years, my retirement was my first and only goal.
I realize that I “MIGHT” have slightly more than the average Gen. X, I will never ever complain about my overly cautious approach.
I look at it like this, If life offers you lemons, be greatful. Its better than offering you razor blades. ( Dad was a great influence) My brother (1971) was a totally different kettle of fish, earn big and spend big.
(what’s the point of being worth millions if you owe millions, CRAZY!)
Retired/semi retired at 55, many body injury’s early in working life (Out of work hours accidents) and then Cancer before my 50’s is what has led to this.
If I had of been able to work till 60, Life would have been super sweet!
You do not know what life will serve up to you. Make a plan early and stick to it.
My point being, One Gen X, coservative and the other extreme from the same family!
our needs and wants have tapered now in our 70s, however I average a $100 dollars a day spend. the cost of living has increased since the baby boomer days