BRISBANE, Australia – Baby boomers share their money tips when it comes to planning and saving for retirement, which might help millennials in ensuring a comfortable retirement.
Planning and saving for retirement are considered somewhat impossible for the younger generation, especially with the housing affordability crisis experienced by Australians as of late. Combining financing for a home and planning for a retirement savings fund has never been more difficult.
But, with the years of experience of baby boomers, or the generation born between 1946 and 1964, when it comes to planning and saving for retirement, offers some valuable advice for the younger generation on how to set themselves up for better years ahead.
Based on a report from a research conducted on behalf of CoreLogic, the rate of Australians who believe that they will not be leaving home until they are at least 30 years old had significantly jumped to 34% in 2019 from the 20% recorded in 2017.
The same report also showed the recent estimate millennials have to scrimp to stump up the 20% deposit for a house worth $1 million or more. Further, it suggests that the younger generation will also need to save a minimum of $1 million for their retirement.
Meanwhile, Australia’s Association of Superannuation Funds has issued a retirement standard, which indicated that at least $61,800 per year can provide a comfortable lifestyle for a 65-year-old couple, while at least $40,200 is needed for a modest lifestyle.
Based on the published retirement standard, millennials need to have their super funded at least $1.5 million to get an untaxed $70,000 per year during retirement.
Further, the older generation is giving some tips to help the millennials in saving for retirement.
Baby boomers have years of experience when it comes to retirement planning and saving, and three of them shared what they think are the best money tips to help the younger generation.
A 58-year-old secondary school teacher from Ballarat, Victoria, Michael Weadon, said that one of the things he’s done to set himself up for retirement is making voluntary contributions to his super account since he was in his late 20s.
Weadon stated that he’s been sacrificing much of his salary to make these contributions, which, he said, hasn’t always been easy. It is tempting to use the 10% of his annual salary set for his super contributions into other things, but according to him, it is essential to consider the long term. His advice for the young when it comes to saving for retirement is to invest ethically.
With the 9.5% super guarantee (SG) rate at the moment, he said that millennials would have even bigger benefits when they retire than their parents at the same age. Weadon encourages the young to do something about their contributions, because he said, even small contributions starting and 25 years old can compound into a significant amount over 30 years.
Another from the baby boomer generation, Frances White, a 65-year-old accountant from Perth, said that she investment any surplus cash into her requirements. However, she admitted to having started planning and saving for her retirement a bit late. She only started saving for retirement after turning 50, which she did through investing in shares.
Among other retirement planning she did, was buying a residential investment property, which she then sold to put in a lump sum to her super account.
White said that she was able to have a couple of streams of income after retirement, her rental income, dividends from share assets, and her super pension. But she explained that since she started funding her super a bit late, there wasn’t a lot in there.
A 62-year-old office worker from Tanunda, Janet Hardman, also shared her experience when it comes to planning and saving for retirement.
Hardman explained that she started working part-time when she was still in high school, then went directly into the workforce after that. And while she has been great at saving money, the company she worked for didn’t allow women to enlist in the super scheme due to the old-fashioned belief that women would leave the workforce to get married and have babies.
She had been working for years before becoming eligible to join the super scheme when she turned 25. Meanwhile, she also purchased a unit during her early 20s, she said, then later sold it to purchase her first live-in home.
But despite her savings, White said that her maximum of $35,000 income per year wasn’t enough to amass a significantly higher super account. As for advice to the younger generation in terms of planning and saving for retirement, she said to start as early as possible and do some salary sacrificing to funding their super, which according to her, is the best way of self-regulated retirement savings.
It is important to start early, White said, citing that it is not a guarantee that one will still be working when they are at the normal retirement age. Health may deteriorate, which can often hinder someone from going back into the workplace, she said, which is why it is essential to think long term early on.
White also said that seeking out a good financial planner will also help in getting personal finances organized properly.
She also added, besides thinking long term when saving, it is also beneficial to think about the possibilities of a downfall in the coming years. She explained than one of the reasons why a lot of people struggle financially, like in married couples, are they assumed early on that they would have joined assets during retirement. But, she said, that isn’t always the case since some marriage ends in a divorce, where assets are split between the two parties, which leaves them with lesser retirement funds that they have expected.
White also said that another thing to consider is the likelihood of a second marriage and what happens if one partner will die before the other. It can be a huge disadvantage for a person financially if the deceased has children, which would be taken into account when dividing the estate.
With that said, White recommended getting a good estate planner, as well as getting a Will drawn up as early as when one starts earning an income.