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Baby Boomer Retirement Options In Australia and Beyond

baby boomers retirement options

Why Many Baby Boomers Should Be Worrying

Many baby boomers are worried.  Why?  They’re scared they’ll run out of money.  They also hate the thought of drastically reducing their lifestyle to make ends meet.   Let’s face it many boomers are not exactly into frugal living. Over the years, many have wasted money on all sorts of fads and indulgences.  But as they move into their senior year’s, reality has finally caught up with them.
So here is what’s really happening to many Baby Boomers:

1). Your Pension or Superannuation Plan Won’t Be Enough

If you’re receiving a monthly pension of say $2,000 how will it impact on your ability to enjoy an above average lifestyle?  Many baby boomers tell me their retirement schemes are not adequate to serve their needs.
In 2016 Go Banking Rates published a research document.  It was conducted with 1,504 American adults over the age of 55. Not surprisingly approximately  30% of the respondent’s age 55 and over said they had zero savings for retirement.  An additional 26% reported less than $50,000 saved for retirement. When considering typical benchmarks needed for a successful retirement, 54% of the older Americans in this survey lacked sufficient retirement funds.
Think about those figures for a moment.  Fifty-six percent of the Americans surveyed did not have enough money to see out their retirement years.
Of course, not all boomers are in the same position.  Indeed, 20 percent of those surveyed (aged 55 to 65) had more than $200,000 of cash saved or invested.
But here’s the thing.
Whilst $200k might sound like a high number, the reality is that it’s chicken feed.  It’s likely to last less than 5 years for most middle-class boomers.  This assumes they still want to lead a life similar to the one they enjoyed when they had full incomes.
Another point:
How much is Social Security paying retirees? In January 2017 the average payment was approximately $1,317 in the US.  Can you live on that?

Why They Run Out of Dough

There are various reasons why many Boomers don’t have enough money when they retire.  If you’re like me you want enough money to fund a lifestyle that is at least as good as the one you enjoyed pre-retirement.  But as you’ve seen many Boomers have not put enough money aside.  Here are some of the reasons:

Erosion of Investment Capital Due to Mishaps and Bad Decisions

Some Boomers were adversely affected by the GFC (Global Financial Crisis) in 2008-2009.  These folks had invested in the stock market directly and/or via managed investment funds.  When the crash came a lot of their capital was depleted.  To make matters worse they took fright, then took flight out of these assets, thereby markedly affecting their net worth.  The sad thing is that if they had hung in there, they would have seen a big rebound.
Boomers also invested in dubious schemes that funneled money into a variety of so-called assets, including local government securities, plantations etc.  Some of these schemes collapsed and never recovered.
On the property front lots of older folk invested in real estate deals that went bad.  Some were stuck with empty houses, with no rental income.  This caused them to sell the property at a loss.  Indeed, some of theese assets were overpriced due to over the top marketing practices by various high-pressure sales groups.  So when the day of reckoning came, many of these investors made capital losses of $50k and much more.
Another issue has been the shift in countries like Australia from ‘defined benefit’ pension/superannuation schemes to defined contribution.  The effect has been a transfer of risk from the managed fund to the plan holder.  In other words, members of the scheme were now required to shoulder the burden of their fund’s poor performance.  So, if there was a downturn in the immediate period before they retired – too bad for them.

Low-Interest Rates

Whilst some of these Boomers were reckless in their investment decisions, another group took a polar opposite approach  – they were too conservative.  These folks left their money in low-interest savings accounts thereby seeing the purchasing power of their capital being eroded by inflation over time.
Low-interest rates are great for borrowers, but a disaster for investors, including baby boomers.  Western countries like Australia, Canada, USA and the United Kingdom have experienced low-interest rates for the best part of a decade.
Combine this fact with plateauing wages and you have a situation that makes it harder for people to accumulate capital for retirement or investment purposes.

Deadly Debt

Debt can be a good thing.  But if you’re a baby boomer, the last thing you want is debt.  Debt for you is a straight jacket that will cramp your ability to enjoy a nice lifestyle.  In earlier times seniors rarely carried any debt.  But things are different now.  According to one report seniors have 50% more credit card debt than earlier generations.

How did it get to this?  Various reasons, but here are a few:

Borrowing On House Equity For Lifestyle Reasons.  In the age of easy credit, temptations abound.  Witness the explosion in the number of people dipping into the equity of their homes to fund expensive overseas trips, as well as luxury cars and boats.

Increased Credit Card Usage.  Rather than save up and buy the thing you want with good old cash, some Boomers chose the instant gratification pathway.  Many have credit card debt of $50,000 and more.

Both of the above problems are largely due to the easy credit environment that has been evident in recent decades. The other reason can be sheeted home to the attitudes of the baby boomers themselves.  Some have called them the most selfish and indulgent generation in history.

Is This a Crisis?

If you are happy to live off government benefits, then everything may work out fine for you.  If you own your home and have no mortgage or rental payments to meet every month, that is certainly a plus.  But even so, you’ll probably struggle to make ends meet.  This is due to the fact that government pension payouts are on the low side. For instance, in the United States, the average payout is $1317 per month, as stated.  This is significantly less than the average wage.
Another interesting stat is that 84% of retirees now receive Social Security benefits in the US.  This contrasts with only 69% of retirees in 1962.

So if you’re in that unhappy place where you have minimal cash, you’ve got two choices:

  1. Trim Your Cloth.  It’s belt tightening time!  What are you prepared to forgo so you can balance your small budget?
  2. Expand Your Horizons.  Go for growth – create another income stream.

Baby Boomers Still Want More

You Want More Than Bread and Jam

I remember the image of an old age pensioner eating bread and jam because she couldn’t afford to have a real meal. That was many years ago and government benefits have increased in the ensuing years, but no way can they come close to giving middle-class baby boomers a great lifestyle.

Chase Lifestyle Before You’re Too Old To Enjoy It

Do you want to travel?  Do it now, why wait?  Ok, so it’s lack of money that’s holding you back.   Well, I’ve got good news for you today.  If you’re in good health and mentally agile you can make money and make your lifestyle dreams come true.  Take a look below for ideas.

A Way Forward – Income Options

Rather than scratch around like a turkey in the dirt, consider income boosting options.  Here are some examples:

1. Day Trading

Not for the faint hearted.  That said, some people have prospered after learning the ins and outs of day trading shares and other financial instruments.
Odds of Success.  Very low

2. Affiliate Marketing

There are many facets of affiliate marketing but suffice it to say that tens of thousands of people have created online income streams by promoting other company’s products.  In essence, there are two types of products:

  1. Digital Products.  Think ebooks, online courses, and software.  You can access tens of thousands of offers by hooking up with platforms like Clickbank, JV Zoo, and Warrior Plus.
  2. Physical Products.  If you like the idea of promoting physical products, companies like Amazon offer affiliate opportunities.

Odds of Success.  Low to Medium

3. Consulting

If you have a marketable skill this option is a no-brainer.  You will be drawing on years of experiences and knowledge which you can leverage into an income stream.
Odds of Success.  Medium to High

4. Coaching and Mentoring

Another example of leveraging a skill or even a passion.  If you see yourself as a teacher, this could be a perfect fit for you.
Odds of Success.  Medium to High

5. Network Marketing (MLM)

If you’re an outgoing type with the gift of the gab, perhaps network marketing might be a good fit for you
Odds of Success.  Very Low
The above ideas represent just a few of the income producing options available for Baby Boomers.  If you need help, let me know.

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1 thought on “Baby Boomer Retirement Options In Australia and Beyond”

  1. Hi Kim,
    When I read your figure of $1317 government pension I was surprised, because my UK government pension is WAY below that, and it’s supposedly enhanced! I’d be at poverty level if I was relying on that 🙁
    Despite putting my private pension savings into the supposed safe, darling of the UK pensions industry several years ago, I managed to pick one that went bust, taking most of my money with it. That left me saying “Never again”, and although I did eventually take out another private pension, the income it brings plus the government pension are still below that $1317.
    Thank goodness, being long-term self-employed, I have several other income streams and strategies in place that keep me comfortably off, although not “rolling in money”.
    When I look at some people, retired or not, with no “Plan B”, I wonder how they sleep at night!
    Joy – Blogging After Dark


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