Neale Prior: Baby boomers aren’t stingy, just worried they’ll outlive their savings. You should be, too

Another week, another lot of attacks on those of us lucky enough to be born between 1946 and 1964.

But this time it wasn’t just the usual gossip site clickbait or ill-informed social media rambles about baby boomers.

It was the magazine The Economist talking about boomers being “relatively stingy” and the “luckiest generation in history”.

Apparently boomers have not fought wars.

This might shock the Australian men born between January 1946 and December 1952 who were conscripted to fight in Vietnam.

It might also surprise Aussie and UK boomers tangled up in the Gulf War of 1990-91 after staying in the military beyond age 27, or those caught up in the wee affairs in Iraq and Afghanistan this century.

But let’s not forget even The Economist is in the game of journalism, where we sometimes highlight a simplistic proposition to grab attention and then shed light on a more complex question.

That question was why baby boomers continue to accumulate wealth in their retirement years, thereby defying the life-cycle theory developed in 1954 suggesting that savings begin falling after our income had peaked.

Apparent motives for boomers defying this theory include a desire to look after their families and anxiety after the COVID-19 pandemic.

The Economist then landed on a golden notion called “longevity risk”. This refers to a widespread fear of living longer than our savings.

This is very much an issue in Australia, where life expectancy has risen from 67 in 1950 to beyond 83 nowadays.

A variety of government and private reports have tried to grapple with longevity risk given Australia’s diabolical shortage of products allowing us to hedge against living beyond our life expectancy.

A Federal Treasury discussion paper in December last year pointed out that about 84 per cent of retirement savings were in account-based pensions “that do not manage the risk of outliving one’s savings”.

“Retirees remain worried about running out of saving,” the report said.

It also summed up the findings of the 2020 Retirement Income Review by saying it was “inherently challenging” for people to:

• navigate the different parts of the retirement income system;
• combine multiple income sources;
• consider the needs of a partner and dependents; and
• manage all the risks and changing circumstances.

Most of us will live off varying combinations of our superannuation savings and the age pension, through surges and crashes in investment markets.

Then there might be months or years of dealing with the complex systems for gaining access to Federally-funded home care and residential aged care.

Aged care funding is a work in progress as Treasury wonks tremble about the swelling costs.

Recent recommendations of the Federal Government’s Aged Care Task Force included that “older people make a fair contribution to the cost of their aged care based on their means”.

While some of us may see this as yet another incentive to spend big and maximise our age pension, there are lots of us worry-warts who dread not having comfortable choices in our older years.

We are not stingy, we are worried.