Initial insights: what the baby boomers told us
Money is the second of five key themes that emerged during the time we spent with baby boomers in relation to five overarching areas that are often discussed in reports about ageing – and which we wanted to explore with baby boomers to find out what they mean in people’s lives:
We linked what we learnt from the baby boomers we spent time with to what we have found out from a range of the reports and research that has also explored these issues, and analysis of statistics about baby boomers. Read more background on our method in the introduction to the first theme, Participation, here, and on the Innovation Age work here.
The picture of baby boomers that is often presented in Australia is generated through an aggregate analysis of their wealth. Research by JP Morgan summarises this perspective:
“Baby boomers, benefiting from a long period of economic growth and stability during the bulk of their peak earning years, have quadrupled their aggregate net worth since the late 1980s. Nonfinancial assets, specifically residential property, played an important role in that wealth accumulation, accounting for two-thirds of median household assets in 2013” (Mandel and Wu, 2015;p1).
While there is much touted about the wealth of baby boomers – as the ‘wealthiest’ generation to date, there is also a growing realisation that many in this generation do not share this wealth. Indeed some researchers speak of “the accumulation of inequality over the life course” (see particularly Hal Kendig, 2015) and “the life course as an engine for the generation of advantage or disadvantage over time” (Dale Dannefer).
Savings and assets provide a sense of security – if they are missing, we are fearful about the future
Around 35.6% of baby boomers are paying off their home mortgage. Around 17.6% are renting a home (Hordacre and Barbaro, 2015;p.22). So, while the stereotype of baby boomers and their aggregated balance sheets look quite spectacular, the reality is that many baby boomers are still servicing debt, and almost one fifth have either not entered the housing market, or have had to exit the market during their lives.
For those baby boomers we spent time with who did not own a house, or who had experienced longer-term financial hardship, there was a real sense of fear about the future – about housing, health and possibilities for retirement. Wendy summarises this when she says:
“It scares me what retirement would be like because of finance”.
Debt, financial stress and hardship are a feature of many people’s lives, which makes retirement seem a long way off.
Nicky and John say they:
“Can’t think about retiring because we don’t have enough money”.
Lana has found herself unemployed and in debt, with her house being repossessed and also defaulting on her car loan:
“I’ve got a ute, but it’s under loan still, and I haven’t paid it for the last two months. I don’t know if they will take the car away from me”.
Many of the people we spoke with were not well off.
Some were experiencing significant financial hardship.
For many this meant a degree of insecurity and uncertainty about the future.
Income beyond pensions is important – but can also be complicated.
Research suggests that baby boomers are likely to mirror past trends in terms of retirement incomes (see Hordacre and Barbero, 2015;p.27), particularly since the Global Financial Crisis which affected both financial wealth and confidence. Overall, then:
“In the ten years to 2013-14 more than 70% of male and almost 80% of female retirees have the age pension as their primary income source” (Hordacre and Barbero, 2015; p.27).
Though superannuation will certainly assist baby boomers (particularly younger baby boomers) plan for their financial futures, research also suggests that planning and preparation is not as widespread as it could be (for example, a REST White Paper in 2013 suggested that only 14% of the 1200 baby boomers surveyed were financially prepared for retirement).
For those with few assets (including superannuation) or high levels of debt, generating income beyond the pension is often necessary to make ends meet and/or to fund ‘extras’ such as holidays or family visits. Some of this has been discussed above, however there are other aspects that were uncovered about the difficulties of generating income whilst on a pension.
Many of the people we spoke with relied on full age pensions for their income, but they wanted or needed to do some extra jobs to afford small luxuries and annual holidays.
For example, Pauline had started gardening for older people in her neighbourhood and in turn they paid her a small amount of money. Pauline explains:
“There are quite a few people who don’t qualify for a home care package but have needs. A formal business charges them $60 p/h and they still don’t do what they need. They just do the big stuff like mow lawns, trim hedges, etc. One lady I garden for was going to move. Her husband used to tend the garden and she just couldn’t do it and she definitely couldn’t afford a private company. Also I garden in a way that the hard stuff is done, but they can still potter. There are other people like me who need extra pocket money, we all get benefits from the arrangement. The arrangement is cash in hand $20p/h. I do an hour tending the garden like their extra pair of hands, but then it is also a social thing, we chat, have a cuppa, share stories”.
Pauline does have concerns that doing this sort of work will lead to trouble:
“I would like to find a way to help the community without feeling like I am doing something illegal. I worry someone will ask about a police check or insurance or an ABN. There is so much fear about abuse and stealing money off older people – I’d hate it if someone thought that of me. I choose what I charge and I know it is affordable”.
Her husband argues that it benefits everyone concerned, and that it would be good if there could be ways in which it was easier for more people to do small amounts of paid work:
“Our garden has had its 50,000 service. She gets to enjoy gardening in another way, the ladies are all so lovely and the extra cash means I can have jam on my toast. I’d love it if there was a structure to allow pensioners like me to do something like this in the community without drowning in bureaucracy. I don’t want to hassle with an ABN and insurance or training that doesn’t value my experience. I don’t want to lose this thing of ‘community’ we have here. For me it is about my time, my effort to helping our community in a way that I enjoy. It’s win-win”.
A number of people spoke about other forms of income – such as putting a room up on Airbnb, or renting out a spare room. All worried about the implications of this kind of income for their pensions and benefits.
Thrift and prudence is still a feature of boomer lives – it didn’t finish with our parents
Research suggests that objective measures of financial security need to be tempered with more subjective assessments including people’s own assessments about their use of financial resources (see for example, Snoke et al, 2011). While broader stereotypes of baby boomers suggest that they have no need for financial restraint, the time we spent with people suggests that concepts of thrift and prudence are still very much part of many baby boomers lives – and not only if they are asset-poor or experiencing financial hardship.
Many of the people we spent time with spoke of their ability to plan for and stretch the limited income they have to manage to live well. Brian explains his finances:
“We don’t have a lot of money, we live off the pension and we have a mortgage, but we have a good life. We live tight and this creates pressure. I’ve become a good manager of no funds [i.e. debt]. We live on $700 a week and $480 of that goes to our mortgage. We also run 2 cars. I know where we are every minute financially.
We’ve found creative ways to earn extra cash or achieve things on a shoestring… Lots of things around our home come from garage sales, some of it giveaways like the wood we used to make the arbor in the garden. I get joy out of restoring and creating from nothing – this kind of achievement makes me happy.
We’ve also cut down or dispersed our major bills – with our council rates (which are phenomenally high) we pay $77 a quarter and the balance accrues as a debt to be paid on sale of the house; water rates we pay weekly; electricity we got solar when we built.
We use a credit card with frequent flyer points and these points buy me a return flight to Perth to see my sister once a year. I have $8.50 pocket money a week – $3.50 for a coffee on my Saturday bike ride and $5.00 for tennis. We are resourceful.
When things got really tight we had a student live with us for a few months. He was on placement at the hospital, we saw his ad on Gumtree and responded. He paid $80 per week. He was a perfect tenant, he was here to study and he loved the place, we rented him an ensuite bedroom.
It was a mutually beneficial arrangement. If pushed we would do it again but more and more I value my own space. Also I wouldn’t do it if we were penalised in our pension for earning extra dollars”.
By Ingrid Burkett, Project Director and Kerry Jones, Project Lead, The Innovation Age.
This is the fourth of seven excerpts we’ll be sharing from the Starting the Innovation Age Report: Boomer’s perspectives on what it takes to age well. This is the first report in a series as we open an invitation to be part of this movement towards what we are terming ‘The Innovation Age’. You can also download the report in its entirety here.