UniSuper’s Derek Gascoigne says many Gen X feel like they’ve ‘missed the boat’, with half feeling unprepared for retirement. (Source: Getty/UniSuper)
The first wave of Gen Xers are about to hit retirement and they are facing a very different set of circumstances from the generations that came before them. Despite holding the most wealth in property and shares of any generation, half of Gen Xers have admitted they don’t feel financially prepared for their golden years ahead.
Born between 1965 and 1980, the oldest members of the five million-strong cohort are now entering their 60s. This means they have reached their “preservation age”, which is when their superannuation can be accessed if they are no longer working.
UniSuper advice manager Derek Gascoigne, a member of Gen X himself, told Yahoo Finance the national conversation around retirement had largely been Baby Boomer-focused, leaving the issues facing Gen X “somewhat invisible”.
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“You’ve got higher living costs, you’ve got non-linear career journeys with people changing careers and it’s not just a job for life,” he said.
“The financial pressures that are facing the generations following Gen X are to some extent the problem for Gen X because they’ve got younger and adult children trying to get into the housing market, looking to the Bank of Mum and Dad for support.
“Then you’ve got aging parents, many of whom didn’t get to accrue wealth outside of property in a lot of cases.”
There’s also the looming intergenerational wealth transfer, with Baby Boomers set to leave younger generations $5.4 trillion over the coming decades.
Gascoigne said these shifting environmental factors meant Gen X were entering retirement with “way more complexity” than previous generations.
“Boomers will no doubt argue the toss on that,” he said.
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Gen X worried about retirement
UniSuper research found that half of Gen X believed they were not financially prepared for retirement. The biggest worry was not having enough savings to live the kind of retirement they wanted.
The average Gen X super balance is below where it needs to be to achieve a comfortable retirement, with UniSuper finding more than two-thirds have less than $500,000.
At 67, ASFA estimates homeowners would need $630,000 as a single and $730,000 as a couple to achieve a comfortable retirement. To achieve that, you’d need $296,000 at 50, $377,000 at 55, and $469,000 by 60.
By contrast, the average account balance for the 50 to 54 age group is $222,491, while the median is lower at $147,857.
For those between 55 and 59, the median is $169,146.
Gen X will be the first to retire with a lifetime of super earnings, with the compulsory guarantee beginning in 1992.
However, it was initially set at between 3 to 4 per cent of wages, before slowly increasing to the current 12 per cent.
How to ‘supercharge’ your super ahead of retirement
Gascoigne is already seeing clear patterns emerge among Gen X approaching retirement, with many feeling like they’ve “missed the boat”.
But he said there was still a meaningful runway to improve retirement incomes, with different opportunities available that haven’t existed for previous generations.
Above the “basics” of making additional contributions, such as through pre-tax or salary sacrifice, Gascoigne said people could “supercharge” this with carry forward concessional contributions.
You can carry forward unused cap amounts from up to five previous years, provided you have a super balance of less than $500,000.
Gascoigne said this could be helpful for people who have been focusing on paying down their mortgage in previous years, or those with lower balances wanting to play “catch up”.
Another strategy to consider is downsizer super contributions, where you can contribute up to $300,000 from the sale of your home into your super fund if you are 55 years or older.
“It might be a little bit soon for Gen X to start kicking the kids out of the house and selling and releasing capital. But it could be something as [kids] turn 30 and children start to flee the nest, they start looking at,” he said.
Gascoigne recommended people seek out advice tailored to their personal circumstances.
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