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Crunch time for boomers

AUSTRALIANS aged from 50 to 64 years have accumulated an average wealth of $240,000, the majority of which is in the family home, a new report has found.

The AMP.NATSEM report “highlights the lack of savings of many Australians and may cause many to wonder if it is too little, too late”, according to AMP Financial Services managing director Andrew Mohl.

This group has average superannuation balances of around $56,000 – “enough to provide only a marginal income over a 65-year-old’s average life expectancy”.

“Even with top ups from other savings (which average $58,000) and the aged pension, the most likely outcome is that many of these Australians will have to curb their lifestyle,” Mr Mohl said.

“Another likely outcome is that they will start to run up some big bills related to long-term health and aged care as they grow older.”

He said the funding for these expenses might have to come from selling the family home, which many people would find extremely difficult. The biggest issues may arise with the early baby boomers, aged in their 50s.

“They expect to retire early and live for a long and happy time on the proceeds of their superannuation,” Mr Mohl said.

“Herein lies the problem – there is a massive gap in expectations about the kind of lifestyle they may want when they retire and their ability to fund it.”

The report, co-written by the National Centre for Social and Economic Modelling (NATSEM), also found a very uneven distribution of wealth among 50 to 64-year-olds.

The wealthiest 25 per cent hold nearly 60 per cent of the total wealth, with an estimated average personal wealth of $559,000.

Even more extreme is the wealth of the top 5 per cent, who have an estimated average personal wealth of $1.1 million (see table).

At the other end of the scale, the poorest 25 per cent have an estimated average personal wealth of just $47,000.

The study found that wealthier people have their non-housing assets spread across superannuation, shares, rental properties and cash.

In contrast, poorer people have nearly all of their non-housing assets tied up in superannuation.

Mr Mohl said current polices that favoured retirees needed to be reviewed, in light of the growing pressure on younger working people to pay (via taxes) for rising public health care costs.

“It is imperative that government spending and tax concessions be well targeted,” he said.

“Currently, wealthy retirees can qualify for pension and other benefits and can pay lower tax rates than those in the workforce.

“We have to debate whether as a nation this is either right or affordable.”

The average wealth of those aged between 50 and 64, at $240,000, compares with an average for all adult Australians of $149,000.

There are two main contributors to the difference.

Older Australians have built up more equity in their family home ($127,000 versus $77,000) and they have accumulated larger superannuation funds ($56,000 versus $35,000).

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