Boomers should reject calls to die broke
by Gareth E on 16/09/2022
Statements made recently by federal politicians have targeted supposedly rich boomers. In particular, the fact that many boomers are dying with their superannuation intact has become something of a sore point.
The point of the matter is that because superannuation funds are tax-advantaged investments for retirees to live off, they are not meant to be inherited by members' children. The money should be spent during members' lifetimes. This blends in with a common grudge that in the absence of a death tax, younger families inheriting the wealth of parents who have done well in life is helping to widen the gap between the well-off and the strugglers.
Aside from the obvious flaw in this reasoning - no one quite knows how long they will live for - it sounds fair and reasonable. However, I am unconvinced. I believe that deciding to die broke might not be smart. Aussie boomers should strongly object to having that requirement forced upon them.
I was an insurance and superannuation consultant with MLC Life throughout the 1980s and early 1990s. Hence, I can well remember the conversations of the period that drove compulsory superannuation into being. We were told as younger boomers that we would need to save hard for our elder years because by the time were reached retirement there would no longer be an age pension. The sheer number of boomers living to retirement and beyond would make the provision of one impossible.
That claim was pushed hard by the government of Bob Hawke and Paul Keating and it became a strong sales line. I went along with it because I had to, but I had serious doubts about its accuracy. Nevertheless, it was a strongly and widely held belief.
Politicians' predictions are just as unreliable as their promises. Thirty years later, there is still an age pension, albeit strongly means-tested for assets including superannuation.
Life expectancy of Australians in 1990 was 76.99 years. Today it is 83.79 years, so it has increased by nearly seven years since then. While statisticians aren't now expecting large increases in longevity, vastly improved healthcare treatments have clearly resulted in greater participation in life. This is supplemented by far better attitudes and mindsets, helped to permeate throughout society by social media. This trend can be expected to continue, certainly among our age group.
However, there is one magic ingredient that is vital to maintaining a positive mental attitude. It applies particularly to those who have no future employment prospects. We need financial security.
People who face a bleak financial future begin to fret and worry. That can badly impact their attitudes and mindsets which are vital for effective decision-making. They can lose hope, which then erodes their health and their will to live. It can also result in foolish and desperate acts, plenty of which we learn about in news media reports.
These are not imaginary demons. They are real and we are reminded of them constantly. So, it bothers me greatly that senior government figures would pursue this line. It seems based more upon sentiment than practical considerations. Young people resent the wealth of boomers, who they see inaccurately as idle rich without regard to the lifetime of effort that gave us financial security. Politicians and sections of mainstream media seem desperate to attract the young, so they validate without challenge the opinions that are common among them.
Political leaders now appear to be convinced that boomers can safely erode their assets while they are alive so there is no strong tendency for inheritance. That's all very well politically, but if their estimation proves to be as accurate as the claim that there would be no age pension by 2020, boomers would be idiots to go along with it. In a world in which change is the only constant, nobody knows what is around the corner.
Photo by Lee Luis on Unsplash