Throughout the creation of my documentary about the Baby Boomer generation entering retirement, one common theme was the view they are a wealthy generation.
As this post-war generation of Baby Boomers enters retirement, will they really be as wealthy as many think?
A new study from the Institute of Fiscal Studies (IFS) believes it will be a wealthy retirement for Baby Boomers.
Those around age 70 are likely to have ‘oversaved’ for their retirement, according to the IFS.
They found that people born in the 1940s had levels of wealth “far greater than necessary to maintain their living standards in retirement”.
How much is enough?
It does rather beg the question, how much is enough?
When you are approaching retirement, any level of savings and retirement income provision can often feel insufficient.
Without undergoing a detailed Financial Planning exercise, including a lifetime cash flow forecast, it is difficult to accurately quantify ‘enough’.
Fortunate generation
Baby Boomers do tend to be fortunate in a number of respects when it comes to their retirement wealth.
Many Baby Boomers – particularly older Baby Boomers who find themselves at the leading edge their generation entering retirement – have benefited from defined benefit (final salary) pension schemes, with generous accrual rates and inflation proofed income.
They have also benefited from a strong savings ethic, inheritance from frugal parents and a substantial rise in property prices throughout their lives.
Combined, these factors mean a wealthy retirement for Baby Boomers, who can tap into property wealth by downsizing or releasing equity, while also living high off the hog with healthy final salary pension income.
Challenges for Baby Boomers
That is not to say that it is all plain sailing financially for the Baby Boomers in retirement.
Despite reasonably good levels of wealth, and excess wealth to meet requirements in some cases, they are having to deal with living longer but not necessarily healthier lives.
Many Baby Boomers find themselves squeezed by the financial pressures of elderly parents and adult children; the former needing time and money to cover care requirements, and the latter needing a helping hand onto an expensive property ladder.
Baby Boomers are retiring in uncertain economic times; low interest rates and quantitative easing forcing down gilt yields have meant the conversion of pension funds from capital to income takes place at the worst possible time.
Generalisations about a generation
And these are of course all generalisations about a generation.
Every Baby Boomer will find him or herself in a different financial position, with different demands on their wealth and of course different priorities in life.
Working with a Financial Planner who understands the various financial and non-financial issues associated with retirement for the Baby Boomer generation is essential to understand when enough is enough.
Boom! Demographics Are Destiny is the first feature-length documentary by Chartered Financial Planner Martin Bamford. It is released on DVD and Vimeo on Demand on 1st December 2014. Watch the trailer here.
