Baby Boomer Finance

Baby Boomer Finance – we examine whether the baby boomers are heeding the Federal Government’s messages of saving harder and working longer in order to help finance a comfortable retirement. 

Baby Boomer loans

The baby boomers

While age ranges for different generations are somewhat arbitrary, according to demographer Bernard Salt the baby boomers are currently aged around 46-61 years. In the 2004 data from the Australian Bureau of Statistics (ABS), the boomers are aged about 45 to 59 years – while today, some have edged into their sixties.

As we are particularly interested in the outcomes just before retirement, we have also examined outcomes for 60 to 64 year olds. There are currently 5.25 million Australians aged 45-64, or one-quarter of the Australian population.

Eighty per cent of the men in this age group are living as a member of a couple, while 76 per cent of the women are a member of a couple. These values are reasonably consistent across the different baby boomer age groups.

The highest participation rate is for married men aged 45-54 (92 per cent), with little change for these men over the last decade (up 1.1 percentage points). Strikingly, however, married men of this age are much more likely to be participating in the labour force than unmarried men.

The participation rate of married men aged 45-54 is around 15 percentage points higher than the rate of unmarried men in this age group. A similar pattern is apparent for all men aged 45-64.

The participation rates for women are lower than for men, as expected. However, the sharp growth in the proportion of women in their late 40s, 50s and early 60s holding down jobs has been one of the factors helping our economy during the past 10 years. The participation rate for both married and unmarried women has grown by around 5 to 20 percentage points over the past decade.

Baby boomers and the labour force

A critical issue is the proportion of baby boomers that have a job or would like one. International research has suggested that the size of the future fiscal burden that population ageing will create for governments will be greatly reduced if people delay retirement by even a few years. As a result, government is keenly watching the labour force participation rates of the baby boomers.

More boomers in jobs

This has been a good news story over the past five years, with strong economic growth helping more baby boomers to find and keep jobs. By November 2006, about six in every 10 married males aged 60 to 64 years were in the labour force, up from five in every 10 only five years earlier.

Similarly, for married females also aged 60 to 64, about three in every 10 were in the labour force by 2006, up from about two in every 10 back in 2001. Strong growth is also apparent in the labour force participation rates of unmarried 60 to 64 year olds and in the participation rates of 55 to 59 year old boomers over the past five years.

These are striking changes in employment, which will help the boomers to fund their forthcoming retirement. Yet, despite these positive trends, it is still apparent that many baby boomers are retiring early.

While some growth might have been expected in the 60-64 age group due to changes in the eligibility for the Age Pension, the increases in the likelihood of 55 to 59 year old women participating in the labour force have been equally remarkable (up around 18 percentage points for married women and 16 percentage points for unmarried 55 to 59 year old women).

The part-time divide

Employed baby boomer women are about three to four times as likely as employed baby boomer men to work part-time. These differences do not seem to have narrowed very much during the past 10 years, although a shift is evident away from part-time and towards full-time work for baby boomer women in the past five years.

Another interesting trend is the growing preference for part-time work as one ages. About one in every four 60 to 64 year old males who has a job works part-time. This is about four times higher than the proportion recorded by employed married male boomers aged 45 to 54 years. The impact of marital status is also again starkly apparent.

The proportion of unmarried men aged 45 to 54 working part-time is around double the rate for married men. However for baby boomer women the pattern is again reversed, with married female baby boomers being more likely to work part-time than unmarried female boomers.

Baby boomers and their homes

Home ownership has traditionally been the clear favourite preferred tenure in Australian society. With four in every five households headed by a baby boomer owning their own home (with or without a mortgage) it is clear that this preference continues with the baby boomers. It is the major or only savings vehicle for many baby boomer households.

The proportions that are buying or own their own home varies with type of household and age. Couples are the most likely to have leapt the home purchase hurdle. Around 90 per cent of couples are living in their own home by age 65. Two-thirds of couples with children and four out of five couples without children own their home outright before age 65.

In contrast, single baby boomers and those who are sole parents are less likely to have been able to buy the roof over their heads and are thus much more likely to rent.

For example, only about 62 per cent of single female baby boomers and 64 per cent of single male baby boomers have managed to purchase their own home by ages 45 to 49, compared with 88 per cent of baby boomer parents with children still at home at the same age.

Also for single baby boomers and couples without children it is clear that, with advancing age, the proportion that manage to buy their own home gradually increases. For example, while 62 per cent of single female baby boomers aged 45 to 49 own their own home, this has crept up to 70 per cent by ages 60 to 64.

Baby boomers and debt

Baby boomers are renowned for their comfort with debt. The total debt of baby boomer households is estimated at around a hefty $150 billion.

The average debt for all baby boomer households was an estimated $59,000 in 2004, with 73 per cent of the entire group recording some debt.

South Australia stands out as the state or territory where the highest proportion of baby boomers have any form of debt (76%) – yet average finance debt levels are relatively low in SA, at only $42,000 per boomer household.

On the other hand, the combined results for the ACT and Northern Territory show the lowest proportion of households reporting debt (64%) – but the one of highest average debts of $64,000 per household.

This high average debt reflects the higher than average incomes of ACT residents. Sydney house prices are one of the factors driving the NSW results, with 73 per cent of NSW boomer households paying off debts and the average debt of all boomer households reaching $70,000.

Baby boomers and spending

In addition to being comfortable with debt, the baby boomers are also famous for their spending and self-indulgence. But is this reputation accurate?

The average incomes of households headed by 45 to 64 year olds are only very slightly higher than those of households with a head aged less than 45 years. This means that the average income results for the boomers are a mix of the relatively high incomes earned by those who are still working combined with the much lower incomes experienced by the early retirees among them.

After paying income tax, the total spending of boomer households and those headed by younger Australians aged less than 45 years is relatively similar – about $1,120 a week for boomer households and $1,165 a week for younger households.

The spending of older households, with a head aged 65 years and over, is roughly half that of working age households, at only $535. The boomer households spend more each week than either younger or older households on food, alcohol, transport, personal care and miscellaneous goods and services (which include such items as rates, insurance, child and spouse maintenance payments and accountant fees). They spend about 50 per cent more than either older or younger.

Medical care

households on medical care and health expenses, reflecting their poorer health status relative to younger households allied with their inability to access the more generous government health subsidies offered to those of age pension age. The $60 a week spent by boomer households on health products and services represents 5.4 per cent of their total after-tax spending, compared with only 3.3 per cent for younger households with heads aged less than 45 years.

As they “sea-change” and “tree-change”, the boomers are spending more on recreation than either younger or older households – $132 a week for boomer households compared with $120 a week for younger households and $71 a week for households with heads aged 65 years and over. Recreation and entertainment thus account for about $12 in every $100 spent by the boomers.

Superannuation is another area of major difference between the generations, as the boomers save hard for their imminent retirement. The boomers total spending on superannuation and life insurance of $38 a week is double that put away by younger households – but it is still less than one-third of their weekly spending on recreation and entertainment.

Younger households are spending far more on housing costs than either boomer or older households. In 2004, younger households were spending almost $200 a week in rent or mortgage interest and another $59 a week in paying off the mortgage principal on their home.

In contrast, boomer households were paying $12 a week in rent and mortgage interest and another $34 a week in chipping away at any remaining mortgage principal, with these two items together making up only 14 per cent of total boomer discretionary spending.
Older households with heads aged 65 plus are spending only $71 a week on housing costs.

Baby boomers and wealth

Of the estimated 11.6 million Australian adults living either as one of the partners in a couple or as a single adult household, 4.3 million are living in a household headed by a baby boomer. These baby boomer households are estimated to be the wealthiest households in Australia. The average household headed by a baby boomer in 2004 had a net worth of $650,000.

“Net worth” is defined here as being the sum of the value of their assets – the family home and its contents, other property, money invested with financial institutions, shares, superannuation, vehicles, own incorporated business (net), and other assets – minus any debts.

The total wealth of different households can be misleading, however, as couple households typically have more wealth than single persons – but the likelihood of being part of a couple can vary systematically by age and the wealth of the couple potentially has to support two people in retirement rather than just one.

Accordingly, we have calculated wealth per person; by dividing total household wealth in two when it is a couple household and leaving it untouched when it is a single person household.

Using this definition, each baby boomer has on average accumulated a net wealth of $381,100. This average level of net worth for baby boomers compares with an average net wealth for all Australians of about $292,500 per person.


Five years of strong economic growth and extensive publicity about the need to “work longer, save harder” have resulted in more baby boomers finding and keeping jobs. There have been some striking increases in labour force participation rates by older baby boomers – and these will help the boomers to fund their forthcoming retirement. Yet, despite these positive trends, it is still apparent that many are retiring early.

Many baby boomers are entering early retirement while still having debt hanging over their heads. The total debt of baby boomer households is estimated at a hefty $150 billion. The average debt for all baby boomer households was an estimated $59,000 in 2004, with 73 per cent of the entire group recording some debt.

The good news is that boomers are managing to reduce their debt levels as they approach the official retirement age. At age 60 to 64, less than half of all single boomers, about two-thirds of couple households and about three-quarters of couple households with dependent children still at home report that they still have some debt.

Roughly four in every five baby boomer households have leapt the home purchase hurdle, giving most a comfy base for their forthcoming decades of retirement. The boomers are also socking away superannuation, with their average spending on superannuation and life insurance of $38 a week being double the amount put away by younger households – although it is still less than one-third of their weekly spending on recreation and entertainment!

Boomer Finance

The baby boomer households control one half of all household wealth. On average, they have accumulated a net worth of $381,100 per person. However, just under half of this is through home ownership, with this resource perhaps being more difficult to tap into to fund a comfortable retirement.

This report was written by Simon Kelly and Ann Harding from the National Centre for Social and Economic Modeling Pty Limited (“NATSEM”), and published by AMP and MyRV Publications.

This report contains general information only and the information was obtained from sources considered to be reliable. However, the authors, NATSEM and AMP and MyRV Publications do not guarantee that it is accurate or complete. Therefore, readers should not rely upon this information for any purpose including when making any investment decision.

Except where liability under any statute cannot be excluded, NATSEM, AMP, MyRV Publications and their advisers, employees and officers do not accept any liability (where under contract, tort or otherwise) for any resulting loss or damage suffered by the reader or by any other person.

Stephen Allan, principal of Financial Planning firm Estate Planners Australia has received permission from the author to reproduce this article.