Could it be that since the mid 80s, when as I recall much of the major change in super occurred (the Super Guarantee, portability etc), the finance industry has not had much reason to educate people about retirement finance? I recall hearing the CEO of a Victorian govt dept, in the business of overseeing super, saying publicly that those who ran the super industry had an interest in keeping it complicated and unintelligible.

I was a union officer then, dealing with members who had never had super, and had just thrown the application form for the new 3% employer paid super into the rubbish bin saying, "I can't afford to pay that".

There must be other more systemic barriers out there apart from numeracy, fears and blindspots that have made this such a poorly understood area.

This is an interesting thread. Thank you. Much to discuss. I’ll pick a couple of points relating to SMSFs versus super/pensions funds managed for the benefit of many members (e.g. industry funds and retail funds).

“Superannuation funds are also concerned about the looming possibility of a mass exodus of the fattest account balances into self-managed funds or property investments.

So are the baby boomers simply profligate and short-sighted?”

I’d suggest there is a big difference in the attitudes to wealth management between those who have SMSFs and those who have their super in publically managed funds (either industry or retail). In my experience, those who have SMSFs are concerned about whether they have enough super to last their life and pay for a reasonable retirement, especially approaching the late years (wanting decent care in late years). They are concerned about how to maximise the returns in their SMSF’s, not in how to draw down their savings. This is a very different attitude to those who have been forced to save in compulsory super funds and want to get their hands on the money they’ve been forced to save.

Secondly, I think there is a big difference between the two types of funds in their approach to handling volatility and generating wealth. The industry funds and retail funds have to diversify their portfolios to minimise volatility. This is because the members get very scared when the balance goes down. On the other hand, many SMSF owners recognise and accept they need to accept volatility in the fund balance to achieve better returns over the long term.

Especially in the pension phase, the consensus of advice from financial advisers, investment advisers and the government is that pension funds should have low volatility e.g. http://www.thesmsfreview.com.au/smsf-investment-process.html. However, it seems to me, that if the SMSF has sufficient size (and sufficient income and cash buffer) so it will be able to pay the pensions at all times - even in the worst market crashes - then SMSF’s can accept high volatility in the total fund assets for the benefit of the better overall returns over the longer term.

The ‘consensus’ recommendation of financial advisers is that diversification is important to reduce volatility. They recommend more diversification and more conservative portfolios the older one gets. I’d be interested in your views on the applicability of this advice to SMSFs.

Below is a question and answer regarding the diversification advice.

Q. Why are the vast majority of experts (the 'consensus' if you like), recommending diversified portfolios?
A. Group think (I have seen the course notes for Financial Planners and that is what they are taught) and the fact that most clients hate volatility. But also diversification is so obvious. It is motherhood. Everyone knows you don't put all your eggs in one basket. And in so many ways it is clearly a good idea, e.g., don't invest in just one company or sector, or rely on one financial planner (though they never say that). The problem is that diversification is such an open concept that you have to decide when and how much is appropriate, and here the experts are all over the place.

“If government wants to see less superannuation accumulations used to extinguish debt and more used to generate long-term incomes, they need to look to their own house first. We need to address the totality of incentives now in place.”

I agree. I’d add …

The first and most important point I’d emphasise is to leave the super system alone. Stop adjusting the rules. Otherwise confidence in super will be jeopardised.

If changes are to be made they would should be made as one integrated whole. That is as part of fixing:

1. Australia’s total tax ation system (not just fiddling around the edges)

2. Sorting out Federal-State responsibilities, accountabilities and funding arrangements

Interesting article but not necessarily of general applicability.

Some baby boomers actually focused on paying down debt before retirement. They, like me, believed that paying down debt was a retirement strategy. I still remember opening a bottle of French Champagne as I clicked on the button to reduce my mortgage to zero - years before retiring.

All sorts of assumptions here.
Define "Home". I am going to be living on my yacht. That will be my home. Does a home need foundations and be immovable?
Muggins is most certainly not going to buy a house at the peak of the housing bubble. ("A snip at half a Million, sir") So you were taken in? May I suggest the Red Pill?
I am working on the assumption that the government will not be able to resist the temptation of the $1.5 Trillion that we have squirreled away.
They will want to control it for our benefit, you understand. There is always someone who knows how to spend my money better than I.

It is no good saving cash. The government will change the face of it and anything you have will become worthless. And you will be labeled a "Hoarder" if you try to provide for yourself. The label "hoarder" will be the pretext for confiscation.

Do our pension fund managers have access to High Frequency Trading Computers? If not we are being fleeced as I write.
We will have to listen to our youngers and betters because they have the means and the motive to rob us.
Heaven help you if you don't fit the bog standard retiree profile.
By the way I do not have any debt at all. One of Life's little Lessons, you understand.
And another of Life's little Lessons; It wasn't always this good. And the Limits to Growth Report has interesting things to say about future trends, doesn't it?