There are roughly 79 million baby boomers and they are looking to retire. Unfortunately retirement for many, is not what they had planned or dreamed. The fact is many baby boomers are left with fears regarding the rest of their lives and how they will live.
Retirement has always been a time looked upon to enjoy life- sit back, relax, and take vacations. Being able to do what they had always dreamed of doing. The Employer Benefit Research Institute says that baby boomers confidence regarding their retirement years is at an all time low. Baby boomers fear they will not be able to afford a comfortable retirement, along with taking care of their health care needs.
Fears concerning retirement because of economic issues has become the “new normal”. Many baby boomers have fears consuming them on how they will handle their life after retirement. Many baby boomers, according to research, show they do not even have money saved for retirement. Seventy percent do not have confidence in Social Security or Medicare.
Retirement used to mean you did not have to continue to work. Today around 74% plan to maintain a job in some capacity after they retire.
Health care is also a major fear with baby boomers. Not only are they afraid they will outlive their money, but the cost of health care. Even though they can have Medicare, they still need to pay deductibles.
The Insured Retirement Institute (IRI) recently released a report that 24% of baby boomers feel confident they have enough money for their retirement years. In 2011 when they began their research, found 37% had the same level of confidence.
This same report shows only 55% of baby boomers even have savings for retirement. And nearly one half of those with savings, 42% have less that $100,000 saved. This would only generate less than $7,000 a year in retirement income. One in five feel they will not have enough savings to cover their basic living expenses.
Retirement Facts
1. 22% are confident with their retirement preparations.
2. 27% are confident their savings will be enough to cover health care costs when they retire.
3. 16% are confident they can cover long-term care costs.
4. Within the last year, 30% of baby boomers have decided to postpone their retirement plans.
5. About 59% plan to retire at 65 or older. This includes 26% who say they plan to retire at 70 or older. Whereas, in 2011 17% planned to retire at 70 or older.
6. 71% of retirees would rely solely on Social Security if they have exhausted their financial resources, and 54% would return back to the workforce.
7. About 30% have stopped contributing to their retirement account and 16% have taken withdrawals from their retirement account prematurely.
8. 59% will depend on Social Security to be their chief source of income in retirement. In 2014, that number was 43%.
9. In 2013, 67% believed it was important to leave money to their heirs. Today that number is only 46%.
How to plan for retirement
Your retirement is going to be quite different than your parents. They were able to retire with a guaranteed pension, and health insurance for life. Today retiring for most Americans is a mystery. Workers of earlier generations could depend on their employer-provided pensions. Americans today need to count on their own work-related and personal savings along with Social Security benefits. Also, as Americans live longer, their funds need to last longer, possibly well into their eighties and nineties.
Here are a few suggestions to see if you have enough for retirement:
1. Add the value of all your current assets – cash, investments, house, savings bonds, etc. “Assets” are anything you can exchange for cash. Only count money you are not going to touch for at least 15 years.
2. If you are a married woman it is likely you will spend some retirement years as a widow. This could mean less or reduction of benefits. You will need to focus not only as a married couple, but also as a single woman.
3. Next spend sometime estimating the growth of your money for the next 10 to 15 years. Remember it will only be a guess as the further out you plan, the more that can happen. But it will give you an idea of what you will have to work with.
4. Inflation – keep is mind of inflation. In the simplest terms, it means dollar for dollar your money will not buy as much next year as it does this year. Keep in mind, if your money is not earning more than the rate of inflation, your nest egg will lose its buying power.
5. Health Care – one exception to low inflation rates is medical costs, which over the last 20 years has risen faster than inflation. Some experts feel health care costs will rise around 7% a year over the coming years. About 20% of retiree income will be spent on health care. Medicare can be a great benefit to those 65 and older, but does not cover all your medical expenses.
6. Housing – This should be one of your first decisions. Where you live in retirement will not only affect your income, but your emotional, social, and physical well-being. It should be an important part of your overall retirement strategies. Keep in mind cost of heating and cooling your home are rising quickly. Maintenance, condo fees, property tax, and insurance are costs affected by inflation.
Retirement strategies
If you are finding you need more money for retirement, here are a few strategies to close the gap.
1.Contribute the maximum to your retirement plan, especially if your employer also contributes to your plan. Contributions made by salary deduction can almost seem painless. And because it is pre-tax money, you are “deferring” taxes until retirement when you begin withdrawals. At that time, you may be in a lower tax bracket.
If you are over 50, see if your retirement plan has a catch-up provision. If so, act on it now.
2. If you are able stay employed as long as possible. This benefits your money for retirement in a couple of ways. By having income gives your retirement savings more time to grow. Also, if you work for a company that provides health care, you will not have to fully pay for a policy yourself.
3. Cut expenses. Maybe moving to an area with lower housing and living costs or even a smaller house can help reduce expenses. You may want to stay in your community but downsize to a condo. But keep in mind, moving also includes its own financial expenses.
4. Social Security. Your monthly Social Security benefits go up the older you are when you begin receiving it. For example, in 2011 a 61-year-old man earning $60,000 and is eligible for Social Security benefits at 62, would receive an additional $1,068 a year by waiting until he turns 63.