Every day, roughly 10,000 baby boomers retire and nearly half of them have less than 5% of their annual income saved for retirement. And zero is a far cry from the $1 million to $1.5 million AARP recommends we save for retirement.
In addition to not saving, many are facing skyrocketing healthcare and living costs, leading some to say we’re in a retirement crisis.
The issues boomers face are unique, and the solutions varied.
Challenges of boomer generation
It’s not just a matter of saving more. Baby boomers are facing challenges previous generations didn’t.
The financial crisis of 2008, along with a period of low interest rates, means the baby boomers will encounter more financial stress as they live longer.
Other challenges boomers face are:
Cancer and heart issues, along with growing impact from dementia, are draining finances more than most boomers expected.
The parents of baby boomers are living longer and relying on financial and care assistance from their retiring adult children.
Years in retirement
Baby boomers are living longer so their financial assets need to last longer.
Baby boomers have longer and more expensive “bucket lists,” leading them to spend more money on fulfilling dreams and traveling.
Many boomers don’t have company pensions like their parents did and have to rely solely on their own retirement savings, like 401(k) plans.
One thing is for certain: the longer boomers wait to reset and reprioritize their finances, the harder it will be for them to retire and take care of their family.
The solutions aren’t rocket science, but they do take discipline.
1. Modify your investment behavior
Plan on a slow but steady rate of saving and Investments. Don’t expect to get rich off of picking dark horse stocks or bouncing money from one fund to the other. Diversifying across the global markets and staying disciplined have proven to be successful over the long-term.
2. Change your lifestyle
Start saving today. And then save some more. That likely means cutting back on travel or going from two cars to one, for example. As this study by the AARP Magazine suggests, you can double, on average, your nest egg in the last decade of your working life if you save diligently and Invest conservatively.
3. Be smart with property
Many boomers are downsizing the primary home (exiting the suburbs) to a more convenient urban setting, moving closer to the, along with selling the vacation homes. If done right, you could invest the proceeds to extend your retirement funds.
4. Create a financial plan with your family
One reason boomers haven’t saved enough is because many didn’t learn how. Don’t repeat that same mistake with the following generations. Involve your children in the education and planning of your financial future. Working together, you can help them establish good habits that will lead to a more stable future.
5. Focus on your legacy
Boomers often have acquired assets that the next generation has little interest in. Whether it’s a business you’ve built, a collection of art or a timeshare vacation home, be realistic about what it will mean if you leave it to the next generation. Will it be an asset or a burden? If it’s not something they value, develop a business transition plan or convert assets to investments.
6. Don’t go it alone
Finances are an emotional issue. Control, trust and shame hinder transparency and causes many to live in financial isolation. Talk to your spouse and talk to your family. And work with a financial planner who can help take the emotion about of money and help you plan for retirement and the legacy you will leave behind.
If you’re ready to start the conversation about getting set for retirement, reach out to us.