Retirement Planning: How to Address the 3 Biggest Problems Facing Boomers

Baby boomers face some problems in retirement.
Baby boomers face some problems in retirement.

If having the finances to maintain a comfortable lifestyle in retirement is of growing concern to you, you’re not alone.

Baby Boomers have seen their confidence in retirement deteriorate as a result of the recent economic downturn. As the economy improves, the ability for baby boomers to reach their goals should improve with the economy, but not everyone is confident they will be successful.

The number of Baby Boomers who are confident in their efforts to prepare financially for retirement has dropped nine percentage points, from 44% in 2011 to 35% in 2014, according to the Insured Retirement Institute’s fourth annual report on retirement preparedness of the boomer generation.

“As they near retirement, more and more people are worried about running out of money,” says Chad Noyes, managing director and financial advisor of Chicago, Ill.-based Hoopis Financial Group, a member of MassMutural Financial Group. “And, people are living longer than ever — that presents a wildcard when planning for expenses.”

Life expectancy in the United States rose to 78.8 in 2012  — setting a record high, according to a 2014 report on mortality in the USA from the Centers for Disease Control and Prevention’s (CDC) National Center for Health Statistics. More than a decade earlier, in 2000, Americans’ average life expectancy was 76.6 years old.

Here are boomers’ top three expectations for retirement, and what you can do to get out in front of some of the challenges that lie ahead.

1. Less savings

The percentage of boomers who are confident they will have enough money to live comfortably throughout their retirement years has dropped from 37% in 2011 to 33% in 2014, according to the Insured Retirement Institute (IRI) report.

While boomers report being less confident about their savings, data show that boomers in 2014 were more likely to have determined a savings goal than in prior years, according to the IRI report. In fact, in 2014, 55% of boomers calculated a savings goal, compared to 50% in 2013.

Start saving as early as possible to maximize the return on your funds, says Joshua Sheats, financial planner and host of of Radical Personal Finance, a financial advice podcast.

“Start retirement income planning now,” he says, noting that revenue streams need to be consistently monitored throughout retirement. “Once you connect savings as the path toward reaching a goal, saving is no longer difficult or a burden in any way.”

2. Struggling to pay bills

But many boomers continue to face financial challenges. In 2014, 20% of boomers reported experiencing difficulties with paying the rent or mortgage, the IRI study shows.

Understanding how different financial products work can help you to maximize revenue streams in retirement, and close the gap between what you have and what you owe.

Younger boomers may underestimate Social Security as a source of income in retirement, the IRI study finds. Social Security is a federal program that provides benefits to retired people and those who are unemployed or disabled.

While only 36% of younger boomers expect Social Security to be a major source of retirement income, 56% of their older boomer counterparts, who are age-eligible for Social Security benefits, share this view. In reality, according to the National Academy of Social Insurance’s “Social Security: Benefits, Finances,and Policy Options: A Primer,” 65% of Americans aged 65 and older receive about half or more of their retirement income from Social Security.

If you have reached normal retirement age, which is 66 for people who were born between 1943 and 1959, you can access 100% of your Social Security benefits.

For each year after that, up to age 70, your benefits increase 8%, meaning you can access 32% more at age 70 than at age 66.

If those benefits are tapped at younger than normal retirement age, they will be reduced based on the number of months you receive benefits before you reach your full retirement age. For example, if your full retirement age is 66, the reduction of your benefits at age 62 is 25%; at age 63, it is about 20%; at age 64, it is about 13.3%; and at age 65, it is about 6.7%, according to data from the Social Security Administration.

“People continue to live longer than they expect and the one source of guaranteed income we have is Social Security,” says says Kate Holmes, founder/principal at Las Vegas-based Belmore Financial, LLC. It can be tempting to take it early, but in your 80s and 90s you’ll be glad you waited for that higher amount.”

3. Working longer

While many people continue work for myriad reasons, including personal fulfillment, a growing number of Americans say financial concerns are driving their decision to stay in the workforce for longer than previously planned.

During the past year, 25% of not-yet-retired boomers said they postponed their plans to retire – the highest percentage since IRI’s research series began in 2011.

Of more than 1,000 American workers over the age of 50, 78% of workers cited financial needs and 67% said their need for employer benefits, such as health insurance, drove their decision to delay retirement, according to a 2013 Associated Press-NORC Center for Public Affairs Research.

“When you retire and take your last paycheck, all of the sudden a switch flips — and now you have to worry about having enough money for the rest of your life,” Noyes says.

The No. 1 way to ensure a comfortable retirement is to meet with a financial advisor to create a strategy tailored to your needs and expectations.

In fact, the percentage of boomers working with a financial advisor who are highly confident in having sufficient savings to live comfortably throughout their retirement years is more than double those who are planning for retirement on their own, the IRI study finds. Boomers working with financial advisors are also more likely to have savings for retirement and more likely to have determined a retirement savings goal, data show.

“There is a lot to consider when planning that next stage of life,” Holmes says. “Like all big decisions, it can be invaluable to have a third party walk you through all the steps, ensure everything is covered, and help you clearly think through it all.”

NewRetirement Planner

Do it yourself retirement planning: easy, comprehensive, reliable

NewRetirement Planner

Take financial wellness into your own hands and do it yourself retirement planning: easy, comprehensive, reliable.

Share this post:

Keep Reading

All Posts