The Biggest Retirement Planning Mistakes Boomers Made and How to Fix Them

Data from the Insured Retirement Institute (IRI) suggests that Baby Boomers are pretty busted and busted up about their retirement prospects.  Boomers have made some big retirement planning mistakes — even beyond giving away their record collections.  (You didn’t really do that, did you?)

The results of the IRI survey reveal that many Boomers have a dismal view of their future prospects.  But the news does not need to be entirely bad. Here are a few highlights — perhaps low lights — from the survey and what you can do to fix them. A secure retirement is still within reach.

Can’t Get No… Satisfaction…

The percentage of Baby Boomers who are satisfied with how their lives are going from an economic perspective has fallen to 43 percent, the lowest level since 2011.

In fact, boomers are less confident than they were five years ago about almost every aspect of retirement. The study finds that a “mere 22 percent believe they are doing a good job preparing financially for retirement, versus 41 percent in 2012.”

What You Can Do About It: Now is the time to take a detailed stock of your current resources and prioritize your needs and wants for the future.  There is no going back to save a little more, but there are definitely ways to move forward.

Assessing what you currently have and what you might need in the future can help you see some of the good decisions you have made and that you do have options for retirement — this can be very satisfying!

Named a best retirement calculator by the American Association of Individual Investor’s (AAII), the NewRetirement retirement calculator is a powerful and very personalized tool.

Ain’t No Mountain (Savings Account) High Enough

One of the biggest retirement planning mistakes Boomers have made is not saving enough money for retirement.  The IRI study found that a full 68% of Boomers who lack confidence in their retirement plans wish that they would have saved more and 67% wish that they had started saving earlier.

The study also found that Boomers are feeling even worse off than a few years ago.  Only 24 percent of Boomers are confident they will have enough savings to last throughout retirement, versus 36 percent in 2012.

What You Can Do About It: Maybe you haven’t saved enough, but you likely still have some really good options for a secure retirement.

  • Do you own your home?  If so, have you factored how your home equity can subsidize your retirement finances either now or at some point in the future?
  • Still feeling pretty good? Working a little longer — either part or full time can dramatically improve your long term finances.
  • Can you delay the start of Social Security to boost your monthly benefit?
  • Do you know what is important to you?  If you focus on priorities, cutting expenses doesn’t have to feel like a burden.

Use the NewRetirement retirement calculator to “try on” these strategies.  This easy to use tool takes retirement planning way beyond savings and assets.  This planner is designed to help everyone.  Assess which options will give you a secure retirement.

Money… That’s What I Want! (Just Don’t Keep it in Cash)

Of all the tactics you can use to achieve a secure retirement, one of the easiest things you can do is to invest your money and earn returns on that investment.  Doing this requires virtually no sacrifice, compromise or a lot of work.

However, a new study from BlackRock finds that Americans hold 58% of their investible assets in cash where little or no interest is earned.

What You Can Do About It: Get out of cash and into some kind of holding that can earn interest or dividends.  Learn more about the best asset allocation for retirement.

Breaking Up is Hard to Do

Divorce is impacting Boomers’ retirement plans. Twenty four percent of divorced Boomers are, or expect to be, worse off in retirement than if they had not divorced.  And, divorce by older Americans is increasing. The number of people over the age of 50 who divorce nearly doubled between 1990 and 2010.

Experts agree that divorce is financially difficult for Boomers.  Susan Brown, a sociologist at Bowling Green State University, says, “Individuals who go through gray divorce are considerably economically disadvantaged, and they are a growing demographic group.”

What You Can Do About It:  Assuming you are not going to work out differences with your spouse and stay married, you need to tackle the economic challenges of divorce head on to avoid some big retirement planning mistakes.  You will need to:

  • Arrive at a plan for dividing assets.
  • Make sure that all of the details are carefully managed.  For example, when splitting retirement accounts, you need to be extremely careful not to incur tax penalties.  And, don’t forget to update all beneficiary designations.
  • Plan for your own future.  Once there is a general understanding of who gets what, each party should create their own retirement plan to help them fully envision their new financial future.

Stand by Me (Your Financial Advisor)

According to a report from the Society of Actuaries, only 50% of baby boomers have worked with a financial advisor and even fewer meet with one on a regular basis.  However, the IRI study found strong evidence that financial advisors yield better finances:

  • At least nine in 10 Boomers who work with a financial advisor have retirement savings, a measure which has remained above 90 percent since the inception of the study in 2011.
  • More than eight in 10 Boomers who work with financial professionals believe they are better prepared for retirement as a result of that relationship.
  • Among the 55 percent of Boomers with retirement savings, 58 percent have saved $100,000 or more for retirement. When Boomers work with financial advisors this increases to 78 percent.

What You Can Do About It:  While it can be difficult to find a financial advisor that you trust, it is clear that they can help you have a stronger financial profile.

I Feel Good… I Knew that I Would Now (but Can I Pay for Medical Costs?)

Only twenty seven percent of Boomers believe they will have enough money for health care expenses. This is down another 10 percent from 37% in 2012. Medical expenses are indeed a huge concern. According to a study done by Fidelity Investments, today’s retirees will need an average of $130,000 for health care alone in retirement.

What Can You Do About It: Looking at healthcare costs can be discouraging.  Here are a few ways to tackle them:

  • Be sure to include healthcare costs into your planning. The NewRetirement retirement calculator does this automatically.
  • Continually evaluate your supplemental Medicare coverage.  Policies can change and your health needs also evolve.  You’ll want to make sure everything is as cost efficient as possible. You can compare supplemental Medicare policies here.
  • Stay Healthy: Medicare actually has quite a few perks to help you stay healthy. Free flu shots, good preventative care and help for healthy living are all part of your coverage.
  • Get Creative with Funding Long Term Care: Insurance is only one option for funding long-term care. Once you enter your information and have an initial analysis of your retirement plan, the NewRetirement calculator allows you to try out different ways of funding the care. It can be interesting to compare your options.

Come on Baby.. Let’s Do the Twist

According to a recent Employee Benefit Research Institute report, about 30 percent of people feel mentally or emotionally stressed about preparing for retirement.

What You Can Do About It: Do the twist!  No, you don’t need to dance, but you should flip your perspective. Flipping your perspective enables you to see things in a new and different way.  This fresh approach can change your attitude and help spark creative ways of approaching a problem — even a problem like how to retire.  If you are stressed about retirement, you might just need to change how you think about the problem and what you are doing.  Here are 8 ways to flip  your retirement perspective.

A good retirement plan may help you avoid mistakes

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