Baby Boomers, you profess that your number one goal is a secure retirement, yet your actions belie your words. According to the recently released Global Investor Pulse Survey from BlackRock, “Saving to live comfortably in retirement was cited as the most important financial priority by Americans… yet the majority (71%) are concerned they won’t be able to do so.”
“Baby Boomers (age 55 to 65)… said they want to have $45,500 in annual retirement income, but the nest eggs they have accumulated ($136,200 in average retirement savings) could provide $9,129 of estimated annual retirement income, leaving a potential annual gap of $36,371,” according to the BlackRock CoRi Index.
This situation is crazy, and likens itself to, “One Flew Over the Cuckoo’s Nest” – not “Nest-Egg” planning. Baby Boomers, it is time to acknowledge your investing shortfall and take charge of your financial lives. Now is the time to fly a straight course toward a healthy retirement.
Tip #1: Set Realistic Goals
Don’t guess at the number you will need in retirement; plan for it. Some things to think about before you start designing goals with your financial professional are; Where are you living now? Is that where you want to be in retirement? If not, visit the proposed places on your list. Visit them during different seasons. Florida may not look as great in the summer as it does in the winter. Do you want to travel? Play golf? Visit the grandkids? Set your goals, with a price tag on each of these, per year, and start to figure out the buying and carrying costs.
Tip #2: Take Stock of Where You Are Now, With An Eye To The Future
Really figure it out. The first step to your financial security is to understand where you are now. Ask your financial professional for a clear delineation of your portfolio by asset class and return. What are your other assets? Do you have a lot of equity in your home? Realistically what could you sell or rent it for?
(As a side note, many seniors are using the equity in their homes as their cash machine. The Times reported this global phenomenon, “Baby boomers are releasing record amounts of cash from their homes to spend on cars and holidays.” Need I say that this is not a great way to use a home equity line?)
The next thing to think about is the number of years you and/or your partner will live. Hint: Add extra years to your life expectancy. Your parents may have only lived into their 70’s; however, chances are, with good preventative medicine and a healthy lifestyle, you will live longer.
According to WebMd, “Boomers are expected to live longer than any previous generation of Americans. Of the 3.4 million born in 1946 – including Bill Clinton, George and Laura Bush, Donald Trump, and Susan Sarandon… 2.8 million are still alive. The men can expect to live another 22 years, the women another 25.”
You don’t want to outlive your assets. Make sure you come out of this exercise with a realistic monthly income, assuming you will live a long time. (You fill in what “a long time” means.)
Tip #3: Create Your Plan
Make it happen... today. Is that simple and direct enough? Most financial firms have calculators to help you figure how much you’ll need to live on in retirement. This is a process, not an end-point. Most people find out the shocking numbers, and then have to cut back and redo the numbers several times. Finally, the question will be; Does your portfolio match your needed future income? Does it match your risk tolerance? The BlackRock study also found that, “While Americans said that they ideally should have 33% of their net worth in cash instruments, they admit to holding 65% -- far too high an allocation to achieve their retirement goals, given interest rates…”
I realize that many of us, post-Recession, were “freaked” by what happened, and many saw their, “401(k)s turn into 201(k)s.” That is pithy, but also serious and real. The flight into cash made sense, but now it doesn’t. Move back into investments that will conservatively match your goals.
The other phenomenon that the Recession caused was the need for many retirees to keep working. According to the 2015 CareerBuilder’s annual retirement survey, “54% of senior workers (age 60+) say they’ll work after retiring from their current career – up from 45% last year.”
That extra and needed income is great, but it doesn’t mean that you should stop investing and live solely on the income you are generating. You should be living below your means and socking away as much as you can. I’m not picking on Baby Boomers. The BlackRock Survey also found that, “Fewer than one in four Americans regularly put aside a certain amount of income into long term savings or investment (23%) or has a formal financial plan for their retirement (14%).”
Ideally, you want to live your advanced years out, free from worrying about money and actually leave enough of your monetary legacy behind for your loved ones to enjoy.
A friend gave me a purse with the following statement printed on it: ”Happiness is being retired and spending all of my kids’ inheritance before I die!” I just haven’t had the heart to use it because it doesn’t match my goals! If you want my purse, let me know. Maybe it’ll inspire you to start putting some money aside for your own retirement.
