Written By: Teresa Arrigo
We recently discussed on our radio program an article Barron’s released regarding 7 mistakes many Baby Boomers have made regarding retirement planning. This article focused in on retirement readiness issues baby boomers are facing despite having been alive during some great growth periods in our economy. The research was completed by the Insured Retirement Institute and included over 800 baby boomers. So, what were the 7 deadly sins they discussed? And, what can you do to avoid or correct them?
First, many boomers aren’t saving enough – or at all! 23% of those surveyed had never saved anything toward their retirement. Many more were saving, but the amount they were saving would not be enough to sustain them in retirement. Saving takes discipline – many don’t have a plan for savings, but you can start today by making small changes. For example, you could have a small amount of each paycheck direct deposited into a savings account.
Second, the survey revealed that 17% of baby boomers once had retirement savings, but withdrew them to pay off debt, make purchases, etc. If you are considering taking a distribution from your retirement savings, please consult a financial advisor and accountant to determine the full impact of that decision first. If you already have, consider meeting with a financial advisor to discuss how you can get back on track.
Number three – Not having a goal. The survey found that only 25% of baby boomers who did not have an advisor had even attempted to calculate a savings goal. If you don’t have a goal, how can you work toward it effectively? More concerning than this statistic for me was that even among those who are working with an advisor, approximately 25% still didn’t have a savings goal! Consider meeting with an advisor to create a goal for your retirement savings – then get to work on the steps needed to meet that goal.
Next, many boomers underestimate the costs of healthcare. A number of participants in the survey thought healthcare costs would require between 10%-20% of their total retirement assets. However, estimates from a study released by Fidelity investments, state that an average couple can expect to pay $285,000 during retirement on healthcare costs.
Along the same path of underestimating healthcare costs, the next mistake highlighted is ignoring long-term care costs. According to the survey, 46% of boomers believe that Medicare will provide coverage in the event they need long-term care, but Medicare doesn’t cover long-term care expenses. When you consider that nearly 70% of boomers will need long-term care, this issue becomes more concerning. There are strategies you can create to protect yourself and your assets in the event you fall in the majority who will need care. If you would like more details on these options, our team would be happy to walk you through them.
Number six on the list was mishandling your retirement date. Some boomers, due to missing the mark on their savings, aren’t able to retire when they planned to. Others planned to work longer, but found themselves unable to meet their goals because they were forced to retire earlier than expected. Whether the savings fell short or their career was cut short, they have found themselves in a difficult place at retirement. Before you face this circumstance, take time to meet with an advisor to get your goals on paper and determine how you can make steps toward them now.
The last item listed in the article hit home with me. My stepdad was in a hospital, unable to speak or take care of his affairs for 6 months prior to us losing him. Thankfully, we had power of attorney so that I could handle his finances for him during that time. However, based on the survey, 2/3 of boomers have not taken steps to protect themselves in the event they suffer diminished capacity or dementia. They haven’t got power of attorney documents and haven’t established medical directives, outlining their wishes for their family. As someone who has been there, please let me encourage you to resolve this now before your family needs them.
Whether you have made several of the mistakes listed or none of them, you don’t have to step into retirement blind. We at GenWealth have developed our Ready to Retire Process through our years of experience helping others navigate retirement. We can help you plan for and navigate the unique situations you face in retirement. To meet with one of our team members, contact us at email@example.com.