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Strategies For Baby Boomers Worried About Retirement

May 13, 2019
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Here it is. A topic that can spark concern whenever it comes to mind - even on a sunny Saturday morning: retirement. Notice how we say “can spark concern”, vice “will.” The following article will explain why, and will walk through important strategies you should consider. In turn, we hope you will gain newfound confidence both before and during retirement.  

The Numbers

If you are worried about your retirement savings, do a quick comparison with the following statistic. According to the Transamerica Center for Retirement Studies (TCRS), the median savings for household retirement accounts is $50,000. Of course, the number will vary based on generation (i.e. baby boomer vs. millennial), though having a reference point is usually helpful.

Are you still concerned after comparing your savings to the above statistic? If so, you should know that 45% of working-age households own no retirement assets at all. While this may not bring you much console, here’s some information that could. Compared to the 62% of people who feel somewhat confident that they will have enough to last throughout their retirement, 82% who are actually retired report feeling confident that their retirement savings will carry them through the remainder of their lives. 

That’s a difference of 20%! We’ll explore the reasons why later in the article, however, there are essentially two options any given person has when it comes to retirement. Conscientious spending combined with a more reasonable post-retirement life style, or maintaining the same life style through better retirement planning now. If you’re like most people, you’d prefer the latter. 

Post Retirement Spending

Frugality. While the word may cause mixed emotions for any prospective retiree, frugality through living a more modest post-retirement lifestyle is one way to gain financial confidence. Later in the article, we will explore planning strategies to accommodate the same living standards as pre-retirement. For now, consider the following list of major post-retirement expenses.

  • Healthcare
  • Housing
  • Transportation
  • Communications
  • Food
  • Utilities 
  • Entertainment
  • Care Services

As you read the list, you may have noticed that some expenses are controllable, while other, more unpredictable expenses, are not. On the same token, there are expenses which will naturally decrease in retirement. For example, the daily work commute is no longer necessary, which means lower transportation expenses. 

Healthcare expenses can unexpectedly crop up, and so a mitigation plan should be in place to account for medical spending. The main take away from our list, however, is that most expenses - from entertainment all the way to housing - can be reduced. You may not like the prospect of reduction, but saving a little across the board can prevent calamity down the road while still maintaining a solid quality of life. 

Now, let’s move into proper planning. 

Pre Retirement Planning

When should you start planning for retirement? The short answer is now. The best answer is decades ago!  

Before we delve in, let’s start by considering some factors to expand upon our list from above. 

  • From morning to night, what do you imagine your daily routine in retirement will look like?
  • Where do you want to live?
  • Who will you spend the most time with?
  • Which past times will you continue into retirement?
  • Have you addressed the above questions with yourself to ensure you are on the same page?

With a special emphasis on the last bullet point, each question you are able to answer helps paint a picture of what retirement will look like (and how much you will need to save)

All too often, people think of retirement as an event. In reality, retirement can and oftentimes does encompass a third of your life. Planning out 30 to 40 years is no easy task, however, asking the right questions is always a step in the right direction. 

How Much Will Retirement Cost?

How much will retirement cost? With inflation in mind, an excellent gauge of how much retirement will cost is your personal past spending. Here are the types of questions you might want to ask yourself while examining your spending history. 

  • What has your total cost been for past vacations? 
  • What does your typical grocery bill look like?
  • What are your most expensive hobbies, and will you continue to pursue them in retirement?

At the same time, consider how much you spend on everyday items such as health insurance, utilities, and vehicle maintenance. While on the topic, do you plan on keeping your current car for the next 30 to 40 years? Likely not, and so plan for potentially one or two more dealings with the car salesman as well. At the end of the day, you can generally use your past to aid in learning about your future.

Expect The Unexpected

Here are a few major factors you may want to consider when determining the capital required to retire. 

  • Economic downturns
  • Care services
  • Inflation
  • Increased taxes
  • Rising health care costs
  • Longer life expectancies

Asset allocation toward a more secure portfolio can help mitigate many of the above risks, however, none of the above items will help strengthen your financial confidence. 

The insight we hope you gain from the above list is that proper planning should include a healthy buffer for what can and will go wrong. 

The Big Picture

By now, you may realize that proper retirement planning involves a considerable amount of leg work. A stitch in time saves nine, and if you plan properly, you may save yourself an enormous amount of trouble down the road. 

Here is our summary of what we covered today!

  • Retirees are more confident in their ability to stretch their finances throughout retirement than individuals who are still preparing.
  • While some expenses in retirement are unpredictable and unavoidable, many are within your control. If you have already retired, small lifestyle changes across the board can make a big difference.
  • Asking yourself the big questions, such as location and daily routine, will help you determine how much to save.
  • Your greatest planning tool is oftentimes your past expenditures. 
  • Unexpected expenses will get the best of you if you fail to plan properly. 
  • Save early, and save often.

Closing Thoughts

Retirement planning is not a guessing game. You have the ability to review past expenses, save progressively greater amounts of money, and decide what kind of life style you want to live. Ultimately, retirement planning can even be exciting. If you have any questions about the article, are seeking help with retirement planning, or have feedback, please feel free to reach out to us via phone at (732) 888-4994 or on our contact page at https://www.castlefinancial.com/contact

Disclaimer

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The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. Some of this material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named representative, broker - dealer, state - or SEC - registered investment advisory firm. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

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