Forever Young? Boomers Can't Turn Back the Hands of Time on Retirement Planning
You can hear the Baby Boomers mantra "60 is the new 30" everywhere in the media and it has replaced the now thoroughly inconvenient "Never trust anyone over 30”. As the creators and rulers of the Youth Culture, Baby Boomers are not about to give up their title easily. Boomers are getting facelifts, receiving Botox injections, and dyeing their hair, all in the name of maintaining a youthful appearance.
While their parents may have made jokes that their "get up and go got up and went," Boomers are making no such concessions. The question becomes: will Boomers have the financial resources to maintain a vigorous lifestyle and enjoy the activities of renewed youth? Turning back the clock when it comes to physical appearance is one thing; it's quite another when the topic is retirement planning. Just because you look 30 doesn't mean you still have 30 years to prepare for retirement. No magic pill can make up for years of little or no planning or give you more years to prepare. When it comes to retirement planning, 60 is still the same old 60, and for some of the first wave of Boomers who reached 65 in 2011 their lack of planning was a cold dose of reality. For many other Boomers that reality looms up ahead like a major black cloud, threatening to rain on their parade.
Seventy-six million Americans were born from 1946 to 1964. Today, they represent approximately 25 percent of the population. Between 2011 and 2029, Boomers will reach the traditional retirement age of 65.
General expectations for retirement have changed right along with the economy. "It used to be that retirement was a three-legged stool," explains Tema Steele, MBA, Agent with New York Life Insurance Company since 1981. "Social Security, company pension and 401(k)." Now that all three of these legs may be on shaky ground, Steele advises her clients to take control of their financial future. "We try to put in place a strategy so that retirees have control over their money and aren't at the whims of their employers," says Steele. Options Steele can help clients implement include vehicles such as a fixed deferred annuity1 that allows you to defer taxes, or a permanent life insurance policy that provides death benefit protection as well as allows for cash value accumulation. “No one used to have to worry about retirement," says Steele, "but things have changed and now it’s important to look outside the box for solutions."
So no matter how active you are or how long you plan to work, it's never too early to begin implementing strategies to save more for later so that you can ensure a secure retirement.
According to The 2009 Retirement Confidence Survey2 conducted by Employee Benefit Research Institute (EBRI), workers who say they are very confident about having enough money for a comfortable retirement this year hit the lowest level in 2009 (13 percent) since the Retirement Confidence Survey started asking the question in 1993. Retirees also posted a new low in confidence about having a financially secure retirement, with only 20 percent now saying they are very confident (down from 41 percent in 2007).
There had been earlier reports that Baby Boomers could rest easy because they will be inheriting trillions of dollars. That now appears overly optimistic. A January 2009 article on AARP.org3 cautions Boomers not to count on an inheritance, citing the organization’s recent study In Their Dreams: What Will Boomers Inherit. The study found that only about one-fifth of Boomer households have received inheritances and only 15 percent can still expect to receive one. The study also notes that out of Boomer families who have received an inheritance, the median value was about $64,000 – a nice amount of cash by anyone’s standards, but certainly not enough to retire on.
Women and Retirement
Women, in particular, have a lot of catching up to do when it comes to planning for retirement. According to the 2008 WISER (The Women’s Institute For A Secure Retirement) brochure Don’t Run With Your Retirement Money4, the average future life expectancy for a woman at retirement age is greater than for a man at the same age. So women on average need to secure more money and more years of guaranteed income to finance their retirement.
But conversely, according to 2009 United States Department of Labor article Women and Retirement Savings5, women are at a disadvantage when it comes to building that much-needed retirement income. “Women are more likely to work in part-time jobs that don't qualify for a retirement plan. And working women are more likely than men to interrupt their careers to take care of family members. Therefore, they work fewer years and contribute less toward their retirement, resulting in lower lifetime savings,” cautions the report.
As wife.org (Women’s Institute for Financial Education) summed it up so succinctly in its 2008 piece Why Women Need Retirement Planning More Than Men Do6, “The good news for women: they live longer, so they will have longer to enjoy their retirement. The bad news: they live longer, and so their retirement will be much more expensive than for their male counterparts.”
Reality Check and Plan
No matter which view of retirement planning you take, both optimists and pessimists agree that Boomers must take time to do a "reality check" and take some basic proactive steps to secure their retirement.
- Create a Plan
Many financial experts say you will need at least 70 to 80 percent of your pre-retirement income to maintain your standard of living after you stop working. This figure has increased in recent years for a variety of reasons, including inflation, increasing life spans, better medical care, and changing expectations during retirement. If you plan to be part of the youthful Boomers, the time to start is now. Use an online calculator, like the ones available at this site, to get an estimate of your income needs and how much you will likely need to accumulate. Check out the Current Retirement Savings Planner, which can help determine if your current plans for retirement will be sufficient.
- Save More/Maximize Contributions
If you don't have any established retirement plans, begin a savings plan now. Set a monthly goal and stick to it. If you can, contribute to an employer-sponsored savings plan. Contribute the maximum or at least be sure to contribute enough to be eligible for any company match, if available. This is especially true for women.
Most experts believe that if you have a time horizon of 10 years or more, your 401(k) should be heavily weighted in stocks, but spread out over several sectors. They recommend a mix of small, mid- and large-cap domestic stock funds and international funds. This kind of diversity may help to smooth out potential ups and downs of Wall Street.
The Bottom Line
Not only should Baby Boomers expect very little in the way of wealth transfer from their parents, but they’re also likely to need more money to retire than they think. And for women especially, it’s never too early — or too late — to begin planning for a secure retirement.
Be sure to find out about new policies, plans, and products that are available. Insurance companies introduce new products and enhance their existing products each year. Ask your New York Life insurance professional about new life insurance policies, and products for retirement savings and other strategies, and how you may be able to take advantage of them.
New York Life also has a financial checklist and filing system that not only helps you organize what you have — it helps you identify what you may need down the road. It’s called the LifeFolio System: Your Lifetime Financial Organizer. At no charge to you, a New York Life agent — professionally trained and experienced — can help you get on the road to financial organization and also assist you in analyzing your needs and recommending appropriate solutions through insurance and financial products and concepts. Request a no obligation review with a New York Life agent today.
1Issued by New York Life Insurance and Annuity Corporation (A Delaware Corporation)
2Ruth Helman, Craig Copeland, and Jack VanDerhei, “The 2009 Retirement Confidence Survey: Economy Drives Confidence to Record Lows; Many Looking to Work Longer,” EBRI Issue Brief, no. 328, April 2009.
4Wiser Brochure: http://www.wiserwomen.org/pdf_files/dontrun.pdf
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