By John Drachman
According to the Insured Retirement Institute (IRI), as boomers have grown closer to retirement age, their confidence in their readiness to retire has declined over the last decade.
IRI’s recent report, Boomer Expectations for Retirement, describes the “Me-too” generation’s conundrum this way: “Boomers are largely unprepared for retirement; unrealistic in their expectations, and under-saved. In fact, 45 percent have no retirement savings.” A critical decision Americans must make about retirement is “when.” Assuming an average annual spending rate of $55,000, the difference between retiring at 65 versus 70 means that another $275,000 in income must be generated to keep up with expenses.
Surprisingly, many younger boomers – those in their 40s and 50s – who actually have savings said they haven’t taken adequate steps toward ensuring the assets will generate a sustainable level of retirement income down the road. Still, steps can be taken to address a retirement shortfall while there’s still time.
Shortfall Action Steps for Younger Boomers
- Keep Working: Being in the work force still helps. For example, working another three years and saving 15% of earnings could substantially increase one’s future income prospects.
- Reduce Spending during Accumulation Years: One of the best ways to save more is to spend less. By slightly modifying spending habits, you can uncover a significant source of money for your retirement nest egg.
- Combine an Accumulation Approach with an Income Strategy: By dedicating resources to growing your savings now, you’re better positioned to receive regular income later.
- Delay Social Security: Try to refrain from receiving Social Security benefits until age 70 to qualify for your highest payout.
- Invest Savings in Tax-Advantaged Vehicles: Reducing your tax liability will help you get the most out of tax-deferred compounding.
- Temper the Impact of Market Risk on Your Savings: Consider ways for providing at least some portion of your retirement savings with a guarantee against market loss.
- Talk to a Financial Professional: You do not have to play the retirement game alone. Working with a financial professional can help ensure that once you build it your retirement nest egg will last.
“There is a strong correlation between a positive feeling about retirement and the use of financial advisors,” the IIR report continued. Seven in 10 boomers who worked with advisors said they had a positive outlook toward retirement. On the flip side, only one-third of boomers who struggled forward without financial advice said they felt positive about their future retirement.
By tapping into professional advice and adapting a more disciplined approach to saving for retirement, today’s younger boomers will be better positioned to find the security they need with the long-term peace of mind they want.
John Drachman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. John is an IABC award-winning writer, who applies his 30 years of financial marketing experience toward advancing the dialog between investors and investment professionals.