Retirement and financial security, and how to achieve it. That’s the burning question of the day. It seems that we cannot set through an evening of television watching without seeing several advertisements regarding ways to prepare for our retirement. This also means that since only baby boomers are presently retiring in any significant number, these ads are targeted at us boomers, and we are the ones who are mostly unprepared for retirement. What can I say. I guess Guilty As Charged would be appropriate.
Here’s the numbers which I read lately. As I recall the number is 42%. That’s 42% of the boomers who are already retired, or will be retiring soon, are nowhere near prepared for retirement. Why is that? Who said preparing for retirement was easy. Who said saving money for retirement, when there are so many other demands placed upon the use our of money, is easy. And who said that we boomers should have been setting up diversified streams of retirement income, when we were twenty-something, was easy. Now the easy thing for us boomers to say is something like, I Could Have and I Should Have Done It. Also It Didn’t Seem That Important at The Time.
Well enough with the sourcism already. That’s not going to do us any good. I’d first like to discuss the difference between our retirement, and the retirement that our parents enjoyed.
When our parents retired.
First of all our parents have to take their portion of the blame for the Baby Boomer thing. After all they put this situation in motion back in 1946 and 47. Anyway our mothers and fathers spent their careers working for companies which offered a Defined Benefit (DB) Pension plan. It’s really too bad that there are not many of these plans still available, because they were really cool. All the employees had to do was sign up for the plan. The money would automatically be deducted from their pay, and all our parents had to do was work hard, and look forward for their retirement, because they knew that there was a boatload of money waiting for them in their retirement account. Our parents had no retirement concerns because the DB took care of everything.
Then a bad thing happened. I think it was Ronald Reagan, who decided to create a tax sheltered supplemental retirement fund. The keyword here is supplemental. The main source of my father’s retirement came from the DB, and the supplemental funds came from, what turned out to be a IRA, or a 401(K) funds. Well it didn’t take long for employers to figure out that they could discontinue the DB’s, and in its place set up Defined Contribution (DC) plans. This took the cost of administration of the plan, from the responsibility of the employer, and put it in the control of the employee.
That sucks sense how many ordinary employees were, and are well versed at administering a profitable retirement fund. But that’s what happened. Our parents went from being members in a well oiled, profitable retirement plan, which as far as our parents were concerned, ran on autopilot. To the plan which we are saddled with. A plan which we have to sent up and keep track of ourselves. And, by the way, which pays a fraction of the DB plan, which our parents enjoyed.
Boomers are living longer
Good news right? We boomers are supposed to live significantly longer than our parents did. Yippy! We get to retire, and are blessed with the ability to live longer after we retire. Things keep on getting better and better.
But we need to take a closer look at the consequences of our increased life spans. Our parents were expected to live until their mid 70’s. We, on the other hand, are expected to live into, and beyond our med 80’s. That means we have to be able to finance our retirement for at least 10 additional years.
Most of us boomers a struggling to figure out how to finance 10 years of retirement, and then we find that we need to finance our retirement for an additional 10 years, at minimum. So what to do. The logical solution, and the solution that many boomers have decided to choose is to delay retirement. If, we feel we are going live 10 years longer than our parents did, then we have to delay our retirement 10 years. Plus continuing to work after retirement is a likely option.
It’s obvious that many of us boomers are not prepared for retirement. The thing is that sooner or later, we are all going to have to retire. Two things are bound to happen. Our health will turn bad, and we can no longer work like we used to. Or our employer may decide that he, or she needs younger employees. Bottom line is that we need to overcome the retirement challenges, which are unique to our generation. And challenge is a shortage of money.
I heard a saying, maybe you heard it to. “The old 65 is the new 70”. What we used to do at 65, which is retire, we now do at age 70. So why 70? That is the age that our Social Security benefit is fully matured. That’s the age when we receive all the SSI bonuses for delaying our retirement. If, we work past the age of 70, our SSI benefit will not increase. If, we retire prior to 70 we will be leaving money on the table. A definite bad thing.
Delaying our retirement until we turn 70 may seem like a bummer, is we have our hearts set on retiring at 62 or 65. If, we have all of our financial ducks in line at 62 or 65, then I say go for it. Most boomers, however cannot make that claim. And the additional 5 to 8 years of working can give us a chance to get our retirement financial act together.
So how do we do that;
- Start an aggressive retirement saving plan. And diversify it. Put money away in a retirement savings account. Utilize direct deposit. Get a qualified financial adviser, invest so your money works for you. Set up a IRA or a 401(K) plan. Your financial adviser can help with that.
- Treat your retirement as a necessary expense. A expense which is just as important as our mortgage, or car payment.
- Identify all retirement expenses, such medical, education transportation needs.
After we have done all of these things and we find that we still are not prepared for retirement when we hit 70. What then? Well first of all don’t feel lonely. There is still a boatload of boomers in this position. What we need to do while putting our financial house in order, is figuring out how we are going to generate a supplemental retirement income after we retire.
I like to look at work we do after we retire, as doing something we’ve always wanted to do, but were never able to do it. It’s our chance to become our own boss. Work but not having to punch a clock.
So what do we do? Do we have hobbies which we could turn into a marketable product? Do we have skills which we can market over the internet? It would be a shame to have the computer skills which we’ve learned waisted on FaceBook. Have you ever heard of Affiliate Marketing on the internet as a way to supplement your retirement income. If that interest you, here is a link to my website.
Most boomers are not prepared for retirement, and retirement is in the same category as death and taxes. Neither of the three are ever going away. We have to deal with these challenges. The sooner we deal with them, the less painful the outcome.
That’s all that I’ve got for now. I hope you have found this post informative. In any event I do want to hear from you if you have anything to add to my thoughts. Or if you disagree with my line of thinking. You can leave your comments below.