Baby Boomers and Retirement

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Are you a baby boomer looking forward to retirement? Before your last day of work, be sure you've planned accordingly and have enough money saved.

According to the 2015 Insured Retirement Institute Survey, 73% of baby boomers are not confident they will have enough saved for retirement. About half of the baby boomers surveyed said they are currently having difficulty paying their mortgage, and 40% report not having any retirement savings.

For many people, planning and saving for retirement is an uphill battle. Ric Sarro, CFP^® and Senior Program Manager of BECU Investment Services, says there are myriad reasons why a baby boomer may not be financially ready to retire. “Life happens. People are busy with their career and their kids. Many people have financial planning on their to-do list, but they don't do it because it's never the most pressing thing,” he says. “Then, they find themselves five years from retirement and they have no idea where to start and there's not a lot of room to catch up.

Sound familiar? Sarro says planning is one of the most common barriers to financial health for baby boomers. Boomers are being held back from their retirement goals because of a lack of planning and financial literacy, as well as emotional and external factors including:

A Lack of Planning

• Not properly planning for increasing life expectancy
• Not budgeting enough for medical care throughout retirement
• Caring for an elderly parent

Low Financial Literacy

• Lack of knowledge about retirement planning and saving
• Lack of knowledge is a direct cause of a lack of savings and investments

Emotional Factors

• Overconfidence in social security and company retirement plans
• A lack of confidence in the markets, or residual fear lingering from the Great Recession
• Limiting investment opportunities because of a lack of confidence
• Fear of the future, which causes avoidance and inaction
• A feeling of hopelessness—that it's too late to start.

External Factors

• The ongoing fallout from the Great Recession of 2008
• Declining availability of employer-provided health insurance for retirees

Despite these challenges, if you are approaching retirement and don't have enough saved, there are options. “An old proverb says: ‘The best time to plant a tree is twenty years ago,'” Sarro says. “The next best time? Now!” Although it depends on your overall situation, if you find yourself approaching retirement without an adequate nest egg, then you need to start saving more and investing more – as soon as possible.

People have fallen into a mindset that they are never going to be able to get started, or they're not sure how,” Sarro says. “Every member deserves access to a quality financial plan, which means at the very least they will have an atlas in front of them. But first they need to know where they want to go and how soon they need to get there.”

For baby boomers who haven't planned for retirement or who find themselves short, they may need to lower their expectations and consider a more modest retirement, or even delay retirement. But the best solution is to carefully plan, while you can. “People need to really sit down and assess what their retirement will look like,” Sarro says.

Re-Imagining Retirement

Many people believe that at 65 their retirement will be like that of their parents', which was an either-or scenario – either work or retire (and have fun). But Sarro says that many baby boomers don't realize that retirement today looks very different. “Will you be working after retirement? Maybe you want to open a winery to generate revenue,” Sarro says. “There's a lot of career switching happening, and some retirees are even going back to school to learn a vocation they've always wanted to pursue, but couldn't.”

Although many retirees are opening a business, Sarro cautions using savings as the seed money to start a new venture. “You need to be very careful if you're thinking about starting a business in retirement. What if the business doesn't work? You'll need a backup plan. Get a CPA or financial planner to help you,” he advises.

No matter what your retirement plans are or when you start the planning process, you need to carefully map it out. “Do you need to defer your pension so it has more time to grow?” Sarro asks. “Or do you need to layer your nest egg with a continued income stream so that you don't draw down on your savings as quickly?”

Although a lot of baby boomers are playing catch-up, it doesn't mean retirement isn't possible. BECU members should start with a financial health check, and talk to their financial advisor to ensure they're on track, or to create a plan if there isn't one. Feel like time is running out? No matter your age, the best time to plan and save for your retirement is now.

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