Plan on retiring at age 65? Not this Baby Boomer generation!
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Boomers are setting a new pace settling into their Golden Years. According to a new survey by Transamerica Center for Retirement Studies (TCRS), 66 percent of Boomer workers plan to, or are already working past age 65. Some do not plan to retire at all.
“Today’s workers are grappling with retirement security and challenged by the wobbly three-legged stool comprising Social Security, employer-sponsored retirement benefits and personal savings,” said Catherine Collinson, president of TCRS.
With the changing times for retirement planning, Collinson discussed with FOXBusiness.com some key findings from the survey. Here is what you need to know:
Boomer: Why are Baby Boomers considered trailblazers of the “new retirement,” and what is meant by the term “new retirement”?
Collinson: Like no other generation before or since, Baby Boomers have re-written societal rules at every stage of their lives. Now, Baby Boomers are redefining retirement into what I call the “new retirement,” and blazing a trail for future generations to follow. Unlike their parents’ generation, Boomers are planning to work longer and fully retire at an older age -- and they are proving that the idea of work and retirement is not an all or nothing proposition.
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Many expect to continue working in retirement, at least on a part-time basis. Most Boomer workers say it’s for income or health benefits, yet the survey also found that 29 percent are planning to do so for enjoyment.
Boomer: Since many Baby Boomers were already mid-career when 401(k) plans were first introduced, what steps can they take to play catch up?
Collinson: Three out of five Boomer workers believe that they could work to age 65 and not save enough to meet their retirement income needs. The survey found that total household retirement savings among Boomer workers is $147,000 (estimated median).
For Boomers who may be feeling behind on their savings, the secrets to catching up are grounded in common sense, yet are infinitely easier said than done. Steps include: working longer and delaying full retirement, saving more, spending less, planning well and investing wisely.
A great starting point is using a retirement calculator. According to our survey findings, only 14 percent of Boomer workers have used an online calculator or completed a worksheet to estimate their retirement income needs. Be sure to try a few free online calculators and pay close attention to assumptions such as retirement age, life expectancy, investment returns and inflation because they can heavily influence the outcome calculations. Also, consider seeking help from your employer’s retirement plan provider or a professional financial advisor. After running an initial calculation (and recovering from its shocking result), start crunching numbers to set forth realistic goals, adjust expectations, and map out a plan.
Boomer: What is your advice on creating a Plan B, for when or if retirement happens unexpectedly due to job loss, health issues, or other intervening circumstances?
Collinson: Working longer and fully retiring at an older age is an important opportunity to help bridge a savings shortfall. It can bring income, benefits, more cash to save, and a means of staying active and involved. However, life’s unforeseen circumstances can derail the best-laid plans. That’s why having a backup plan or Plan B is so critical for retirement planning.
Here are five ingredients to consider as part of a good backup plan:
Get your financial house in order. Keep good records of financial accounts, savings and investments. Ensure that beneficiary designations are up to date.
Know your government and employer benefits. Take time to develop a full understanding of Social Security and Medicare benefits. Keep a file or spreadsheet of all employer-related benefits and contact numbers which could include retirement, life, and health benefits.
Review insurance coverage to ensure that it’s adequate and make any needed adjustments. Consider major medical, short- and long-term disability, life insurance and the possible need for long-term care insurance.
Consider consulting an attorney or legal service to set up legal documents such as a general power of attorney, health care power of attorney, last will and testament, and revocable trust.
Initiate a candid conversation with family and close friends to set forth any expectations to either receive or provide financial support. In reality, it’s family and close friends that we’re most likely to turn to. It’s far better to have hard conversations up front than wait until there’s a crisis.
Boomer: What is the new myRA account introduced in 2015, and is this a good fit for working Baby Boomers?
Collinson: The good news is that our survey found that the vast majority of Baby Boomers (83 percent) are already saving for retirement (although I’d like to see that percentage be 100). For the other 17 percent who are not saving, the U.S. Treasury’s myRA savings account may be a good option for getting started.
myRA is designed to make saving for retirement easy for people who need it most – workers who don’t have access to a retirement savings plan at their job or lack other options to save. It is a type of Roth IRA that costs nothing to open, has no fees, and no risk of losing money. However, it has just one investment option – a low-risk variable interest rate fund that yielded 2.04 percent in 2015. A myRA can be transferred to a private-sector Roth IRA at any time – and a myRA must be transferred when it reaches $15,000. Visit www.myra.gov to learn more.