The economy is going to get worse for boomer retirees… much worse. It’s no secret that future inﬂation, low savings, and staggering healthcare costs are going to cripple most Americans in retirement. The writing has been on the wall for years – have you seen it?
According to the Center for Retirement Research at Boston College, less than 10% of boomer retirees will be lucky enough, and smart enough, to plan for these events and prosper in retirement. That’s really bad news. And to make this picture worse is the fact that David Walker, the former comptroller general of the United States (essentially the nation’s CPA), has tried to warn us for years that the US “has been diagnosed with ﬁscal cancer” and that policymakers have given the public an incomplete and misleading picture of the nation’s ﬁnances. Does that mean Social Security cuts in the future? Probably.
There is a litany of terrible economic projections over the next 18 years based on the fact that our nation’s population is growing considerably older, while at the same time we are living substantially longer. Think about this: There will be 10,000 baby boomers turning 65 years old today and everyday for the next 18 years, according to the Pew Research Center. And nearly 60% of these boomers haven’t even calculated their retirement needs, much less saved for them.
Recent studies by the Employee Beneﬁt Research Institute have estimated that a 65-year-old couple that retired in 2012 will need from $227,000 to $240,000 to pay for out-of-pocket medical costs throughout retirement. That’s the expected out-of-pocket cost after Medicare! Of course, this is just the healthcare estimate, which doesn’t include food, transportation, housing, debt payments, or anything else. Forbes Magazine has called this situation “the greatest retirement crisis in American history,” citing that the “new normal” will be the millions of people who are too frail to work and too poor to retire.
There is imminent danger on the retirement horizon, and there will be very few of these boomer retirees zipping along the coastline in luxury convertibles like so many of the ridiculous ﬁnancial companies’ commercials depict. For most retirees and baby boomers, this is a shocking revelation that can cause anxiety, fear or even complete denial. Sadly, that’s why it is predicted less than 10% will prosper in retirement.
But there is a glimmer of light in this dark place. There are three things you can do to increase your chances of success nearly 100-fold in retirement. Research has consistently shown that following these steps can have dramatic results.
First and foremost, you must have a plan. This is not an option. You need a written plan that covers your expenses, income and assets at the very minimum. Seeing your entire ﬁnancial picture in one place will give you better understanding of where your money is, where it is going, and what it is doing for you. Remember, those who fail to plan are planning to fail!
Second, you must have your risk tolerance evaluated and incorporated into your saving and investing strategy. The only bad investments are the ones that you shouldn’t be in based on your risk tolerance! Hire a ﬁduciary advisor to put you on the right path and proactively monitor your progress toward your goals. “Fiduciary” is the important part. It means that the advisor must put your interests completely above his or her own. Brokers, insurance salesmen, and banks are not ﬁduciaries like doctors, CPAs and registered investment advisors.
Lastly, you must act NOW. If you are already retired or will retire in the next 10 years and you haven’t done the ﬁrst two items yet, then you are already behind the 8-ball. The best retirement plans in the world are worthless if you don’t create and implement them as early as possible. Waiting is the reason there is a crisis in the ﬁrst place – get moving!
There are numerous studies that document those who follow these steps have a much better chance of success. Sadly, those who don’t follow them will just be another statistic in the upcoming retirement crisis.