Here’s What Needs to be on Every Boomers’ Retirement Check List


The economy might be on the mend, but that doesn’t mean baby boomers’ security in being able to retire is also on the mend.

Earlier this month, the Insured Retirement Institute (IRI) released its fourth annual report on the retirement preparedness of boomers, called “Boomer Expectations for Retirement 2014.” The report shows only 35%of boomers says they’re confident in their efforts to prepare financially for retirement, a drop from the 44% who felt that way in 2011.

When it comes to create a secure financial future, it’s all about creating and executing a plan. But as many of us know, life often gets in the way—whether it’s an unexpected job loss or health issue—and derails the plan.

Jane Bryant Quinn, personal finance expert at AARP Bulletin, offers the following tips to assist baby boomers in preparing for retirement:

Boomer: What is the best way to develop a retirement income plan?

Quinn:  The best way to develop a retirement income plan is to create one far before you near retirement. While you’re working, be sure to squeeze your paycheck like a sponge to save money during your middle and pre-retirement years.

Don’t give up on stocks – stick with 50% (at least) because fixed-income investments won’t be enough to carry you through in retirement. Once you finally reach retirement, be smart and plan to draw on your savings at a rate no higher that 4%-4.5% assuming that you have diversified your investments, so you can be sure to have enough through the third stage of your life.

Boomer: How important is it to add to your tax-favored retirement accounts while you are still working?

Quinn: It’s incredibly important. Use tax-favored employer plans or IRAs to strategically save while working. It’s the best possible way to save while you’re still receiving a paycheck. Traditional accounts give you a current tax deduction with earnings tax-deferred. Roth accounts let you accumulate your gains tax-free, and you can invest that money for long-term growth.

Boomer: How can boomers avoid leaving themselves house rich but cash poor?

Quinn: At retirement, you want to be certain that you’ll have enough income to cover your monthly bills so strive to pay off your mortgage before leaving the labor market.

If you enter retirement with a big loan, consider selling the house and buying something smaller. If paying off the mortgage would leave you with too little money for your daily bills (plus some), don’t do it. It’s nice to be free of a mortgage when your paycheck stops, but not if it will leave you so squeezed that you worry about having enough money for food and fuel. If it’s not a possibility, be smart and don’t forget to factor the mortgage payment into your retirement budget.

Boomer:  If you sell your house for a substantial profit where would those monies best be distributed?

Quinn: If you sell your house for a substantial profit and downsize, consider buying the new place for cash—if you’ll have enough cash left over to live comfortably. You can usually tap this home equity at a later date by getting a reverse mortgage, if necessary. Reverse mortgages provide current income and don't have to be repaid until the last surviving homeowner dies or the house is sold.

Boomer: For those boomers carrying heavy credit card debt, college loans or personal loans, how would you advise them to pay off the debts?

Quinn: Pay them off first and as fast as you can, tackling the highest-rate debt first. And of course, don’t add to the debt, so pay your bills with cash or debit card while you’re working that debt down.