In five years the first wave of baby boomers will turn 60, and they will face retirement – a very different retirement than that of their parents.

Everywhere they have appeared in U.S. society – most notably in schools and the workforce baby boomers have made a visible impression. In the next decades, as the number of people over 60 grows to unprecedented numbers, boomers may very well redefine “retirement” as it has been lived in our country.
 

For years, economic prognosticators have been sounding alarms about the enormous drain this large population will place on Social Security, Medicare, the nursing home industry, hospice and other federal, state and local programs for seniors.

What are some of the challenges boomers face? And how are they planning for retirement? First, here’s a look at the generation, by the numbers.

During the post World War II years of 1946 to 1964, approximately 77 million children were born in the United States. Today they are 37 to 55 years old and represent 28 percent of the U.S. population. An estimated 27 percent of boomers are in the 37 to 41 age group, and the Social Security Administration reports that every day 10,000 individuals reach 50 years old. (source? Publication, date).

The American Association of Retired Persons, Employee Benefit Research Institute, Roper Reports and many other organizations have studied the generation’s retirement challenges. One thing is certain « there is no one-size-fits-all solution, as these statistics reveal:

• Boomers can expect to live longer years in retirement – up to 30 years longer than their parents.
• Fifty percent of boomers don’t know how much they’ll need for retirement.
• Social Security benefits will account for just under 30 percent of the income of baby boomers, compared with today’s retirees. This will require individuals to work longer and save more.
• Nine percent of boomers are saving virtually no money for retirement because they say they cannot afford to, and another 23 percent are saving some money but not enough to meet their anticipated needs.
• Sixty-seven percent of boomers are putting aside money for retirement – up from 56 percent in 1995 – and 75 percent of boomers believe they will be better prepared for retirement than their parents.
• Eighty percent of “retired” baby boomers expect to work at least part-time – either for enjoyment or out of financial necessity.

   So what’s a boomer to do about retirement planning?

Many financial services companies provide online planners that can help individuals calculate how much they’ll need for retirement, based on their current income and lifestyle expectations.

The help of a financial services professional also can be invaluable. For example, are your assets allocated across a broad range of investments? Do you have adequate long-term-care insurance for yourself and your parents? Are you making the most of the equity in your home? Given today’s softening economy and uncertainties posed by recent world events, many boomers will benefit from financial advice on these issues.

Investments: Many financial advisers recommend that your investments be allocated to allow for growth during the inevitable shifts in investment markets. Also, you should review your investments on a regular basis to make necessary adjustments as your needs change and as you near retirement.

Pension and 401(k) Benefits: Ask your employer how much you will receive from pension benefits. If your employer matches your 401(k) investment, be sure you are taking advantage of the entire match. Ask your financial adviser for help with apportioning your 401(k) investment among a balanced range of stocks, bonds and money market funds that will help you meet anticipated needs.

Leveraging Home Equity: Baby boomers who have built up equity in their homes should talk to a financial adviser about making the best use of that equity. For example, you may be able to use the proceeds of a home equity loan or refinanced mortgage to pay off high-interest credit card debt. This may be an especially attractive option given current low mortgage interest rates. Monthly payments may be reduced « freeing up cash for 401(k) and other investments. Further, mortgage and home equity interest may be tax-deductible « unlike credit card interest.

Working in “Retirement”: The U.S. Census Bureau reports that the number of workers ages 20 to 34 has declined by 6 million while the number of people over 50 has increased by 12 million – and those trends are expected to continue. As a result, the experience and skills of older workers should continue to be valuable commodities. If you intend to keep working past 65, now is the time to plan. Ask employment counselors and your company’s human resources department for advice. For example, you may want to go back to school to train for a new career.

Insurance and Care-giving: As individuals age, health care needs increase, and a good financial plan must include provision for long-term-care insurance – for boomers themselves and for their parents. Some studies predict that a married couple will spend more years caring for an elderly parent than raising their own child.

Estate Planning: Baby boomers are expected to inherit more than $15 trillion of wealth – the greatest exchange of wealth in the history of our nation. Expert financial advice will be required to handle that exchange, and to prepare for transition of that wealth to the next generation.

While the retirement challenges of the boomer generation are considerable, so are the opportunities. The time is now to make the most of your potential for the next decades.

(Editor’s Note: Molly McCausland is a financial consultant with Wells Fargo in Gig Harbor. She can be reached at 253-593-5252 or 877-263-5037).