There’s plenty of doom and gloom news surrounding the Millennial Generation’s financial management. But, new reports suggest Baby Boomers aren’t doing too well either.
Baby Boomers, which are those born roughly between 1946 and 1962, seem to be missing the mark when it comes to saving enough money for retirement. As MarketWatch pointed out, the average Baby Boomer has just $263,000 saved in their employer-sponsored retirement plan, despite needing about $658,000 to live comfortably on.
If the math holds up, this means the average Baby Boomer has saved less than half of what they really need to live on during retirement. This is especially concerning now that 10,000 or so Baby Boomers are retiring on a daily basis.
Whether you’re ahead of the game when it comes to retirement savings or too close to the average Baby Boomer for comfort, it’s important to consider the personal, familial, and societal implications of Baby Boomers retiring in droves.
Are Baby Boomers Doomed When it Comes to Retirement?
Not Saving Enough
According to research from the Insured Retirement Institute, 70% older workers have less than $5,000 immediately available for emergencies or other unexpected expenses. This means that older workers on the verge of retiring are already on the brink when it comes to financial stability.
Any healthcare emergency or other major expense could quickly derail your retirement plans if you don’t have enough money set aside to cover those costs without dipping into your retirement savings.
Even if you’re on a limited budget, it’s incredibly important to save as much money as you possibly can. This may sound like common sense, but it’s much easier said than done for a lot of people.
If you want to stay on track to retire by a certain age with a big enough nest egg to protect yourself and your finances throughout retirement, then it’s equally important to save money for everyday emergencies and unexpected costs in addition to saving for retirement.
New research from the NHP Foundation found that 65% of Baby Boomers have reportedly not budgeted for unforeseen health expenses that might arise while they’re retired. Since Medicare and other healthcare programs for the elderly will be unlikely to cover all of your medical bills and long-term healthcare costs such as long-term stays in memory care or assisted living facilities, it’s absolutely crucial that you account for these types of expenses in your retirement plans.
It’s important to find ways to save money on health insurance, but this shouldn’t be your only course of action. You must also budget for less-than-favorable medical scenarios, such as potential hospice care, in-home aides, and other long-term care costs. Even if you’re currently in excellent health, you never truly know what might happen later on down the road. Preparation is key to avoiding massive, unaffordable medical bills!
Ignoring Potential Income Opportunities
One problem older Boomers may run into within a few years is running so low on money that they need to drastically downsize their lifestyles or return to the workforce to maintain their current standard of living.
Fortunately, cutting back on your budget until it’s bare bones or submitting job applications isn’t necessary if you’re able to find side gigs or passive income opportunities to supplement your retirement income.
For instance, if you own your residence, then you could make money by renting out a room or two to guests on Airbnb. If you enjoy driving and meeting new people, you could drive for Uber or Lyft, deliver items for Amazon, or deliver food as a PostMates driver.
There is no limit to your income potential when you transform your hobbies into lucrative side gigs, so don’t mistakenly assume you have to find a boring desk job if your nest egg starts to run dry.
How Can You Better Prepare for Retirement?
If you’re currently retired or close to retirement, then it’s important to stay up-to-date on the latest retirement trends for the Baby Boomer Generation so you don’t make the same mistakes that other people are.
Even if you have to work 2+ additional years than you originally planned for, delaying retirement is arguably preferable to the anxiety of running out of money with no back-up plans.
As you can see from the suggestions mentioned above, there are plenty of ways to enjoy retirement without risking the headache of underestimating your long-term expenses. Talk with a trusted financial advisor about your retirement goals and always plan to save more than you anticipate needing to ensure you’re protected even if major expenses unexpectedly arise.