While baby boomers probably remember their first few days in the workforce, they are steadily working their way towards retirement. And it’s coming quickly! However, many baby boomers are a part of a smaller subset of their generation who do not really know how to prepare for retirement, or how to take advantage of that preparation. This article does not aim to be the definitive resource on retirement, but it does address several mistakes that baby boomers make that limit the amount of resources at their disposal when they enter retirement. So, here are a few tips and tricks according to a top top NJ financial advisor on how to avoid those missteps and better educate this generation on how to retire right.
One of the best things about retirements are the financial benefits. However, there is a best practice method of taking advantage of those benefits so they can continue accumulating over time, or such that they do not decrease as quickly. The first way to accomplish this is to refrain from collecting Social Security checks immediately when they become available at the age of 62. Rather, hold off on applying for those benefits until age 65, or until age 70, for those who are in good health. This way, the checks will be much larger and baby boomers will get more of their contribution back. Starting Social Security at age 70 means that over time baby boomers will get back 100% of their contribution, on average, rather than 75% or less, if they were to start at ages 65 or 62, respectively.
Furthermore, consider life expectancy when planning for retirement. Many people fail to anticipate exactly how long they will live! And while these calculations are never an exact science, studies show that baby boomers tend to underestimate, rather than overestimate, their life spans. Therefore, they frequently live more lavishly than they should in the early years of retirement, meaning that they will have much less to live off of in their later years if they did not plan ahead carefully. Closely related to this realization is the fact that many baby boomers do not know the best way to access their pension plans. Removing a large amount of money from a pension plan could be a costly mistake. Rather, ask a financial advisor how the pension plan compares to an annuity. An annuity is a fixed amount of money paid to an individual on an annual or semi-annual basis. If moving money from a pension plan into an investment annuity will earn more money in the long run, by all means, do so. However, keep in mind that this may not necessarily be the case.
Finally, baby boomers should seriously start writing a will or creating an estate plan, if they have not yet done so already. Without either of these documents, all of the money remaining once the retiree passes on will be forfeited. An estate planner or financial advisor can help baby boomers decide how to allot those funds, and whether there needs to be any left after the final years of life. An estate planner can also help with other, non-financial areas of retirement life. For example, they can help plan end-of-life care, and can help retirees appoint trustees and custodians of their accounts. They will advise baby boomers on who would be a good candidate for the responsibility of making medical and financial decisions in the event that the account owner is unable to do so for him or herself. Though this can be a somewhat grim aspect of retirement, it is a very necessary thing to consider so that the rest of retirement can be much more carefree.
However, even though baby boomers have been in the retirement savings mindset for so long, they should start to feel comfortable with spending rather than saving everything. They accumulated a significant amount of wealth, not to simply watch it grow but rather to put it to good use later. And guess what? That time has come. So rather than continuing to keep track of every penny that goes in and out, enjoy the fruits of one’s labor! Be responsible, of course, but also remember to take advantage of retirement and enjoy a work-free lifestyle. It is, after all, exactly what the retiree has worked for all this time.
To learn more about planning for retirement contact a New Jersey financial advisor today.