What are the financial needs of baby boomers? How does one go about figuring out if they have sufficient funds saved up for retirement? Perhaps if you have a pension that will last until you die, you will be ok financially. Add government pensions and many people with pensions will be found. They may not be able to do everything they want, but they will be able to live comfortably. Baby boomers have become accustomed to having whatever they want and they have the money to make purchases that their parents never could.
Retiring in Large Numbers
Now they are going to retire on mass and many of them do not have company pensions to fall back on. They have to rely on their own savings, odd jobs, and government pensions which do not pay a lot compared to the cost of living these days. With so many people retiring at the same time, all of the financial companies are developing products that are designed to help the baby boomers. But are they really helping them?
All of these companies are in the business to make money and they have high overhead and that means they need to make a lot of money off of you and me to be profitable. If you are planning to retire soon and have some money to invest, be very careful how you invest and who you invest with. These funds need to last sometime. So let’s break the problem down for people in general terms so that you can help yourself figure out what you need to do. You may have to go over your plan several times to make everything work for you, however, that’s ok, you should do this at least once per year and any time there is a major change in your finances.
Financial Needs of Baby Boomers – When to Retire
Sometimes you just have had enough, sometimes it is health, and other times people are forced into retirement. Pick an age that you are comfortable with for your plan. If your actual retirement age changes, then re-evaluate the plan. You might choose 50 or you may work until you are 70 years of age or even longer. It does not matter as long as you can and you are enjoying the job. Start with the age that you think is most realistic for your situation.
What income will I Have After Retirement?
The next step is to figure out what your income will be when you retire. You will have a combination of company retirement plans, government pension plans, and your savings. Look up these amounts or contact your HR people to find out what to expect. If you have savings, assume that you will receive 4% income from your savings. Don’t forget to project what your savings will be at retirement.Â 4% is a conservative number so anything higher than that is a bonus. Add up all of these income amounts and this will be your total income before taxes.
What do I make now?
Next, calculate all of your income. Your last tax statement will be a good place to look. This will be the total income that you are currently making and is a good measure of what you need to make assuming you are living within your means. You will actually need a little bit less since it is assumed that you are not saving for retirement now since you have actually retired.
Compare your Retirement Income with Your Current Salary
As a baby boomer, this is where you may be in for a surprise. Most people will be shocked when they find out that they are receiving less than they thought for their retirement. Now is the time to take stock of your situation. Possibly you will want to adjust your retirement age so that you can build up a bit more savings and also earn income longer. If you have to retire then there are plans that need to be made to ensure that you can live comfortably.
How Long will I live?
This is another big question since it really puts a limit on how much money I will need to have to live comfortably. If baby boomers are an average 55 today, they can comfortably assume that they will live another 30 years. That is a long time to live on savings alone if there is no pension. For those folks with a pension, they are better off, however, inflation can catch up with them and make things difficult financially.
You can talk to an accountant to have someone do the calculation for you. However, in simple terms, assume you have $300,000 saved up and you are going to live another 30 years. Then that is only $10,000 a year plus interest that you can take out of your savings. If you want your money to last well into your 80’s. This can be very scary for a lot of baby boomers and it is time for a wake-up call to take a look at what savings they need to have.
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