B is for Baby Boomers Bracing for Retirement
Personal Finance from A to Z
Eileen St. Pierre, The Everyday Financial Planner
It seems like every day there is a new study coming out reminding us how woefully unprepared baby boomers are for retirement. The generations that follow aren’t doing any better. If you want to motivate people to save for retirement, bringing up the negatives is not going to get the job done. We need to focus positive, realistic steps.
There are a lot of things in life we’re told that we cannot afford, like raising a child or paying for a college education. Yet we gladly undertake these challenges because by doing so, we hope to make our lives more fulfilling. Think of retirement the same way.
For those of you bracing for retirement soon, here are some tips to help you get ready:
Take advantage of catch-up contributions.
To encourage older Americans to save more for retirement, the IRS allows people age 50 and over to make catch-up contributions. You can deposit an extra $5,500 in your 401(k), 403(b), and governmental 457(b) plans. You also have the option to deposit an extra $1,000 in a Traditional or Roth IRA.
Let’s say you want to retire at age 65. So you decide at age 55 to deposit an extra $450 a month into your 401(k). If you invest this money at 6% per year, you will have an additional $73,746 saved by the age of 65.
Try out your new retirement lifestyle now.
While you may not have the retirement income that you wanted, you have much more control over your costs. You may realize that you are perfectly happy living more modestly. Downsizing your life can give you a real sense of freedom. Developing healthy habits can increase the quality of your retirement years and reduce future health care costs.
Think about how you will spend your time.
When you were younger you probably dreamed of traveling the world during your retirement. You don’t have to shell out gobs of money to see new things. You’d be amazed at how little people have seen of their own state. Explore what’s closest to you and slowly branch out. Perhaps you will find something that really peaks your interest that you want to learn more about.
Be prepared for change.
My grandparents retired early to their cottage on Cape Cod. I have fond memories of summers there. Then their property taxes shot up and they could no longer afford to live there. They sold their cottage and moved into an apartment. They could still go to the beach every day, but there was less space for my grandmother’s antiques. The grandkids got older and did not come to visit as much.
Whatever you envision your retirement to be, chances are that ten years later, it will be much different. And that’s ok. Memories are priceless. My grandparents died 5 months apart. It’s comforting for me to know they enjoyed their retirement years.