The generation known as baby boomers has always charted an original course. Boomers have significantly impacted the western world in every conceivable way, and will continue to for many years to come. While baby boomers have grown to become leaders of industry, published scientists and scholars, brilliant artists and championship athletes, they are not exactly known for their financial conservatism.
Baby boomers grew up in the prosperous years when the world had recovered from the second World War, and didn’t know a depression like the previous generation. A lifetime of spending big and saving small can be fun, eventful and adventurous, but doesn’t exactly set you up well for retirement. Whether you just started saving last year or have been putting money aside for decades, you must have a plan in place you can execute consistently.
To determine if you are ready to retire you might like to use our Retirement Preparation Checklist.
Here are five tips to help baby boomers keep those retirement plans on track.
Any realistic plan must start with a rock solid budget. You’ve got to take the time to estimate your expenses during retirement, as well as the income you expect to cover those expenses. Start off by tracking your expenses as they stand now, and do that for a couple of months so you can come up with a comfortable average. Make sure that you add in money that would cover at least six months of expenses as well, so you have an emergency fund you can draw from. This is your pre-retirement budget. To adjust it for your overall plan, remove the expenses that will change upon retirement (such as commuting costs) and trim down your income to what you expect during those years as well.
With that number in front of you in black and white you are either ready to celebrate your frugality or suffer a panic attack. You may need to adjust your retirement expectations at this point. Review your timing for when you would like to retire, and tweak it if necessary. You may need to work longer than you expected, but that’s not always a bad thing. If many of us are going to live to a ripe old age so you really want to face 30 years of not working
Pay down expenses
It is wise to cut out some of the long-term bills you face now, so you won’t have to include them in your retirement budget. Always pay off any credit card debt before you stop working, as it will only get harder when you are retired. More and more seniors are facing bankruptcy these days, and the primary culprit is credit card debt. And if you own a home, do your best to pay off your mortgage before you retire as well. With those two major expenses off the books you’ll have a much better chance of enjoying your retirement comfortably.
The other big issue you should check off as early as possible is how you will handle medical expenses. This is one budget area that nearly always increases as you age, and you cannot control the outcome or the size of the bills. Many seniors have medical insurance, but even that isn’t always enough to cover all issues. Health problems can eat through your savings in a hurry, so learn everything you can about your options. And consider setting aside money specifically for healthcare costs. There are specific savings accounts for these issues, as well as separate insurance policies to cover the expenses of long-term care should you need it.
Being prepared psychologically
Finally, make sure you are emotionally prepared for what’s to come. Just as you may need an accountant to help you understand the financial implications of retirement, a few conversations with a retirement coach could help you determine if you are ready for retirement. You don’t want to take on such a big change too early, or without thinking it through. It’s a whole new life, and you don’t want to make decisions that impact your emotional health and your financial health in negative ways.
Plan an income producing retirement
Of course there are options to a traditional retirement, designing a retirement lifestyle that involves some income producing work while you also fulfil your lifestyle dreams. Click on the banner below if you’d like to know how you can do this.