The first half of the infamous “baby boomers” (born 1946-1955) began reaching normal retirement age six years ago. Lucky you if you fall into the older boomer category. You have seen the longest bull run in stock market history and if you remained invested after the financial crisis of 2008, you are probably quite happy with your portfolio right now. In fact, one of the top concerns we hear from these boomers is the large required mandatory distributions one will have to begin taking at 70 ½ as well as the taxes that need to be paid on these distributions.
A larger percentage of older boomers also still have pensions compared to their younger counterparts which could mean that less supplemental income from retirement savings is needed for cash flow.
Younger boomers may have significant challenges for their retirement that the older generation often didn’t see.
In addition to fewer defined pensions, younger boomers have also seen higher college costs and have often had to provide financial assistance to grown children and more support for parents who are living longer than.
Facing all of the above during peak saving years while experiencing a much lower stock market return to boost these savings is creating the need for families to really sit down and strategize for their retirement more than ever before.
Younger boomers will also miss out on several benefits from Social Security that older members of this group have enjoyed, like filing a restricted application and collecting half of a spouse’s benefit for free until age 70.1 Boomers born 1960 and later will also have to wait until age 67 to receive their full benefits. Those born between 1943 and 1954 receive full Social Security benefits at age 66.2
And then there’s the kids…
Moving in with your adult children because you don’t have enough money to live in retirement…not your best option!
Even though the job market has improved for younger people, many are not earning enough to live on their own.4 Mom and Dad are still helping their college educated children and carrying them on their health plans until age 26 along with the interest on student loans-unbelievable!
As we mentioned before, don’ t count on lofty stock market returns to provide a solution. Even Joe Davis, Vanguard’s chief economist stated “…investors do need to be prepared for a significant downturn.” 5 The general consensus after an 8 year bull market in stocks and a 35 year bull market in bonds, returns going forward will be significantly lower.
So what to do?
Save more! Have family conversations about money. Have a plan. Work longer, even part-time. Live within your means- that means knowing what you need as opposed to what you want and paying attention to where your money goes. And did I say have a PLAN? Have a plan!
Questions? Concerns? We can create an investment strategy to help you work toward your financial goals. We have many resources and informational classes to help you.
Written by Kathleen Nolan, CRPC®
Kathy Nolan is a Charted Retirement Planning Counselor and holds the CRPC® designation from the College of Financial Planning
2 Social Security Administration, Retirement Planner: Benefits By Year Of Birth, https://www.ssa.gov/planners/retire/agereduction.html, Accessed February 23, 2018
3 CollgeBoard, Tuition and Fees and Room and Board over Time, https://trends.collegeboard.org/college-pricing/figures-tables/tuition-fees-room-and-board-over-time, Accessed February 23, 2018
4 Paul Laudicina, World Economic Forum, Wages have fallen 43% for Millenials. No wonder they’ve lost hope, https://www.weforum.org/agenda/2017/01/wages-have-fallen-43-for-millennials-no-wonder-they-ve-lost-hope/, Accessed February 23, 2018
5 Eric Rosenbaum, CNBC, Chance of US stock market correction now at 70 percent: Vanguard Group, https://www.cnbc.com/2017/11/27/chance-of-us-stock-market-correction-now-at-70-percent-vanguard.html, Accessed February 23, 2018.
By Kathy Nolan
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