Just as the we-can-do-anything generation approaches the open doors of retirement, many are hesitating to take the jump. Skydiving, rock climbing, running marathons and other evidence of physical prowess and purpose characterized the boomer generation. They made themselves the healthiest, and they set new standards for spending money and living in the now.
Now is an uncertain economy. Now is a volatile stock market. Now is a real-estate bust. Now is the time to retire.
Here's my assessment of what boomers see as they stand on the threshold of retirement. These further observations are based purely on my 15 years of experience advising boomers on how to get themselves on an appropriate financial course.
About 20 percent (that's one out of every five) have laid out a credible plan for themselves and are confident they'll be fine financially in retirement. The problem is that 60 percent of the boomers think they are in the top 20 percent. That means that 40 percent are overconfident and are deluding themselves and, more regrettably, their spouses.
Another 20 percent are indifferent. They seem to think they got to where they are without planning ahead, why bother planning now.
Then the final 20 percent, 25 percent at best, get the value of consulting an experienced retirement-income specialist to design an appropriate distribution strategy with the highest possible probability, based on the best statistical modeling available, they will not run out of money before they die. Retirees are looking for a clear and simple set of steps which make their money and resources last.
As a retirement-income adviser, I explain that my job, above all others, is to do what I can to make your money last at least as long as you do.
Here are five questions for those boomers who are uncertain about which 20 percent they belong to.
Are you confident that your retirement income and savings will last until you and your spouse reach age 100? Remember, we boomers lived healthier lives until now and will live longer lives than our parents.
Are you confident you can handle the costs of long-term care, those expenses for non-medical events, which require rehabilitation or chronic care at home or in an institution? Remember, we boomers lived healthier lives until now and we may be at a greater risk of disability than death.
Are you confident you can handle the rising costs of medical care as co-pays rise and providers seek more from us out of pocket? Make sure you know what your insurer covers. A recent Fidelity study determined that a 65-year-old couple today will face over $200,000 in non-reimbursable health expenses in its lifetime.
Have you given thought to new earnings in retirement for financial or social reasons? Sometimes the primary benefits of post-retirement employment are psychological. And be careful how and when you initiate Social Security and any other pensions.
Don't have a pension? Many boomers don't. Have you thought about creating your fixed-income pension-like plan, the distributions from which you cannot outlive? A number of methods are available to set up a pension for you.
Despite the waning confidence among boomers in general, be sure you pursue a strategy that's right for you. If you listen to and read the media, you can easily get discouraged. Answer the questions above for yourself or consult somebody you trust who can answer them for you.
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Donald E. Askey is a Certified Financial Planner and a registered investment adviser with Provident Financial Advisors, located at The Provident Bank in Amesbury and Newburyport.
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