4 Secrets Baby Boomers Need To Know To Have a Successful Retirement
Written by
Yaël Bizouati-Kennedy
Edited by
Amber Barkley
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Boomers are either retired or approaching retirement. While inflation has cooled down, it has also taken a toll on many Americans who, in turn, have put retirement planning and saving on the backburner. And now, retirees report that the past years have left them worrying about several factors, top of which is inflation (71%), meeting future healthcare needs (51%) and potential reductions in Social Security (46%), according to a Goldman Sachs Asset Management survey.
In turn, a new study found that 25% of pre-retirees — non-retired Americans aged 55-65 — say they are planning to retire later than expected, and another 15% are unsure if they will ever retire, according to Nationwide’s eighth annual Advisor Authority survey, powered by the Nationwide Retirement Institute.
Yet, with this new chapter in their lives, there are many steps they can take to avoid financial setbacks and enjoy their golden years. Experts shared some tips on what to do to have a successful retirement.
Eliminate All Debt
Baby boomers should strive to eliminate all debt well before retirement, said Michael Collins, CFA, adjunct professor, Endicott College and founder of WinCap.
“This means paying off any credit card or student loan debt, as well as any car loans or mortgages. Having no financial obligations in retirement can significantly reduce stress, and allows for more financial freedom,” added Collins.
Kyle Enright, president of Achieve Lending, further points out that boomers should pay particular attention to credit card debt.
“Consider that paying off a credit card balance with a 20% interest rate is equivalent to earning a 20% return. Plus, you will provide yourself with breathing room on a fixed income,” said Enright. “If you need to, look into a personal loan to help you pay off the debt, debt resolution (settlement) or credit counseling.”
Work With a Financial Advisor
“When we get sick, we go to the doctor. When we get into legal trouble, we hire a lawyer. Yet, somehow people believe that they should be able to navigate the ever increasingly perilous financial waters without professional help,” said Robert R. Johnson, PhD, CFA, professor of finance at Heider College of Business, Creighton University.
According to Johnson, one of the most important functions of a financial advisor is working with clients to establish an Investment Policy Statement (IPS) — a written document that clearly sets out a client’s return objectives and risk tolerance over that client’s relevant time horizon, along with applicable constraints such as liquidity needs and tax circumstances.
“The whole point of an IPS is to guide you through changing market conditions. It should not be changed as a result of market fluctuations. It only needs to be revised when your individual circumstances change — perhaps a divorce or other unanticipated life change,” he added.
Another benefit from working with a financial advisor for retirees is determining how to decumulate assets when in retirement — that is, determining a sustainable spending policy, he added.
Plan for Emergencies
Experts agree that having an emergency fund in retirement is still much advised.
“Unexpected costs including health expenses and family emergencies may come up and reduce your monthly income — and you won’t be able to make that money back on a fixed income unless you go back to work,” said Kim Gattis, senior vice president and senior financial planner at UMB Bank.
Another reason is that an emergency fund can take the stress off your finances should your retirement account experience a down market, added Gattis. “The supplemental income will provide potentially critical support while the market recovers.”
Understand Your Retirement Income
While everyone’s retirement is going to look different, you need to understand all of your sources of income, such as pensions, Social Security, 401(k), savings and investments, said Col. Jerry Quinn (USAR) COO and secretary at American Armed Forces Mutual Aid Association (AAFMAA).
“The Social Security Administration provides a personalized report of your taxes paid over the years and how that translates to the amount you will receive in retirement at different times,” he said, adding that the report also includes a host of information and links to make the best choices regarding this special source of retirement income.
“If you don’t already have an account, go to ssa.gov to get signed up,” added Quinn.
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