5 Smartest Money Moves for Boomers To Make
If you are a baby boomer, chances are you are either nearing retirement or are already retired. And if you are fortunate enough to have a pension or substantial savings, perhaps you will be comfortable in retirement. If you aren’t, you might have to be a little more creative with your money when you retire.
Either way, money management is crucial for those in your age group. Since most or all of your earning years are behind you, it’s important to make your retirement dollars last. That means getting out of debt and protecting your assets, plus some things you might not have considered, like thinking about long-term care.
We’ll cover those tips and more in this article on the smartest money moves for baby boomers to make.
Assess Your Finances
Making a financial assessment can be helpful for people of all ages, but it can be more productive for boomers than it is for younger generations. This is because you may have acquired a slew of assets and debts over the years. Start by listing all your assets like cash, investments and properties. Then add debts like credit cards, personal loans and student loans. This will show you where you stand financially.
Next, review your retirement savings and investments. Given where you stand right now, are you on track to retire comfortably (if you haven’t already retired)? If not, you might consider tweaking your portfolio or increasing your contributions at least temporarily.
Lastly, create a budget for your retirement. This is based on the previous steps and will help determine how much you can spend each month. If you aren’t on track for retirement, one piece of your budget might be to stash more money in a savings account or some other conservative investment.
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Plan for Long-Term Care
Long-term care refers to a range of services and support designed to help individuals with chronic illnesses or disabilities manage their daily activities and maintain their quality of life. You might eventually need long-term care or you may not, but it’s necessary to plan for it financially.
Jay Zigmont, founder of Childfree Wealth, says Medicare doesn’t pay for long-term care. Medicaid might pay, but only after you’ve run out of money. “The average cost for a year in a skilled nursing facility is $108,000,” Zigmont said. “Men will, on average, spend 2.2 years in long-term care, and women will spend 3.7.”
This means men might need over $230,000 for long-term care, and women might need nearly $400,000. And this is just when using the average costs. “You need to have a plan that either sets aside money for long-term care or take out a long-term care insurance policy,” Zigmont said. But he added that these plans could be more expensive if you have a family history of certain health conditions dementia or Alzheimer’s.
Eliminating debt is a good move for anyone, but again, it’s even more critical for baby boomers at this stage. This is because, as mentioned, boomers are either nearing the end of their earning years or have already reached that point. This could make debt especially burdensome during retirement. Your debt payoff strategy might include the basics, like starting with high-interest debt and using a debt-payoff method.
These strategies might not be enough, however, especially if your income is limited. Fortunately, debt forgiveness programs might be available to you, depending on your situation. For example, you can look into Social Security debt forgiveness, student loan forgiveness and debt management programs. There is also the option of bankruptcy declaration, but this should be considered a last resort as it can have long-lasting impacts on your credit and financial stability.
Reduce Your Expenses
Depending on your financial assessment, you might need to reduce your expenses. The good news is that there are many ways to save money, says Gordon Stein, author of Cashflow Cookbook.
Stein recommends simple moves anyone can make. For example, sign up for a grocery loyalty card or shop for a cheaper auto insurance policy. You could also take some more ambitious steps like doing your own home maintenance or reducing how many cars you have. Depending on how much you currently spend, you might be able to reduce your expenses by thousands every year with a few relatively simple steps.
Determine Your Retirement Red Zone
If you love football, it might help to think of your career like a football game. Phil Cannella, retirement phase expert and founder of The Exclusive Crash Proof Retirement System, compares the red zone in football to a crucial time in your career.
“In football, the red zone is the final 20 yards before the end zone in which the game could be won or lost.” He says the comparison in your career is the last 20% of your working years. This is the point, he says, where your retirement future is won or lost because people only have 20% of their working years left.
Cannella says this is the point at which you should begin exiting the market since you would only have 20% of your working life left to re-accumulate wealth should the market drop. “For example, if your planned retirement age is 65 and you started working at age 25, you’ve worked 40 years. 20 percent of those 40 years is eight years. Subtract eight from your planned retirement age of 65, that equals 57, which means you should start exiting the market at age 57 and move your hard earned money to safe investments outside of Wall Street that will guarantee a winning retirement game plan for you.”
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