Individuals born between 1946 and 1964 are approaching the end of their working years. The question at the top of the minds of this generation is can baby boomers afford to retire? This is a valid question, as many baby boomers have faced financial challenges throughout their lives. There are several financial considerations that boomers will need to think about when planning for retirement.
First, understanding the current state of retirement savings for baby boomers is important. A recent study by the Economic Policy Institute found that the median retirement savings for households headed by individuals in the 56-61 age group stands at just $17,000. Some families have no savings at all. This is very concerning for baby boomers. It suggests that boomers may not have enough savings to last through their retirement years.
The Rising Cost of Living
One of the major factors contributing to the lack of savings is the rising cost of living. Inflation has been steadily increasing over the past several decades. This has made it difficult for many baby boomers to save enough money to afford a comfortable retirement. Additionally, many baby boomers have faced financial challenges. Issues such as job loss, medical expenses, and caring for aging parents have further depleted their savings.
And, between the years 2019 and 2021 during the COVID-19 pandemic, boomers had to tap into their savings to take care of everyday expenses. These expenses included everything from mortgage and car payments to food, as well as chipping in to help other struggling family members.
The Decline of Traditional Pension Plans
Another factor that has made it difficult for baby boomers to save for retirement is the decline of traditional pension plans. In the past, many workers were able to rely on a guaranteed pension from their employer to provide a steady stream of income in retirement.
In fact, retirement savings benefits were an important part of the overall compensation packages for boomers when they first entered the workforce. However, employers have shifted away from traditional pension plans in favor of 401(k) plans. Now the responsibility for saving for retirement has fallen more on the employee. This has made it more difficult for many baby boomers to save enough money to afford a comfortable retirement.
CLICK HERE TO LEARN HOW TO MAKE MONEY SHOPPINGSteps That Baby Boomers Can Take
Despite the challenges associated with saving for retirement and the decline of traditional pension plans, baby boomers can take steps now to improve their chances of being able to afford to retire. First, start saving as early as possible. The earlier you start saving, the more time your money will have to grow through investments and other returns on your money.
Moreover, starting to save for retirement early increases the likelihood that you will have enough money saved to afford a comfortable retirement. If you are just getting started, check out Investopedia’s ideas for catching up on savings to ensure that there is at least some money around to support your retirement.
Second, it’s important to take advantage of any employer-sponsored retirement savings plans, such as 401(k)s and IRAs, as these plans offer valuable tax benefits that can help you save more money.
Be Realistic About Your Retirement Expenses
Lastly, when considering retirement be realistic about your retirement expenses. So many of us have unrealistic expectations about just how much money we will need in our retirement years to meet our basic expenses. This often leads to disappointment and unnecessary financial struggles.
To better prepare yourself, create a detailed budget that includes all expected expenses. Your list should include healthcare costs, housing costs, food, clothing, utilities, gasoline, and any other expenses you may incur. Furthermore, don’t forget about travel and entertainment. While you are still working in a hybrid model, this site encourages you to Take a Break – 50 Fun Things For A Hybrid Boomer To Do. You will want to do these things in retirement too! Include the money in your budget for entertainment, so that you don’t worry about how to pay for it. All of this can help you get a better understanding of how much you need to save to afford a comfortable retirement.
Alternative Sources of Income
Boomers might also consider alternative sources of income to help fund your retirement, such as part-time work, renting out a room in your house, or starting a small business. If you want to get out of the house a couple of days a week, part-time work can supplement your retirement income. You might even find remote opportunities to try something different from what you were doing before retirement. And, college students, traveling medical professionals, airline employees, and even other boomers are always looking for safe, comfortable rooms to rent. Similarly, turn your hobby into a small business where you are working but only doing what you choose to do.
These are alternative sources of income that can make retirement affordable. One final thought on generating retirement income is downsizing your home or moving to a more affordable area. This can help reduce your expenses while in retirement.
Social Security Benefits
Remember the Social Security withholdings coming from your paycheck? Go to the Social Security Administration website now to review your Social Security benefits. This is money that you contributed involuntarily during your working years. You are entitled to draw down these benefits once you reach retirement age.
For boomers considering retirement, this is one of the first places to look when the question of whether baby boomers can afford to retire is raised. Social Security benefits can provide a significant source of income in your retirement. So, it is important to understand how much you can expect to receive and when you should begin taking benefits. Equally important, consider the tax implications of Social Security benefits, as they may be subject to federal and state income taxes.
Seek Professional Advice
Finally, adequately planning for retirement and properly managing your life savings can be overwhelming. Seek professional advice! A financial advisor can help you to create a well thought out retirement plan that considers your unique financial goals. They can also help you identify any potential risks and opportunities and suggest ways to manage them.
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