Boomers: So, You Haven’t Saved Enough…

Baby Boomers SavingsYou are not alone.  Baby Boomers are a generation that has generally saved less than needed as they approach retirement. On average, a boomer (born 1946-1964) is approximately $500,000 short of the savings that they will require. The Employee Benefit Research Institute reports that only 20% of Americans older than 55 have a nest egg amounting up to $250,000. Thankfully, it is not too late to step up the savings plan and take advantage of incentives for late savers.

Take Stock

Review your retirement plan and how much you will need during your Golden years. Create an income stream that totals 80% of your final salary. Couples should look into:

  • Traditional Pensions
  • 401K planning that allows a draw down of 3 ½ to 4% annually
  • Social Security Deferment- Deferring payments adds 6-8% annually for each year delayed. (A new Congressional law could negatively impact this.)

Prior to retirement, your savings should amount to 8 to 12 times that of your final salary. To stay on track, 35 year olds should have an amount saved equal to their annual salary. 45 year olds should have a savings of three times their salary. 55 year olds should be reaching for 5 times their salary. Time and compounding interest can allow your savings to grow into a sizeable nest egg.

Play Catch-Up with Incentives

Take advantage of employer contributions and tax law. If you have a tax-advantaged (like a 401k) account and your employer matches contributions, contribute the maximum amount allowable in such accounts to get the most free money from your employer.

For those 50 years and older, the IRS allows some catch-up provisions. The provision for those over 50 for traditional and Roth IRAs is an additional $1,000. This is in addition to the $5,500 limit generally. (If your household income is less than $59,000 and you have a plan, you can also qualify for a $1,000 Retirement Savings Contribution Credit.)

Pay Down Debt

Tackle high interest debt first. Pay off high interest rate credit cards and then focus on others. Most automobiles are known to depreciate with age, so it makes sense to make do with a less expensive vehicle and purchase a pre-owned vehicle when necessary to reduce financial outlay. Consider moving into a smaller home or apartment to save on taxes, utilities or monthly rental payments. Tap into community and state resources for exercise options that reduce the need for a gym membership. Depending on your family’s needs and resources, there are many ways to save for those rainy days.

Golden Rule:  Pay yourself first. Even after paying off a loan, continue making payments into your savings account. When you receive a pay raise, put the extra income aside. Having an automatic withdrawal of funds into a savings or brokerage account makes it easy to continually set aside the funds you will need in the future.

Seek the Advice of Professionals

According to the Insured Retirement Institute’s newly released report, 86% of Boomers that plan for retirement with the assistance of a financial planner state that they are more prepared for their future financial needs due to their advice. Contact a Retirement Specialist at The Windsor Group, Ltd to review where you stand and tailor a retirement plan that can meet your unique situation.