You’ve probably been hearing a lot about Baby Boomers lately. Not surprising considering this huge generation is reaching retirement age in a very different economic climate than their parents. In fact, 10,000 Boomers are turning 65 every day.[i] Boomers, as a group, will be retiring with more debt than their parents, be it credit card, education, or a mortgage. On top of that, the cost of living has jumped significantly in the last few decades, with housing up 21% in the last three years alone[ii], food up 26% in the last ten years.[iii] Medical costs even for those over 65 who qualify for Medicare have increased as well. What that means for retiring Boomers, as this is a population who has the potential, through lifestyle and advances in medicine, to live well into their eighties, nineties, and hundreds, is that they should go over the following checklist of financial goals.
Get Rid of Your Debt
Pay off your debts. Easier said than done right? While you are working, especially if you have a dual income household, attacking and paying down your debts should be the main priority besides saving for retirement. Why? Because debt can dog any future financial decisions, it charges interest, and once you are retired and on a fixed income, can be devastating. Baby Boomers, born between 1946 and 1960 owe a median balance of $25,000 in non-mortgage debt.[iv] Most of that debt is from car loans and credit cards, but student loan debt has been on the rise, jumping an astounding 72% in the last five years alone[v]. The best advice, while still working, is to pay as much debt down. Attack high-interest debts first and work your way down to federal and more secure debt. Always make sure, before paying off anything to have an emergency fund, as it would not be helpful to pour all your resources into paying off debts only to encounter an unexpected large expense.
Up Your Retirement Contributions
Socking away as much as you can afford to into a diverse retirement planning portfolio is another very important step to a good retirement. Take advantage of any and all employer match or savings programs and max out your contributions. Seek professional advice from a certified financial planner to help get you on track and ensure that your money is working for you. A good goal is fifteen years from retirement to be putting 15% of your earnings into your retirement savings. If you worry that you started saving too late, or aren’t where you need to be, a financial planner can also help with that.
Invest in Your Health
You know the old saying: use it or lose it. Investing in your health and well-being may be one of the smartest items on this list. Incorporating exercise and improving your diet, on top of regular checkups, dental, and mental health check-ins can make all the difference in the quality of your retirement. Poor health will cost you. In fact, the average retired senior pays around $18,000 out of pocket yearly for health costs.[vi] Making small changes like incorporating a few minutes of walking can add years to your life. Moderate diet changes can stave off various issues like high blood pressure, cholesterol, or diabetes.[vii] Idleness and inactivity are literally bad for you, and this is even truer in the older populations. Poor health and inactivity make it harder to bounce back from injuries, even increasing the likelihood of depression in old age. You are working toward a happy and comfortable retirement and treating your body as an important investment, same as your 401k, is a smart strategy for a longer, healthier, most cost-effective retirement.
Make a Budget
If you are still far from retirement, you may feel you have plenty of time to learn, catch up, etc. But like the story of the grasshopper and the ant, there is often benefit in being proactive and prepared. Educating yourself on the costs of retirement, from housing to health care, to the lifestyle you want to lead, will help you to see if you are on the right track, or need to be. Once you have a rough understanding of how much you’ll have coming in and how much you’ll need, you can make up a retirement budget. Make sure to factor in the non-essentials like going out to eat, vacations, and gift giving, as well as the basics. With time on your side, you can start planning and saving, so that the estimated retirement budget is not a far-fetched fantasy, but a realistic goal and blueprint for your retirement lifestyle.
Bucket Lists and Long-Term Goals
When looking ahead and planning for your retirement, whether it’s twenty years or twenty-months away, it’s imperative that you have an idea of how you want to live. You’ve worked hard to retire well and part of that is figuring out what you want to do with the time. Do you want to travel? Go back to school? Downsize? Maybe live on the beach, or on a farm, or on a boat. Making space to dream and fantasize, to revisit passions and hobbies that had to move to the sidelines while you were working and raising families and the rest. This is the time to dust them off. If you have a spouse or family, it’s vital that you share your hopes and dreams and listen to theirs. The more you understand how you want to live, the clearer the path becomes to getting there.