6 Retirement Savings Tips For Baby Boomers

Blog Category: Finance

According to Boomer Expectations for Retirement (BER), current retirees might not be where they think they are in their retirement planning. Here are some tips to keep in your back pocket (or start using now!) to get you on track to retire the way you want to.

6 Retirement Savings Tips For Baby Boomers

1. Evaluate How Much Income You Need

Having a goal in mind for how you want to retire is helpful so you can make the best decisions to save appropriately. Target a 70-90% income replacement rate with room to adjust based on your desired lifestyle. Consider using a retirement income calculator to adjust your investments as you age and revisit your retirement plan every year with a basic retirement needs evaluation. It’s important to address any changes so you’re as aware as possible about your capabilities for retirement and saving for it. If you don’t have a retirement plan, now’s the time to meet with a financial planner to create one and start exploring your retirement plan options.

2. Review Your Retirement Accounts and Investment Portfolio

After saving money throughout your career, you have to decide how to handle those assets, such as keeping your retirement accounts separate or consolidating them into one account. Consolidating your retirement accounts makes it easier to manage and see the bigger picture of your retirement plan, reduces fees for investment management and account maintenance, provides a wider range of investment funds, and makes it easy to manage beneficiaries. However, consolidating can also lead to higher fees to maintain one large account, potential tax consequences, loss of grandfathered benefits, and limited investment options. Consult your financial planner.

Consider diversifying your retirement investments if you have 10-15% or more in one stock. You can do this through a balanced fund or target-date retirement fund. You should also allocate your investment portfolio appropriately between different asset classes, such as bonds, cash, stocks, and real estate.

3. Create a Personal Spending Plan

Spending plans help you avoid spending more than you have coming in and ensure your spending and goals are aligned. They can also free up extra money to pay down debt, such as maxing out a tax-advantaged account like an IRA, HSA, or 401(k). A great way to create a personal spending plan is assessing your current spending and deciding how and if you continue that way.

4. Decide Where to Live and Other Important Wants and Needs

Where and how you decide to age will also affect how much you need to save for retirement. You could stay in your home, downsize, relocate, or move into a continuing care retirement community; there’s many options to consider based on your wants, needs, and affordability. It’s important to keep in mind how your home equity plays into your retirement plans.

5. Prepare for Possible Long-term Care Expenses

You may be in great shape now and have plans to live entirely independently, but unexpected changes happen in life, and you might find that you need care in the future. It’s best to assume you’ll need some form of long-term care later in your life and plan for it, as it could affect where you live, you may evaluate moving closer to family or downsizing to put more money in savings.

Unlike Medicare, Medicaid covers long-term care expenses, but there is a five-year look-back period on assets you’ve gifted to others, and you have to spend down nearly all your assets to qualify. You can either spend down the assets to qualify for Medicaid, purchase long-term care insurance, or pay out of pocket from your retirement nest egg. Consider purchasing long-term care insurance coverage if your retirement assets will be between $200,000 and $3,000,000. Your state might also offer a long-term care partnership program where one dollar from Medicaid’s asset limit is protected for each dollar the policy pays for your long-term care.

6. Explore Your Health Insurance Options and Social Security

On the subject of care, health-related costs add up over time and eat into your spending. Review your retiree medical insurance options and the associated costs. You’ll also want to take advantage of your high-deductible health plan with an HSA option if you have it. This helps cover future medical care costs by setting aside up to $3,650 for individual coverage or $7,300 for family coverage in an HSA from pre-tax dollars. At 65, you become Medicare-eligible and must enroll within three months before and after your 65th birthday, or there may be penalties.

Although you can start taking your Social Security benefits at 62, you might want to wait until you’re 66 when you’re at full retirement age or up to 70 for a higher lifetime benefit. Maximizing these benefits for as long as you can will go a long way in supporting you through retirement.

Worried about your future? Take hold of the decision-making process with our new eBook, Moving to a Senior Living Community: Make Decisions Your Way.

At Life Enriching Communities (LEC), we’re committed to ensuring seniors feel well-equipped to plan for their future and age how they wish. Contact us today to learn more about LEC and the programs we offer, and feel free to learn on your own with resources we’ve created for those interested in our services.