I recently ran across a post by sometimes-FCN-guest-poster Richard Barrington over at Money Rates. In it, he talked about ways to overcome the general lack of savings that is threatening the retirement dreams of many Baby Boomers.
You can read the full article on Baby Boomer Retirement for more details, but here are his six tips:
- Work longer
- Diversify your investments
- Use laddering to manage interest rate risk
- Save on bank fees
- Actively shop for the best rates
- Monitor your progress
To these, I would add that you should consider making deep spending cuts to allow for an increase in your savings rate. When combined with working longer, this will give you the best chance of digging yourself out of your retirement savings hole.
Obviously, diversifying your investments, seeking out the best rates, etc. also have their place, but those things will only get you so far. You really need to ramp up your savings rate and/or save for longer (thereby shortening your retirement) if you want to make a meaningful dent in the problem.
4 Responses to “Avoiding the Baby Boomer Retirement Bust”
As a whole, I believe this is all valueable advice. For those people concerned about their level of accumulated wealth, a good first step is to make a realistic attempt to identify and understand your own income needs in retirement. Simply wondering if you have enough, or if you will have enough is no more than a shot in the dark, until you make a realistic effort to identify your needs. Once you can identify a realistic target, it may become easier to look for areas to gain savings, cut spending, or downsize.
Randy A. Schaller
Ross, some people, my mom included, won\\\’t change. I can\\\’t get her to save in Roth IRA because she thinks maxing out her 401k is enough. She just started really putting money away 8 years ago and thinks she will just move to a cheaper area when she retires, early at 62. She is 56 and that is not going to happen without major cuts. She won\\\’t realize how much she needs until she does not have the money. I wish there was a way to get through to the boomers that the $100000 is not just money you can pull out, it really is $4000/year but I have not figured out how to.
I would simplify Barrington’s steps to a more fundamental level:
1. Diversify. don put all your eggs in one basket.
2. Cash. Keep a percentage of your investment liquid.
3. Eliminate Debt. No mortgage, car payments, and especially credit card debt.
4. Down size. Be realistic about your needs. Sell the big house, buy a smaller less expensive dwelling, and invest the difference.
I’m not part of the boomer generation, but I can already foresee that I’m going to have to work longer and save more over the next 20 years in order to retire before I’m dead.