Retirement

Boomers Are Reshaping Retirement Today

Finding themselves in a savings pickle, it turns out putting cash in a can might not be the way to go.

Unfortunately, for many, the grand idea of retiring at age 65 is quickly becoming the un-reality. The true reality is that Baby Boomers today are placing their bets on retiring much later.1 Why? The confidence in their expectations of retirement has decreased significantly over the past two years, leaving folks wondering if they will truly be able to afford retirement.

The fact is that, unlike the generation before them, Boomers are living longer and extending their retirement by sometimes 30 to 35 years (or more) and unlike their predecessors, the Boomers have a different expectation of their retirement lifestyle, which often includes expensive travel and hobbies.

Over the years, Boomers have continuously revised the social standard of retirement, and today they are re-writing the rule on the golden retirement age. Working longer, extending Social Security benefits, and adjusting their overall outlook of retirement expenses is the new way of life for many Boomers.

According to the 2016 Transamerica Retirement Survey of Workers, “66% [of Baby Boomers] plan to or are already working past age 65 or do not plan to retire at all – and many expect to continue working in retirement, at least on a part-time basis.” A harsh reality that is much different than the generation before them.

With the retirement date for many extended longer than they initially anticipated, how else are Boomer’s preparing?

The Social Security Life Vest

For boomers, the expectations of retirement include leaning on Social Security and what they have in 401(k)s, 403(b)s, and other savings and investments. In fact, 87% are assuming that their Social Security income will be a source of income and 34% will rely on it for their primary income during retirement.2

 

Chart Source: Transamerica Retirement Survey of Workers 2016

Chart Source: Transamerica Retirement Survey of Workers 2016

 

There are many upsides and downsides to Social Security and tapping into it can almost be considered a game of strategy, as the time to start receiving benefits is different for everyone.  For example, working after full retirement age won’t affect your Social Security check. A great benefit for many who find that they may have to continue to work after retirement. In addition, if you extend your working years and take your benefits at a later age, your monthly income from Social Security will increase. On the downside, benefits are tilted towards lower-paid individuals, leaving those with higher-earnings to save more through other retirement savings vehicles including company sponsored retirement accounts.

Investment Portfolio or Cash in a Can

Beyond timing Social Security benefits, there are of course a number of other issues to consider when planning out retirement, and planning for it requires exactly that, planning. Unfortunately for the Boomer generation, asking for help can sometimes hard to do.

From marriage and children to careers and retirement, a person’s lifecycle includes a wide array of sometimes challenging situations, and after years of twists and turns on the financial roadway, it would seem critical to understand where one stands financially, how much they should be saving, and when the best time to collect Social Security really is.

Reality is that the concept of a “Retirement Plan” is very different for everyone and ranges from a professionally managed investment portfolio or 401(k) plan, to relying solely on Social Security or storing cash in a coffee can.

No matter how it is saved for, the fact is many times retirement comes without a plan, or at least a plan that isn’t written down. Specifically, 36% of Boomers say they don’t have a plan while a sigh of relief comes from the 51% that have a plan, even though it’s not in writing. Many in the Boomer generation seem to opt for managing their own funds and less than half seek out retirement calculations from a professional advisor.2

The specific reasons for Boomers’ lack in written retirement planning efforts in unknown, but one possibility could lean toward the generational bias of avoiding digital investment platforms and professional financial advice for self-managed savings efforts.

 

Chart Source: Transamerica Retirement Survey of Workers 2016

Chart Source: Transamerica Retirement Survey of Workers 2016

 

Inspiration for the Next Generation?

With the Millennial generation surpassing the Boomers as the nation’s largest living population, it is important to help instill a greater sense of financial responsibility in the younger generations.

The question now is if future generations will learn from the Boomers. Will they be able to retire at 65?

Will they seek out professional advice? Will they increase their retirement plan contributions and seriously consider the financial impacts of early withdrawals?

For now, only time will tell.

 

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Citations.

1- Boomer Expectations for Retirement 2016. Insured Retirement Institute [11/4/16]

2- Perspectives on Retirement: Baby Boomers, Generation X, and Millennials – 17th Annual Transamerica Retirement Survey of Workers. August 2016 [11/4/16]

3- 8 Social Security Basics You Need to Know. Kenn Tacchino. MarketWatch.com June 16, 2014. [11/4/16]

Securities offered through World Equity Group, Inc. Member FINRA/SIPC. Advisory Service offered through BCJ Capital Management. World Equity Group, Inc. and BCJ Capital Management are independently owned and operated. BCJ Capital Management is a (SEC) registered investment adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed. Be sure to consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. BCJ FG 16-344

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