Baby boomers are an American generation born during the post-World War II baby boom, from the mid 1940s to the mid 1960s. The oldest are retired and the youngest are still in the thick of working, raising families, and putting kids through college.
Boomers need to prioritize expenses carefully and boost their retirement savings before it’s too late. The key is to anticipate future expenses and fill any gaps in your retirement planning.
Use these five financial strategies to make the most of the years leading up to retirement.
1. Consult a financial advisor for help.
When it comes to managing your money and investing for retirement, you can do it yourself. Robo-advisors, which are online investment services, use software to automate the allocation of money into different funds (such as mutual funds and exchange-traded funds) based on factors such as your risk tolerance, net worth and age.
However, a robo-firm may not be for you if you have a high net worth or a complicated tax situation, you’re feeling financially stressed, or you’re getting close to retirement. In many cases, working with a financial professional is the best way to flesh out goals and create a solid plan to achieve your financial dreams.
You might find a financial advisor through personal recommendations or visiting sites such as Certified Financial Planner Board, National Association of Personal Financial Advisors or National Association of Insurance and Financial Advisors.
2. Make careful decisions about taking Social Security benefits.
When it comes to claiming Social Security retirement benefits, there’s no magic age that’s right for everyone. For boomers born before 1960, your full retirement age is 66. But it’s age 67 for those born in 1960 or after. No matter your birth date, the earliest you can elect to start retirement benefits is age 62.
While that may be tempting, taking Social Security early reduces your monthly payment about 30%, according to the Social Security Administration. If you can afford to delay benefits past your full retirement age, you’ll qualify for an even larger payout. How much more you’ll receive depends on the year you were born and how many months you wait.
Create your online account at SSA.gov to review your expected benefits and make sure you understand your retirement choices.
3. Live on your expected retirement income before you retire.
A general rule of thumb is retirees may expect to spend 70% to 100% of their pre-retirement earnings, including Social Security benefits. As you approach retirement, practice living on a fixed income.
If you have trouble staying within an anticipated retirement budget, consider downsizing your housing or relocating to a less expensive area. Cutting costs sooner, rather than later, may allow you to use savings to boost your retirement nest egg.
4. Consider what insurance you need.
In addition to planning and budgeting carefully, another way boomers can protect their finances is having the right insurance. Without it, a catastrophic event — such as a health problem, natural disaster or a death in your family — could jeopardize your entire financial future.
- Health insurance is the most important coverage to have because any kind of medical issue or accident could leave you with a massive bill. Even if you’re not ready to retire, be sure to sign up for Medicare three months before your 65th birthday. Missing this deadline means you’ll have to pay a higher monthly premium.
- Life insurance is critical when your death would create a financial hardship for those you leave behind, such as a spouse or children. It can help put kids through college, pay off debt or just provide daily living expenses.
- Disability insurance is another important, yet often-overlooked, coverage every earner should have. It provides a percentage of replacement income if you’re unable to work due to a disability, illness or accident.
- Long-term care insurance covers many costs that aren’t covered by Medicare or health insurance, such as a nursing home, assisted living facility or in-home care.
5. Review your emergency and legal documents.
Boomers should create or update important legal documents — such as a will, health care proxy and power of attorney — to make sure they’re as prepared as possible for a tragedy.
As awful as it is to think about not being here or being unable to make decisions for yourself, it could be worse for your family or friends if they don’t know your wishes. After something unexpected occurs, it may be too late to make important decisions.
So, do your loved ones a favor by getting all your emergency documents in place as soon as possible, and making sure you’re planning to enjoy a long, happy retirement.