compensation for actions taken through them.
If you’re a baby boomer nearing retirement, or you’re already there, the last thing you want to run into is financial setbacks.
Unfortunately, many are still making decisions that may prevent retirement and potential disaster in retirement. In fact, here are just a few of the top ways Boomers are setting themselves up for major headaches.
Key Points About This Article
- Unfortunately, baby boomers are still making decisions that may prevent retirement and potential disaster in retirement.
- About two-thirds of Baby Boomers don’t have enough saved for retirement.
- One of the top ways to figure out the next steps is to sit with a financial advisor.
- Should ETFs be a part of your investment strategy? Why not meet with a financial advisor near you for a complete portfolio review? Click here to get started today. (Sponsored)
No. 1: Some Baby Boomers are Not Saving Enough for Retirement
About two-thirds of Baby Boomers don’t have enough saved for retirement.
“A majority will find themselves with inadequate resources for retirement, and a large majority will either have inadequate resources or are likely to suffer significant strains in retirement,” Robert J. Shapiro, a co-author of the study and the chairman of economic consulting firm Sonecon, told CBS News. “This isn’t part of the American dream.”
According to the Federal Reserve, as of 2022, less than half of Boomers have saved enough to retire with comfort. About 43% of Americans aged 55 to 64 have no retirement savings. About 30% of those aged 65 and older were considered to be economically insecure.
None of that is comforting, especially when there are 71.6 million retiring Baby Boomers, as noted by Pew Research.
No. 2: Too Many Baby Boomers Rely Too Heavily on Social Security
Social Security is only designed to replace about 40% of your working income, according to the Social Security Administration. They add, “Your full retirement age is 67. Starting retirement benefits before your full retirement age (as early as age 62) lowers this percentage, and starting benefits after your full retirement age (up to age 70) increases it.”
In addition, eligibility for retirement benefits does start at the age of 62.
But if you wait until your full retirement age, you’ll receive 100% of your earned benefits. Better, for every year you wait beyond full retirement up to 70 years of age, you can receive another 8% boost to your benefits.
Also, with the average retired worker collecting just $1,979 a month in Social Security, relying on benefits too heavily puts many Boomers at risk financially, especially if they have an unexpected expense pop up.
Even finance coach Dave Ramsey warns against over-reliance on Social Security. For one, the government isn’t the most dependable when it comes to your dreams. And two, Ramsey suggests that instead of relying heavily on the government’s payments, work to build up your savings accounts.
No. 3: Some Baby Boomers are Not Starting Required Monthly Distributions in Time
Missing required monthly distributions (RMD) can be a costly mistake. This is another key reason to check in with your financial advisor often.
Once you reach the age of 73, you’re legally required to take your Required Minimum Distributions (RMDs), ensuring the government can collect taxes on your money.
Two, there is a required beginning date, which is April 1 of the year after the year when you turn 73. So, if I turn 73 in 2025, I would have until April 1, 2026, to take my first RMD, which would cover my RMD for 2025. I would also have to take another RMD by year-end to account for my 2026 RMD as well.
Three, if you do not take your RMD in time, you could see penalties of up to 25% of the outstanding RMD you had to take. It was once as high as 50%.
It ensures the IRS gets its money one way or another.
If you fall behind, you can still retire in comfort
One of the top ways to figure out the next steps is to sit with a financial advisor. You can also downsize your home, reduce expenses, and even work a bit longer.
As noted by SmartAsset:
According to a report from United Income, 20% of adults over the age of 65 are either working or looking for work. This is up from 10% in 1985. If you’re in good health, you may want to consider working in your retirement years – or delay your retirement for a few years.”
The post Three Costly Retirement Mistakes Baby Boomers Keep Making appeared first on 24/7 Wall St..
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Author: Ian Cooper
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