Financial Problems for Many Boomers
While Others Learn How to Maximize Their Retirement Income
How do you envision your retirement years? Perhaps you imagine yourself playing golf every day; fishing by the side of a lake; or traveling to all those places you have dreamed of seeing. Sooner or later most people eventually stop working. However, far too many of them discover that their Golden Years are not all that golden.
The Great Recession that began in 2008 created havoc for the retirement plans of many Baby Boomers. Every day, 10,000 Baby Boomers are turning age 65, and many of them have found themselves woefully unprepared for retirement. Between 2014 and 2019, the number of people over the age of 65 who are living is the United States is expected to double! There have been a number of recent articles in the Baby Boomer Retirement bloglately about the problems facing this generation as they try to retire over the next two decades, as well as suggestions for how retiring Boomers can increase their retirement income.
Retirement Concerns that Plague Boomers
Currently, one in six people over the age of 65 lives below the poverty line. Some of these people failed to plan for their retirement. However, many of these people thought they had enough money when they retired years ago. Unfortunately, inflation has eaten away at their assets, leaving them destitute.
In the coming years there will be far fewer young adults around to support the retiring generation of Baby Boomers. Today, there is one adult between the ages of 15 and 64 for every five people past retirement age. During the next four decades, this number will decline until by 2050 the ratio will be 1:3.
Retired Baby Boomers will put a heavy burden on their children and grandchildren. To make matters worse, the Boomers are expected to live longer than previous generations. Since there are so many Baby Boomers, the result will be that the overall number of senior citizens will mushroom from the current level of 40 million to approximately 89 million by 2050. That is more than double the number of seniors!
Another factor that will affect many Baby Boomers will be how to pay for all the medical expenses and extra care they will need, especially since they are expected to live longer than ever. Currently, the average cost of assisted living in the United States is about $3,500 a month. In some states, the price is approaching almost $7,000 a month. Since the average person living today on Social Security receives approximately $1,200 a month, the price of assisted living is already unaffordable for many retirees. This problem is expected to grow worse as the Baby Boomers retire.
Poor financial planning, high assisted living costs and the bad economy during the past four years have combined to create serious challenges for retiring Baby Boomers. Preceding generations have often prided themselves in paying off their mortgages and their other debts prior to retiring. This has given many of them the ability to live a quiet life on very little money.
Baby Boomers, however, often are loaded down with debt, even as they reach their senior years. Even if they have paid off their mortgages, many live in communities with high HOA dues in addition to their property taxes and homeowner's insurance. Currently, people over the age of 55 now account for approximately 20% of all bankruptcies in the United States. Many of these bankruptcies are the result of skyrocketing medical expenses; however, older citizens also tend to have more credit card debt than the younger generation, and this contributes to the bankruptcies, as well.
Another serious economic issue for Baby Boomers has been the surge in divorces in this age group. This trend is called gray divorce. While overall divorce rates have been decreasing over the past two decades in the United States, it has actually doubled for couples over the age of 50! When older couple divorce and split their assets, they often do not have enough time to recover financially before they retire. This makes them even more likely to live in poverty as they age.
The recent recession has also taken a serious toll on the retirement savings of many Baby Boomers. When many of them lost their jobs, they often lived for the first couple of years off their retirement savings. Then, once they reached age 62, they had no other survival choice except collecting their Social Security benefits early. This has created a double problem for the Boomers. They depleted their savings, and they started collecting their Social Security early.
When a person begins collecting their Social Security at age 62, rather than waiting until they are age 66 or older, they have a permanent and significant reduction in the size of their monthly Social Security benefit. As a result, millions of senior citizens are reaching retirement age without savings, and they are receiving the lowest amount of Social Security possible.
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Possible Solutions for Baby Boomers
Despite all these retirement concerns, there are a few actions that Baby Boomers can take in order to salvage their finances, and still have a pleasant retirement.
First, most Baby Boomers should continue to work as long as possible. If you work until the age of 70, you will substantially increase the amount of Social Security you will receive. Some individuals can even receive over $3,000 a month, depending on their earnings history. If they were the only breadwinner, or the primary breadwinner in the home, their spouse can receive half that amount. This means that a couple who manages to wait to collect in order to maximize their benefits can easily earn $3500 to $4500 a month, simply by working a few more years. If you have lost your job, it might be advisable to find some kind of basic job that will pay enough for you to get by a little longer, just so you can postpone collecting Social Security as long as possible.
The second thing Baby Boomers should do is begin to cut back on their living expenses sooner, rather than later. Far too many people tell themselves that they will downsize when they retire. By downsizing a few years earlier, they can ease their financial pressure, making it possible to live on a lower salary, and possibly even adding to their retirement savings. Some financial advisers recommend that you tell yourself that you are simplifying your life, rather than downsizing. It makes it sound as if you are on an adventure, rather than giving up things that are important to you.
Younger Baby Boomers may also want to consider the benefit of Long-Term Care Insurance. This insurance provides for assisted living or, with some policies, in-home care when you reach a time in your life when you have a difficult time dressing, bathing, walking and feeding yourself. Although the cost of this insurance may be prohibitive for some people, especially those who are older, it could save a lot of money in the future if you purchase it while you are still in your 50’s. Currently, according to an article on gray divorce in the AARP Magazine, there are 5.4 million people in the United States who have been diagnosed with Alzheimer’s disease. Half of them have no identifiable caregiver! The number of people in this situation is expected to skyrocket over the next few decades. If you think you may be vulnerable to this or any other serious illness, long-term care insurance may be a financial lifesaver for yourself and your relatives.
Source for facts about retirement: http://money.usnews.com/money/blogs/On-Retirement/2012/06/15/8-scary-retirement-facts
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