Ten years ago, the first baby boomers were hitting retirement age, and they were fine with that.
For many, their planning had paid off.
Their nest eggs were stocked and they were ready to reap the rewards.
If they had lost money in the dot-com bubble, they had recovered it by 2007. And, their houses had appreciated to the point they could cash out, downsize, and live large in retirement. But then the housing bubble popped, the market crashed, and many workers nearing retirement postponed their golden years in efforts to repair their savings.
You’ve heard this story before, of dreams lost or altered due to the 2008 financial crisis. But did you know that many baby boomers, particularly those middle-income boomers, are still clawing their way out ten years after the fact?
Today, only 2 percent of middle-income boomers believe the economy has fully recovered. On a personal level, 65 percent don’t believe they have seen any personal benefit from whatever recovery has taken place.
These results are from the study, “10 Years After the Crisis: Middle-Income Boomers Rebounding But Not Recovered.” The study comes from the Bankers Life Center for a Secure Retirement, and the research was conducted by The Blackstone Group in October 2016.
“Ten years ago, baby boomers had a clear vision of what a personally satisfying retirement looked like,” says Scott Goldberg, president of Bankers Life. “But today, many are realizing they will not be as financially independent in retirement as they once expected.”
Long road to recovery
Many boomers remain pessimistic about their financial future. This is likely due to a variety of reasons:
- Half (52 percent) report that their savings are lower than they were before the crisis.
- Nearly half (46 percent) have less money to share with family.
- Four in 10 (40 percent) are unable to travel as much as they want to travel.
- Four in 10 are not earning as much as they used to earn (40 percent) or unable to dine out as much as they want (39 percent).
In the wake of the Great Recession, many workers nearing retirement postponed their golden years in an effort to repair their savings.
In the midst of the financial crisis, confidence in meeting daily financial obligations fell to 41 percent for middle-income boomers. That number has risen to 57 percent today.
According to the study, “long-term financial planning… hasn’t fared as well. Two in 10 middle-income boomers now save a smaller percentage of their paycheck, nearly one quarter don’t save anything at all, and one quarter no longer invest.”
Goldberg says, “Boomers should plan for any unexpected costs that can arise, especially expenses related to retirement, such as long-term care or critical illness. Also, they should make a concerted effort to pay down debt before retiring to create more financial flexibility.”
Financial professionals help confidence
According to a 2014 study by the Center for a Secure Retirement, six in 10 (59 percent) middle-income boomers do not receive professional financial guidance of any kind. However, seeking the help of a financial professional gives boomers a boost of confidence. The study reveals that financial professionals provide more optimism “for boomers to meet daily financial obligations, make smart investment decisions and have a personally satisfying retirement. They also feel better financially prepared for retirement.”
For example, more than half (55 percent) of middle-income boomers who work with a financial professional are very or mostly confident in their ability to make smart investment decisions, compared to just four in 10 (44 percent) of those who do not work with a financial professional.
Meanwhile, half (48 percent) of middle-income boomers who work with a financial professional are extremely or very confident in their ability to have a personally satisfying retirement, compared to just one-third (33 percent) of those who do not work with a financial professional.
Today, only 2 percent of middle-income boomers believe the economy has fully recovered.
Recommendations for middle-income boomers
The study provides five ways in which middle-income boomers can improve their financial stock. These tips also allow financial advisors an opportunity to open the dialogue with clients and gain insight into how to guide them through this difficult time.
Watch your spending
Many boomers are realizing they will not be as financially independent in retirement as they once expected they would be. More than eight in 10 middle-income boomers took steps to manage their spending behavior following the financial crisis. The study suggests they create and maintain a household budget that minimizes monthly bills and discretionary spending. They also should make a concerted effort to pay down debt before retiring to create more financial flexibility.
Save, save, save
Many boomers are relying on Social Security to be their primary source of retirement income, but it was never designed to fully replace one’s savings or wages. There are a wide range of affordable and secure options available to help people save for their retirement, provide them income and protect their assets, such as annuities.
Seeking the help of a financial professional can boost baby boomer savings and financial confidence.
Consider tax-deferred investment options, including 401(k), IRAs and Roth IRAs. The study suggests middle-income boomers should consider working with a financial professional to help them build their plan and find products that can protect their investments. Boomers who sought the help of a financial professional feel more confident in their financial decision making and more optimistic about their retirement expectations.
Be prepared for anything
Even in good times, there are many things that can impact someone’s financial security. Create or update a will and power of attorney. Plan for any unexpected costs that can arise, especially expenses related to retirement, such as long-term care or critical illness. Critical illness insurance products, for example, can provide additional financial protection for a number of unanticipated, yet common, conditions such as cancer, heart attack or stroke. In addition, life insurance is suggested by the study to help people feel more secure.
Stay in the workforce
If possible, consider remaining in or rejoining the workforce. Employment income will relieve pressure on other sources of income and provide more money to spend on the things people really want. Plus, many jobs may provide access to valuable employee benefits.
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