Life has changed for many Americans at or near retirement over the past two years. People lost jobs, health concerns abounded, and this all resulted in uncertainty and fear for boomers’ financial future.
How can you help prevent financial doom and design the life you want? It starts with facing your fears.
What keeps you up at night?
SeniorLiving.org1 found that:
- Nearly 1 in 2 older adults’ biggest financial fear was not having enough money saved for retirement.
- 1 in 4 older adults fear they will never pay off their existing debt.
- 45% of people between 55 and 64 fear having high medical bills.
These fears are only natural, because our work life has changed as millions of people lost their jobs and many have not returned to work. Some older adults may have had to leave work to become caregivers. The workforce migration we’ve seen recently has taken away many people’s ability to currently earn money and keep saving for their own retirement and future.
It’s even worse for women. The pandemic disproportionately affected women, with more exiting the workforce. Women live longer than men and therefore will have to rely upon their retirement savings and Social Security for a greater number of years.2
Another thing that keeps boomers up at night is their debt. The pandemic has wreaked havoc on older homeowners and renters. A recent Census Bureau report indicated that about 1.7 million older homeowners were behind in their mortgages, and they fear eviction.3
You need to look at your living situation and future in a realistic light. Will you be able to still live in your home? Should you consider other living arrangements? Is it time to sell the big family home and downsize? Can you live with family members? These options can stretch your dollars farther, so keep and open mind.
Time to take some financial measurements
You need to take a hard look at your current and future income and expenses. Knowing well that there’s no crystal ball to tell you what the future will hold, here are a few benchmarks you should plan to aspire to:
- 10 Times Rule. The general rule of thumb is that you should have saved about 10 times your pre-retirement income by the time you turn 67. Remember to factor in your Social Security and any pension money that you may receive.
- 80% Rule. You should think about adjusting your future budget for expenses you won’t have in retirement. It is said that figure will be about 20% of your current budget, and therefore you will need to replace 80% of your current earnings each year in retirement.
Work on your debt
If you are behind on your mortgage or credit cards, you are not alone. There may be an opportunity to renegotiate terms of debt consolidation or terms on a new mortgage.
The point here is to take charge of your financial life, now. It may seem scary. Many of these decisions are hard, but if you don’t design your own financial future, someone else will.