Complete your emergency fund In a 2016 GoBankingRates survey, 33% of baby boomers aged 55 to 64 had no money stashed away in savings, while 36% had less than $1,000. That's why, regardless of age, you still need enough emergency savings to cover three to six months' worth of living expenses. Currently, anyone aged 50 and over can put up to $6,500 a year into an IRA and $24,000 a year into a 401(k). Even if you've been saving throughout your career, now's the perfect time to boost your retirement savings rate because, conceivably, you only have a few more years to fund your account. If you have a fully loaded emergency fund, and your IRA or 401(k) balance is healthy, it pays to pump some extra money into your mortgage so that it's paid off by the time you retire. This way, you'll be able to stretch your retirement income further once you do stop working. Get out of credit card debt Believe it or not, seniors aged 65 and over carry more than $6,300 of credit card debt on average -- and that type of debt can be a huge drain on your limited retirement income. In fact, Genworth's 2016 Cost of Care Survey estimates that it typically costs more than $43,000 a year to reside in an assisted living facility, and $82,000 a year or more to live in a nursing home. That's why it pays to sign up for long-term care insurance in your 50s, when it's cheapest to secure coverage. Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we're all after.
It’s a sad truth that 60% of baby boomers are more afraid of running out of money in retirement than they are of dying. But given how little today’s older workers have saved up for retirement, that fear isn’t unfounded.
In a recent Galllup poll, 43% of workers aged 50 to 64 say they intend to rely on Social Security as a significant source of retirement income. And while the program is scheduled to continue paying benefits at their current level for at least another 17 years (beyond which benefits could be cut), this attitude among boomers is cause for major concern.
Social Security is only designed to replace roughly 40% of the average worker’s pre-retirement income. And if you think you can live off just 40% of your former earnings, here’s a reality check: Healthcare alone will cost the average healthy 65-year-old couple $377,000 over the course of their retirement. Throw in housing, transportation, clothing, utilities, and meals, and retirees need to replace at least 70% to 80% of what they previously earned, unless they’re willing to cut every expense to the bone.
You can certainly count on Social Security as a form of supplemental retirement income. Those who save independently but factor retirement benefits into their budgets aren’t necessarily doing themselves a disservice — especially since, according to the latest projections, Social Security can keep up with scheduled benefits until 2034, which leaves Congress plenty of time to save the program from future cuts. But according to Gallup data, prior to the 2008 recession, older workers were more likely to cite their 401(k)s as a major source of retirement income. Nowadays, those same workers are relying more on Social Security and less on their own savings.
The good news is that baby boomers, especially younger ones, still have some time to ramp up their savings and salvage their long-term financial security. But those who continue to bank on Social Security as their primary source of retirement income will likely find themselves in the dreaded situation of being cash-strapped in their old age.
We’re not saving enough
The Economic Policy Institute reports that an estimated 41% of baby boomers have no money saved for retirement at all. But even those who are saving aren’t doing such a great job. The median savings amount among workers aged 56 to 61 is a measly $17,000, which is a drop in the bucket.
Meanwhile, this group’s average savings amount — which is skewed by extremely large figures and therefore doesn’t represent the typical nest egg — is $163,577. That may sound impressive, but it won’t get a typical senior very far. Let’s assume you’re a…