by Rich Wesselt, founder and principal, Wesselt Capital Group
The baby-boom generation has entered its collective retirement age. According to CNBC, 47 percent of this generation, defined as ages 55 to 73 by the Pew Research Center, already have retired. The younger contingent is now nearing their 60s and preparing for their golden years.
So far, this transition hasn’t been smooth.
Data from the “Boomer Expectations for Retirement” report by the Insured Retirement Institute indicates that baby boomers are poorly prepared for retirement. Forty-five percent of them have zero savings for retirement, and as this stage of life nears for many, this trend is becoming wincreasingly concerning.
Retirement planning should always be a priority for working adults. For people turning 60, optimal financial planning tends to shift towards an emphasis on short-term retirement planning. The goal is no longer accumulation, but to find the best ways to distribute wealth across a variety of channels.
Turning 60 soon? Here are a few suggestions to help you prepare for and execute the financial shift of retirement.
Safe financial investments are key at this stage. This is the perfect time to refocus your 401(k) to more risk-averse accounts, ones with lifetime guarantees and high tax efficiency. This may mean gradually move away from the stock market and move those funds into safer, more reliable accounts.
This is also an opportunity to max out a 401(k) plan. While the limit for people under the age of 50 is $19,000 in 2019, anyone 50 and older can currently add an extra $6,000 a year as “catch-up” contributions. With 401(k) plans, taxes are deferred until withdrawal, which will be after retirement. So, during this late career period when many working adults are at their peak salary and in a higher marginal tax bracket, it makes most sense to max the plan out. The tax cost may be lower when it comes time to retire.
Plan for Healthcare Costs
One of the most common retirement planning pitfalls of the baby boomer generation has been misunderstanding the costs of healthcare. The Insured Retirement Institute’s survey indicated that 50 percent of boomers had not considered the cost of long-term health insurance when financial planning, because they planned on solely using Medicare. Yet Medicare provides no long-term coverage, such as custodial care for basic activities like bathing, dressing and eating that a nursing home would cover, and is only available beginning at age 65. Custodial care can get expensive, which is why properly budgeting for these long-term healthcare costs is crucial.
Work with a Financial Planner
Past the age of 60, experts recommend reviewing and adjusting financial plans on a frequent basis, as the performance of investments fluctuate along with your needs. It’s never too late to have an extra eye on your planning to help determine the right next steps, particularly when it comes to retirement and planning for the future of your family.
Seek out an expert to help you plan. If you were diagnosed with a heart condition, you would go see a heart surgeon for consultation and maybe surgery. Similarly, if you need financial planning help as you near retirement, work with a quality advisor committed to excellence and providing you with the best possible care.
About Richard Wesselt, Principal and Founder of Wesselt Capital Group
With over 23 years of dedication to the financial services industry, Richard Wesselt brings a wealth of knowledge and experience in helping clients plan for a secure future with financial and investment planning. As principal of the Wesselt Capital Group, Rich uses a relationship driven, individual-based approach to macro economic planning. Rich has a bachelor’s degree in Economics from the Wharton School and is a member of Top of the Table. He holds his FINRA Series 6 Registration. Follow him on Twitter @RichWesselt.