If looking ahead to retirement makes you a little nervous, you’re not alone. Nearly half of Americans (46 percent) who haven’t reached retirement predict that they won’t be financially comfortable once they get there, according to a Gallup survey.
For some, those potentially uncomfortable retirement years are decades away. But for the Baby Boom generation, retirement either already arrived or will in the next decade or so, prompting many Boomers to wonder whether they are prepared for their looming date with destiny. And that raises a question: Just what does it take to be prepared?
“Many Baby Boomers measure their preparedness in terms of assets,” says Ryan Eaglin, founder and chief advisor of America’s Annuity (www.americasannuity.com). “They’re trying to hit a certain number or account balance. Asset accumulation is an important part of retirement planning, but it’s not the only component. There are a few other steps you need to take to make sure you’re ready to leave work behind and enjoy a stable and comfortable retirement.”
Eaglin suggests three planning steps that can help Baby Boomers or anyone else, be better prepared for retirement:
•Prepare not just one, but two budgets. Most Americans don’t use a budget, even though it’s a handy tool— especially in retirement. “It helps you see where you’re spending your money, how much money you can afford to spend and what adjustment you should make,” Eaglin said. He recommends creating two budgets. One would be for your remaining years before retirement so you can look for ways to cut spending and save more. The other would be for after you retire. “Think of ways to live the retirement you’ve dreamed of while also staying within you income,” Eaglin says. “It may be difficult but just the act of preparing a budget can help you get a better understanding of your financial situation.”
•Project your income. While your budget will help you understand how you are spending your money, you also need to have a good grip on what your potential retirement income will be. For most people, that’s a combination of Social Security, personal savings and possibly employer pensions. Social Security has an income estimator tool on its website, and an employer should be able to provide a pension-benefit projection. “Your financial professional should be able to help you project how much you should be able to take from your savings each year,” Eaglin says. Once you compare your projected income to your spending budget, he says, you’ll know whether you need to save more or rethink retirement spending. You also might want to look for ways to increase your guaranteed income, such as through an annuity, he says.
•Plan for long-term care. As much as people don’t want to hear this, the average 65-year-old has a 70 percent chance of needing long-term care in retirement, according to the U.S. Department of Health and Human Services. “That means it’s very possible you or your spouse may need care either in your home or in a facility at some point,” Eaglin says. “That care can be expensive. Unfortunately, it’s usually not covered by Medicare, and it’s covered by Medicaid only after you’ve depleted much of your assets.”
“If all this tells you that you’re behind on where you want to be with preparation and your savings, the good news is it’s never too late to get started,” Eaglin says. “You may have to adjust your plans, but with focus and discipline, you can still put yourself in a position to have a comfortable and enjoyable retirement.”
Ryan Eaglin is the founder and chief advisor at America’s Annuity He has 14 years’ experience in the retirement and lifestyle, planning field. For more information, visit: www.americasannuity.com