Retirement Planning in a Volatile Economy

From my US News & World Blog

Between a challenging economy and changing demographics, it is getting harder for senior citizens to make ends meet. Many baby boomers are experiencing shrinking 401(k)s, investment losses from erratic stock market gyrations, and declines in property values that have reduced home equity. At the same time, medical costs seem to be going nowhere but up.

[See The 10 Best Places to Retire in 2012.]

Baby boomers have also been under-saving for retirement for decades. Only 7 percent of Americans have saved their desired retirement nest egg, according to a recent Wells Fargo survey. Many people will never have the luxury of retiring, and instead will continue to work until they are unable to do so. Having identified the threats to our retirement, here’s what we can do to prepare ourselves:

1. Do an honest analysis of expenses. This is not the time to be overly optimistic. Determine a bare minimum survival income as well as the money necessary to finance a lifestyle that you would like to live. You are ultimately trying to identify any shortfall and figure out how to address it. If you are comfortable with spreadsheets, you can track your monthly finances to see how the money comes and goes. There are online tools available to review your financial situation, and in some cases bringing in a financial analyst can be money well spent. Start your planning now to give you time to make adjustments where necessary.

[See top-rated funds by category ranked by U.S. News Mutual Fund Score.]

2. If you need to work, search for a job that suits you. Having been in the working world for years, you know what you like to do and what you are good at. At the end of your career it is more important than ever to put this knowledge to work for you. Create a page with columns for pluses and minuses to help visualize what is most important to you in a retirement job. Once you know what you want, spread the word that you are looking for a new position. Networking is far more productive than blind resume sending, and people you know are a good resource for jobs that may not be publicly advertised.

If you cannot find a job, the harsh reality is you will need to cut back or change your lifestyle to live within your means. Some options include selling your house to move into a smaller home (assuming there is enough equity so you are not increasing your mortgage payments), cutting back on luxuries like dining out, clothes, and travel, or moving in with family. You may need to become a deal-hunter who seeks steep discounts on trips, food, cable TV, phone, and Internet services. You can also continue to job search and be ready for opportunities as soon as they surface.

[See 65-and-Older Population Soars.]

3. Don’t be afraid to ask for help. In difficult times we need to turn to our support network. Honestly share your situation with friends and family so they can enlist their networks as well. Sound advice and emotional support may be just a call away, but we have to make that call. It is time to realize that we cannot always do it alone.

4. Remember the importance of balance in retired life. We worry about managing time in a busy working world, but it is just as important to find a balance in retired life. Idleness can lead to boredom, solitude to loneliness, and lack of physical activity to accelerated aging. The reality is that retirement can be a struggle, so remember to take time for yourself.

Dave Bernard is the author of Are You Just Existing and Calling it a Life?, which offers guidelines to discover your personal passion and live a life of purpose. Not yet retired, Dave has begun his due diligence to plan for a fulfilling retirement. With a focus on the non-financial aspects of retiring, he shares his discoveries and insights on his blog Retirement–Only the Beginning.

4 thoughts on “Retirement Planning in a Volatile Economy

  1. All you say is true. Baby boomers need to remember that the life expectancy has grown significantly over the last 75 years. It just isn’t realistic to work for 40 years and then expect to be retired for 30. Most financial professionals focus on income, and work will continue to be a part of that. I like that you also stress looking at expenses. The good news is research continually confirms that people who work longer are happier in their later years.

  2. Excellent points Kathy. The nature of worker has changed as well from the physical requirements of past jobs to the current knowledge workers who at age 65 are far from worn out. Future retirees will have so much left to offer in the way of creativity and inspiration for us all that working in some capacity will be good for all concerned!

  3. Things don’t always go as planned. Over the years I had three major job changes with some time unemployed between each and as a result a secure retirement has been delayed. My advice is to control debt during times of difficulty. I have been fortunate to be able to continue working fulltime well past 65. Now the road ahead looks a little brighter.

  4. Very true Warren – things rarely go as we plan. But as you say if we can maintain our focus on the little things like controlling debt and if we are fortunate enough to have the option to continue working to age 65 or thereabouts, hopefully we will be okay in the long run.

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