Retirement Planning Red Flags

If we are to believe recent press, baby boomers are in for a rude awakening as we enter retirement. Across the board we read about how our generation has been overly focused on the here and now, gleefully choosing to spend money today rather than save for tomorrow. Boomers are depicted as the “me generation” and our perceived shortsightedness is often blamed for where we are today. And where exactly are we today?

  • $6.6 Trillion difference between where we are today and where we should be for retirement account balances
  • House values are down on average one third and with 1/3-1/2 of boomers net worth accounted for in their homes, this is a big hit
  • Pensions that existed on average for 39% of boomers back in 1980 are now found in only 15% of cases

Many of these situations are the result of financial fallout and the reorganization of our labor force so baby boomers are not completely responsible. But we do shoulder some of the blame. According to Jean Setzfand of AARP, the failure to save has had the biggest impact on boomers who ignored or underestimated their worsening financial situation.  The personal savings rate that back in the 1970’s was 10% came in at negative one percent in 2007. If we have not been saving to prepare to retire, what are we going to do after retirement to get by? Or is retirement even a possibility?

What are the retirement planning red flags that all retiring baby boomers will have to address?

(1)  Living longer so spending more – Americans are living 7.5 years longer compared to 1970 and boomers are an active crowd. The longer we live the more time we have to be active and travel and enjoy life but the more we will spend.

(2)  Medical Expenses – skyrocketing costs for medical coverage and treatment are showing no signs of slowing. Blue Cross recently petitioned for the right to increase premiums 59%. With no end in sight, this red flag is waving feverishly. Once we reach the age of 65, Medicare pitches in but not at zero cost. The average couple age 65 will spend $250,000 in out-of-pocket medical premiums and co-payments. And with no overall limit to out-of-pocket expenses, extended illnesses are always a risk to retirement security.

(3)  Employment challenges – we all hope that the economy will eventually get back on track and unemployment numbers drop. With financial issues, retired boomers will need to work in many cases to make ends meet. But the reality is that the nature of jobs is changing. Our technological advances are doing what they were meant to do, namely automating much that used to require human intervention. Due to this, many jobs that have been recently lost will not likely be refilled. And the added disadvantage of being older comes into play as companies prefer to hire younger employees who cost less to provide benefits to and whose early career path is at a more affordable point.

(4)  Social Security – will social security be there for us? The 75 million baby boomers will put serious stress on the system as soon taxes will not produce enough to cover future benefits. The social security trust fund is projected to be depleted by 2037 – then what? And if we do in fact receive benefits, can boomers wait or will they be forced by financial challenges to start at the earliest possible age of 62 which reduces the monthly amount of benefits received?

(5)  Living situation – currently 2/3 of those between ages of 55-64 still have mortgages to pay with a median balance of $80,000. We all hope to have no mortgage going into retirement but reality is what it is. Will seniors be able to stay in their homes and pay the bills? Or will they be forced to move in with other family members if that is possible? And as boomers age, their needs become greater and sometimes living with family is not an option. Retirement communities offer an option but are not cheap. And nursing homes currently run $70,000 per year for a shared room and $85,000 per year for private rooms.

The retirement planning red flags are plenty and solutions will be difficult to find and implement. Awareness of the problems is the first step but then in most cases it is up to individual retirees to navigate the retirement jungle.

Look for help early to understand exactly where you are and what your retirement will look like. You can still have an impact but with the passing days, the magnitude decreases so get on it now.

Retirement should be our time to do what we want to do when we want to do it. But for baby boomers caught up in the harsh realities of an unsure financial state of affairs, insufficient savings, and rising costs of living, the reality may not be exactly what we were dreaming of.

Why Boomers Need To Accept Impermanence

Nothing lasts forever. Given enough time, colors fade, buildings crumble, continents shift, even suns grow cold. People around us grow up and grow old. We grow up and grow old. It is the nature of things; it is the way of life. At a logical level, we realize this. After all, boomers are smart people! And yet, despite accepting reality and despite our logical thinking, it is not always easy to remain positive as we witness and participate in this gradual decline all around us. A loss realized is a loss felt.

Why love if losing hurts so much? We love to know that we are not alone. ~ C.S. Lewis

If boomers are not careful, it is possible to become obsessed with the impermanence of life and what is taken from us, fixating on the negatives. If in the end I am going to lose everything, what is the value of anything? I don’t want to become attached since I will ultimately lose it. Relationships and commitment scares me since 50% are destined to fail – why put in the effort?

On the flip side, boomers knowledge and acceptance of the impermanence of life can be a way for us to focus on today, appreciate what we have, not take for granted our loved ones, and generally live a more complete and satisfying life.

The Challenges and the Promises

If not for the impermanence of life, I would not be able to witness my daughter growing up and becoming the beautiful woman she is. Ever changing, ever progressing, we go through the process together. It is important to remain consciously aware of what is happening and appreciate each step along the way. Together we experience her first words spoken, her first unsure steps, the start of her school career at the wise age of five, school plays where she sings her solo and I in the audience with my heart pounding in rhythm to help her succeed, graduation from high school, and so quickly after that graduation from college. Each step along the way a distinct memory and one more piece of the final puzzle that will be her life. Without change and evolution and impermanence none of this could take place.

It is through impermanence that we start each spring observing life busting out as trees bud and bloom. Leaves grow and fill out the branches and life is abundant. Then as the months pass, we notice the greens fading to yellows and reds and oranges in vibrant displays of magnificent color. We know that this change in colors indicates the coming end of summer and the arrival of winter. And ultimately, leaves fall and trees are bare and life seems to stand still. But were it not for this cycle of life we would not have colorful autumns to populate our memories.

If I can learn to appreciate the impermanence of the world, hopefully I will stop taking for granted what happens to me each day. I will wake up next to my wife and truly appreciate her for the wonderful person she is and hug her close to me. When my uncle begins his rambling discourse on the topic du jour, I will pay attention and hear what he is saying. As I drive down the road with my wife in the passenger seat, I will be conscious of her presence and the blessing of our togetherness and I will not take it for granted.

Nothing is forever so we boomers need to appreciate now:

  • Enjoy every moment with those we love
  • Respect and value every experience and everything around us
  • Appreciate what we have now – good health, a roof over our heads, enough to eat, water to drink, warmth on a cold night, protection from the storm
  • Do not take friends and family for granted
  • If we have something nice to say, say it now
  • Don’t save all of the good wine for later
  • Live your life so at the end you have no regrets

Because I could not stop for death, he kindly stopped for me. The carriage held but just ourselves and immortality. ~ Emily Dickinson

Because of impermanence and the ever-changing world in which we live, bad weather storms in and then moves on, anger rises and abates, tears well up and then dry, and hope springs up in the most unlikely of places. Boomers need to learn to appreciate the value of impermanence. If I am healthy now, I will do what I can to maintain that health. Knowing that life itself is impermanent, I will appreciate each experience that much more. For each moment, I will be thankful, engaged, appreciative, and above all I will live and love that moment.

Long Term Care in Retirement

The likelihood of a senior citizen over the age of 65 requiring some kind of long-term care is two in three, with an average time of three years during which help will be needed. The Center for Medicare and Medicaid Services estimates that by 2020, 12 million older Americans will need long-term care services. And long-term care is an expensive proposition – according to Kiplinger’s Retirement Report, the rates on private-room nursing homes rose 4.6% to an average of $229 per day in 2010. Medicare does not generally fund long-term care. According to, Medicare does not pay for what they term “custodial care” –  non-skilled care that helps you with daily living activities including dressing, bathing, and using the bathroom. And we can throw in the fact that MetLife, one of the largest sellers of long-term-care insurance will accept no more applications for individual and group long-term care insurance starting in 2011.

With an aging senior population that in 2030 will for the first time in history result in more people over the age of 65 than under the age of 17, this is a recipe for disaster, a perfect storm brewing on the horizon.

What are the options?

Two-thirds of all long-term care spending is publicly financed with Medicaid paying the largest share at 40%. 36% of long-term care services is financed either through private insurance or out-of-pocket expenditures. And the out-of-pocket expenditures (premiums, co-pays, deductibles) account for 29% of total long-term care annual expenditures, second only to Medicaid. What can we do to prepare for our own potential long term care requirements? Continue reading