With millions of boomers facing retirement over the next 15 years, planning should be a priority. But too many people between ages 50 and 62, experts say, avoid financial decision-making. According to Michael Garrity, owner of the Garrity Group and a consultant with the Small Business Development Center of Harford/Cecil Counties, “The biggest mistake I see in this age group is not getting involved with advisors. They either believe they don’t need them or it will cost too much.”
Inaction, seasoned advisors speculate, derives from embarrassment over not having saved enough money or feeling uneducated about financial matters.
On the contrary, working with a trusted advisor or financial team will educate you about investment goals and strategies. The educational role of the advisor is crucial to setting financial goals, creating a successful savings plan, avoiding mistakes, and maximizing your retirement savings and income. Staying informed about retirement expenses you’ll confront, as well as trends in an ever-changing market, is important.
Some financial professionals now rely on a one-stop-shop or team approach to guide clients through the maze of retirement-planning issues. The advantage with this approach, Garrity says, is that one source can “roll out the red carpet,” leading you to a network of professionals, including accountants, bankers, insurance agents, and attorneys, who can help resolve issues at each phase of retirement.
Retirement Then and Now
According to actuarial statistics, Americans are living longer lives, thanks to improved healthcare. During the 1950s, for instance, most retirees lived, on average, only five years beyond retirement. Today, retirement may last nearly 30 years. Current Social Security guidelines indicate that standard retirement age is no longer 65, but 67.
“People need to realize that they’ll be working much longer than their parents did,” says Tim Cummons, president of the National Association of Insurance and Financial Advisors (NAIFA) Baltimore Chapter and a vice president of Riggs, Counselman, Michaels & Downes in Towson. He adds, “A trend among older individuals is that they can’t afford not to work, because of rising costs in healthcare, food, gasoline, and [home heating] fuel.”
Says Jim Van Eperen, CEO of the Washington Group in Bethesda, who also teaches what he calls “financial self-defense” at the University of Maryland’s Robert H. Smith School of Business, “For Baby Boomers, outliving their retirement savings is a big issue.”
Historically, the American workforce relied on employer pension plans and Social Security for retirement income. But over the decades, more and more companies have phased out traditional pension plans as an employee benefit, turning instead to 401(k) plans, which shift the burden of retirement contributions to employees.
“The old guard has gone away, and that really speaks to the need for planning,” says Van Eperen.
Tips from the Pros
So just what are the best pre-retirement strategies? Experts emphasize that everyone’s needs vary, underscoring the importance of establishing a relationship with a trusted advisor. Choose someone who can map out a plan that meets your needs and who can evaluate which financial adjustments will pay off in the long term. A one-size-fits-all approach to financial planning won’t do.
“Don’t go online and do a Google search or buy something in a box from Staples for $19.99. It may be the easy way, but the results won’t be good,” Garrity says.
Folks in their 50s and 60s are relatively young, advisors agree, and time is still on their side. They may be earning their highest salaries and saving more money than ever before, especially if they have older children or no dependents at all.
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