50 With No Retirement Savings? What to Do Now

Now that the presidential election is over, health-care costs and Social Security moved up to the top of transition boomers’ economic worries.

A new study released by Allianz Life Insurance Company shows that among boomers ages 55-65, rising health-care costs and the future of Social Security were their main worries heading into retirement. With retirement 10 years away for this age group, these two issues transcend political lines and have boomers worried about their future financial security.

There are two key steps that baby boomers at that stage in life should take:

The first step is to develop a budget. You don't know how much you can save until you determine what you need to spend on a monthly basis. This involves not only analyzing monthly expenses, but also determining wants versus needs. Especially when close to retirement, boomers need to take an honest look at their spending and understand how it affects their future retirement plans.

For example, many people believe that their spending will go down in retirement. Popular financial planning wisdom says that without the costs associated with day-to-day work, retirees will save money – about 20% of their pre-retirement expenses - but this doesn’t always happen. A consumer survey of retirees ages 50 to 70 overturned some traditional ideas about retirees’ expenses. The survey divided the participants into four wealth quartiles, with total wealth ranging from $26,000 to more than $1 million. No group reduced spending by 20% in retirement. The most sizeable reduction was less than 14%, while the most affluent group actually increased spending by 7%.

The second step is to look for online resources that can help you understand retirement income planning concepts including Social Security. This resource should help you understand what gap you might experience between expenses and what Social Security will fund.

Finally, boomers should look at how aggressively they can ramp up their savings, including their 401(k), IRA, etc. By cutting down on expenses and exploring other options for adding income,  boomers can help jump-start their savings and begin the process of following a true retirement plan.

There are 75 million baby boomers in the United States. Every day for the next 19 years, 10,000 of these boomers will reach age 65, the traditional age for retirement in America.  Many of these boomers are part of the first pension-less generation. Unlike previous generations, their retirement savings are not guaranteed in the form of a pension that pays out every month for the rest of their life. They are responsible for making that money last and need to determine a strategy to ensure it does just that.

Working in retirement is another topic that baby boomers need to understand. When people are confronted with the reality that they won’t be able to retire on time, many assume they’ll just be able to work longer. But the ability to work longer is not always in your control, so you should plan accordingly.

Source:  CaseyDowd, Fox Business News

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

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