As retirement draws near, many baby boomers aren’t kicking up their heels. They’re pacing the floor, anxious about the years ahead.
An April survey by PNC Bank on retirement preparedness found that among baby boomers:
“Due to advances in medical science, life expectancy is increasing, and people are facing the prospect of spending more time in their non-earning, retirement years,” says Robert R. Johnson, president and CEO of The American College of Financial Services in Bryn Mawr, Pennsylvania.
Taking a few steps now can pay off in a big way for baby boomers entering retirement in the decades to come.
“If you haven’t already done so, make a plan for how you will live and handle finances in retirement,” suggests Kevin Gallegos, vice president of Freedom Financial Network.
Get an updated estimate of your Social Security income. Take into account what your income each month will be during retirement, based on what you’ve saved so far. Also sit down with a financial adviser to go over the plan.
“Begin living on what you anticipate your post-retirement income will be,” Gallegos says. A good rule of thumb: 85% of current income is what to expect to have in retirement. Use online calculators and consult with a financial planner, if needed, for a more precise estimate.
If you want to downsize, now is the time. But before you opt for a smaller house or apartment, do some research. You’ll need to consider the overall costs, including taxes, and the housing costs and living expenses in an area before relocating.
If you’re concerned that you’ll need more cash during the years ahead, reconsider when and how you want to retire.
You might decide not to retire from your current job as soon as you originally planned. Or you may find that it’s worth your time to start an “encore” career or take a part-time job.
While most retirees will have medical insurance in the form of Medicare, there’s no cap on total out-of-pocket expenses, says Johnson of The American College of Financial Services.
Think about limiting costs with a policy such as Medigap — extra health insurance purchased from a private company to help pay for health care costs not covered by Medicare.
Or, take an individual approach. Baby boomers should consider current health conditions and what expenses are involved with ongoing treatment for them, as well as future needs.
“Some people have almost nothing out of pocket, and others have hundreds of thousands due to long-term medical issues,” Johnson says.
Gallegos suggests that baby boomers do some comparison shopping to help reduce health care expenses. “Strict limits on coverage and high deductibles dictate it,” he says.
If there’s a significant procedure you will need, find out the cost. Then, seek a 2nd opinion on both cost and health care.