Many Wash. baby boomers not prepared for retirement
Sunday, October 2, 2011
If you go
What: Portland Financial Planning Day. Financial planners donate their time to advise people on their finances
When: 10 a.m. to 4 p.m. Oct. 22
Where: The Portland Building, 1120 SW 5th Ave., second floor, Portland.
Information: Register at Financial Planning Days or call 877-861-7826
At age 53, Vancouver resident Tammy Howard has put in enough years working at the U.S. Department of Veteran Affairs to be eligible to retire. But with mortgage debt that’s more than her home’s value and insufficient savings, retirement doesn’t appear to be realistic at age 65.
In the wake of the economic downturn, many baby boomers, those born between 1946 and 1964, are not prepared for retirement.
“Personally, I don’t know if I’ll ever be able to retire,” Howard said.
Like everyone else, baby boomers were impacted by the recession through job loss, homes lost to foreclosure, plummeting property values and money drained in the stock market.
Some baby boomers also may have something else against them: the general appetite and attitude of their generation. Born in a time of prosperity, baby boomers lead younger generations in the nation’s spending spree, poor saving habits and propensity toward accumulating debt, local financial experts said. Baby boomers also have generally seen themselves as eternally young, which may not lend itself to a realistic outlook when preparing for retirement.
“There is definitely a different generational personality of baby boomers versus people who lived through the Depression and were focused on saving,” said Cory Bolkan, assistant professor of gerontology at Washington State University Vancouver.
Washington baby boomers are aware many of them will have to work past retirement. Just 14 percent of those 50-plus expect to stop working for pay at retirement age, according to a 2011 AARP survey of state residents. About 26 percent hope to work their current job after retirement age for as long as they can. Others plan to either reduce their hours, work a different part-time job or start a new career or business. Although some are choosing to work longer because they enjoy it, many also need the money.
The Great Unknown
Nearly half of them have not attempted to estimate how much they’ll need for retirement, and about 24 percent of them have no retirement or personal savings whatsoever, according to AARP.
“They have their heads in the sand because they really don’t want to know; they’re scared,” said Bryan Anderson, a financial planner with Edward Jones in Camas. “Some are hoping to inherit money from elderly parents. With the cost of long-term care, they may or may not,” Anderson said. “They’re planning on winning the lottery. They’re the ones in the precarious situation.”
Face the Facts
Anderson’s first piece of advice to his clients is to simply face reality.
“They don’t want to hear the bad news,” Anderson said. “It’s going to be there whether you like it or not, so you might as well face it. People need to understand they’re not the only ones.”
Estimate how much you’ll need for retirement by consulting a financial planner or an online calculator. A calculator can’t predict what will happen in the economy, but it can give you a goal to target.
Local financial planners, including some from Clark County, will give free consultations Oct. 22 at Portland Financial Planning Day at the Portland Building, said Heidi Johnson Bixby, a certified financial planner at downtown Vancouver’s Johnson Bixby & Associates LLC. She plans to volunteer at the event.
Once you know how much you need, you can start planning and estimating when you’ll be able to retire.
Anderson has done the calculation for himself and knows he’ll have to wait until he’s 70 to retire in order to save enough to live at his current lifestyle.
Don’t Depend Solely on Social Security
One of the biggest mistakes people make in planning for retirement is assuming Social Security benefits will sustain their lifestyle.
The average monthly Social Security benefit in August 2011 was $1,081, according to the Social Security Administration. A 65-year-old who is in good health needs between $562 and $1,442 more than that every month to live in Clark County, depending on whether the person is a renter, has a paid-off home or still has a mortgage, according to the 2011 Elder Economic Security Standard Index for Washington. Those amounts don’t account for chronic health conditions or the need for long-term care.
Long-term care costs between about $52,000 and $55,000 per year in Clark County, said Vancouver financial adviser Fran Richter, 59.
Three Ways to Prepare
Debt is the biggest setback baby boomers face in terms of retiring.
“Not having debt is a huge key to being successful,” Richter said. “Debt, that is a four-letter word.”
Paying off debt, therefore, should be first priority.
From there, financial advisors recommend saving whatever you can. Small amounts can add up, and while it might not guarantee you a smooth retirement, it brings you one step closer to that point.
Vancouver resident Pat Gill, a 49-year-old computer programmer, puts 4 percent of his paycheck toward his 401K each paycheck. That’s about half as much as he saved before the recession, when his employer stopped matching. What he had in his 401K also went down by about 30 percent because of the stock market.
“I don’t have enough money saved up would be my No. 1 concern about retirement,” Gill said. “I’m saving, but not very fast.”
Bixby said people who are saving sometimes tend to focus on cutting back on things that don’t cost a lot, such as going out to coffee.
She encourages her clients to focus on larger cost items in their lives, such as their housing and vehicle. Paying off your car or buying one with cash, getting a roommate or moving into a lower-cost apartment will pay more dividends over time than cutting your coffee habit. Sometimes the health benefits of socializing with friends over a coffee or a glass of wine outweigh the savings you might achieve, Bixby said.
Howard, who works at the Department of Veteran Affairs, said having a roommate hasn’t built up her savings; it’s allowed her to pay her bills.
“For single people, it’s going to be more of a challenge,” Howard said. “A lot of my friends and I say we are going to need to live together just to survive in retirement.”