What do you baby boomers think of when you hear the word “retirement”? If you’re prepared, you may have blissful thoughts about life without the need for an alarm or days spent with the grandkids. In contrast, if you aren’t financially prepared for it, the word itself can inflict apprehension about what the future will bring.

Too often, boomers don’t realize until they hit retirement that they weren’t ready. My guest blogger, Danielle K. Roberts, co-founder of Boomer Benefits and a member of the Forbes Finance Council, lists four of the top mistakes boomers can avoid, to be one step ahead in your retirement planning.

Mistake #1: Taking Social Security benefits too early

First, it is important to know that Social Security was not designed to sustain your lifestyle without another source of income. The majority of seniors need 70% or more of their pre-retirement income to maintain their lifestyle in retirement.

How to Avoid:

The longer you can delay Social Security, the easier it will be to supplement your other savings in retirement, leaving you a comfortable amount to live on.

Full retirement age is 66 or 67 depending upon your birth date. For every year that you delay taking your benefits (beyond full retirement age), you will increase your benefits by eight percent.

If at age 67 you are set to receive a benefit of $1,600 a month but delay taking your benefits until you are 70, you would instead get $1,984 a month for the rest of your life. A few years can equate to a large sum of money over time.

Mistake #2: Having debt entering retirement

The sad reality is that over 70% of baby boomers in the U.S. (60 and older) are in debt. Debt alone can wreak havoc on your retirement.

How to Avoid:

Before you quit your job and head off into the sunset, pay off as much debt as you can.

Interest rates have a bad habit of increasing and your income is likely going to be fixed. Having a fixed income makes it a lot more difficult to put a dent in your debt. Eradicating debt before you retire will be both a financial and mental relief as you head into your Golden Years.

Mistake #3: Underestimating the full cost of health care in retirement

Medical costs in retirement are staggering, even if you’re healthy! In a widely publicized study, Fidelity estimates that a healthy couple retiring in 2019 would need $285,000 set aside for health care costs. This number will only grow over the coming years.

How to Avoid:

Don’t assume that having Medicare will mean no out-of-pocket expenses. In fact, you could potentially have hefty bills that you are responsible for. Of course, Medicare will help cover a large portion of your health care costs, but you will still have monthly premiums, deductibles and coinsurance.

The best thing you can do is prepare ahead of time with a tool like a Health Savings Account (HSA). An HSA can be a vehicle for setting aside money for health care costs, but it can also act as a triple tax advantage for you.

Last, don’t forget about long-term care. Long-term care is one of the costliest expenditures a senior can face. Whether you choose a long-term care insurance policy or set aside a portion of your HSA savings for this substantial expense, don’t let it become an afterthought.

Mistake #4: Assuming your money will outlive you

Most of us want to get as much out of life as we can. Too often, our optimism overshadows our savings accounts. Data from the Federal Reserve shows that the median amount Americans have saved for retirement in total is $120,000; a fraction of the recommended $1 million nest-egg.

How to Avoid:

It is never too late to start stockpiling money into a 401k or IRA. These types of savings accounts will propel your money much further than storing it in a traditional savings account.

Whether you need to cut down on your grocery expenditures, downsize your home, or find a way to boost your income – getting more money into one of these accounts will make life easier for you in retirement.

It’s Never Too Late

The best thing you can do is have a plan. Whether you find yourself in the middle of retirement without enough to live on or you are a pre-retiree realizing the monster expenses you’ll face, devising a plan to build up a nest-egg is still in reach.

Start today, your retired-self will thank you later.

Danielle K. Roberts is the co-founder of Boomer Benefits where she and her team help baby boomers navigate their Medicare insurance options. She is a member of the Forbes Finance Council and writes frequently about Medicare, retirement and personal finance.

New data released last month was disturbing for the 85% of baby boomers still working. Many don’t have enough saved for retirement or simply aren’t ready to leave the working world behind. Some say they plan to continue working into their 70’s and even 80s, according to a 2017 report, America’s Aging Workforce.

Unfortunately, new analysis by ProPublica and the Urban Institute published last month shows that the decision may not be up to them. Dismally, more than half of employees over the age of 50 are being pushed out of longtime jobs before they choose to retire. Most suffer financially and only one in 10 of these workers ever earns as much as they did before their employment setbacks.

Apparently, 50 is the new 65.

The analysis was based on data from the Health and Retirement Study that began tracking 20,000 people in 1992, from the time the participants turned 50 through the rest of their lives. The study focused on workers who entered their 50s with stable, full-time jobs, and who have been with the same employer for at least five years.

The results are sobering. According to the U.S. Census Bureau, there are currently 40 million Americans age 50 and older who are working. That means, according to this study, that as many as 22 million of these people have or will suffer a layoff, forced retirement, or other involuntary job separation. Of these, only a little over 2 million have recovered financially – or ever will.

Unfortunately, this problem could be worse than we think. Jeffrey Wenger, a senior labor economist with the RAND Corp., claims some older people are likely laid off, but cover it up by saying they retired. “There’s so much social stigma around being separated from work,” he says, “even people who are fired or let go will say they retired to save face.”

As a result, the steady earnings that many boomers count on in their 50s, 60s, and beyond to build up their retirement savings and ensure financial security often disappears.

“This isn’t how most people think they’re going to finish out their work lives,” said Richard Johnson, an Urban Institute economist and veteran scholar of the older labor force who worked on the analysis. “For the majority of older Americans, working after 50 is considerably riskier and more turbulent than we previously thought.”

What can older workers do?

You may be thinking, wait a minute. Isn’t it illegal under the federal Age Discrimination in Employment Act for employers to treat older workers differently than younger ones? Yes, but employers can be sneaky about the way they fire older employees, Often phrases like “layoff” and “job elimination” are used as an excuse for age discrimination. No matter. You may have legal recourse and an age discrimination claim if:

• you experience a layoff and notice that less-qualified, younger employees at the same level are not being laid off.
• your company claims to be eliminating a job, but simply changes the title and puts someone younger in the same position.
• you’re being targeted for poor performance while younger employees doing the same things aren’t suffering any consequences.

In addition, there are some steps you can take to prevent being laid off. Although there are no guarantees, experts recommend the following strategies to enhance job security:

• A common myth concerning older workers is that people over 50 are rigid. You can prove this disparaging idea wrong by remaining flexible, resilient, and adaptable.
• Understand your company’s objectives and your boss’s priorities, and then align your work performance with them. In other words, find ways to make your boss’s job easier and make yourself indispensable.
• Do not contribute to the false belief that all old people are cranky and difficult. Be friendly, cooperative, and helpful. Makes sure management likes you and be the kind of person others enjoy working with and hanging around.
• Brag a little. Ensure that your boss knows about any improvements you’ve implemented, challenges you’ve overcome, and projects and goals you’ve completely successfully.
• Be careful not to give the impression that you lack initiative and are simply coasting along until retirement, which can make you vulnerable during a layoff. Make a point of continuously updating your skills and expanding your knowledge. Read journals, take courses, attend conferences, or attain additional certifications in your field.

Finally, while it’s important for everyone to have emergency savings, if you’re 50 or older, it’s even more critical to have a strong financial safety net. Have enough savings on hand to ride out a potentially lengthy period of unemployment.

 

 

When the stock market has an alarming drop, does it make you baby boomers wonder if you should stay invested in the stock market?

 

If so, the short answer is that it depends on your age.

The good news: Younger baby boomers don’t have reason to worry about the correction, says Kyle Woodley, senior investing editor at Kiplinger.com. Remember, the 2008 stock market crash had a recovery time of six years.

“If you’re between 50 and 60, there’s still time to recover,” Woodley says in a MarketWatch article, At What Age Should You Be Most Worried About a Stock Market Downturn? “Fifty years ago, life expectancy was much lower. You’re not investing for the next 5 or 10 years, you’re investing for the next 20. You have room to grow your nest egg and participate in that growth. Half a century ago, you would have been in two-thirds bonds in your 50s. That’s not the case anymore.”

Financial guru Suze Orman agrees. “If you are saving for retirement or another goal that is 10 or more years off in the future, you should be happy stock prices are down,” she says. “When stock prices are lower, your money buys more shares. And then you own more shares for when stock prices rebound.”

One rule of thumb for your retirement money you might consider is to keep your age in safe investments, she adds. “So if you are 60 you might have as much as 60% in CDs or short-term Treasuries, and the rest can stick with stocks.”

Keep in mind, because the market has soared the last eight years,  you may need to rebalance your retirement portfolio to ensure your investments are aligned with your risk tolerance. Otherwise, you could lose a lot more money if the market crashes.

What if you’re older and plan to retire in the next five years – or perhaps you’re already retired and drawing from your retirement funds?

Some older boomers may have more reason to worry: Jared Snider, senior wealth adviser at Exencial Wealth Advisors in Oklahoma City, says that your risk depends on how well you have prepared for a downturn. “Those folks who have not prepared are most impacted by it. It can do irreparable harm. They sell out of fear or out of necessity because they don’t have any other assets to liquidate.”

Experts generally agree that you shouldn’t invest anything you’ll need within the next five years. That way you’ll avoid pulling out all of your money during a market downturn which historically has always come back up again.

“If the market crashes, you’ll need to be able to ride the storm out rather than selling everything in a panic,” writes Katie Brockman in a CNN Money article, How to Protect Your Retirement Savings from a Crash. “By only investing money that you know you won’t need for at least five years, it will be easier for you to leave those savings untouched until the market recovers.”

 

My childhood friend was visiting me last month when she asked me, “Where do you want to retire?”

We both turn 56 this month, an age where boomers typically start dreaming about where they’d like to retire. Interestingly, we both reside in places known to be pretty popular for retirees.

My friend is from Asheville, North Carolina. She enjoys mountain biking in the scenic Great Smoky Mountains, the robust arts community – and since her late husband was a musician – she loves the live music scene that ranges from bluegrass to classical. Asheville consistently receives great rankings as a great place to retire for those reasons as well as its typically mild weather (with the exception of this year!) and unique art deco architecture. In fact, recently US News & World Report named Asheville one of “10 Best Places to Retire.”

My friend is currently retired and active in her volunteer work and she likes living in Asheville. However, she is considering whether that’s the spot she wants to settle in for good.

Me – I’m from the Palm Springs, California area, which has long been one of the most famous retirement communities. Snowbirds love this place with over 300 days of sunshine a year. Golfing, casinos, hiking, and cycling are popular activities. Places to shop and dine abound. In addition, a fairly strong economy and low unemployment rate make the Palm Springs area a popular destination for baby boomers and retirees.

But do I want to retire here? Not especially. Some people love the heat, but I’m not a fan of the long, hot summers with temperatures that exceed 115 degrees. However, I have time to consider my options. Like many boomers, retirement is nowhere in sight for me at the time being.

But of course, a girl can dream, right?

That’s why I found Bankrate.com’s survey interesting. It used six criteria to determine which states are the best and worst for retirees that included cost of living, taxes, health care, weather, crime, and residents’ overall well-being.

The results were surprising. Traditional retirement spots like Florida and California didn’t make the top 10 while other states, not usually considered as premier places to retire, like South Dakota and Wyoming, made the top five.

So, exactly what are the ten best and worst places to retire according to the survey and why?

The Ten Best States

Wyoming: Low taxes, a low cost of living, and a low crime rate puts this state in the top ten. The sheer beauty of this state is appealing with seven national parks, including the famous Yellowstone National Park, and plenty of expansive land to roam. In fact, Wyoming is the least populated state in the nation. Maybe that’s why this state scores so high in the well-being of its residents and is considered a “happy” place to retire.

South Dakota: This state scores high for its low taxes, living costs, unemployment rates, and crime rates. South Dakota offers a rugged retirement destination to those looking for new adventures, affordable housing, and a sense of seclusion. Nonetheless, South Dakota scored low for the well-being of its residents. Perhaps that’s, in part, because of its typically brutal winters and hot summers.

Colorado: What’s not to love? Gorgeous scenery with low taxes and living costs. Compared to the two states above, Colorado has fairly mild weather with few rainy days that is conducive to lots of outdoor activities like hiking, cycling, and skiing. In fact, the latest U.S. News & World Report recently ranked Denver as the best place to live in the country. Colorado Springs ranked fifth.

Utah: This state made the list with its pleasant weather and abundance of natural attractions and activities for outdoor lovers. Housing costs, however, are higher in Utah than the national average as is the state’s overall tax rate. Utah has recently began  attracting retirees, mostly in the St. George and Park City areas.

Virginia: This state rated highest east of the Mississippi. A vibrant economy and plenty of historic destinations put it on Bankrate’s top five list. According to their study, Arlington is the best place to retire in the state and nearby Alexandria came in second.

These five states were followed by Montana for its temperate weather that ranks above the national average and residents reporting being happy with their gorgeous surroundings, 
Idaho for its affordable housing, low crime rate, and many natural treasures, Iowa for its quality health care system and low crime rates, Arizona for its great weather and high scores in well-being, and Nebraska with its relatively low cost of living and low crime rates.

It should be noted some of these states (South Dakota, Idaho, Arizona, and Utah) made the top 10 Kiplinger list which also included the states of Florida, Washington, South Carolina, Alabama, Tennessee, and Georgia on its top ten list of places to retire.

The Ten Worst States

New York: Known for its high cost of living and high taxes, this state also had the lowest well-being scores in the nation, especially on feeling a sense of satisfaction with their lives and where they live, according to the Gallup-Healthways Well-Being Index.

West Virginia: While the state offers a low cost of living, natural beauty, and lots of activities, for the 6th straight year, West Virginia received the worst scores in the country for personal well-being by the Gallup-Healthways Well-Being Index. In addition, the Agency for Healthcare Research and Quality gave West Virginia its 7th lowest rating in the country for its high rates of hospitalizations for conditions such as hypertension, asthma and diabetes, as well as potentially avoidable hospitalizations for acute conditions.

Oregon: The state’s high cost of living and high taxes along with its stormy weather put this state as one of the worst places to retire according to Bankrate.com. However, it’s interesting to note that Portland, Oregon often tops lists of great places to retire with its beauty, ocean access, great food and wine, and lack of sales tax.

Arkansas: Arkansas received below-average marks for crime, health care and overall well-being. Arkansas has the 9th highest violent crime rate in the nation and the 6th lowest score for health care quality. The state struggles with hospital admissions for hypertension and diabetes, among other issues. Arkansas also received the 7th lowest happiness score in the nation among seniors, with especially low overall scores for physical and social health.

Louisiana: Unfortunately, one of the major problems with Louisiana, which also made last year’s list, is crime. The state recorded the 5th highest violent crime rate in the country in 2015, according to the FBI, and had a murder rate double the national average in 2014. In addition, The Agency for Healthcare Research and Quality gave Louisiana the 2nd lowest score in the nation for health care quality.

Hawaii made number six. A lovely place to live except for the high cost of living. Honolulu is the 2nd most expensive place to live, ranking 2nd to New York City, according to the Council for Community and Economic Research. Residents of Hawaii pay an individual income tax rate of 11% — the 2nd highest in the U.S. If you can afford it, however, this state ranks high for happiness and personal well-being.

That state was followed by Oklahoma whose state’s health care system ranked as the worst in the country, according to the Agency for Healthcare Research and Quality. Add a high crime rate and a low rating on the Gallup-Healthways Well-Being index. Alaska made the list for it’s a high cost of living, frigid temperatures in much of the state, and high crime rate. Connecticut ranked number nine due to its state’s income tax rate and property tax rate which are both 2nd highest in the country. Maryland rounded out the 10 worst states for retirement for its high cost of living and lofty tax rate which makes it hard for retirees living on a fixed income.

Where Should You Retire?

Where to retire is a deeply personal decision and you may not agree with this list. There are many things to consider.

For most people, retirement means less income, but more time to do what they enjoy. That means typically they are looking for a place with lower housing and living costs, good weather, opportunities for outdoor physical activities, cultural offerings, and volunteer work.

But there are other factors to consider too, for example, nearly a quarter said in the survey that being close to family is the most important factor in deciding where to retire. Other interesting findings from the Bankrate survey:

• Three in five Americans want to spend their golden years in another city or state, but the desire to move away from home fades with age.
• Women value a cheap cost of living more highly than men (59% vs. 43%).
• Four in 10 Americans say locales with access to mountains, rivers and other outdoor recreation would be most appealing, while 25% prefer living near a beach.

In the end, you’ll have to consider all those factors before you put down roots. As Bankrate.com research and statistics analyst Chris Kahn said: “Warm weather may be an initial draw, but all the sunny days in the world won’t make you happy if you’re constantly stretching your budget or don’t have access to quality health care.”

True, true. But that doesn’t stop me from dreaming about retiring somewhere near an ocean with our sailboat docked in a marina. Or maybe some exotic land or a Caribbean island which are dancing around in my head. Why not? Like I said before, a girl can dream, right? And who knows where I’ll land? Only time will tell!

Where would you love to retire? Please share your dreams in the comments below.

Image courtesy of Stuart Miles, J Frasse, and Troy Faulder at FreeDigitalPhotos.net