Slideshow 10 Ways Boomers Can Avoid Savings Shortfalls in Retirement

  • April 11 2012, 5:16pm EDT

10 Ways Boomers Can Avoid Savings Shortfalls in Retirement

What’s scarier than dying? Outliving your savings, say scores of Baby Boomers. The fear is understandable. Today, healthy 65-year-olds have at least a 40% chance of living into their 90s with health-care costs expected to be a significant challenge. Here’s a 10-point checklist from the Women’s Institute for a Secure Retirement, an education and advocacy group, to help Boomers avoid retirement shortfalls.

1.Save more.

Sounds obvious, but most people don’t even estimate how much money they’ll need for retirement, and if they do, they vastly underestimate how much they will need.

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2. Accept that you will probably live longer than you expect.

People plan for the average life expectancy, not realizing there’s a 50/50 chance they will live longer; and a decent chance they will live much longer.

3. Learn about the various sources of retirement income.

Workers misunderstand what their primary sources of income will be in retirement. Social Security is the most important source of income for many people, but before retirement, they tend to vastly underestimate its importance.

4. Learn how to manage your retirement savings plan.

Due to the growth of retirement savings plans such as 401(k) and 403(b) plans, workers are now responsible for managing their investments. Most workers need to increase their financial knowledge and become experts about their workplace retirement plans.

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5. Look for good advice.

A significant portion of retirees and pre-retirees do not seek the help of a qualified professional. While they indicate a strong desire to work with a professional, most ask friends and family for advice.

6. Don’t count on working.

Plan early, WISER urges Boomers. Many workers will retire before they expect to, and before they are ready. Nearly four in 10 people retire due to poor health, caring for a family member, or job loss.

7. Deal with inflation.

Inflation is a fact of life that workers usually deal with through pay increases. After retirement, it is up to people to manage their own assets, or secure guaranteed income. Few people have the skills to manage income to keep up with inflation.

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8. Face facts about long-term care.

Many people underestimate their chances of needing long-term care. Relatively few people either own long-term care insurance or can afford to self-insure a long-term care situation.

9. Provide for a surviving spouse.

Many married couples fail to plan for the eventual death of one spouse before the other and the resulting drop in income at the time of widowhood. Many more single women live in poverty in old age.

10. Make your money last for a lifetime.

People often pass up opportunities to get a lifetime pension or annuity, failing to recognize the difficulty of making money last for a lifetime. People say guaranteed income is important, but in practice they usually choose a lump sum.