People say that 50 is the new 40, but delivered along with your birthday cards when you turn 50 will be your membership card to AARP. Yes that’s right, your official “pass go” into the American Association of Retired People. Quite ironic, given that retiring at 50 isn’t plausible or realistic for 99.9% of us.
So, after you’ve shredded your AARP card (no early-bird dinner specials needed), it’s time to get realistic about what you need to do to get your insurance and financial life in order. Here is a quick checklist to help you do just that.
Make sure your retirement planning is on track. Hiding your head in the sand because your 401(k) took a hit over the past several years is not a retirement plan. While it may be painful to dissect what you currently have and what you need to save (probably much more than you are), it’s better than the alternative: living in poverty in retirement.
Review your life insurance coverage. Rates for life insurance have come down recently and it is often less expensive now than it was 10 years ago. Sit down with an agent to make sure you’re not overpaying for your coverage and that you have appropriate coverage for your risks.
Explore long-term care insurance. It’s important to understand that this isn’t “nursing home insurance”—80% of people who need long-term care services are receiving them in community settings, which for many of us will be our home. Long-term care insurance protects against the significant financial risk (aka draining your retirement funds) of potentially needing extended care services, at home or in a facility, due to a chronic illness or disability.
Examine your estate plan (or get one if you don’t have one). I know this is daunting, because it is for me, too, and I’m in this business. Keep in mind that the plan you had in place 20 years ago (when choosing a guardian for your children was key) needs to be reexamined. Now it’s about more about managing your assets, mitigating estate taxes and debt. Your advisor may be able to help you with this, or can refer you to someone who can.
Get your legal documents in order. Make sure you have durable power of attorney, which is a legal document that gives someone you trust the ability to act on your behalf if you were to become disabled or incapacitated. In addition, make sure you draft a health-care directive, which gives instructions about medical treatment if you were terminally ill or permanently unconscious.
You don’t have to go this alone. If you don’t have an advisor, you can find one in your community here.
Retirement. I’ve been talking about the Boomers’ lack of preparation for their retirement for many years. Many Boomers are not and will not 
be in a financial situation where they can enjoy a secure retirement.
Financial-Planning.com published “12 Terrifying Retirement Facts Keeping Boomers—And Their Advisors—Up at Night,” which discusses these concerns and reinforces the urgency for Boomers to work with their financial planners and professional agents to be better prepared.
Here are just a couple of statistics that stand out:
- About half American workers have less than $10,000 saved for retirement, and 29% have less than $1,000, according to the Employee Benefit Research Institute.
- One in six elderly Americans lives below the poverty line, according to the U.S. Census Bureau.
- Between 1991 and 2007, the number of seniors aged 65-74 that filed for bankruptcy increased 178%.
- In 1991, half of all American workers planned to retire before 65, now that number is less than a quarter.
- A recent AARP survey found that 40% of Boomers plan to work “until they drop.”
- The vast majority of Americans—88%—are worried about “maintaining a comfortable standard of living in retirement,” according to a survey by Americans for Secure Retirement.
Scary thoughts, and if these facts don’t bother you, you are:
- In denial of your financial position
- Unaware of your financial predicament
- Have been smart enough to be proactive in your planning.
If you are in either of the first two categories, you should contact your agent or planner today. If you do not have someone to help you, go to LIFE’s agent locator.
The real question is whether 80 is the new 65 by choice or by circumstance. Wells Fargo Bank surveyed a group of Americans from age 20 to 70
who earned between $25,000 and $100,000 asking questions about retirement, savings and Social Security and came up with some interesting information.
Three-fourths of those surveyed said they expect to work in their retirement years. One quarter said they will need to work until at least age 80 to live comfortably in retirement, and you can be assured that this is not by choice. Given the choice, they would retire as soon as possible.
Almost half (47%) of respondents said that they are planning to continue in the same job or a job of similar responsibility. This, of course, assumes they have the ability to continue in their same or similar job, the economy justifies their continued employment and their employer is willing to extend their employment. And what happens if none of these options are available?
The survey found that three-fourths of Americans said it is more important to have a specific amount saved before retirement, regardless of age, while only 20% said it is more important to retire at a specific age regardless of savings.
In terms of saving for retirement, 53% of those surveyed said they need to significantly cut back on spending now to save for retirement. Notice the word significantly. How likely are you to initiate a major change in lifestyle to achieve a goal 20 or more years in the future?
According to Wells Fargo, on average, Americans have saved only 7% of their desired retirement nest egg, with a median of $25,000 saved versus a median retirement goal of $350,000. Americans have been saving less than what is needed for retirement and the majority do not trust the stock market as a place to invest for retirement.
On the issue of Social Security, there was an age divide. Those in their 60s expect Social Security to provide 46% of their retirement funding. But more than 25% of those in their 20s and 30s expect no income at all from Social Security during their retirement.
This sounds like a very good reason to start planning now by reaching out to an agent or advisor to help navigate the options available in reaching their goals and reduce their reliance on government programs.
A recent Guardian Life Insurance Company survey found that Americans are overwhelmed about the prospect of saving for retirement, and they are unsure how life insurance fits in the overall planning. This survey indicates that all Americans are exhibiting uncertainty and, at worst, complete inaction when it comes to financial decision-making.
The survey also revealed persistent uncertainty about the economy, coupled with the belief that it is headed in the wrong direction, as a leading source of anxiety at every life stage about the ability to save for a comfortable retirement.
This sense of being overwhelmed about retirement planning further heightens the distress many Americans are feeling about financial security over the long term. While nearly all respondents (92%) surveyed say they are confident in their personal financial decision-making, almost four in 10 of the general population (39%), and more than half (52%) of Gen Y and one-third of Gen X don’t even know where to begin when it comes to planning for retirement.
Among factors the survey looked at were people’s perceptions of the direction the economy is heading. From a generational standpoint, Gen X (82%) believes the economy is headed in the wrong direction and feels the least financially secure (47%) of any group. Three-fourths of the general population also shares a pessimistic view of the economy’s direction, while more than one-third (37%) do not have a sense of financial security. Gen X members (59%) are also the most concerned that they will not have enough money saved for retirement, perhaps reflecting the sequence of economic forces that have impacted their working lives.
Survey respondents who own whole life insurance were the most confident that they will have saved enough for a comfortable retirement. This feeling of security may be due to their knowledge that the cash value of a whole life policy can be accessed on a tax-advantaged basis for supplementing retirement income. However, among the general population, the survey found that there is a lack of understanding about how different types of life insurance work. Americans in general are divided about whether it’s smarter to buy term life insurance and invest the rest, or to buy whole life insurance and treat it as part of one’s overall financial portfolio (40% each).
As for how their perceptions of the economy have impacted their overall financial decision-making, the survey revealed that two-thirds of respondents from the general population (65%) are more likely to keep their money in a savings account rather than invest it, despite the fact that 62% of them feel that a down market is an opportunity. However, most respondents (60%) still believe it is important to keep investing in their retirement fund because the economy is less stable, with skittish Gen X being the exception: 47% of respondents from this cohort believe investing in their retirement fund is actually less important during this time of economic instability.
Based on survey findings, Gen Xers may have been disproportionately impacted by the turmoil of the economic landscape, but the Guardian survey indicates that all Americans are exhibiting uncertainty and inaction when it comes to financial decision-making.
So what do these results tell us? It says the financial services industry needs to do a better job of educating the consumer across all generations as to how they can and should plan for their financial future, and not just pure financial products, but life insurance too.
This is where the LIFE foundation comes into play. We’ve been educating the consumer for the past 17 years about the different types of insurance and what these products do. LIFE has the resources and the credentials as a non-profit third party to help consumers make these important insurance decisions, but the industry needs to do a better job of accessing and using these tools.
In a recent LIMRA survey of Americans not yet retired, 40% said they currently save no money each month toward retirement.
The LIMRA research indicates that fewer future retirees will have pensions to pay for their living expenses and more will be relying on their personal savings to fund their retirement. Without a significant change in savings behavior, many Americans will not have enough money to afford to retire.
The survey also found that 19% of adults not yet retired typically save less than $100 a month, while 27% save $100 to $499 a month. Even those with household incomes of $50,000 or more, a sizeable proportion—42%—are either saving $100 or less, or nothing, each month.
Looking at pre-retirees, the results were not much better: 41% of pre-retirees are not putting aside any money for retirement and a little more than one-fifth (21%) of pre-retirees save less than $100 a month.
People may think they will just continue to work until they die, but LIMRA’s research shows that 56% of retirees retired before they expected and 43% were involuntary. So the choice of when to retire may not be theirs.
Employer-sponsored retirement plans, such as 401(k), 403(b), etc., are an easy way for employees to save for retirement tax-free. LIMRA’s study revealed that many Americans who have access to one of these plans do not take full advantage of the tax-deferred savings.
While 55% of surveyed adults do not contribute at all to an employer-sponsored plan, of those that do, 48% contribute less than 5% of their annual earnings. Overall, more than 20% fewer women contribute to their employer-sponsored retirement plan than men (39% vs. 50%). In addition, the survey found that women are more likely than men to contribute less than 3% of their earnings (19% vs. 13%, respectively).
The good news is, despite the poor economy, only 12% of plan participants have decreased their contribution rate over the past year; 24% increased the amount saved and 64% kept their contribution the same.
As LIMRA stated, educating people about the benefits of systematic saving is critical. For more information on how to accomplish your savings and retirement goals, contact your personal agent or advisor or go here.
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People say that 50 is the new 40, but delivered along with your birthday cards when you turn 50 will be your membership card to AARP. Yes that’s right, your official “pass go” into the American Association of Retired People. Quite ironic, given that retiring at 50 isn’t plausible or realistic for 99.9% of us.
