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From now until 2030, about 10,000 Baby Boomers will turn 65 every day, according to the Pew Research Center. This large generation, born between 1946 and 1964, has had a huge effect on American culture and society, and that remains the same as they head into retirement.
If you or a loved one is a member of this generation, the California Society of CPAs offers advice on how to avoid some of the pitfalls that could prevent members of this group from enjoying a happy retirement.
Fitness has always been a high priority for Boomers, so it’s not surprising that their average life span continues to lengthen. In fact, the average 65-year-old man today can expect to live until age 84, for a woman, age 86, according to the Social Security Administration.
One of every four 65-year-olds today will live past 90, and one of every 10 will live until at least 95. That means it’s important to have a solid plan for funding your retirement years. If you don’t think you have enough for 20 or 30 years, it may be necessary to step up your savings or to consider postponing taking your Social Security payments so that you will receive a higher monthly amount later on.
You’ll need about 80 percent of your pre-retirement income to cover your expenses in retirement, according to the Center for Retirement Research at Boston College. Many people who thought they were on their way to a well-funded retirement saw their investments reduced by the recent recession.
If you want to take stock of where you stand, the Retirement Pension Planner on the American Institute of CPAs 360 Degrees of Financial Literacy site can help you get a sense of how much you might need, along with an estimate of when your retirement savings will run out.
If you want to have more money for retirement, start reining in your spending now. Baby Boomers have helped fuel the luxury market for years, but living within your means can help you stretch your money now and in retirement. A common change in retirement often involves downsizing from a large family home to a smaller one.
As you discard or give away things you’ve collected through the years, consider how many new things you’ll actually need to purchase during retirement. You may find yourself better able to enjoy what you already have.
Saving for a second home or for a child’s or grandchild’s education are worthwhile goals, but be sure to put your own retirement needs first. Consider postponing a vacation home purchase until you’ve accumulated enough savings to cover your other retirement expenses. If you find that one residence is actually plenty, you can potentially save yourself years of additional mortgage payments.
And remember, it’s always possible to use student loans to pay for college tuition, but there won’t be similar financing available to cover retirement expenses if your savings runs out.
No matter how close you are to retirement, your local CPA can answer your questions and help you create a plan that addresses your short- and long-term needs. Be sure to turn to him or her for advice on all your financial questions.
Copyright 2013 American Institute of Certified Public Accountants.