Retirement planning for baby boomers can be a daunting task. Let’s start by defining this term. Baby boomer is a term used to describe a generation born between 1946 and 1964. Months after WWII had ended, there was a growth of 20% in the population size called a baby boom. This growth continued until 1964 where people born within this time period made up more than 40% of the population. In 2012, we began seeing baby boomers reach retirement age and for the next 17 years, more and more will retire. The question many baby boomers are faces with we will cover in the article.
Question: Is it too late for me to start a retirement plan?
If your a baby boomer, chances are you have an urgency to start planning for your retirement. Start your retirement plan by realizing the advantages that lay ahead. As a baby boomer, chances are that your major expenses such as a mortgage, car loan, school expenses, etc. have been paid off. Using this extra cash, you can plan for your retirement.
What I notice that even with this extra cash coming in, many are worried that it might be too late for them at this stage in their life and take advantage of the compounding effect. This doesn’t have to be the case if you take advantage of the provisions the IRS made for you.
Question: What are the IRS provisions I can take advantage of?
As a baby boomer, chances are that your mortgage expenses are close to being paid off and your at your peak earning years. This can easily give you the advantage of funding your IRA or ROTH IRA to the maximum allowed contribution of $5,500 if you under the age of 55, and $6,500 contribution if your over age 55. If you have access to a 401(k) at work, you are allowed an additional contribution of $6,000 on top of the annual $18,000. This ultimately means that if your past age 55, you can start putting aside annually up to $30,500 (24,000 in an 401(k) and 6,500 in an Roth IRA). Broken down monthly, this means you’d contribute each month approximately $2,500 for the next 10 years. Assuming you’d earn an average interest rate of 9%, your account would be worth $335,500 by the time you are ready to retire. This mean that for the next 20 years, you will have a steady income coming in each month.
Question: What can is do to ensure I don’t outlive my money?
This is a questions that plagues many baby boomers ready to retire. How can you ensure you will have enough to retire for the rest of your life? A strategy that I’ve found to work is Life Insurance plans that offer Longevity insurance. Longevity insurance is a type of insurance you invest into today with the assurance that at age 85 you will begin to receive monthly income for the rest of your life.
For example, a man who pays $50,000 for MetLife’s longevity insurance product at age 50 would receive annual income of $42,997 once he reaches age 85, according to the company’s brochure. Assuming an inflation rate of 2.5 percent per year, that annual payout is equivalent to $18,118 in today’s dollars.
He would receive about half that amount — $21,741 per year — if he purchased the same contract at age 60, and $15,439 if he bought it at 65. That’s equivalent in today’s dollars to annual payments of $11,727 and $9,422, respectively. Female policyholders receive slightly less, since statistically they have longer life spans.
To counter the erosive effects of inflation, insurance companies, including MetLife and Hartford, offer longevity products with an inflation hedge — for a price. Thus, the key is to start now! To learn more about longevity insurance, please view this source: MetLife Longevity Brochure.
Time is ticking and you will need to take action soon. Retirement planning for baby boomers is a topic that is being discussed and prepared for by many industry leaders. I want to share with you a book that I know will bring you value. You can view the link to this book here: