Retirement Planning for Late Starters

“We’re getting a late start on our retirement.” This is a conversation we often have, and my response is always the same, better late than never. Between 2022 and 2030, around 75 million people are expected to retire. It is what is being dubbed by some as “The Great Retirement Boom”. This is a result of the end of the Baby Boomer generation entering their retirement years. It looks like social security isn’t going anywhere anytime soon, so that will help, but social security is only supposed to be a supplement in retirement. The primary portion of your income is supposed to be from assets and/or pension.

A good portion of this group of pre-retirees are running into problems when it comes to their retirement plan. You see, if you were born between 1959 and 1964, the last 5 years of “boomers” you most likely started work between 1981 and 1986, assuming a start time at age 22. If this sounds like you, then you lived though multiple economic downturns, and if you were one of the ones caught in the crossfire of the dot com bubble, or great recession, then retirement was the last thing on your mind. Making ends meet is all that mattered, especially when there are kids to feed.

Speaking of kids, there is another issue that we have noticed when it comes to money behavior with this specific group of people. When they were kids, their parents might not have had the best saving/investing habits. A good number of that generation was able to retire off their company’s pension plan, something these late boomers probably don’t have.

When someone is getting a “late start” on retirement, it usually means they have some money saved up, but it’s all over the place. One couple that I have worked with for a while had about 150,000 in their 401K, and that was all their retirement savings. They basically started investing in retirement after depleting their savings while unemployed during the great recession. This story is all too common among this age group. They basically started saving at age 48, which is a late start. However, through some creative planning and discipline, they will still be able to retire comfortably at age 66. This is due to a couple of things, number one was investing more aggressively, not just in asset allocation, but in how much we invest as well. Being able to push more of your income into retirement savings when your children become financially independent is one of the biggest keys to building retirement savings quickly. The other big piece is making sure that you invest in tax-efficient accounts.

The biggest reason we see people pushing off retirement planning comes from embarrassment. They know that what they have done and are doing is not enough. They know they need to make changes, but change is scary, and can be difficult. The longer someone pushes it off, the less likely that they will be able to get their plan together properly. I suggest sitting down with a fiduciary financial advisor. A couple of them if you can (I suggest interviewing three). Find one that is going to teach you the why behind your plan, and one that will hold you accountable. If you want me to be one of those three interviews you interview, use the calendar link at the bottom of the page to set up a meeting, or use the link here.

Thanks for reading!