Last week, I received an email from a well-respected digital media consultant. It seems that I am about to named a "top 20 social influencer" on personal finance and financial services. She was gathering comments from the "top 30 social influencers" on results of a Financial Health Survey of Baby Boomers, commissioned by MoneyTips.com, a new personal finance portal. Flattered to be selected, I replied I'd be happy to comment. I felt like a second grader who had just won a gold star for citizenship!
However, when the survey results arrived, what had seemed like an honor felt like a slap in the face. I looked over the first data point, "Babyboomers- ages 51 and up..." What? I was a babyboomer nearing retirement? When did that happen? I stopped reading, and reached for the Haagen-Dazs. This attitude change had nothing to do with my diet, love life or biorhythms; instead, it had everything to do with the survey headline: "For 1 in 3 Babyboomers, No Retirement Plan is THE Plan." Ugh-- Did that mean me?
There it was, flickering on my Apple Cinema monitor: I was that 1 boomer in 3 with NO real retirement plan. I was totally busted. My head spun, and in the next few minutes, I went through all five stages of the Kübler-Ross grief model:
My first reaction was denial - Hold on a minute. This can't be true! I'm 54; I'm still young! I'm practically invulnerable! This problem just doesn't affect me yet.
Followed by anger - Why on earth is this happening to me, anyway? This just isn't fair! I should never have agreed to review that survey!
I then proceeded to bargain - OK, OK. Maybe I did get myself into this, but I've been so busy! And life is different now, can't you see? One in three Millennials still live with their parents, for God's sake! I don't live with my parents; I'm a responsible adult. And I can make changes. I can do better! I'll save half my disposable income, I promise! I'll do my own nails. I'll give up my personal trainer. Just tell me it's not too late!
Followed by the onset of guilt and depression - It probably is too late, isn't it? Looks like I really blew this. In 20 years, I'll be one of those bag ladies who rides the subway all day, mumbling to herself about what might have been. I'm so depressed. Somebody get me some chocolate sauce for my ice cream.
And finally, I arrived at acceptance Wow. It is true, isn't it? I'm well into middle age, and I have no real financial plan for the end of my working days. That end won't come next year, of course, and probably not at 65. After all, people are working longer now. But they're living longer, too, and I need to account for that. Put simply, I need to be accountable to myself. I need to make provisions for tomorrow -- starting today.
But how? As the Bard said, there's the rub.
Fortunately, I cover some of the world's best and brightest financial minds. Here's what a few of them have to say about the origins of -- and possible solutions to -- this lack of retirement planning by so many boomers (like me):
Carolyn McClanahan, MD, CFP, and president of Life Planning Partners, believes that boomers' inadequate planning is rooted in their "live for now" mentality, which is reactionary to their parents' mindsets. Boomers don't want to wind up like their parents, whom they saw "scrimp and save and then die, never enjoying their money," according to McClanahan. However, as boomers live for now, they forget a key difference between their parents' and their own post-retirement futures: "Their parents had pensions, while generally, they do not," she says.
Fortunately, it's not too late for boomers without retirement plans to remedy our situations, according to McClanahan and other experts. Sheryl Garrett, CFP, AIF, and founder of Garrett Planning Network, says that we should start by focusing on retirement. "No one will do it for you," she says. "If you're not interested in living off whatever Social Security will provide I recommend saving at least 10% in a 401(k) plan or Roth IRA. Just get started, not all at once - ease into it."
"Most Americans spend 100% of their net paychecks. Dropping that "cold turkey" to 90% would likely be a recipe for failure. Instead, bump up your savings by 2% and make those savings contributions automatically come out of your paycheck. Then live with that for three months. At the end of three months, bump it up another 2% and so on until you hit your target savings requirement for retirement," she says.
Garrett also points out that federal government "Catch Up" provisions permit anyone over 50 to contribute significantly higher tax-deferred amounts to their 401(k) and other participant-directed defined contribution plans. So if you're making good income today, you can accelerate your savings plan rapidly.
Of course saving is just part of the total solution. Continuing to earn money -- for as long as possible -- is another. That's why McClanahan implores us to "rethink retirement."
Age 65 became the retirement age when people didn't live for many years beyond that, she notes. "Now people live 30 to 40 years in retirement. Staying financially engaged through employment goes a long way toward improving financial, physical and emotional health as we age. Don't give up your safest asset (aka your ability to work) too early."
Fair enough. That gives us two parts of the solution: (1) implement a savings plan that is methodical yet flexible and (2) keep earning money as long as possible. What about cutting expenditures? Isn't that vital, as well?
"Absolutely!" says investment advisor Alex Bentley, founder of Baldwin Partners and a MoneyTips.com professional member. "Cancel your cable, cut your cell phone bill, and stop eating out. Cut up your credit cards and pay off your debt. Then start saving like your life depends upon it -- because it just might."
Ouch. That hurt, Alex, but I get it. It's time to create my retirement plan and then work on it religiously. I also need to keep bringing home the bacon for years to come, provided I don't actually eat it. (Nitrites and all that.)
As for doing my own hair, nails, etc? We "babyboomers" need to budget some dollars for our own maintenance...