Top 3 retirement preparation tips for Baby Boomers

Top 3 retirement preparation tips for Baby Boomers


Hey, Baby Boomers! Your generation has seen the beginning and end of the Vietnam War, you watched (and maybe even participated in) the women’s liberation movement, and you saw the assassination of a President. You were asked to “tune in and tune out” and “do your own thing.” And you’ve dealt with a lot of change. It’s no wonder your generation is described as resilient, resourceful, competitive, disciplined, educated, independent, and health-conscious. In fact, it’s predicted that one out of every four 65-year-olds today will live past age 90 [1].

But when it comes to saving for retirement, you’re a mixed group. A 2016 survey by the Transamerica Center for Retirement Studies found that Baby Boomers have an average nest egg of $147,000, but 60 percent say they could work until age 65 and still not have enough money saved to meet retirement needs [2]. This means Baby Boomers are expecting to face an income gap in retirement, and frighteningly, a much-too-high 17 percent of Baby Boomers have no retirement savings at all.

Experts agree, the way Boomers will live out their retirement years will look very different from the historical, stereotypical image of “senior citizens.” So, rather than retiring into the background of our society, more will remain vibrant and active throughout their retirement years than was the case of previous generations [3].

Tips to help Baby Boomers prepare for retirement

1. Transition your investment portfolio

Many Baby Boomers are either already in retirement or are less than 10 years away. And since the entire generation is now over the age of 50, remember you can contribute extra funds to your retirement plan by taking advantage of catch-up contributions!

a. For those in retirement, you may want to focus your portfolio on providing income. A combination of investments that may help include government and corporate bonds, REITs, dependable company stocks that could pay consistent dividends, and possibly an annuity for those that like a guaranteed income stream. 

b. For those still working, now might be a good time to prioritize protection of your nest egg by reducing exposure to higher risk investments.

2. Create a written retirement plan

Statistics show that pre-retirees with a written strategy for retirement are more likely to turn their good intentions into reality, so documenting your retirement goals and strategy will help raise your chances of living the lifestyle you want and can afford [4]. Do you want to spend your golden years traveling the world or making daily trips to the driving range? How do you plan to pay for these expenses? Put thought into estimating which of your monthly expenses that will remain in retirement and how much you’ll need to fund your desired lifestyle, and don’t forget to budget for increasing health care costs as you age.

a. Determine how much you expect to annually take out of your retirement accounts. Many experts say around 4 percent of the retirement funds can be withdrawn annually to ensure assets last a lifetime. Using the average Baby Boomer nest egg from above of $147,000, this means only $5,880 can be withdrawn each year.

b. What about Social Security? When FDR created Social Security, the expectation was to supplement retirement savings—not fully fund retirement. However, many Americans these days rely on the benefit as the primary (or only) source of income. Full retirement age for Social Security benefits is currently age 66 for most Baby Boomers, but Boomers born after 1960 will have to wait until they turn 67 to receive full Social Security benefits. And there are some serious advantages for waiting to collect the benefit until after you reach full retirement age. In fact, every year you wait to collect Social Security checks after you’ve reached full retirement age increases your monthly benefit by about 8 percent [5]. For those short on retirement savings, this strategy paired with the next tip may be a good alternative.

c. Should you continue to work? According to a recent survey by the Aegon Center for Longevity and Retirement, about 57 percent of Americans plan to continue doing some form of work in retirement. Some report they want to continue working to keep their bodies active or their brains alert, while others report they’ll have to work to pay the bills [4].

d. Hey, you’re not getting any younger, and as you age, you may not be as sharp as you once used to be. Now is a good time to document a “roadmap” that discusses how you want your assets to be invested as you age. This roadmap provides you and/or others (children and powers of attorney) something to refer to later in life.

3. Payoff mortgage and right-size your home

Before you retire, it is a great idea to reduce fixed expenses as much as possible. Typically, the largest monthly fixed expense is your mortgage, and many Baby Boomers still live in the same home they did when they were raising their children. Do you still need the space provided by a three or four bedroom home? You may be able to downsize to a smaller home that is easier to maintain as you get older. And if the smaller home costs less than the larger house you just sold, your nest egg will receive a nice boost!

Although there’s no one-size-fits-all solution when it comes to saving for retirement, following these tips will help you plan for your financial future and put you on the path to retirement readiness.


Ryne Lambert, MBA - Financial Services Representative Team Lead - rklambert@pai.com - 800.236.7400 Ext. 3491

Ryne is a subject matter expert on 401(k), retirement savings, investments, participant advice, personal finance education and behavioral finance.