How Will all the Retiring Baby Boomers Impact the Economy? – 5 Ways for Near Retiring Baby Boomers to Prepare for an Uncertain Economy
For those unfamiliar with the “baby boom,” it is the period that stretches from 1946 to 1964, children born at the tail end of the trials and tribulations of World War II right up to the start of the Vietnam War. It is true that baby boomers are working longer than before; however, as they retire, the impact may be noticeable across the economy.
As baby boomers retire and leave the labor force, their departure could impact the economy in several ways, including:
- Productivity rates could decrease
- There could be a shortage of workers
- The costs associated with an aging population may put a strain on the economy
- Their exit may create a “talent gap” as decades of industry experience go out the door with them.
Despite the uncertainties of the economic future, baby boomers with retirement on the horizon are not sitting idle. They are taking proactive steps to prepare for this new phase of life. Here are a few measures they are implementing:
1. Postponing their retirement
It is becoming more common for baby boomers to put off retiring for a few years to put a little bit more money away. The uncertain economic landscape leaves many wary of how long their money can stretch if faced with unforeseen financial surprises like a recession or depression, consistently rising cost of living, and high interest rates.
2. Create a retirement spending budget
One way of managing your spending in retirement is to determine how much you could have on the date you want to retire. Then, determine how much you can comfortably spend versus your household income after you stop working, such as Social Security benefits, your pension (if you get one), withdrawals from a retirement account, and any other sources of income. You have a number that for your future expenses, you can focus on working toward a lifestyle where you can make that work, for example, downsizing and reducing expenses like utilities, lawn service and landscaping, excessive HOA fees, and more.
3. Review your investment portfolio
As you near retirement, there is a good chance you will have a nest egg built up. You may have a significant amount of that money in a traditional savings account, for example, but you have been interested in something that provides a higher interest rate. Consider reviewing your investment portfolio and modifying it if necessary in pursuit of your financial goals. There is no guarantee that you will earn the returns you anticipate, as all investments have risk.
4. Establish an emergency fund if you don’t have one
It is impossible to predict the future and medical care for people after retirement can be expensive. Having an emergency fund and cash available when needed can help mitigate the risk of insufficient money to cover costs such as medical events. According to Bankrate, more than 1 in 5 Americans have no emergency savings. An estimated one in three had some emergency savings but not enough to cover three months of expenses.
5. Consulting with their financial professional
Nearing retirement can be stressful, especially during uncertain times with a perceptively unstable economy. Whether you feel confident that you saved up enough over the course of your working years or not, consider consulting a financial professional to help you redesign your retirement and savings strategy and stay aligned with your long-term goals.
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