You’d think that most (if not all) of the executives I work with have reached a level of success – and with it the financial resources – that go along with being prepared for retirement. But think again. You’d be surprised to know that the outlook is grim for many Baby Boomers – those born between 1946 and 1964 – including even the most successful executives if they don’t take measures to prepare early on. A study from the Insured Retirement Institute (IRI) shows that only 1 in 10 Boomers has enough saved up for retirement and while those in my Core may have better percentages than that, they’re not automatically immune to this plague of unpreparedness. So, what are those who are prepared for retirement doing differently than those going into it with little to nothing in the bank? Here are nine ways smart business leaders prepare for retirement:
1. Set a date. Before you can calculate how much you’ll need to save, you need to know how much time you have to work toward that goal. Setting a general retirement goal date seems simple but the IRI study shows that 33% of Boomers aged 67-72 have had to postpone their retirement because they couldn’t afford it. Another 30% think they’ll work for a lot longer than they actually do, cutting the amount of time they can save up short.
2. Calculate a retirement goal. Another seemingly obvious task is to calculate how much you’ll need to survive once you’ve retired. From cost of living to pensions and social security, a lot goes in to how much you’ll need once you stop working but studies have shown that 25% of those who don’t have a financial advisor (and, even more surprisingly, 25% of those who do have one) haven’t even set a target number.
3. Estimate health costs. A factor that’s often underestimated (and sometimes overlooked entirely) is health care costs. Be realistic about health costs and how they could change as you age.
4. Factor in long-term care costs. Another unforeseen cost for many approaching retirement is long-term care costs. Many believe Medicare will cover this expense when in reality, it doesn’t cover long-term care at all. Yet another major expense many don’t take into account when estimating their retirement goal.
5. Don’t forget about retirement income taxes. Many don’t realize that various sources of retirement income will be taxed and are often faced with unexpected costs. In calculating your retirement goal, be sure to factor in how much money you’ll actually see from your retirement income.
6. Account for health issues before they happen. Beyond the monetary impact of unforeseen health issues, it’s important to make arrangements in case you suffer from dementia or other debilitating factors. Things like power of attorney and spelling out your wishes for your care and end of life are extremely important – and if you wait until they’re needed, it’s often too late.
7. Figure out what’s best for your 401(k). If you have a 401(k), you’ll need to figure out if it’s more beneficial to leave your money where it is or roll it over to an IRA. The answer is different for everyone, often depending on your age at the time.
8. Set it and forget it. Saving is no easy task, especially when you have other immediate needs. A shocking 17% of Boomers saved up for retirement at one point but drained their savings before they made it to the big day. While it can be tempting to dip into your retirement savings, smart leaders understand the necessity of that pot of money and refrain from spending it at all costs. You won’t regret it.
9. Save, save, save. This may seem like the most obvious of all but so many aren’t saving enough – or anything. The IRI study showed that 23% of Boomers have no retirement savings at all. The earlier the better but at the end of the day, it’s better to start now than not at all.
In business and in life, it’s about planning ahead, being strategic, and adjusting when necessary. Planning for retirement is no different. Interested in reading more about life and leadership? Head over to the Connection Room.