Today's Retirement Journey
Forget those stereotypes. Stay active, stay involved, and prepare for what may be your best years yet
Money matters aside, most baby boomers simply are not interested in heading for a rocker before they have to. They have many years ahead--16 on average for a 65-year-old man, 19 for a woman--and intend to live them fully. Seventy percent of boomers plan to hold a full-time or part-time job while collecting pension income, according to an AARP survey. "Retirement is a fluke of the 20th century," says David Ekerdt, a sociologist at the University of Kansas's Gerontology Center. "For people who are active and healthy, it's destructive. You can only play so much golf."
Time to save
As many as 25 million boomers, or nearly one third, have virtually nothing saved for retirement. So putting something away now and regularly, even seemingly trivial amounts, will matter a lot later. "Time is the most important ingredient in any retirement recipe," says personal finance expert and author Suze Orman, who also counsels savers to start clearing away their major debts--including the home mortgage--at age 45. "The key to affording retirement isn't just about having more money," she says, observing that people tend to spend more after they retire, not less, as conventional wisdom holds. "It's about having fewer fixed expenses." So start saving now. If you intend to retire in 15 years, according to one guideline, you should have more than three times your annual income banked already. At five years out, it should be more than six times current income.
The federal government is trying to make saving (and catching up) easier. Capital gains and corporate dividends are being taxed less, while limits on 401(k) contributions are now up to $16,000 annually for those 50 and older.
On the smarter-saving side, you need to reassess what you have and where you have it. "The earlier you sit down and figure out there's a problem, the less of a problem you'll have," says Evensky. Although 401(k) accounts were hit hard by the bear market, most people still have the bulk of their money (70 percent, on average) in stocks. That remains a good strategy, says Evensky, even though the returns won't be what they once were. Many financial experts say that the annual real return on stocks in dividends and capital gains during the next decade will be less than 6 percent annually, compared with an average of 11 percent during the past several decades.
You can't change that, but you can be smarter and more diligent about your investments. A typical 401(k) investor can choose from among more than a dozen mutual funds--including "lifestyle funds," with asset allocations targeted to specific retirement dates--yet invest in only three. It also is more important than ever to keep a keen eye on investment costs, such as fees, commissions, and taxes that can whittle away your gains.
Get a game plan
Saving for retirement should not be confused with planning for it. "Most people don't grasp that they may have 30 years in front of them when they retire, and they aren't sure what will make this stage of life meaningful," says Helen Dennis, a retirement expert in Redondo Beach, Calif. "Unfortunately, you can't put that on a spreadsheet." Since daily activity is so tied to quality of life, failing to have a game plan can be devastating. Last year, for instance, the average retiree watched 43 hours of television a week, says Dychtwald.
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