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Retirement Financial Planning for Baby Boomers

By Carol Stack

For many baby boomers retirement is around the corner. It is amazing how fast the years have gone by. In 2007 the oldest baby boomers started collecting social security, and in the following eleven years another 77 million are expected to do the same.What About Social Security

Currently there are about 40 million retired people collecting social security. With another 77 million expecting to get their social security payments back with interest, that is going to be a tremendous strain on the system.

Most boomers (and those coming after them) realize that they cannot count on social security being around long enough for them to collect any of the money they paid into it. They are hoping that the government repairs the system, but they cannot depend on that.

Retirement Savings Accounts

For this reason it is very important that baby boomers and those following behind them start saving for retirement as soon as possible. A 25 year old who starts setting as little as $100 aside each month will have about $350,000 saved by retirement age (at 8% interest). In comparison, someone who starts saving at 40 or 50 years of age would need to put in a lot more than $100 a month to have $350,000 by age 67.

It is too late for baby boomers to start saving for retirement at 21, but it is never too late to begin saving. If your company offers a 401k sign up today. If they offer matching contributions, then sign up for the maximum deduction allowed.

A good retirement savings plan for small business owners is a Keough account. This is similar to a 401k. There is a certain amount you can put in each year that is tax deductible.

There are other retirement accounts available, too, such as traditional IRAs and the Roth IRA. The Roth IRA does not allow for tax deductions when you make the contributions, but you do not pay taxes on it when you make withdrawals.

Even if retirement is just a few years away, by starting to save today you will have something to live on. If on your 65th birthday you find that it isn't enough to retire on, you can always work a few more years to build up the retirement fund some more.

How to Make Your Savings Stretch

Working part-time after you retire is often a good idea. It provides you with something to do that keeps you involved socially and exercises your mind. It will also make your retirement savings last longer.

Another way to make your retirement savings last longer is to start withdrawing from taxable accounts and let the tax-advantaged savings accounts compound for as long as possible.

Basically, baby boomers need to start planning for retirement now by having an IRA, 401k, or Keough (or a combination of these), and by getting out of debt now rather than later. The longer you wait to pay off credit card debt, car loans, and your house, the harder it will be for you to live on a fixed income when you reach retirement age.

Carol Stack has written numerous articles about finance and debt. She lives with her husband, three children, and various cats and dogs in the United States. As a baby boomer Carol is concerned about what is going to happen after social security collapses. She wants to encourage others how to prepare for retirement so they are financially secure and can enjoy the retirement years. Check out http://www.cafebabyboomers.com for lots of information for baby boomers.