Many baby boomers facing retirement risk
February 16, 2012
Baby boomers face significant financial challenges that will greatly influence the quality of their retirement years. Their future might not be as rosy as their past.
Boomers are a large segment of the Canadian population born during the period 1946-1964, and many of these people are just entering their retirement years.
This privileged group has pushed entitlement to new heights influencing everything they have touched including the increased demand in their earlier years for educational facilities and housing.
This “me “generation has been catered to because of the sheer numbers. However, their past might prove to be far brighter than their future.
Our federal government has signaled a need to be more financially prudent with retirement benefits. The announcement prior to that was a reduced level of federal health care funding just as baby boomers are entering their years of greater health care consumption.
A recent study by the Canadian Imperial Bank of Commerce reported that a significant part of the increasing consumer debt is being created by baby boomers.
Add in an element of unemployment or underemployment and many face an uphill climb as they approach retirement.
Any financial problem will be magnified by the increase in life expectancy. Boomers will have more time to run out of money and more time to live after the money is gone.
This is a time for them to be resourceful and plan for their own retirement success. All boomers should have a well thought out financial plan.
The starting point is the review of current assets and earning power against all future cash flow requirements. Understanding the significance of existing investments and earning power against future cash demands is critical.
Everything else flows from this information. How much more do you have to save and what is your target return on investment to have enough capital to fund retirement?
Retirement will be based on your estimated life expectancy and your desired lifestyle.
Without a good understanding of your current financial position, all future financial decisions are just wild and uninformed guesses.
You do not plan a road trip without a destination and a specific journey. That should be no different in planning for and working towards a comfortable lifestyle during the last decades of your life.
For the moment forget all short-term investment and savings decisions. Plan where you are and what you need to do to be successful.
This type of high level thinking will drive all future decisions. It will be these future decisions that will determine whether or not your golden years will truly be golden.
If you make mistakes now your future lifestyle will suffer. All decisions you make must help your financial security.
You no longer have the luxury of doing what you feel like doing. You have to do what you must do to have financial success.
Lower your debt, increase savings, be more tax efficient, reduce investment fees and have a written Investment Policy Statement that outlines your investment strategy.
Establish benchmarks and targets and measure your progress towards these targets. These are the serious years and serious and sound decisions must be made.
Baby boomers have had a history of controlling their destiny. Now is the time to transfer that control towards establishing your financial well-being.
Baby boomers need a financial plan and they must follow that plan.