Boomers’ biggest retirement fears

Once upon a time retirement meant a life of leisure and enjoying the fruits of one’s labour — but these days, some people fear there may be no happily ever after. Instead, many baby boomers are facing their career finale with a growing sense of dread.

So what’s got people so worried? While the numbers may vary among studies, these three fears continually come out on top.

Healthcare

Will the care be there when we need it… And can we afford it? Living longer, healthier lives can be an expensive proposition — especially with all the technology and treatments available. A recent survey from Edward Jones found one third of Americans aged 55-64 were worried about not being able to cover healthcare costs — a higher percentage than any other age group, as reported by HealthyAging.net.

Likewise, a recent AARP poll of Americans age 50+ reported healthcare was the top concern — and only 35 per cent of respondents felt they had enough coverage, according to a report from U.S. News. A 2011 report from the U.S. Employee Benefit Research Institute (EBRI) found that only 27 per cent of workers felt confident they could cover their healthcare expenses, while only 13 per cent could report the same about covering long-term care.

While most of the surveys are U.S.-based, Canadians are also anxious about healthcare, as recent election platforms have shown. Many worry about the health and sustainability of our system — especially as baby boomers age — and the potential tax hikes to pay for it all. In addition, people who cope with chronic issues pay hefty amounts out-of-pocket, as do their caregivers.

Besides, many of things that help us live better — like assistive devices, physiotherapy and alternative and complementary therapies — may not be covered at all.

How to deal with it:

– Budget for rising costs. It’s hard to predict what it will cost to stay healthy, active and independent, but experts say we should expect increasing costs and build them into our retirement and post-retirement plans.

– Continue to build an emergency fund. Emergency funds aren’t a finite thing: experts advise we keep contributing as our risks increase. A short-term issue shouldn’t put your retirement savings and credit at risk.

– Consider insurance coverage . Even when healthcare costs are mostly covered, an accident, illness or medical emergency can result in lost income and even cut careers short. Many people overlook insurance to cover critical illness or long-term disability, or rely solely on their employers’ policies — leaving them vulnerable in case of a job loss. Long-term care coverage is also available to help with the eventual costs of living in a care facility.

Running out of money

Will the money last? Statistics consistently show a steady decline in people’s confidence that they can afford to retire — especially if they want to keep their current lifestyle. The AARP poll found that about 60 per cent of respondents worried about saving enough for the future, and a slightly higher number were worried about managing their money after retirement. Nearly half are still dealing with debt.

Similarly, the EBRI report found around two-fifths of people aren’t all that confident about their preparations, and a poll from the Associated Press found only 11 per cent of boomers in the U.S. felt they could afford to retire comfortably. Fifty-five per cent were “uncertain” or “somewhat uncertain” that they would have financial security in retirement, while the remaining 44 per cent doubted they have enough money.

The numbers aren’t out of line with Canadians. A recent report from Statistics Canada found that more then 40 per cent of workers over the age of 55 felt their savings were inadequate. One third of older workers still have a mortgage, as do one quarter of people who are semi-retired.

Worse yet: Many seniors are carrying debt into retirement — including credit card debt — and taking on more to help cover costs. A recent report from bankruptcy trustee service Hoyes, Michalos & Associates showed an increase in insolvency rates among people over 55 since the beginning of the recession.

Deal with it:

– Know your numbers. Don’t wonder if the money will be enough… find out! Review your retirement plans and make necessary adjustments. (If you don’t have a plan, it’s never too late to start.) What needs and wants should you anticipate, and how can you make your assets last?

– Reduce your debt. Debt can be a dangerous habit, especially when combined with a decrease in income in retirement. Experts recommend having a plan to pay off debt during the working years — especially mortgages and high interest consumer debt.

– Earn a little extra. Pad your nest egg or reduce your debt with a little extra income. Sell off unwanted items, pick up some overtime or even do a little work on the side. Avoid the trap of thinking it’s too late. For instance, if you make an investment at age 55 and don’t withdraw it until age 75, that’s still twenty years of growth.

Delaying retirement can also help, and it’s a step many boomers are already taking. However, if staying at your current job doesn’t appeal, consider part time work (like starting a business, freelancing, consulting or teaching) as part of your overall career plan.

Losing independence

Driving, staying in your own home and remaining financially independent is something we often take for granted, but many people fear losing this independence when they age. In the AARP survey, about 30 per cent of respondents worry about what will happen when they can no longer drive. Forty per cent want to stay in their own homes as long as possible, and another 40 per cent are already considering alternative housing arrangements.

Canadians also want to stay in their own homes, according to one survey commissioned by Living Assistance Services. The results show more than 70 per cent of Canadians want to “age in place”. Why? Not surprisingly, respondents feel that living at home offers more dignity, comfort and choice, according to an article in the Globe and Mail .

Money is also a worry. While many baby boomers willingly help out their parents and adult children, they don’t want to become a burden Just over half of respondents in the AARP poll worried about supporting family members while looking after themselves too. In the Edward Jones study, one in five people worried they’d have to rely on a family member for financial support.

Deal with it:

– Starting thinking about future housing arrangements.. Don’t wait until a crisis forces a move — think about ways you can update your home to facilitate aging in place, and start to look at options for your next move. Get a feel for the options available — like downsizing to a condo or retirement residence — and how the costs could fit in to your budget.

If you’re involved with someone else’s care, talk over the options and create a plan. Experts note that setting benchmarks can help, like agreeing on “when this happens, it’s time to do this…”

– Focus on health. We’re often told to eat right, get regular exercise and go for regular check-ups and screenings — but are we making these steps a priority? Poor health can lead to lost income and an earlier-than-planned retirement as well as extra expenses and the need to rely on others for help. Staying healthy longer offers more financial options.

– Balance your priorities. Many boomers want to help their children and parents, but experts warn this could put their own financial security at risk. It’s okay to focus on your own financial health first so you’ll be in a better position to help others.

So what’s the bottom line? There are a lot of scary numbers out there — and we’ve just cited a few — but there is also a lot everyone can do to improve their retirement prognosis. We might have to leave the policy changes to parliament, but finding ways to boost our savings and be more proactive in our planning can go along way.

At the end of the day, fears aren’t certainties — they shouldn’t paralyze us, but they can prompt us to be more thorough.

Sources: AARP, The Associated Press, Employee Benefit Research Institute, the Globe and Mail, HealthyAging.net, Hoyes, Michalos & Associates Inc. “Joe Debtor: The Face of Bankruptcy”, Statistics Canada, U.S. News

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