My retirement savings was derailed by the Great Recession as well as higher college expenses than I expected. Even though my retirement savings was derailed by unanticipated events, I got off easy compared to baby boomers. According to a recent Ameriprise Financial survey called "Retirement Derailers," 90 percent of baby boomers lost $117,000 in retirement savings. Although retired baby boomers can do very little now to reverse the problem, I can anticipate and plan for some of these retirement derailers.
Expecting the unexpected
Instead of expecting the stock market to go up, I try to save as if the stock market is going to go down. According to the survey, the average respondent had four economic or life events that derailed their retirement savings. Two in five people or 37 percent said they had five or more unexpected events that cost $144,000. Sixty-three percent of the respondents said the growth of their investments was affected by low interest rates. More than half said the stock market declines crushed their retirement nest eggs. I'm maxing out my Roth IRA so I can be prepared for the unexpected market declines.
Living inside my investment
One-third of the baby boomers surveyed said they can't depend on their home equity to fund their retirements as they had assumed. Even though I bought my home at the top of the housing market, my home purchase won't derail my retirement. By paying off my mortgage, I'll be able to live in my home investment during retirement. We are not going to downsize because we want to have enough room for grown children or grandchildren who might need a temporary place to stay in between jobs. One in four of the baby boomers said their retirement was derailed by supporting grown children or grandchildren. I want to have enough money in retirement to be able to cheerfully help relatives. My strategy is to pay off my mortgage and retire in place.
Anticipating job and social security cuts
Almost 20 percent said their retirement was derailed because they took social security before their full retirement age. Some people experienced a job loss which impacted their retirement savings goals. My plan is to work until no one will pay me anymore. If I'm capable of working, I plan to wait until I'm at least 70 to retire.
I can learn a lot by hearing about the different regrets baby boomers have as it relates to preparing for retirement. Fifty-seven percent said they wish they had started saving earlier. Many wish they had spent less on eating out and vacations. Even though my retirement savings was derailed in recent years, I still have time to get back on track. By saving more now for retirement and spending less of my discretionary money on the "fun stuff" now, I can be more secure in the future.
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