The Baby Boomer generation is approaching or has already reached retirement age. With more Baby Boomers retiring every day, it is important to know how ready they are to leave their professions permanently. We will go through the typical retirement savings for Boomers in this article, as well as some recommendations on how to increase retirement income. Average Retirement Savings for Baby Boomers The Transamerica Center for Retirement Studies estimates that the average Baby Boomer has $202,000 in retirement savings. This would result in a yearly retirement income of $8,000 according to the 4% Rule. This portfolio size might be more or less than you imagined, depending on your perspective. According to Transamerica, over 45% of Boomers have saved $250,000 or more. Furthermore, 40% of Boomers feel that they have not put enough money aside for retirement. According to the Stanford Center on Longevity, individuals born between 1948 and 1953 had an average tax-advantaged plan account of $290,000, while those born between 1954 and 1959 had a median tax-advantaged plan balance of $209,246. Moreover, this figure should continue to climb for Boomers who are still employed as they make extra annual payments and their investments increase. If you adopt the Rule of 72, the youngest Boomers may expect a last “doubling” of their retirement nest fund before they turn 67, with average returns of 8% to 10%.
Increasing Boomers’ Retirement Income Initially, engaging with a financial adviser helps to overcome the odds, according to research published by a financial sector trade association. Below are some methods for Baby Boomers to increase their average retirement savings:
Maximize Your Retirement Savings You will have a greater nest egg to pull from in retirement if you contribute the maximum amount each year to your retirement plans. Furthermore, contributing to pretax retirement plans (such as a 401(k), 403(b), or 457 Plan) lowers your tax burden each year, giving you more money to invest. These plans allow you to invest up to $20,500 in 2022. Contributing to after-tax retirement plans like a Roth IRA results in tax-free income in retirement. Because these plans do not demand minimum payouts until you are age 72, your tax-free money can grow for a long time. Depending on your salary, you can contribute up to $6,000 each year to your Roth IRA (2022 annual maximum).
Using a Brokerage Account When your retirement funds are at a peak level, it is a smart idea to invest through a brokerage account. There are no donation or withdrawal limitations to be concerned about. Although most retirement plans have restricted investment possibilities, you may pick from an endless number of investment alternatives in a brokerage account. Because you may choose which assets to sell using a brokerage account, it can also aid with your tax-planning techniques. Capital losses, for example, can be used to offset an infinite amount of capital gains and up to $3,000 of regular income every year. When you sell successful assets after more than a year, the proceeds are taxed at a reduced capital gains rate.
Use a Health Savings Account An HSA has three tax advantages. When combined with a high-deductible health insurance plan, your contributions are tax-deductible each year. While the money is in the account, it grows tax-free. When used for qualified medical costs, such as Medicare premiums, your withdrawals are tax-free. Furthermore, there are no mandatory minimum payout restrictions, allowing the money to grow and fund future medical costs in retirement.
Cash-Value Life Insurance When you buy a cash-value life insurance policy, you may buy a death benefit to secure your loved ones while also having the option to invest more funds. Your cash balance has the potential to boost your death benefit for your beneficiaries as your cash balance grows. Furthermore, if you take out a loan, you may be able to withdraw the money tax-free. The outstanding sum is removed from your death benefit when you pass away.
Bottom Line Baby Boomers have an average retirement savings of a little over $200,000. Since the last of the Boomers will not retire until 2031, there is still time to increase their retirement funds. We recommend working with a financial professional to construct your retirement plan for more specific advice. Seven out of ten baby boomers who worked with a financial adviser were optimistic about their retirement funds.
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Bio:
I grew up in Dubuque, Iowa, where I learned the concepts of hard work and the value of a dollar. I spent years in Boy Scouts and achieved the honor of Eagle Scout. I graduated from Iowa State University and moved to Chicago and spent a few years managing restaurants. I then started working in financial services and insurance helping families prepare for the high cost of college for their children. After spending years in the insurance industry, I moved to Arizona and started working with Federal Employees offing education and options on their benefits. I became a Financial Advisor / Fiduciary to further help people properly plan for the future. I enjoy cooking and traveling in my free time.
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