While retirement is the ultimate goal for many working professionals, no matter what age or demographic they fall into, it is not always possible to do so at the typical age of 65. In fact, two generations are retiring well after age 65, forcing them into the position of working longer and later in life: Generation X and the Baby Boomers.
According to a recent survey by Off CivicScience: “61% of people over 55 say they will not be able to retire at age 65,” and many of them fall into the categories of Generation X: those born between 1965 and 1980 who are currently between 44 and 59 years old, and the Baby Boomers, those workers who were born between 1946 and 1964 and are currently between 60 and 78 years old.
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While there are many economic factors and reasons why this trend is on the rise, some major mistakes that Generation X and Boomers made early in their lives are causing them to retire later. Some financial experts weighed in on the top three mistakes Generation X and Boomers are making as they push their retirement age past 65.
Not enough savings
Pensions, social security and retirement plans are great, but they are not offered to everyone and even for those who have access to these financial lifelines after work, they may not be enough to pay all the bills.
“Many people underestimate how much they need to save to have a comfortable retirement. They rely heavily on social security benefits, which are often not enough,” said Prestizia Insurance founder John Crist.
“For example, I have had numerous clients who started saving late and did not take advantage of employer-sponsored retirement plans, such as 401(k), missing out on potential matching contributions,” Crist recalled. “To avoid this, younger generations should prioritize retirement savings early, automate contributions, and maximize employer contributions.”
Inadequate financial planning
Not creating a comprehensive financial plan is something Gen X and Boomers have in common, which hurts them in the long run. Inflation, rising health care costs and longer life expectancies are contributing factors in pushing the retirement age of these generations beyond 65. All of this is on top of neglecting or underfunding retirement accounts, which can often protect against changes in the economy and put people at risk. Prepare for financial success in your post-work life.
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“I have seen numerous cases where people lost the employer match in their 401(k) plans due to inconsistent contributions,” said John F. Pace, CPA. “This oversight can dramatically reduce your retirement savings. “Gen Z and Millennials should prioritize consistent contributions to retirement accounts like 401(k)s and IRAs from an early age to take full advantage of compound interest.”
“I had a client who retired without a proper plan and had to go back to work because his expenses exceeded his savings. To avoid this, working with a financial planner to create a realistic budget, investment strategy, and contingency plans is crucial to ensuring long-term financial stability during retirement,” Crist described.
Underestimating long-term care costs
Another common problem that Generation
“Many people overlook the potential high costs associated with long-term care, which can devastate retirement savings,” recalled estate planning and elder law expert Marty Burbank. “I have seen clients who did not plan for these expenses and ultimately depleted their assets to cover unforeseen medical costs.”
Crist pointed out how many Boomers and Gen Xers don’t plan for their long-term care needs.
“Medical expenses, especially long-term care costs, can quickly deplete retirement savings. I have seen clients spend their entire savings in just a few years due to unforeseen health problems,” Crist said.
To avoid this problem, Burbank recommended that “…younger people should consider investing in long-term care insurance or explore other savings strategies, such as health savings accounts (HSAs), to ensure they are prepared for possible future health care expenses.
“Future generations should consider long-term care insurance as part of their retirement planning. This can provide a safety net and preserve assets for other retirement needs,” Crist added. “By learning from these mistakes and taking proactive steps, younger generations can better prepare for a secure financial future, ensuring they can retire comfortably whenever they want.”
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This article originally appeared on GOBankingRates.com: Generation X and Boomers: 3 Mistakes That Force You to Retire After Age 65
