The first of the Baby Boomers (those of us who were born between 1946 and 1964) began retiring in 2011, and it’s estimated that the majority of the nearly 76 million people born in that time period will retire over the next 20 years.  Many of us are not prepared – financially or emotionally.

A MetLife study – Boomer Bookends: Insights into the Oldest and Youngest Boomers – found that of the oldest Boomers, only 13% had saved fully for their retirement. An additional 25% said they were on track to do so. That leaves about 62% of us who are not prepared!

In a 2016 Retirement Confidence Survey conducted by the Employee Benefit Research Institute, only 20% of workers ages 55 and over felt confident that they will have enough money to live comfortably throughout their retirement years. Only 28% felt they were doing a good job of preparing financially for their retirement, although 61% said they have tried to calculate how much money they need to accumulate by the time they retire.

The three biggest concerns for Baby Boomers nearing retirement are: 1) Rising health care costs; 2) Running out of money; and 3) Hanging on to their independence.

Rising health care costs

A recent survey by PNC bank on retirement preparedness found that 83% of Baby Boomers fear that health care costs will be unaffordable in retirement.  The MetLife study also found that a major concern for Boomers is affordable health care.

And their fears are well-founded.

Only about a third of people over 50 surveyed by PNC said they feel they have enough health care coverage in case of a major illness. Even with Medicare at age 65, seniors are still responsible for premiums, co-pays and deductibles, depending on whether they have a supplement.  And many of the common needs for older adults – such as eye glasses and hearing aids – are not covered by Medicare. According to the Center for Retirement Research at Boston College, a 65-year old couple will have to pay an estimated $197,000 in out-of-pocket expenses through retirement. The Employee Benefit Research Institute estimates the figure even higher at $271,000. These estimates do not even address long term care costs, such as in-home care or a stay in a skilled nursing facility.

Running out of money

Fifty-seven percent of respondents to the Employee Benefits Research Institute survey said they had less than $25,000 in savings and investments (not including the value of their home and defined-benefit plans) and 28% said they have less than $1,000 saved.

According to the Centers for Disease Control, life expectancy in the United States for a 65-year old man is an additional 17.8 years, and for a woman 20.3 years.  That means that if you retire at 65, you will need at least enough money to cover basic expenses, medical costs, emergencies, and other expenses for an average of 19 years. Now we all know people who are still living into their 90s, so 19 years is a conservative figure! Also, if you enter retirement with significant debt, or need to move to a long term care facility, expenses will eat up savings much quicker.

Remaining independent

According to the AARP, 87% of adults age 65 and older want to stay in their own home and community as they age. Yet for many, this may not be possible due to finances, safety or health issues. If moving in with family is not an option, some type of long term care will be needed, such as a home health aide, assisted living facility, or nursing home, depending on the level of care required. According to the U.S. Department of Health and Human Services, about 70% of adults age 65 or older will need long term care services at some point in their lifetime.

Costs for long term care vary based on geography and level of services needed. You can find average costs for your state at LongTermCare.gov.   In California, the average annual cost for a home health aide ranges from $50,222 to $57,200. For an assisted living facility, the average cost is $45,000 per year, but that can increase to more than $100,000 annually, depending on the location, amenities offered and number of services needed.  For a semi-private room in a nursing home, which provides the most services, the costs range from $74,460 to $91,250.  This type of long term care is not covered by Medicare.

Clearly the time to start thinking about and planning for retirement is long before you actually retire. That being said, if you or your aging parents have not already run the numbers and/or discussed the options, the time do that it is now.

And that’s where I come in. Watch for Part 2 of this series to learn how I can help.