Changing landscape: are aging baby boomers ready for retirement?

• Author: Wegge, Michael
• Position: EstatePlanning

Ready or not, there they go. America's baby boomer generation--more than 78 million strong--is fast approaching retirement. And many, especially the eldest boomers, are rethinking how they will spend, and pay for, their retirement years.

With life expectancies increasing, some 80 percent of boomers plan to work after retiring, according to AARP estimates. In fact, the Bureau of Labor Statistics projects that the number of employed Americans ages 55-64 will increase by 51 percent between 2002 and 2012, while those ages 65-74 will increase by 48 percent. CareerBuilder.com indicates that three out of five workers over age 50 plan to find new jobs when they retire, and 51 percent intend to work full time until age 65.

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With so much fundamental change, as financial advisers, we have had to change how we work with--and talk to--our clients about retirement.

Retirement Reality Check

In addition to helping clients determine the initial amount of income they will need at the time of their retirement, you also will need to follow up with clients at least annually to review any changes to their income needs due to employment status, portfolio performance or health issues.

Because each person's financial situation is different, there is no hard and fast rule as to how often the calculations should be performed. Generally, the closer to actual retirement, the more often calculations should be performed.

AARP estimates 73 percent of people aged 50 years and older do not have sufficient income and assets to withstand a long-term illness or disabling condition totaling $150,000 over three years.

While in 1900, retirement lasted an average of only one year, the U.S. Department of Labor reports that Americans now spend an average of 18 years in retirement.

Since health and long-term care are, by their very nature, unpredictable and risky, clients will need to answer a number of questions regarding their health, family longevity and preferences for care to help advisers address their needs.

Often, a prudent path for clients is to transfer risk by using Medicare at 65 in addition to a health insurance supplement and a long-term care policy. Otherwise, it's nearly impossible to budget for a retirement in which you could easily spend anywhere from an additional $220.000 for short-term health care needs to several million dollars for a long-term nursing situation, not to mention pharmaceutical and medical care.

Funding Strategies

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