Investing

9 Tips to Help Baby Boomers Save for a Longer, More Expensive Retirement

Wells Fargo Investment Institute shares advice on planning for a longer life and higher costs

July 22, 2019

Longer life spans and higher living costs bring new challenges for having enough retirement income to live the desired lifestyle Baby Boomers may be seeking in their retirement years.  According to “Reimagining Retirement: Generational Strategies for 21st Century Challenges,”1 a new report from Wells Fargo Investment Institute (WFII), 63% of investors surveyed are concerned about outliving their savings. And 58% are concerned about how to reduce expenses in retirement.2

The good news is 60% of those surveyed by Wells Fargo are confident they will be able to cover their expenses in retirement. However, approximately 40% will either need to work longer to meet retirement expenses or lower their cost of living.1

WFII strategists believe workers should plan to save for at least 15 to 20 years of retirement expenses. With that in mind, consider these 9 tips to help generate income, manage expenses, and make money last in retirement.

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Generating Income

Consider part-time and self-employment. Some Baby Boomers are turning to part-time or full-time jobs or starting their own business. Most entrepreneurs in the U.S. today are over 50—and individuals in their 50s and 60s launch new businesses at nearly twice the rate as those in their 20s.³

Revisit your asset allocation. Historically, older investors have tended toward fixed income for income and reduced volatility. However, due to low interest rates and working longer, you may want to maintain a higher allocation to equities during your retirement, depending on your risk tolerance.

Consider your home as an income-generation asset. Online services can make it easier for you to earn income from renting out an extra room, especially if you reside in a tourist spot.

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Managing Your Expenses

Consider moving to a lower-cost state or country. Choose a location with a lower income tax rate or cost of living—perhaps a favorite vacation spot here or abroad. The number of retirees relocating abroad grew by 17% between 2010 and 2015.⁴

Control health care costs. Taking health insurance coverage through work can help you manage health care costs. In a recent survey, nearly half of the companies offered full- and part-time employees the same health insurance coverage, along with other benefits.⁵

Reduce tax obligations. Recent tax law changes may have affected your tax obligations. Check with your legal or tax professional before taking any action that may involve tax consequences.*

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Making Your Money Last

Have a plan for taking Social Security. Understand your Social Security claiming options. Full retirement age is generally 66 (if you were born between 1943 and 1959) or 67 (if you were born in or after 1960). Reduced benefits can begin at age 62. Currently, benefits increase 8% per year if you delay your retirement from your full retirement age until age 70.

Consider delaying retirement account distributions. Delaying distributions can help your savings last longer. For most accounts, you must begin taking required minimum distributions at age 70-1/2. (Roth IRAs are an exception.)

Insurance products may hedge against longevity risk. Both immediate and deferred annuities can offer tax-deferred growth and guaranteed income. However, such guarantees are subject to the claims-paying ability of the insurance company. Consult your Financial Advisor and tax professional for advice pertaining to your financial situation.*

Finally, no matter how old you are, reaching your retirement goals means planning for them now. It’s important to compare the costs associated with the lifestyle you imagine to the income you expect from all sources during retirement.

Talk with your Financial Advisor about how you can create or adjust a plan to help you achieve your goals.

Photos from iStock images

Additional Resources

For more, see Wells Fargo Investment Institute’s report, “Reimagining Retirement: Generational Strategies for 21st Century Challenges.”

These tips may help your retirement income gap.

1Source: “Reimagining Retirement: Generational Strategies for 21st Century Challenges,” Wells Fargo Investment Institute, April 2019. Wells Fargo Investment Institute, Inc. is a registered investment adviser and wholly owned subsidiary of Wells Fargo Bank, N.A., a bank affiliate of Wells Fargo & Company.

2Source: Wells Fargo Retirement Study, October 15, 2018.

3Bureau of Labor Statistics, Current Population Statistics, 2016.

4Associated Press, “More Americans are retiring outside the U.S.,” December 2015.

5Bloomberg, “A hot labor market brings full-time perks to some part-time employees,” December 2018.

*Tax laws or regulations are subject to change at any time and can have a substantial impact on your individual situation. Wells Fargo and its affiliates are not legal or tax advisors.

Insurance products are offered through nonbank insurance agency affiliates of Wells Fargo & Company and are underwritten by unaffiliated insurance companies.