Baby-boomers often asset rich, cash poor
In the fourth of five articles in conjunction with the Bermuda’s Demographic Challenge series, Bill Storie highlights the hopes and concerns of those approaching retirement.
Today we discuss the third age group in our series — the 50 to 65-year-olds. Commonly referred to as “baby-boomers”. In Bermuda, this age group numbers about 15,000 today and by the year 2026 will drop slightly to about 14,000, according to government statistics.
The characteristics of baby-boomers include independence, responsibility and maturity. They respect and accept the rules of society. They like to be listened to and will share their opinions freely. They don’t part with money frivolously.
Like most people in this cohort around the world, baby-boomers in Bermuda have three core concerns: being able to retire with enough money, health issues and grandparenting.
By this stage of life, particularly at the older end of this range, it would be expected that the baby-boomer is well established money-wise. Yet, unfortunately for many in this cohort, that is not the case. Partially due to poor saving and particularly due to the impact of the so-called “Great Recession” of 2007/8, this group struggles to believe they will have enough money to retire.
Too often this group is “asset rich, cash poor”. The homestead is the cornerstone of their net wealth and they will have a pension on retirement, but the extra investment portfolio may not be as strong as it should be. This worries the baby-boomer.
Yet the question is probably not “Will I have enough money to retire?” but rather, “Do I know how much money I will need in retirement?” Poor budgeting and longer-term financial forecasting are the main reasons for the confusion and concern. That can be changed.
Pressure on their income come from many areas — everyday cost of living, mortgage not paid off yet, care for elderly parents, perhaps paying for children still at home. The ability to save is therefore limited. In many cases, additional saving over and above pension contributions is simply not possible.
They are beginning to wonder if they will ever retire, even though it may be a few years away.
They are still young in mind and body, so the decision to continue working beyond 65 (full or part-time) is becoming a reality. There may also be a question of whether to retire in Bermuda at all.
The important goal in this demographic is to endeavour to save as much as possible.
In today’s world of advanced medicine, the appearance of health problems is considerably lower than their parents or grandparents at the same age. Nonetheless, this age range is when signs are starting to appear, and signals noticed. An annual check-up should be compulsory to identify problems as early as possible. Yet many people seem to think that only an occasional check of heart, bones, eyes etc will suffice.
While the body is probably beginning to slow down, the need for exercise on a regular basis must be part of their daily life. Apart from feeling better, the exercise routine will improve cardio-vascular and muscle-toning.
In this age range, it is now imperative to know precisely what the healthcare insurance will provide and how much. It is important to find whether certain limits exist in the health policy as we age and whether there are co-pay elements involved.
Many will argue that grandparenting is not a concern. They love it. That is accepted. However, if very regular baby-sitting, driving the grandkids here and there and generally being available for everyday events is indeed enjoyable, the fact is that a toll is being taken on the body and ability to be “on call” around the clock, diminishes over time.
Many grandparents are being asked to be full-time sitters while the parents are at work. That may be due to financial constraints on the parent(s) and as such, it is impossible to refuse. But, the impact on the general wellbeing of the grandparent must be recognised and acknowledged.
The role of the grandparent in today’s Bermuda has never been as important. Certainly, the increasing life expectancy of grandparents contributes to the reliance on them and, in fairness, their willingness to be actively involved in their grandchildren’s upbringing. Bringing many traits from their own upbringing is a tremendous benefit — if the parents are willing to accept “granny’s advice”.
Ideas to consider
1. Financial literacy
Like every cohort, the baby-boomer should gain the knowledge and understanding to have a very good base to work from especially regarding budgeting, pensions and investing as they move towards retirement.
2. Pension management literacy
In particular, be very clear about your pension. Re-adjust the investment aspects in the range of mutual funds, if appropriate. Consider adding voluntary contributions, which may be in the same mutual funds, or choose a different profile. Talk with your pension management company in detail.
Make every effort to clear down your debt, especially the mortgage. It will make an enormous difference in your probably many later years. Don’t deny yourself the luxuries of life, vacations, etc, but work hard at reducing your debt. The benefit on cash outflows in retirement can be substantial
4. Keep active
It is important to keep active in your retirement years and while your daily routine will typically slow down on retirement, it is essential to have a “keep active routine” and to be prepared to continue it into your many years of retirement.
Timeline advisory: full throttle
• Bill Storie is CEO of The Olderhood Group Ltd, a Bermudian company and exclusive Bermuda Partner of Career Partners International, with over 350 offices worldwide. He is also producer and host of The Ozone, a weekly radio show on Magic 102.7FM. He can be reached on www.olderhoodgroup.com or Bill@olderhood.com