Boomers are entering retirement in an era marked by rising costs, longer lifespans and economic forces that can quickly erode even well-built nest eggs.
To better understand the biggest threats facing today’s retirees and issues they may be overlooking, financial and elder-care experts weighed in on where boomers are most vulnerable right now.
The biggest threat to boomers isn’t a market crash, it’s living longer than their money lasts, according to Linda Jensen, a certified exit planning advisor and founder of the Heart Financial Group. With many retirees now facing 25 to 30 or more years of retirement, longevity is “both a blessing and a financial risk,” Jensen added, and traditional savings models often fall short.
“Boomers will need income for 30 years or more, which means retirement planning must be built for endurance, not just the early years,” she said.
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Healthcare is emerging as the “silent budget killer,” Jensen said, and long-term care is the most underestimated financial threat of all, able to “wipe out years of savings if it’s not planned for in advance.”
Most Americans over 65 are likely to need long-term care, yet only a tiny fraction are insured in that way, thus boomers face the real possibility of a single care event wiping out decades of savings, according to Evan Farr, an estate planning and elder law attorney at Farr Law Firm. “Statistics show that approximately 70% of people over age 65 will need long-term care, yet less than 10% of the population own any type of long-term insurance,” he said.
Boomers must plan now with insurance, Medicaid strategy and realistic cost projections.
While general inflation hurts all retirees, boomers face a second threat few recognize, according to Vince Stanzione, a financial trader and author of “The Millionaire Dropout” — the declining long-term purchasing power of the U.S. dollar. “So far this year, the dollar is down around 60% when priced in gold.”
Jensen likened inflation to “termites” for people on a fixed income, saying, it “quietly eats away purchasing power year after year.”
Even moderate inflation can severely strain a fixed income, but prolonged high inflation or currency decline can erode retirement savings much faster than expected.
If the market drops, boomers don’t have as much time to recover from a downturn and are exposed to something called “sequence of returns risk,” where losses early in retirement reduce income for life, Jensen shared.