Many baby boomers are distraught at how inflation and the market downturn have reduced their retirement prospects, Fortune magazine reports.
Anita and Russell Cowles, an American Airlines pilot who retired in February when he turned 65, have seen their retirement savings drop by $500,000, or 25%.
“That’s a big chunk of our retirement,” Anita says, “It’s extremely scary. We thought we would be doing some traveling this year, but that’s come to an abrupt halt.”
The Cowles’ experience mirrors that of millions of Americans, whether they are retired or saving for retirement. Fidelity reported that the average balance of the 35 million 401(k)s it custodies declined 23% to $97,200 in the third quarter.
That’s down from an average balance of $126,100 in the third quarter of 2021.
Likewise, the average individual retirement account (IRA) balance also declined, by 25%, to $101,900, from $135,700.
For those already retired, whose investment horizon is far shorter, who have retirement dreams and hope the road ahead of them spans a few decades, the current savings picture is even more bleak.
That is prompting many boomers to reverse course. Russell is now interviewing with smaller airlines to return to the workforce, and the couple is putting off travel plans.
“You want your money to last,” Anita says.
Many older Americans are reassessing their budgets and retirement plans. Fully 59% of those 50 and older are cutting back their spending or plan to do so, according to the Janus 2022 Retirement Confidence Report.
Reassessing the budget and returning to work are two proactive things people planning for retirement can do, according to financial planners.
Another very important, positive action is to delay taking Social Security to age 67 for those born in 1960 or later in order to get the maximum benefits. Benefits rise even more if one waits to age 70 to begin Social Security.
As Marisa Rothstein, a certified financial planner with Siena Private Wealth in New York, explains: “By claiming Social Security early, they [boomers] are likely forfeiting the promised growth built into Social Security from each year of delay.
“The stock markets might rebound — but will it rebound at a rate of 8% per year?” Rothstein says. “We just can’t predict that. But we can be sure that your Social Security benefit will grow at that rate for every year you postpone beyond your full retirement age, and will continue to grow until age 70.”
It is also vital for retirement savers, even those who are retired with a lower risk tolerance, to keep their money in the stock market — for when it rebounds, financial planners say.
Being aware of one’s investments and expenses, paired with a tight budget, are also positive actions that seniors and retirement savers can take, agrees Gregory Kurinec, a CFP with Bentron Financial Group in Downers Grove, Illinois.
It is important for retirees to be realistic about how much money they will need in their golden years. Typically, people underestimate how much they will need, and many fail to properly budget or adequately forsee their future needs, Kurinec says.
“If you have a plan in place, then you should be able to weather storms like this,” Kurinec says. “And guess what — this isn’t the last one we’re gonna go through.”
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