While retirement is the ultimate goal for many working professionals, no matter what age or demographic you might find yourself in, it’s not always possible to do so at the typical age of 65. In fact, two generations are retiring much later than 65, forced into the position of working longer and later into life: Gen X and Baby Boomers.
According to a recent survey from Off CivicScience: “61% of age 55+ people say they won’t be able to retire by 65,” with many of them falling into the categories of Gen X — those people born between 1965 and 1980 who are 44-59 years old currently — and Baby Boomers — those workers who were born between 1946-1964 and are currently between the ages of 60 and 78.
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While there are plenty of economic factors and reasons why this trend is up, a few major mistakes Gen X and Boomers made early on in life are causing them to retire later. Some financial experts weighed in on the three major mistakes Gen X and Boomers are making that push their retirement age beyond 65.
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Not Enough Savings
Pension, social security, and retirement plans are great, but they are not offered to everyone and even for those who do have access to these financial lifelines post-work, it might not be enough to pay all the bills.
“Many people underestimate how much they need to save for a comfortable retirement. They rely heavily on social security benefits, which are often not enough,” noted Prestizia Insurance founder John Crist.
“For example, I’ve had numerous clients who started saving late and didn’t take advantage of employer-sponsored retirement plans like 401(k)s, missing out on potential matching contributions,” recalled Crist. “To avoid this, younger generations should prioritize retirement savings early, automate contributions, and maximize employer matches.”
Inadequate Financial Planning
Failure to create a comprehensive financial plan is something that Gen X and Boomers have in common, which is hurting them in the long run. Inflation, soaring costs of healthcare, and the additional life expectancy are all contributing factors to pushing these generations’ retirement ages beyond 65. That’s all in addition to neglecting or underfunding retirement accounts, which can often shield against the changes in the economy and set people up for financial success in their post-work lives.
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“I’ve seen numerous cases where individuals missed out on employer matching in their 401(k) plans due to inconsistent contributions,” remarked John F. Pace, CPA. “This oversight can drastically cut into their retirement savings. Gen Z and Millennials should prioritize consistent contributions to retirement accounts like 401(k)s and IRAs from an early age to take full advantage of compounding interest.”
“I had a client who retired without a proper plan and had to return to work because their expenses outpaced their savings. To prevent this, engaging with a financial planner to create a realistic budget, investment strategy, and contingency plans is crucial for ensuring long-term financial stability in retirement,” Crist described.
Underestimating Long-Term Care Costs
Another prevalent issue Gen X and Baby Boomers share is improperly calculating long-term health care costs, impacting them later on in life when more medical expenses and costs become routine.
“Many individuals overlook the potential high costs associated with long-term care, which can devastate retirement savings,” recalled Marty Burbank, an estate planning and elder law expert. “I’ve seen clients who did not plan for these expenses ultimately draining their assets to cover unforeseen medical costs.”
Crist pointed out how many Boomers and Gen Xers fail to plan for long-term care needs.
“Medical expenses, especially long-term care costs, can deplete retirement savings quickly. I’ve seen clients spend their entire nest egg in just a few years due to unforeseen health issues,” Crist said.
To avoid this pitfall, Burbank recommended that “…younger individuals should consider investing in long-term care insurance or exploring other savings strategies, like health savings accounts (HSAs), to ensure they are prepared for potential healthcare expenses down the road.”
“Future generations should consider long-term care insurance as part of their retirement planning. This can provide a safety net and preserve assets for other retirement needs,” added Crist. “By learning from these mistakes and taking proactive steps, younger generations can better prepare for a secure financial future, ensuring they can retire comfortably when they choose.”
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This article originally appeared on GOBankingRates.com: Gen X and Boomers: 3 Mistakes That Are Forcing You To Retire After Age 65
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