A recent survey by the Insured Retirement Institute of over 800 participants age 56-72 revealed how unprepared Baby Boomers are when it comes to retirement. Based on the study's findings, here are the seven deadly sins of retirement planning:

Number 7: No End of Life Plan

Two-thirds of study participants have made no end of life arrangements. As we age, the need to establish certain documents becomes increasingly urgent. Documents such as a will, power of attorney, and advance medical directives. Preparing these documents goes a long way toward protecting you and your loved ones as you advance in age.

Number 6: Retiring Too Early

Among young people today there is a sizeable movement to retire as soon as possible. In fact, it even has a name: FIRE – Financially Independent, Retire Early. Retiring early is fine if you can do it, but it requires a great deal of planning and a penchant for frugality.

The trouble with retiring too early is it’s like jumping off a cliff. There are no take-backs, no undo button. In other words, by the time you realize that you don’t have enough savings to make it through retirement, it’s too late. When was the last time you saw a job posting that described the ideal candidate as someone who has been out of the workforce for decades and is too old to work?

Number 5: Underestimating Healthcare Costs

The study found that more than one in four believe their healthcare costs in retirement will be less than 10% of their total living expenses. The reality may surprise you: the average couple in their mid-60s will spend $250,000 on medical costs over the course of their golden years. That works out to more like 14% of living expenses for the average couple. These costs include Medicare, Medicare supplement, copays, deductibles, and other out-of-pocket expenses. At the rate healthcare costs are increasing, that number can only go higher.

Number 4: Not Having a Savings Goal

They say it’s hard to hit a moving target, but it’s even harder to hit a target that doesn’t exist. A full 75% of Boomers who do not have a financial advisor say they have never attempted to determine how much money they need for retirement. How can you sleep at night knowing full well you may be headed into the abyss? 

Hire a financial advisor or avail yourself to a sophisticated computer analysis that analyzes your circumstances and determines how much you need to save for retirement. Look for something more than a free online calculator that only asks for your age, income, and current savings. There’s a lot more to it than that. Financial modeling software performs year-by-year simulation to deliver results tailored to your unique situation. To learn more, check out this article entitled Best Retirement Planning Software.

Number 3: Early Access to Retirement Savings

This is a big mistake that too many people make. Surely you have heard that until you retire you are supposed to keep your hands off your retirement savings. Do you think that’s a guideline or a suggestion? No! It’s an absolute requirement. 

Tapping your retirement savings before you retire not only subjects your nest egg to early withdrawal penalties, but it denies you the benefit of compound interest that your money would have earned had you left it alone.

Even taking out a loan against your 401(k) or similar plan is ill-advised. While you are paying back the loan – which takes years, by the way – you are not contributing anything to your account. That means you are missing out on the employer match, which is free money. 

Need money? Get a second job or stop spending so much. Do not touch your retirement savings.

Number 2: Not Saving Enough

Did you know that more than half the people who reach 62 years of age will live to celebrate their 85th birthday? That’s 23 years. 23 years is a long time to live on Social Security. Yet half of those surveyed are going to do exactly that. They have no retirement savings whatsoever. 

Only 10% of survey respondents have reached what is considered to be the minimum in terms of retirement savings: $500,000. It sounds like a lot, but for most people it's not enough to comfortably retire on.

Number 1: Emerging Adulthood

The number one reason Baby Boomers fail to save for retirement is Emerging Adulthood. What is that, you ask? Go look in your basement.

Emerging adulthood is the glacial pace at which young people today accept responsibilities of adulthood. It’s a long, slow process that presumably ends with a young man or woman making their own way in this world.

Eighteen used to be the age at which sons and daughters weaned themselves from their parents’ financial support, or 22 if college was on the table. Now adult children sponge off their parents well into their 30s. This is the number one reason people fail to save for retirement.

As chronicled in Still Supporting your Adult Children?, more than half of adults age 21-37 receive financial support from their parents. A whopping one-third still live with their parents.

If you want to have a chance at saving for retirement, you need to put an end to your adult children’s reliance on your financial support. They may have you fooled into thinking that they can’t make it on their own, but they most surely can. 

Parents who continue to support their adult children into their late 20s and 30s are actually enabling them to lead the life they lead. They are paving the way for their children to fail.

Final Thoughts

Baby Boomers had a good run. Their doting parents paid for their college back when college was still affordable. Boomers got out of school at a time when real estate was cheap and the Dow Jones Industrial Average was around 1,000 points.

The Baby Boomer generation has enjoyed the longest economic expansion in human history. To have lived through this period and arrive at retirement’s doorstep with no money is unfortunate. Yet that’s the situation for half the Baby Boomers. 

If you are not yet retired, do not despair; there is still hope. There are all kinds of ways to accelerate your retirement savings. You can get your retirement accounts where they need to be. Eggstack is a treasure-trove of ideas and strategies to assist you with planning and saving for retirement.

Photo credit: Pixabay The Eggstack Blog will never post an article influenced by an outside company or advertiser. Our mission is to help you overcome uncertainty about retirement planning and inspire confidence in your financial future.