The last of the baby boomer generation will be turning 50 this year, and it's time for them to get a fix on how they are going to prepare for retirement.
Fortunately, there are valuable lessons, financial and otherwise, to be learned from those who have already reached their later years.
On the financial front, there is of course room for many regrets. "Generally, the failure to have a plan is number one," Pete Lang, president of Lang Capital in Hilton Head and Charlotte, N.C., told ThinkAdvisor sister site BenefitsPro.
"I find people five years into retirement with no plan whatsoever."
Lang said that includes a tax plan, an income plan and an investment plan. Otherwise, he cautioned, "All your money is slipping through your fingers."
He left out an estate plan, Lang said, because while it may be needed for a financial blueprint it is not needed to retire, as are the other three.
On taxes, according to Lang, the biggest regret is the failure to use a tax-forward plan, such as deferring Social Security. "If you don't take it at 65 or 66, you can defer it and that will minimize taxes."
Other tax regrets include withdrawing money from tax-deferred IRAs too early, and not spreading Roth IRA conversions over a period of time.
As for income, Lang goes back to Social Security deferrals. "Everybody thinks the government will go out of business. That's not the case. The checks will always continue," he said.
"If the government gets into trouble with inflation, that's another issue. But the checks will be there, and deferral is a great way to guarantee enhanced income stream."
Finally, turning to investment, Lang said the big regret is the failure to hedge against inflation. "The inflation rate over the last 15 years has averaged 2.5 percent. And when you look at portfolios, they are also taxable. You have to use a tax co-efficient. I use 3.4 percent. So, if you're not growing at that rate you are not hedging money against inflation. If that's the case, you're losing buying power," he explained. Given the risk inherent in equities and the current low yields on Treasuries, Lang said, "Use the standard rule to diversify a portfolio to create an income stream from safer allocations short term and in the long term from a more aggressive plan."
Clarence Kehoe, executive partner in accounting firm Anchin, Block & Anchin, told BenefitsPro he sees regrets over some very basic mistakes made during the peak earning years.
"From my experience, a lot of people when they get to retirement age look back and say 'why didn't I' or 'I wish I had,'" he said.
The two biggest killers are a lack of savings and a lack of understanding of how much will be needed in retirement, according to Kehoe.
"If you look at it realistically, many see a rise in income as they mature in their career, and when they see salaries go up, instead of saying now I have a chance to save, they are spending it. A lot of people don't pay attention, and don't say I have excess cash and I should save it," he said.
Going hand in hand with this is the problem of excessive borrowing. "Consumer debt has gone but the affluent person who wants a bigger house will have taken a mortgage or taken a second mortgage to take a vacation. Excess leveraging can squash the ability to save for retirement," Kehoe said.
