Is Now a Good Time to Retire? Ep #55

Is now a good time to retire—or a bad time? If you’re a Baby Boomer, you may be questioning what you should do. Many people are quite fearful of retiring given the state of the country and stock markets. So in this episode of Retirement Made Easy, let’s talk about it. I’ll share how you can improve your odds of a successful retirement (and the things you need to be aware of). I understand this turbulent time can be overwhelming. Hopefully, this episode can help prepare you and calm your nerves.

You will want to hear this episode if you are interested in…

• [4:21] Is now a good time to retire?
• [11:34] All the things you need to think of before retirement
• [18:15] How to improve your odds of a successful retirement

All the things you need to think of before retirement

What do those about to retire find concerning? Well, right now we’ve got all-time stock market highs. We haven’t had a large crash where at the end of the year the market was down over 20%. The market was only temporarily down because of COVID. We haven’t had a year where the stock market ended down 20% or more since 2008. Many people are thinking that a market like this can’t continue. They’re expecting a pullback.

We also have a supply chain shortage. Interest rates are at record lows. Government or corporate bonds will pay very little interest. Inflation seems to be rising higher and higher. On top of this all, a Baby Boomer is the sandwich generation. People in their 60s are still caring for elderly parents whose health is declining. My mother is a Baby Boomer who spent the first few years of her retirement caring for her parents.

Many people—because of COVID—had their adult children moving back in with them. According to Experian, outstanding student loan debt has grown to $1.57 trillion as of 2020. Are you helping your adult children pay off student loan debt? Do you have PLUS loans that you’re paying on? The Baby Boomer generation is the first to have to deal with these loans.

Many Baby Boomers believe that their social security is in jeopardy—and it’s true. If no changes are made to Social Security between now and 2035, there will only be enough money coming in to pay 75% of the benefits. There need to be significant changes so Baby Boomers can count on that income.

Another concern? Pension funds may dry up or be reduced. More and more pensions are defaulting or are under-funded. If you’re not yet 65 and eligible for Medicare, what will health insurance cost you? What will coverage be like? The economy is scaring some people. Gas prices are at a seven-year high (according to AAA). We haven’t seen gas prices this high since 2014.

How to improve your odds of a successful retirement

What can you do to move the needle in your favor? How can you increase the probability of success in your retirement?

We are still in a low tax environment based on the current Tax Cuts and Jobs Act of 2017. Until Congress votes to change that, there are many strategies you should take advantage of. Perhaps you can do Roth conversions, contribute more to an HSA, or even open up a 529 plan to take advantage of a state income-tax deduction. With the Secure Act, you can now use up to $10,000 in a 529 plan to pay off student loans.

I’m in St. Louis, MO. Let’s say I have clients contributing to a 529 plan. A couple wants to contribute $10,000 for their son. He has $10,000 of student loan debt. That $10,000 contribution can be deducted on state income taxes and he can use the money to pay off an old student loan.

Now is a good time to reevaluate your portfolio and see how much risk you’re taking. When people get closer to retirement, they want to protect what they have. They’re happy with singles and doubles—not swinging for the fences. Take a good look and see if your portfolio still suits you.

With interest rates so low it may be a great time to refinance your debt like your home mortgage. I enjoy seeing clients get that mortgage paid off by the time they retire. This can allow you to live on less money in retirement. If you have real estate that you don’t plan to keep for the long-term, now may be a good time to sell as the market is at all-time highs.

For big purchases such as vehicles, boats, or recreational vehicles, a lot of people like to purchase those leading to retirement—but now is NOT the time. Prices for used vehicles (because of the chip shortage) mean cars aren’t going to dealerships. Supply and demand dictates that you’ll find very few bargains until production numbers are up (which will take 6–18 months).

What else do you need to consider when preparing for retirement? Listen to the whole episode to learn more!

Resources & People Mentioned

• Student Loan Debt Reaches Record High
• Crude Oil Prices to Hit 7-Year High