Millions of Americans in their 40s and 50s may be suffering from “retirement postponement syndrome” (RPS) shortcomings that could end up robbing their golden years unless they take strong corrective action, according to a warning issued today by Beaird Harris in Dallas, Texas.
Managing Director Steve Lugar said: “Most people know the basic formula when it comes to saving and investing for retirement. Three factors control the wealth that investors are able to accumulate: time; rate of return; and money saved or invested. In reality, it ends up being a little more complicated than that. What we are calling ‘retirement postponement syndrome’ is a little-understood financial malady that can stand between unwary investors and a comfortable retirement that gets started on schedule. Failing to have an adequate cushion for these and other RPS bumps in the financial road can – and often do! – mean the difference between the retirement of your dreams and just scraping by.”
Five “RPS” Warning Signs
What are the symptoms of retirement postponement syndrome? Which conditions put you at greatest risk of suffering this financial malady? Based on their considerable experience in dealing with clients, the experts at Beaird Harris have identified the following five key warning signs of RPS:
- BANKING ON UNSURE THINGS. If you are counting on the sale of your home or small business to bail out under funded retirement savings and investments, think again. As recent months have illustrated, home prices can be mercurial. In addition, a home may sit on the market for months or even longer before being sold , often at a reduced price. Small business owners who rely heavily on selling their firm at a handsome profit or making a smooth transition via a family succession take a big chance on coming up short on their retirement nest egg. That approach is just as risky as the executive who works for someone else and has too much tied up in the stock of the company that employs him or her. You should have a diversified investment portfolio that spreads out the risk by avoiding over concentration of your wealth in the single “basket” of your small business.
- FALLING INTO THE T.R.A.P. Many Baby Boomers had children later in life than their parents did…and others started a second family in their 40s or even early 50s. Both of these parenting circumstances can put even the most diligent saver and investor in the T.R.A.P.: Tuition, Retirement and (Related) Problems. Boomers in their 50s and early 60s with children heading off to college risk seeing their retirement savings substantially depleted at the worst possible time. With some private colleges costing $25,000-$30,000 a year or more for tuition, room and board, many parents who have failed to allow for such costs are forced to put off their retirement dates.
- COUNTING ON AN “ECONO” RETIREMENT. If your retirement plan is predicated on the notion that your living expenses will go way down, you could be making a classic mistake. Financial advisors know that spending by retirees (particularly Baby Boomers) often does not go down. In fact, such spending often surges as people realize they can finally travel and engage in the hobbies they never had the time to do while working. Unless you are the rare person who could be content reading library books and watching basic cable TV reruns for 20 years, don’t base what you save and invest for retirement on the assumption that your golden years will be your penny-pinching years.
- IGNORING YOUR “SANDWICH”. More and more Baby Boomers are finding themselves saddled with medical and housing expenses for aging parents. Investors in such a situation are said to be in the “sandwich generation,” particularly when they are also confronted with paying for college or other expenses of one or more children. In 2005, 71 percent of Baby Boomers aged 41-59 had at least one living parent, according to a survey by the Pew Research Center. That was up considerably from 1989, when only 60 percent of Boomers had a living parent. The good news is that you can look down the road and anticipate well in advance if you are at risk of getting “sandwiched” in this fashion…and then plan saving and investing accordingly.
- LIVING IN YOUR OWN REALITY SHOW. All too many parents with children returning to live at home after college – or never leaving home in the first place -end up saddled with their own “reality show”-like headaches. Irresponsible adult children can mean such major savings-draining expenses as lavish second or third weddings, gambling debts and the cost of dealing with drug problems. Today, more than 25 percent of Americans ages 18-34 live at home with their parents, according to U.S. Census figures. For 18 to 24-year-olds, 56 percent of men and 43 percent of women live with one or both parents. These numbers may be heading even higher: One job search Web site found that fully 62 percent of college students say they expect to live at home after graduation. Those parents who impose firm deadlines and require so-called “boomerang” children to share all or more costs are the ones most likely to emerge from the experience with their nest eggs intact.