Baby boomers are defined as those individuals born between 1946 and 1964. There are about 75 million baby boomers, in the United States, which represent approximately 29% of the U.S. population. The term baby boomer was created to define the “boom” in births following World War II.
Boomers oftentimes have trouble managing their time and money because of three things: their parents are living longer, their children are seeking better and many times longer college educations, and they, themselves, are having children later in life. Many boomers find themselves taking care of children and parents at the same time.
Our society has faced many challenges with the onset of the baby boomers. Initially, there was a need for more schools and more housing. Boomers were also faced with more competition for jobs. Now, as the boomers are beginning to retire, more resources will be needed for them to live comfortably during their retirement.
Many financial planners indicate that the boomers should plan to work at least part-time beyond age 65. Theoretically, boomers may live to 90, or possibly beyond; therefore, it is not realistic to think 44 years of earning a salary can support a family throughout those years in addition to 25 years of retirement. They should try to build their careers so that they can do what they enjoy, and are not forced to work where they are not happy at age 70. Additionally, boomers should be saving for retirement either through their employer, on their own, or a combination of the two. Unfortunately, many boomers have not had much guidance since their ancestors did not live long after retirement and started their careers much younger.
Can boomers depend on Social Security as a source of retirement income?
Everyone is confronted with Social Security and Medicare taxes when they receive their first pay check. We are not asked if we want to participate in this “federal savings plan.” We are told we will participate, and that this withheld money goes into an account to pay for everyone’s Social Security benefits once they retire. Because of the increase in people living beyond retirement age and the poor management of these funds, the age for retirement (as defined by the Social Security Administration) has been forced to increase over the years to accommodate the distributions to eligible retirees and other qualified recipients. Workers born before 1938 are deemed to have reached retirement at age 65. The retirement age rises gradually to age 67 for workers born after 1959. It is reasonable to believe that this retirement age will continue to increase because of the onset of retiring baby boomers.
When Social Security was established in 1935, the first $3,000 of wages earned was taxed at 2%. This wage base was constant until 1973 when it was increased. It has continued to increase in most years since then. For 2013, the first $113,700 of wages earned are taxed for Social Security at a rate of 6.2% for the employee, plus 6.2% for the employer. Additionally, every dollar earned is taxed for Medicare at 1.45%.
Boomers need to save as much as possible and as fast as possible. Because of recent tax law changes, taxpayers are allowed to contribute more money to their IRAs and 401(k) plans. Savings opportunities have increased even more with the “catch-up” contributions that are now allowed for taxpayers age 50 or over.
For boomers, and other generations alike, proper planning is imperative to:
- Define your retirement goals;
- Determine the time you have left to achieve those goals;
- Examine your current accumulation of assets and your income stream, and
- Set in place the proper tools and plans to reach your retirement goals.
If you would like further information regarding this or any other tax related issue, please contact Henssler Financial at 770-429-9166 or experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
