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Pinnacle e-Letter

Retirement Savings for Baby Boomers: Five Tips to Catch Up

By Rick LaLance, Investment Consultant for Pinnacle Asset Management and Raymond James Financial Services, Inc.

If you haven't been saving enough for retirement, you're not alone.

Nearly one-third of baby boomers ages 51 to 61 are at risk of not having enough in savings to finance a comfortable retirement, according to a recent study by the Center for Retirement Research at Boston College. More than 30 percent are at risk for not being able to maintain their pre-retirement standard of living in retirement.

Additionally, many people have unrealistic expectations of withdrawal rates for retirement. At an inflation rate of 3 percent, your income will have to double every 20 years to keep up. Many are likely to run out of money in retirement because they have not planned for inflation.

Growing life expectancies are another concern. For a couple at age 65, one spouse has a 50 percent chance of living to age 92 and a 25 percent chance of living to age 97.

These issues combined with soaring health care costs and the demise of pensions mean Americans today need more savings than earlier generations for a comfortable retirement. Social Security alone won't cut it.

While there's no magic bullet for those who've fallen behind in saving for retirement, these strategies can help you get back on track:

• Take advantage of "catch-up" contributions to pre-tax retirement accounts. For 2007, investors over age 50 can add another $5,000 to their 401(k) in addition to the $15,500 limit. They can add an extra $1,000 to an IRA in addition to the contribution limit of $4,000.
• Rethink your asset allocation. Many baby boomers are too heavily allocated to fixedincome investments. Make sure you have a well-diversified portfolio. It's best to seek a variety of asset classes, including domestic stocks, international stocks, and more.
• Consider working longer. Working just three years past age 62 can make a substantial difference to retirement preparedness because it lets you put off tapping into your 401(k) and allows you to collect potentially higher Social Security benefits. Those who retire early have less time to save and for money to grow, and their money has to last longer.
• Modify your mortgage. If worse comes to worse, consider downsizing or, if you have substantial home equity, consider refinancing your house to improve your monthly cash flow.
• Consider investment alternatives. A range of investment alternatives exist for providing growth potential without completely risking your retirement income and/or principal in the stock market.

If you have put off building your retirement nest egg, it's imperative to consult a financial advisor who can help you tailor a plan to make up for lost time.

Rick can be reached at (615) 849-2250 or rick.lalance@pnfp.com.

Any opinions are those of Rick LaLance and not necessarily those of RJFS. Securities and Investment Advisory Services offered through Raymond James Financial Services. Member FINRA/SIPC. Not FDIC Insured. Not guaranteed by Pinnacle National Bank. Subject to risk and may lose value.

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