The oldest of the nation’s 76 million baby boomers soon will start to turn 59½, the age at which people can begin taking money out of their tax-sheltered IRAs and 401(k) plans with no penalties. But the American Express Financial Advisors says these boomers face a new set of risks that could affect their quality of life during retirement.
“This is a new kind of retirement because many are not covered by pension plans like their parents or grandparents. They’ll have to fend for themselves to create a retirement plan that they won’t outlive,” says Jeff Van Keulen, region vice president of Retirement Wealth Strategies at American Express Financial Advisors in Minneapolis.
Some of the new risks are:
• ;Outliving your assets. Because people are living longer and healthier lives than ever, longevity presents a financial risk.
• ;Taxes. As people continue to work well into their 60s, taking money out of IRAs and 401(k) plans, which are subject to income taxes, might push them into higher tax brackets.
• ;Investment decisions. Being financially secure throughout retirement can mean walking a line between too conservative investing, which could lead you to outlive your assets, and too risky investing, which you might not live long enough to recover from.
• ;Inflation. As inflation increases, you lose purchasing power and the value of your investments declines. As the cost of health care, for example, continues to rise at a rate higher than the inflation rate, your retirement plan must ensure that you’ll stay ahead for several decades.
• ;Retirement leisure. Boomers “see themselves traveling more, so controlling spending will be an issue,” Van Keulen said.
• ;The unknowns. High medical bills, an abrupt ending of your employer’s retirement benefits or any other unforeseen emergency can be high risk for those planning for retirement.
• ;Here’s how to keep track of your stuff
Having a list of all your possessions will take at least some of the burden off you if you’re ever the victim of burglary, fire or other disaster. Regularly updating that list could mean the difference of many thousands of dollars from your insurance company.
Some tips to create a comprehensive household inventory:
• ;Go through every room. Open each drawer and list everything, along with its value. Don’t forget the attic, basement and garage.
Pay close attention to things you might normally overlook, such as window treatments or rugs. Also include outside items, such as a pool and patio furniture or expensive landscaping or gardening materials.
• ;Describe each item in detail. Record identifying information, such as the serial number, age, brand name and size. Record your date of purchase, the amount you paid and how much it would cost to replace it.
Don’t forget to include things of sentimental value, such as photographs that cost 25 cents to several dollars to replace.
• ;Visual records. Photographing and videotaping your possessions can be helpful and will spare you having to write down all descriptions.
• ;Make sure you have appraisals of all art, antiques, jewelry and other valuables.
The American Society of Appraisers, at www.appraisers.org can help you find a local appraiser to suit your needs.
• ;Keep copies of your inventory lists, photographs and videos in a secure location outside your home.