Plan for future pitfalls

Changes in the economy and workforce have taken their toll on baby boomers, a generation that carries a longer life expectancy than its predecessors as well as the financial burdens that come with it.  

People are working longer and retiring later in life. Possible cuts in government spending could result in reduced payouts to Social Security and Medicare, making things even more challenging. 

The good news is that while boomers may have less time to weather the ups and downs of the stock market than younger investors, it’s not too late for them to plan for their financial future. In doing so, experts suggest considering not just financial goals, but one’s values and the type of lifestyle one desires.

For those in the “Me” generation counting on a pension, Social Security benefits or some type of mutual funds, make sure in advance that the fund will be enough to maintain a desired standard of living. Otherwise, you may have to consider working past your anticipated retirement age, according to Karen Codman, an investment adviser from Long Beach.

Take into account the fact that you won’t be working. Because of that, you may be tempted to spend more. 

“The conventional wisdom that they hear on the radio is that it’s going to cost so much less when you retire,” Codman said. “I’ve heard estimates between 50 and 70 percent of what it costs now. The reality is you now have 365 days of shopping and travel time, and most people don’t want to reduce their standard of living.” 

When you add this to potential medical expenses, you may find that you actually need more than you originally allocated. 

Ira Cohen, 54, of Long Beach has been a crane operator since 1979 and plans to retire in eight years. He is practicing living below his means now, so that he will be used to living off his pension. 

“Six years ago I had a wake-up call, and I took a look at how I was living and really simplified my lifestyle,” Cohen said. “I’m living today as if I was collecting my pension and trying to save the extra money.” 

And if you are considering retiring early, understand that sometimes it’s better to work until you are eligible to receive full Social Security payments. 

Codman said that if you have an investment portfolio, make sure that it is both diverse and tax-efficient. She advises putting funds that will be needed sooner in life in conservative investments while other money goes to riskier investments. 

Take into account how the monies will be taxed and decide if a Roth IRA fund is right for you. This will allow you to pay the taxes on these accounts up front so you won’t have to worry about it on the back end. This can help keep your tax bracket lower during retirement so your Social Security doesn’t get taxed as much, Codman advises.

Financial adviser Marc Weiss of Archer Weiss Insurance in Woodland Hills said that several of his clients are looking to only make conservative investments due to the uncertainty in the market. 

Some baby boomers also are taking out life insurance policies on their parents with plans to use the death benefits to support themselves later in life, Weiss said.

In general, both financial advisers agree that everyone should meet with a financial adviser instead of basing financial decisions solely on what they read in the paper or hear on the news. One size rarely fits all when it comes to financial planning, 

In addition to your personal financial planning, a customized estate plan is another helpful tool to help avoid problems for loved ones, according to Benjamin A. Brin, an estate planning attorney from Los Angeles.

“You actually already have an estate plan, whether you know it or not,” Brin said. “You’ve got a one-size-fits-all, supposedly free plan from the government called ‘probate.’ ”

Probate court is the process the government uses to transfer ownership of assets. An estate plan circumvents this by providing a pre-arranged transfer of your assets after death. Even if you have a will, you may still have to go through probate, and the only way for Californians to avoid the process entirely is to include a living trust as part of an estate plan. This will save your loved ones money in lawyer fees, time and court dates, as well as a lot of potential discord, Brin said.

One of the most important things to keep in mind when it comes to planning for the future, however, could be knowing the difference between money you can and can’t afford to lose, he added.

“Unless you are a professional investor, then don’t think of savings as investments; think of them as savings.”