The "Big Boom Theory" For Retirement: Millennials, Pay Attention; You Are Next

*Image from Yahoo Fiance by Neale Godfrey

Here’s The Scene 

Mom and Dad are lounging around their beach house, sippingArnold Palmers (maybe with Arnold Palmer), deciding which golf club to use, which trip to take, and how to keep spoiling the grandkids… all this leisure and fun financed by the steady stream of guaranteed retirement income, which is, of course, coming from Social Security, pensions and investments. The family home is paid off, there is no debt… life is good. I see a picture painted with rainbows and dancing gnomes.

“Being out of debt and retiring financially secure represent the American Dream for a majority of Americans, and most are optimistic that they can achieve it, according to the 2014 American Dream Survey. Retiring financially secure at age 65 represents the ultimate American Dream for 36% of those surveyed, while getting out of debt came in at a close second, with 25% of respondents choosing it as their definition of the ‘American Dream.’

Here’s The Reality…

As Bob Carlson says in The New Rules of Retirement, “…I’ve never seen a situation as dangerous as today’s. Investors, especially IRA owners, are facing unprecedented threats to their financial freedom. The trends are in place and gathering strength. Not only have people not saved enough, but the vehicles for saving may not be what we all expected.” According to USA Today, “Almost a third of workers (28%) say they have less than $1,000 in savings and investments that could be used for retirement, not counting their primary residence or defined benefits plans such as traditional pensions.” Unfortunately, the picture gets darker, the rain has started, and the rainbow has disappeared. Employee Benefit Research Institute and Greenwald and Associates reported results from their telephone survey, in which 57% of their respondents indicate that “they have less than $25,000” in retirement savings. The lawn gnomes are looking for work.

The other reality is that Millennials are not saving for their retirement. I’m very aware that this generation has suffered from the Recession and they are trying hard to get on their feet. Bankrate recently reported, “Unsurprisingly, that late start in the working world may impede their ability to begin planning for the end of those careers. After all, many young people are still struggling to find meaningful employment to cover current expenses and crushing student loan payments. Saving for retirement is a luxury that many in the millennial generation…” It’s not that this generation is just singing Kumbaya and is not aware of the eventuality of retirement. Bankrate also reported in a recent survey that, “the biggest retirement fear among 18-29 year olds is running out of money.

Where Do You Start?

You can’t decide where you are going until you know where you are now. It’s time to get a handle on your current life and how much it costs you to live it. It’s also time to figure out what you are going to need in retirement. There are tons of retirement calculators. Since we are talking about retirement, take a look at AARP’s Retirement Calculator and try to gauge what you will need. You want to “paint” a real picture of what you want retirement to look like. Start with your wish list. (By the way, I’m not just talking to Boomers… I’m also talking to Millennials.) Think about where you want to live. By the shore, the city, near the grandkids…? If you are a Millennial, I know you are laughing about the concept of grandkids. That is not the point for you; the point is that you are beginning to decide on the style of living that suits you. If you think that a retirement home in the woods is your idea of nirvana, it may make sense to consider getting a vacation home that could eventually become a retirement getaway.

The main advice is, “try the suit on before you buy it.” Rent a home by the lake or ocean or in the city BEFORE you make the decision that this is where you want to retire. I can’t tell you how many people have just flocked to Florida or Arizona thinking the heat (dry or wet) is their idea of heaven. It sounds good in February, when your driveway could be used for luge practice, but by August, you may feel that you need to be turned over and basted. Try to paint your own picture for retirement. Do you want to work? Will you have to work? Look at how you have protected yourself for future healthcare needs.

Start to Save And Invest…

I know that you all hear that way too often. That’s because it’s the right advice. Seek advice on this one or do it yourself…just start. There are investment professionals that can give you advice. Again, decide how you want to live in later life and figure out what that will cost, and then build the investment plan with the proper assets to help you get there. Choose safe investments, knowing that there are no guarantees…only that “If it looks too good to be true”, it probably is. If you are a Boomer facing the “Boom” of retirement, BlackRock has a good tool called, CoRi™ that can help you. If you are a Millennial and want to invest by yourself, there are online and mobile products, like DriveWealth, with whom I am associated, which can help you to invest for the future.

The point is that you want to design your own vision of your future. You want the picture to be as pretty as you want it to be colored with your paints and not just a collage of cut-and-paste scraps that have been thrown together for you. Pick up your pencil today and start to sketch so you can later fill it in with all of your own colors… and gnomes!