70 million baby boomers are expected to begin retiring over the next 10 years. Timing can be everything. Retiring at the beginning of a recession can be bad for several reasons. You don’t want to draw money from stocks or retirement accounts when they are in the toilet, because you can quickly reduce your balance and your future purchasing power.
Health Care premiums are also a major issue for retirees. With premiums as high as $800 per month and sometimes $1300 per month with prescriptions drugs, that’s a large part of a retirees budget. Even if you can swing it, Health Care expenses are expected to continue to climb and your health is sure to continue to deteriorate with age.
Reference Article: Boomers and retirement: Trouble ahead!
Kids Moving Home
The children of retirees are increasingly looking for a place to live, after their zero-down mortgage ends with a foreclosure. Retirement plans didn’t include the kids and their families moving home. The unexpected additional costs of food and energy could break your retirement budget. With reduced pensions or no pensions and a trickle of money from Social Security, many retirees will be living on half the income they had before retirement.
Many people use their homes as their retirement account. Paying off their home with the plan to downsize in retirement and live on the profits of selling their larger home. But, with the housing market in decline, more people cannot sell their home without taking a significant loss. Therefore, they will likely want to delay retirement until the housing market stabilizes.
Going Back to Work
If you do have to go back to work after retiring, it might mean hitting the books before you do. Recessions have a way of changing things very fast. As entire industries may no longer be of service and new businesses pop up to take their place, the skills you had worked so hard to acquire may not be relevant anymore. Knowledge and experience can quickly become obsolete in a fast changing economy. Experience is only valued within a company and an industry. When an industry goes away, the value of it's experience largely become worthless. Companies are not going to be interested in hiring a 50 year old with 30 years experience in steam engines. Boomers are going to have to compete with college grads by hitting the books before hitting the job market.
At the same time, a recession will cause companies to stop hiring – which means college graduates will not be able to find jobs. College grads will be eagerly awaiting boomers to retire so that they can get a job. The good news is for the college grads, because there are more boomers than college grads - driving down unemployment and driving up the pay as companies compete for the limited supply of college grads.
If you're thinking about retiring, double check your numbers and make sure you have enough money to afford it. If not, consider delaying retirement a few years or consider reducing your work schedule to part-time. That way you still have some income and will be able to keep your skills up with the even changing economy.