A major generational shift has taken place, and it's having a huge impact on when and how we save and plan for retirement.
Most older baby boomers like myself had children in their 20s and empty nests by age 50. Between the ages of 50 or so and 65, we made a big retirement savings push.
When my children were in high school, their friends' parents were in their late 30s or early 40s. It was unusual to run across 50-somethings at a high school basketball game.
I don't need a bunch of expensive research to confirm what I see with my own eyes: Couples are marrying later in life and having children later. My own unscientific survey confirmed this. My oldest son just turned 50, and his two children are 14 and 12. He's right in line with his peer group.
My son could easily be in his early 60s before his kids are off his payroll. Even if he pushes retirement back to 68, he'll have about 50% less time between an empty nest and retirement than I did.
So let's imagine a couple whose nest is finally empty at age 62. At that point, they get serious about paying off debt and accumulating wealth. If it takes three years to become debt-free, that leaves just three years to stockpile money for retirement, if they retire at 68. This couple could save 100% of their salary for those three years, and they still would not have nearly enough to retire.
So what can younger baby boomers do?
Start immediately
Younger boomers have to run a different race than I did, but they still need to start now, regardless of other drains on their resources.
Make wealth accumulation a top priority
Every time you get a raise, reward yourself with a small portion of it. However, most of it should go to paying off any debt or to your 401(k) or IRA. If you're not contributing the maximum amount to tax-deferred retirement accounts, start now.
Avoid the McMansion trap
I have noticed that younger boomers are becoming more attuned to needs versus wants. Up until 2008, folks were buying the biggest house they could afford, because real estate was an "investment." Houses weren't just homes, they were moneymakers — or so we thought.
My son and his wife just bought a new house. They really liked another model that cost $25,000 more because it had one more bedroom, but it would have been too big for them in 10 years or so.
They made the right decision. They saved the $25,000 as well as the interest on a higher mortgage, since they had already made the maximum down payment they could afford. They'll be just fine without the spare bedroom.
Exercise common sense
I've made this same mistake more than once: I'd get serious about diet and exercise and go way overboard. On day one, I'd exercise to the point of exhaustion and cut my caloric intake in half. By the second day, I could hardly move, and I was starving to death — at least, it felt that way. By the third day, my commitment would vanish. Had I paced myself, I would have been a lot more successful.
The same principle holds true for paying off debt and saving. For most folks, the best way to start is by withholding incremental amounts from their paychecks. Many employers will do this automatically and put the money directly in your 401(k). Tackle debt the same way: cut up your credit cards and start paying a little extra on your regular payments. It is amazing how quickly you can make progress.
Learn about investing now
It is easy to think, "Why do I need to learn about investing when I don't have any money to invest?" I found that the more I read about investing, the more motivated I became to have money to invest. The thought of my money working for me instead of the other way around sounded quite appealing.
After all, isn't the goal to accumulate enough money and invest it wisely so we don't need to work at all?
