Retirement countdown: Are Baby Boomer Nurses prepared for what lies ahead?

August 4, 2016

Baby Boomers (born from 1946 – 1964), eager to step away from the pressures and responsibilities of the workplace and embark on the next chapter of their lives, now retire at a rate of 10,000 per day. Given that most workers heading into retirement lack sufficient income to fund living and healthcare expenses, many Boomers struggle to determine their financial “readiness to retire.” Boomers should indeed be concerned with what may lie ahead during their golden years, which current life span projections suggest may be up to 30 years after employment. Many wonder if their retirement nest egg will last that long. Unfortunately, research suggests that for the majority of aging American workers, retirement savings may fall seriously short of that needed to fund a reasonably comfortable retirement.

In this article, we discuss the problem of failing to prepare for retirement and provide some action steps for you to take.

Women at risk

Data confirm that women face a greater risk than men of inadequately funding a sustainable retirement. In its 2015 Annual Retirement Survey of Workers, Transamerica found that only 14% of women felt “very confident” in their ability to retire and live comfortably. Fifty-four percent planned to retire after age 65 or not at all and 57% admitted that they “guessed” in estimating their retirement savings needs.

Alarmingly, the survey also revealed that over 60% admitted to having no financial backup plan should they be forced to retire earlier than expected. Finally, while 50% of women respondents want easy-to-understand retirement planning and investment information, only 36% confirmed securing the assistance of a professional financial advisor to guide them through the retirement planning process.

The dismal statistics continue when focusing on nurses. Keele and Alpert (2015) found nurses anticipating retirement now feel the effects of insufficient or late retirement planning. In a 2013 Fidelity Nurse Retirement Study, most nurses (60%) responded that they believed they lack sufficient retirement savings and about two-thirds (63%) voiced concerns about being able to retire. More than 40% believed that they would not be able to retire — ever! Further, a study by Blakeley and Ribeiro found that only 24% of a 200 nurse cohort over the age of 45 admitted to undertaking considerable retirement planning measures.

Although nurses’ retirement savings are up, less than optimal interest rates jeopardize retirement nest eggs and contribute to concerns regarding sufficient retirement savings to last over the long haul. Many realize they need help. The Fidelity study notes that 4 out of 5 nurses want guidance preparing for retirement and that employers can provide helpful ways in which to support this Boomer workforce segment.

Influencing factors

Clearly, lack of knowledge contributes to failed retirement planning and wealth management efforts. But other reasons contribute to the current dilemma for many aging Boomer nurses. The significant demands of balancing work and life as a nurse contribute to a sense of exhaustion and feeling overwhelmed. Further, caring for children through college and providing support to aging parents place considerable additional strain on an already burdened work and life environment for nurses.

With the need to focus on immediate budget issues, including credit card debt, mortgage payments, and the like, focusing on retirement planning gets pushed aside for more immediate concerns. In a joint survey by the ANA and the Women’s Institute for a Secure Retirement (WISER), 61% of responding nurses stated simply that they lack sufficient time to address their retirement future due to competing pressing concerns.

In addition, individual responsibility for retirement planning appears to be quickly replacing traditional government- and work-sponsored retirement programs. While these changes may not directly affect Boomers who plan to retire in the not-to-distant future, they may reset retirement planning strategies for younger Boomers at the tail end of the Boomer cohort.

Perhaps the most significant challenge, however, rests with nurses’ decisions to delay or simply not adequately save for retirement. Unless other substantial financial sources surface, this group must “play catch-up” and do so as quickly as possible given that retirement looms ever nearer. In 2009, St. Pierre and colleagues noted that personal sustainability — the practices that meet today’s needs without depleting tomorrow’s resources — applies easily to retirement preparation. Saving for retirement through active financial planning constitutes needed preparation for an inevitable stage of life wherein one can either succeed or fail — all based on prior planning and living within ones means if at all possible.

Another influencing factor rests with information from the U.S. Department of Labor in which data suggest that, as compared to men, women work in more part-time jobs that fail to offer retirement plans. In addition, their focus and responsibility in family matters interrupts their professional careers. As a result, women make fewer financial contributions to available retirement plans and have fewer contribution years toward retirement savings. In addition, women, who live longer than men, are also more conservative investors.

These factors, combined with an increased cost of living, volatility in the market, economic recessionary events, and an aging workforce, contribute to Boomers’ ill-preparedness for retirement sustainability.

Retirement gets scarier

While visions of retirement conjure up sandy beaches, bike riding, tennis, quiet evenings, and doing all the things time failed to permit while working, maintaining health ranks as a key concern for aging workers as well as retirees. Estimates for healthcare costs during retirement suggest that worrying may indeed be unavoidable. According to the 2015 Retirement Healthcare Cost Data Report by health data provider HealthView Services, a healthy couple retiring today at age 65 will pay $266,589 for health care during retirement, a 6.5% jump from 2014 projections. With continued medical cost increases, the cost is predicted to rise to at least $360,996 in the near future.

To make matters worse, these projected costs relate solely to Medicare Parts B and D, falling short of covering out-of-pocket costs that traditional Medicare does not cover such as copays, dental, vision, and hearing healthcare services.

After factoring these expenses in, costs for a healthy couple reach nearly $400,000 and almost $450,000 for couples retiring in 10 years. Add in long-term care or in-home healthcare support and retirement funds easily evaporate. In addition, projections include social security funds no longer keeping up with inflation even in light of sharply increasing healthcare costs, which the Centers for Medicare and Medicaid project will rise 5% to 7% over the next 8 years. Finally, Medicare surcharges based on adjusted gross income will increase retiree healthcare costs for more Americans in the future as well.

Clearly, once the sticker shock of these projections sets in, Baby Boomer nurses can only hope that a sound catch-up financial plan enables an effective retirement savings strategy that nets sufficient funds to get them through their well-earned golden years.

Where to start

Preparing for retirement should begin early in anyone’s career. Given that nurses (for good and for not-so-good reasons) traditionally fail to sufficiently save for impending workplace separation, what steps can Baby Boomer nurses take now to mitigate the possibility of an unsustainable retirement?

Leverage your human resources department. One of the first and often overlooked resources resides in the workplace and many employees including nurses neglect to use the free services offered in human resources (HR). Meeting with an HR representative can prove invaluable in your retirement planning efforts. HR professionals are highly trained to educate individuals about different benefit programs offered to you and your fellow employees.

HR representatives can answer questions on topics such as managing 401K plan contributions, selecting best-fit health plans, and evaluating the tax advantages of using a Flexible Spending Account (FSA). In addition, HR representatives often host educational events and benefit fairs where employees can gain insight on various financial topics. Keep in mind that although HR professionals cannot give specific investment advice or tax recommendations, they can provide information on a wide range of topics and direct you to investment and tax specialists.

Before retiring, it’s essential to review and understand your employer’s policies on the portability of group insurance policies such as life insurance and long-term care insurance. Finally, should you consider retiring before age 65, seek advice regarding COBRA to cover any applicable health insurance gap between employment and Medicare eligibility.

Secure expert advice. Advice from experts such as a Certified Financial Planner (CFP) can set you on the right path for retirement. Not consulting an expert or placing your trust in a close friend or relative who may have limited financial experience could lead to disaster. Secure an independent objective and expert CFP with healthcare experience — one positioned in a reputable firm with resource depth and support.

Evaluate your financial portfolio. Retirement planning begins with evaluating your current financial position in detail. Start with gaining a better understanding of your monthly cash flow. List all sources of income, all expenses, and all systematic contributions into savings and retirement accounts. In this step, estimating the number of years in retirement enables a more accurate determination of necessary funds. So, if you are a female nurse, in good health, and expect to retire at age 65, you can easily plan on living to age 85 if not longer.

Although it may be somewhat uncomfortable to project your retirement life span, such projections can prove invaluable in determining funding levels necessary to sustain your envisioned lifestyle. Sound financial planning, even if close to retirement, can increase your net worth and assist in creating a solid retirement future.

Project retirement income and expenses. Projecting future expenses and income during retirement, represents the most challenging step. Begin with location — do you plan to sell your current home or spend your retirement years in place? Do you plan to gradually reduce your work hours from full-time to part-time? Are you or your spouse in need of medical assistance now and into your retirement years? How do you envision your retirement—sustaining your current standard of living or reducing expenses and lifestyle?

The answers to these questions create the critical scenario within which you and your financial advisor design the best-fit sustainability plan suitable during your retirement years.

Maximize your savings potential. Playing the savings catch-up game undoubtedly factors into your retirement readiness plan. You may consider increasing a current 10% or 15% contribution to a 401(k), 403(b), or 457 plan to the maximum allowable contribution level. Take advantage of retirement benefits available at your workplace. You have significant tax advantages during your working years and, if your employer adds matching contributions (many healthcare institutions do), that’s essentially free money that adds up over your work life to see you through your retirement years.

Maximize income. Consider working more hours. You may wish to further bolster your retirement savings by picking up one more shift a week, or several hours added onto your regular workday. Just remember: be cautious not to spend these extra monies. Place them into immediate retirement savings instead and watch your nest egg grow. In addition, you also may consider working longer given today’s financial realities.

The recession and continued economic volatility has destabilized expectations, especially for the Baby Boomers. Working an additional year or two combined with aggressive saving could make a considerable difference in a retirement savings portfolio.

Adjust to envisioned retirement spending. As early as possible, adjust to living within the lifestyle means you expect to when you do retire. Cut expenses; reduce spending. In the process, your retirement lifestyle transition becomes more comfortable and your savings portfolio enriches considerably as well.

Consider cross-training. Nursing’s unique contribution to the healthcare industry enables significant flexibility not found elsewhere. Cross-training to a related clinical specialty or to academia may prove a valuable option as time passes.

Prepare by acquiring additional certifications, pursuing advanced degrees, and tackling new opportunities if at all possible. In doing so, your employment and professional networks easily expand, enriching your nursing experience and enabling you to continue to significantly contribute to health and healthcare.

Educate yourself

The most important step you can take to start planning for retirement is to educate yourself now; don’t put it off. The earlier you begin the planning process, the more options you have later.

Joyce E. Johnson is an associate professor at The Catholic University of America in Washington, D.C. Sean P. Morrissey is a certified financial planner with the McAdam Financial Group in Philadelphia, Pennsylvania.