Baby Boomer retirement will begin soon. Be prepared with careful planning.

The reality of Baby Boomer retirement is just around the corner for millions. Now is the time to start carefully planning your own retirement, if you haven't already begun. Think about the How, Where , When, and Why. This article is about planning the "How" of your Boomer retirement. It is a shocking fact that the average American spends more time planning their vacation than they spend planning their retirement. Baby Boomers and retirement is a serious topic that deserves your very careful attention.

Boomer retirement is about financial freedom and having secure sources of income. This doesn't necessarily mean you won't work, you certainly can work in retirement, or pursue business and web site ecommerce opportunities if you want to. It just means you don't need to work to support yourself and your family, assuming you are financially free. You are financially free when your passive income exceeds your current and foreseeable expenses. Diversified sources of passive income that are stable and growing is the ideal scenario.

There are two basic ways to become financially free:
• earn more passive income, or
• reduce your expenses.
Or a combination of the two.

Passive income flows from pensions, investments, rental properties, royalties, patents, and intellectual properties such as books, income producing websites , and other publications. An income stream in this category is one where money is received, usually on a regular basis, without too much continuing effort. This does not mean no effort at all; most passive income streams require great effort to get them started and may need attention from time to time. Multiple streams of income are preferable.

Some people find they have enough income to retire if they scale back on unnecessary expenses and simplify their lives. Think about that for a minute if you seriously want to retire early. Can you reduce your monthly payments by buying a smaller house, driving an older car, or perhaps forgoing an expensive vacation each year, and use the savings for retirement investments? If reducing these expenses for a number of years gives you enough financial security to retire early would you be willing to do it?


Take an inventory of your assets and liabilities and see what you have available. Consider all of your assets and prepare a personal net worth statement. This exercise will be a bit of work if you don't do it regularly, but it is vital information to know. Remember, you want to retire and this work is a step in the direction of not having to work in the future.

Assets to inventory
• Your home
• Pension income(s)
• Social security benefits
• IRA assets (Roth IRA and/or Traditional IRA)
• 401k account assets
• Savings accounts, CDs, and bonds
• Stock portfolios
• Real estate investments
• Cash value insurance policies
• Other passive income (rents, royalties, websites , etc.)
• Other assets (accounts receivable, private stock, automobiles, etc.)

Next inventory your liabilities. Compute all of the monthly payment amounts, as well as the total amount of debt.
• Mortgages
• Bank loans
• Credit cards, insurances, and misc. bills

The total sum of your assets, minus your total liabilities = Net Worth
This is what you would have left over after paying off all of the bills.

Now you can see if you have enough passive (non-working) income to pay your monthly bills. If you are able to collect on the pensions and social security immediately you can count this income now, if not, factor these cash flows into future year plans.

The 4% rule. Many experts advise spending only about 4% of your liquid assets per year in order to ensure you do not run out of money. This is especially important for an early Baby Boomer retirement. Thus, if you have an investment portfolio of $1,000,000 you could prudently withdraw only $40,000 (4%) per year to ensure the survival of the principal. This assumes the investment portfolio is prudently invested in assets that produce income and stay ahead of inflation. This is a very conservative spending guideline for your assets. Depending upon your age, actual rates of return in you portfolio, and your actual cash needs you may spend more or less than this guideline. That is your decision of course, but be very careful if your money needs to last a long time. It is better to die rich than broke!

Congratulations! You have just performed a basic net worth and cash flow analysis for your Boomer retirement plan and you have taken a big step forward in your retirement preparation.

Don't quit your day job just yet, even If the preliminary cash flow numbers look favorable. More planning and preparation is advisable, and it is a good idea to talk to a professional financial planner to verify the details and make sure you can stay retired and not run out of money in your older years. A good planner will verify your plan under various investment return scenarios. The information that you have gathered will make their job much simpler and quicker (and less expensive) and will give you a better retirement plan.

The average American life span is about 87 years, so if you retire at sixty five you need enough income to securely last another 25 years, at the very least. If you are taking care of your health you may live another ten years or more. These older years are when you will likely have more health problems and need more care, so plan for higher health costs then. Remember, you want a comfortable retirement, and you don't want to run short of money and be forced to return to work after you retire.

When you know the numbers you will be a knowledgeable participant in the planning of your own Baby Boomer retirement.

Live long and prosper!

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