Many Architects who are actively planning for retirement in the next 5 to 10 years are members of the Baby Boomer generation. The Baby Boomer generation is defined as those born between 1946 and 1964 and there are an estimated 76 million Baby Boomers in the United States based on the 17th Annual Transamerica Retirement Survey of Workers. Since these Boomers began working, the world has changed in many ways—and some changes will affect their life in retirement.
Significant changes over many years that will affect retirement plans include:
- a shift from employer-managed plans (pensions) to individual-managed plans (401(k)s);
- an improvement in medical care leading to a longer life expectancy;
- a drastic increase in the cost of health care; and
- several economic recessions that have caused professional and market losses. This fact is especially true for architects, many of whom saw a significant decrease in projects and revenue in the years after the 2008 great recession.
Since these changes have come about during their lifetimes, Boomers may be less prepared for retirement than the generations that follow. In fact, approximately 35 million Boomers do not have any retirement savings according to a 2015 Self Employed Survey by TD Ameritrade in November 2015.
In addition, if you own a firm, you may find it even more difficult to save for the future. The TD Ameritrade survey on self-employment and retirement reported that nearly two-thirds of the entrepreneurs cited “unpredictable cash flow as their biggest challenge.”
Depending on your age, you may be able to do some things to make up for the lack of savings and to be better prepared for a comfortable life in retirement.
If you are in the pre-retirement stage or recently retired, below are a few tips that you may find helpful:
- The federal government allows those age 50 and over to save additional funds on a tax-advantaged basis in a retirement savings plan through catch-up contributions. Take full advantage of being able to save more money for retirement.
- Social security and Medicare regulations change and it’s important to be educated on your options, since a misstep may cost you. A few ages to keep in mind:
- 62 years—you may begin taking Social Security at a reduced payout amount than waiting until full retirement age;
- 65 years—you may qualify for Medicare benefits (depending on work history);
- 66 or 67 years (depending on birth year) – you may be able to apply for full Social Security retirement benefits – but you may want to consider waiting until age 70 to attain the maximum amount for your social security payment; and
- 70 ½ years—you are required to begin taking Required Minimum Distributions (RMDs) from tax-advantaged retirement accounts, such as 401(k)s and IRAs.
- Consider delaying retirement in order to build up your nest egg or plan for semi-retirement or transition to a different career.
- Review your current spending habits and look for ways to cut back on expenses in order to fund your retirement more effectively.
- Pay close attention to your existing accounts and statements, evaluating where your savings are, how the money is allocated, and any fees you may be paying.
- Seek assistance from trusted financial professionals in order to better understand your options, including savings that offer tax advantages, remaining invested after taking RMDs, and evaluating your firm in preparation for your transition.
In order to ensure that your retirement journey is a positive experience, there is a need to plan today. Make it a priority to think about your goals for the future and take steps to put money aside. Use these tips to help you get started on a strategy—no matter where you are in the nearly twenty-year span of the Boomer generation.
The AIA Trust is here to help.
Whether you’re planning to maintain your firm, or are preparing to wind down, the AIA Trust offers retirement savings and distribution vehicles through AXA Equitable that can assist you in achieving your goals. With over 47 years of experience working with association members and 25 years specializing with architects. AXA Equitable can help you review your options and offer you choices that will alleviate the burden of establishing and managing a retirement savings plan. It’s one of the ways that the AIA Trust makes it easier for you to focus on doing what you do best – design, produce, administer contracts, write specs, run a firm – whatever is your true passion.
Please call 1-800-523-1125 to speak with a Retirement Program specialist or visit us at www.TheAIATrust.com/retirement-plans/ to learn how you can start saving today.