What is keeping Baby Boomers up at night? According to a new poll conducted by Harris Interactive for the American Institute of Certified Public Accountants (AICPA), it’s more likely to be gas prices and uninsured medical costs than retirement and other long-term expenses.
“The mounting costs associated with a trip to the hospital, or an unusually cold winter, have the potential to disrupt consumers from saving for retirement,” Carl George, CPA, Chair of the AICPA’s National CPA Financial Literacy Commission and CEO of Clifton Gunderson LLP, said in a prepared statement announcing the survey results. “Consumers are juggling today’s real financial pressures at hand and trying to save enough for their retirement.”
The poll results reveal that 51 percent of Americans, age 45 and older, have greater worries about short-term financial issues such as rising energy costs, uninsured medical expenses, price of gas and credit card debt – than they do about longer-term concerns like caring for aging parents, lack of savings for an emergency and even retirement itself. Harris surveyed 1,000 U.S. adults, 18 or older, during March 2006, under the aegis of the AICPA 360 Degrees of Financial Literacy campaign.
To help boomers plan for any contingencies, including unexpected increases in basic necessity costs, the AICPA advises taking the following steps:
- Stick to Your Plan – Keep Saving You already should have been working off of a savings plan at this point in life and have progress towards building your retirement nest egg. Try to keep saving so that you maintain momentum toward reaching your goals. Take some proactive steps, such as those shown below, to help minimize the risk of unexpected expenses.
- Have an Emergency Fund The years ahead could prove to be a bit bumpy – especially with higher interest rates and rising energy costs – so it is advantageous to have a financial cushion. Set your sights on saving between three and six months worth of living expenses; this includes rent or mortgage, food, utilities, debt payments and other regular expenses you can’t put off even in an emergency. Remember, emergency-fund money has to be safe and accessible, so steer clear of longer-term instruments like Certificates of Deposit (CDs). You’lll want to investigate money market accounts or traditional savings accounts.
- If you Can’t Beat ‘Em, Join ‘Em Consider carpooling as a way to minimize the impact of rising gasoline prices. If you frequently carpool to a job, or to children’s activities, you’ll want to change your liability insurance coverage to reflect the additional passengers in your car. According to a recent study by the Independent Insurance Agents and Brokers Association of America, 85 percent of people who carpool overlook this. Also, shop around for the best gasoline prices in your local area.
- Make Your Home More efficient One way to help manage the rising energy and home heating costs is to winterize your home. Make sure your windows and electric sockets are properly sealed and insulated. Manage your thermostat more effectively, lowering it by a degree or two from your normal temperature. Turn off lights and electronic devices when not in use. Use fans instead of air conditioners to cool the interior. Take short showers instead of baths. The U.S. Department of Energy has predicted a 16 percent increase in average heating oil prices this winter compared to last year. Heating oil prices during the 2004-2005 heating season were 34 percent higher than the previous winter. Consider ordering your home heating oil further in advance before shortages and price increases occur. When combined, these small steps can save you money in the long run.
- See a Specialist Seek the help of a personal financial planning specialist, such as a CPA, if you are faced with a larger unanticipated expense, like a medical situation. Since this has the potential to erode your retirement savings, a specialist may be able to help you design a plan to counteract the effect.
“The higher these rising costs are today, the more time Americans will have to spend working to replace those funds that were earmarked for retirement, “ George adds. “In some cases, this could mean working additional years to recoup what is spent today on necessities. Americans need to remain focused on their savings goals and plan for contingencies like medical, education and energy cost increases, in order to have a realistic view of how they are going to reach those goals.”