Part 2: Boomers Living Alone – 5 Financial Planning Must Do’s For Singles

Continued from previous article…

4. Cost of Living Increases Mean Changes in Investment Mentality Needed

For quite some time now, the economy has been adjusted for two income households or higher income earners, especially in cities like Boston, DC, New York, Seattle and San Francisco. I have noticed, at least in the Boston area, that there is a group of middle class boomers who are:

  • Homeowners
  • Live alone
  • Are getting squeezed on costs from all sides

Property taxes are staying high, food costs are rising, oil heat has stayed high even though it’s come off higher levels 3 years ago, health and property insurance premiums are rising – and at the same time, these people have seen NO pay raises, lower returns on savings and investments, and shrinking values on homes. Altogether these pressures are causing a squeeze on single boomers so that even though on paper they seem well-off – with a paid off house, retirement account, and some savings – in reality they are struggling to pay their bills.

Oftentimes, these same boomers are using savings to help unemployed adult children and sometimes supporting a parent.

What must change is that the perceptions of what worked, of what was safe, and of what made sense in the past, no longer apply. There is a new normal now. The old normal: save in the bank, invest in CD’s, mindlessly add to retirement plans and their numerous stock mutual funds, and borrow money when expenses arise, all this needs to change.

In today’s world I believe that:

  • Stocks and their dividends could be “safer” than bank accounts
  • Waiting for buying opportunities to get value is better than robotically investing every month
  • Debt, if left out of control, will destroy people

Bottom line: Think differently about what will allow you to survive and thrive even if costs rise too quickly. Make sure your retirement income plan can help defend you from higher costs of living in taxes, insurance, utilities and food.

5. Cost of Living Increases Mean Boomers Must Find Creative Ways to Cut Costs

It’s very important that you focus on ways to cut costs meaningfully. And strategically, you need to work on ways to cut costs on items that will likely rise in cost over the years. Specifically, food, energy, health care costs, and taxes are likely to rise continuously in my opinion.

Therefore, you need to take steps now. Specifically:

  1. Cut energy costs – research alternative, self sustaining energy solutions for your home
  2. Cut food costs – consider growing some of your own food
  3. Health care costs – consider improving your health, likely the one way you can control which can cut your need to seek medical care and thus cut costs
  4. Taxes – there WILL BE haves and have nots at the municipal level. Research cities and towns for financial stability and their budgets. For example, locally, Cambridge, MA offers a very large residential property exemption (~$200,000) and the tax rate is super low (in the $7/mille range). For long term cost controls, think about where you will live.

Some people may laugh at some of these suggestions, especially the growing one’s own food recommendation. But think of this – if food prices rise 40% in the next 3 years, and they COULD (and ARE), and oil rises 40%, and your taxes go up, can you guarantee yourself that you’ll be receiving a 40% pay raise in 3 years? If not, you will be POORER in 3 years than you are now – unless you take proactive steps NOW. What are you waiting for?

For more reading on these topics:

On improving health – see what Bill Clinton is doing (from my personal site

For more on health care cost planning – WHA Financial 101 Section

Health Insurance Costs for Boomers Going Parabolic?

Creating a ‘personal pension’ for retirement income that lasts

No COLA This Year? You Must Control Your Costs to Control ‘Personal Inflation’

How Choosing the Wrong Investments Could Cost You $2,785 Extra in Taxes

If You Are a Single Woman Over 50 – Beware of the “Nice Guy”

Lets be Friends and Stay in Touch!