Retirement action plan for middle-class boomers: Think cash flow, health care

About 8,000 baby boomers are reaching retirement age each day, but fewer than half can expect to maintain their pre-retirement income. A new book by financial adviser Roger Roemmich called “Don’t Eat Dog Food When You’re Old” (iUniverse, 2013) seeks to change that percentage, outlining strategies that middle-class investors can use to boost retirement income and pare down risk. “Too many retirees are stuck watching television instead of checking off their bucket list,” said Mr. Roemmich, the chief investment officer at ROMA Wealth Strategies. The crux of Mr. Roemmich’s argument is that investors need to stop thinking about retirement as a race to accumulate assets, and to start thinking in terms of ensuring adequate cash flow. For most middle-class investors, the low-interest-rate environment makes financing any decent lifestyle off of asset returns nearly impossible. The solution, he suggests, is to explore assets beyond the traditional staples such as CDs and to take other forms of retirement income seriously, such as Social Security. One of the biggest mistakes investors make is retiring too early, he writes. For many investors, Social Security is the biggest source of monthly retirement income, and the difference in lifetime income between retiring too early and working past 65 can be huge. Another major detriment of retiring early is losing years of full-time income. People’s salaries often top out shortly before retirement. Rarely does a retiree who returns to work ever see such a high income again, Mr. Roemmich said. Investors also need to get creative to maintain decent investment income in a world where CDs are returning less than 1%. “Variable annuities are one good way to fill the bond void,” Mr. Roemmich said. “They offer guarantees of cash flows from some very strong companies.” Perhaps the most difficult aspect of retirement planning to discuss is long-term care. But failing to take this into account can have serious consequences, Mr. Roemmich writes. One of the greatest mistakes retirees make is purchasing skimpy Medicare plans to cut down on monthly expenses. “There’s a saying you’ve no doubt heard, possibly as a kid: pennywise and pound foolish,” he writes. “Don’t skimp on health care. It could come back to bite you.”