From the June 2006 issue of Wealth Manager Web • Subscribe!

Retirement Their Way

"We want the world and we want it now!" The same sense of insistence, entitlement and angst that permeated the dark and hypnotic Door's classic "When the Music's Over," is apt to appear when some of your wealthy Boomer clients sit down across the table to discuss their retirement goals and long-term planning challenges. Chances are also pretty good that the world they're imagining today bears not the slightest resemblance to what they'd hoped for in their 20s and 30s.

This is a group used to devising individualistic, out-of-the box solutions, so it's a good bet that planners talking to Boomers about a future of golfing and Princess cruises will be barking up the wrong tree.

"Boomers are rejecting the term retirement," observes Deena Katz, a CFP in Coral Gables, Fla. whose fee-only firm targets customers with $3 million to $10 million in assets. "They want to stay mentally and physically active and the word retirement doesn't seem to fit with what they want to do," she says.

"Boomers are, by and large, still going to be working at age 60, and probably at age 65 in some cases," agrees CFP and CFA Rick Brooks of Blankinship & Foster in Solana Beach, Calif.. "It may be consulting, non-profit, or entrepreneurial, but many will still be working,"--and enjoying it.

Katz notes that her wealthy clients have amassed all the material goods one could ask for--including "the big houses, the three-car garages and the new car every couple of years." Now they are looking for something more fulfilling, and for some, that means a second or third career and a move to a new location with a better quality of life. "The good thing is that Boomers are in demand in the job market because we are experienced and wise, and employers can't replace us," she adds. Thus, "Many employers are creating consulting jobs, flex schedules, part-time work opportunities to accommodate our need to work and pursue other interests at the same time."

Meanwhile, Boomer clients and prospects with $1 million to $5 million or more in investable assets are facing challenges their parents did not--creating real opportunities for planners who can speak the same language.

"Historically, retirement has been something of a fundamental change in a person's life," says Brooks. "You work, you retire, and at some point your heirs inherit what you haven't spent. Boomers who are just starting to turn 60 are hitting retirement with a somewhat different perspective. They are hitting the pre-retirement phase (empty nest) generally later than their parents did because they had their kids later, or divorced and remarried later or started working later. They are generally in better health, with more active lifestyles than their parents at the same stage. Often, affluent Boomers are wealthier than their parents at this stage as well. They often typically have higher expenses, however," Brooks points out, "so their relative affluence may not provide the same level of retirement security that their parents could expect."

Whereas stock options, hedge funds, deferred compensation plans and other sophisticated savings and investment instruments will all come into play at this level, demanding your technical skill, Boomers need help with broader lifestyle issues their parents never envisioned. Wealthy Boomer clients will often find themselves supporting adult children as well as aging parents, using savings, insurance and investment strategies that might raise an eyebrow or two. "Late" Boomers--born between 1956 and 1964--face additional challenges as employer-sponsored pension and retiree healthcare programs have dwindled considerably over the course of the past decades, and they can no longer rely on the guaranteed benefits their parents enjoyed.

Looking after the folks...

Consider that as of 2003, about 21 percent of the adult population, or 44.4 million Americans, already provide unpaid care to an adult family member, and about 16 percent of Americans, or 33.9 million, care for someone aged 50 or older, according to a recent survey from The National Alliance for Caregiving (NAC) and AARP.

"Most Boomer families have had to manage at least one of their four parents through some kind of health crisis, so long-term care issues are extremely important to them," says Brooks.

"We're not insurance brokers, and we're were not going to sell them long-term care insurance, but we do help them walk through the statistics to see whether or not that's going to make sense for them financially," he adds.

Long-term-care insurance can be very costly, especially if someone is planning to fully fund a high-end facility, the advisor notes. "Part of our job, even for someone of significant wealth, is to help them determine if they are likely to need long-term care insurance and how much they should purchase if they do need it," says Brooks. Someone who pays for fully loaded long-term care coverage, covering an insured with a poor health history at a high daily benefit over a long benefit period with no wait early on--at age 50 for instance--could easily pay several thousand dollars each year for LTC insurance, he says, only to use six to 12 months of coverage in old age. Riders to protect against this exist, but they make the coverage even more expensive.

On the upside of the equation, a wealthy client who chooses to self-insure has considerable flexibility in the quality and cost of their care. "We have one client that has moved into a retirement community where they will move up the care scale from independent living to assisted living to skilled nursing care as their need progresses. This works because they are in good health and have traded their home for the retirement community. "They are paying around $5,000 per month," Brooks notes, in addition to their original buy-in of approximately $500,000. They are very active, and have considerable freedom and resources available to them in their community.

"It is extremely unlikely that these clients, whose monthly expenses exceed $20,000, they will be able to spend through their estate," says the planner. "We expect that this kind of arrangement will become more popular as wealthy Boomers live out their retirement years. [NOTE: QUERY ON THIS PARAGRAPH]

...and supporting grown kids

Advisors are also finding it necessary to step in and give advice to wealthy clients with grown children who have returned to their parents' homes or who are relying heavily on their family's financial support.

Hatch cites a 2004 survey by Monster, the Internet job site, showing that nearly 60 percent of college graduates were expecting to move back home with their parents. U.S. Census figures for 2000, the latest available, indicate that almost 12 percent of 25 to 34 year olds were living at home with a parent, up from just 8.7 percent in 1960.

"We'd set up a budget for a client with a portfolio valued at $1.8 million, in the first year, saying $90,000 is what they're planning to spend per year. The following year we see they've spent $140,000 instead. Gently we ask the question: 'Did you make some home improvements? Where did the $50,000 go?' Often you'll hear, 'I needed to help my kid with a home down payment or a new business.'

Hatch says his role as a planner is simply to point that out to the client, and just make sure they're making conscious decisions. "We have clients that make $40,000 per year and others that make $600,000--neither one of them has enough income," says Hatch.

"Most Boomers dramatically underestimate their longevity," he continues. If they're retiring early, at, say, age, they need to plan on 35-40 years of retirement. "Dependent children know no socio-economic barriers," the advisor concludes. He advises Boomer parents that they need to start early developing the habits and expectation that their kids will be financially independent at some point. Children may need a helping hand from time to time, or need to move back home--that's fine, says Hatch, but you need to have the discussions about expectations. Hatch's favorite resources on this topic is the book The Blessing of a Skinned Knee, by Wendy Mogel. "Even though this book addresses younger children, it still reveals that too often parents are afraid to have their children fail at anything, or experience any pain, when quite often those are the most valuable learning experiences we can have."

Katz says the dependent children issue is clearly a hot button with Boomer clients--which is why in January, her firm--Evensky & Katz--began offering free financial education seminars providing "a crash course in personal finance:" Help with money management, saving, and investing to the children of clients and other interested Boomers aged 50 and up. The seminars tend to draw 30 to 35 students two or three times a month. "When our generation's children got into trouble, we bailed them out," says Katz, who is 56. "They had credit cards at obscenely young ages, and we were spending like there was no tomorrow. Our kids got into trouble and wound up coming home. That's one of the things we don't want--we want them financially independent!"

The "Phase Two" Career

The bottom line: Wealthy Boomers need help from planners who can relate to their unique lifestyle issues. Much more than it did for their parents, attaining personal enrichment triumphs over any kind of "play it safe" scenario a planner might describe. Clients in their 50s and 60s--and sometimes younger--will welcome your input as to how they might go about pulling up stakes and moving to a smaller, quieter place--possibly near a college where they can take classes or teach. An article in The Detroit News last February aptly titled "Boomers leave comfort zone to pursue happiness," offered the examples of an emergency room doctor who became a real estate broker, a single mom who left a lifelong career in publishing to fulfill her dream of becoming a police officer, a married couple who abandoned their regular 9 to 5 stints to open a dog-care facility, and a speech pathologist who decided to become a bagger at Safeway because he wanted to leave the job behind when he went home at night. A 2005 study by Euro RSCG Worldwide of 1,000 men and women over the age of 45 living in the United States found 62 percent of Boomers surveyed described a total career change as a viable option for them. Boomers also cited above average interest in pursuing new areas of study, the survey found, and tended to be enthusiastic about returning to university life.

Boomers need help not only deciding how and where they might want to relocate or purchase a second home, but also reconsidering their commitment to family and education, says Katz. "I'm a classic," she says. Katz' own teaching job at Texas Tech university in Lubbock, requires that she travel four and a half hours back and forth every other week from her home in Coral Gables, but "This is what I want to do," she says. Katz has an apartment near the university, and when she is there she enjoys attending the Lubbock symphony.

To help clients interested in picking up and starting over in a new place--a desire which may arise out of nowhere or come with a major life transition such as the death of a close friend or relative, "We spend a lot of time interviewing and taking data," Katz explains. "What does your new phase of life look like to you? Many planners ask, 'What will make you happy? kinds of questions, but frankly, we aren't therapists. Our job is to help you crystallize your future, prioritize it and figure out the various ways you can get there."

For clients who have flexibility and broad boundaries, Katz observes that Money Magazine's "Best Places to Retire" survey, available at (, is a great place to begin. The survey allows you to search for your favorite retirement locale based on factors that include affordable housing, plentiful leisure activities and cultural options, low pollution, low crime rate, low auto insurance, short commute time and access to quality health care. You can even search for stats as to where the most golf is played, or where the best educated neighbors are likely to be found.

One of the most enjoyable--albeit challenging--part of the process for clients is getting them to write their wish list including the sorts of things that are important to them in selecting their retirement location. Their own list might include: proximity to hospitals and healthcare centers, colleges and universities, community programs, cultural interests, places to walk and hike and good weather. "We need to get a good sense of places because we will need to look at what your expenses will need to be," says Katz.

Boomers reinvented so much, and one way or another, they are reinventing retirement as well.

Janet Aschkenasy ( is a freelance writer who has covered Baby Boomer issues extensively.

Hot buttons for Boomers

Rick Brooks of Blankinship & Foster in Solana Beach, Calif. says when the clients are high-net-worth Boomers, the top three issues his firm most often needs to address are:

1. Financial Independence. "Since retirement is often a moving target, we must help the Boomer define financial independence, identify a target for that to occur, and develop savings plans to get there or distribution plans to support their lifestyle once they achieve it." Boomers generally will have higher expenses in retirement than their parents: "The typical assumption that you will spend 80 percent of your pre-retirement income in retirement often falls well short of typical Boomer expectations, especially in the early, 'go-go' years of retirement," says Brooks. "Our experience has been that most retirees will spend at least as much, if not more, in their early years of retirement than they did in their last years of working."

2. Healthcare and LTC issues. Making plans for healthcare and long-term care coverage as well as income will be critical to Boomers, since many of these expenses that used to be covered under corporate pensions and benefit plans are no longer available.

3. Philanthropic giving: Actually, Brooks says, "Our experience has been that affluent Boomers appear to be generally less interested in philanthropy than their parents, and if they are going to be giving money away, they are more interested in continuing to prepare their families for the future by funding their grandchildren's education, for instance. "I think that this is driven at least in part because of the questions surrounding the security of their own retirement," he adds, "so they are less comfortable with planning to irrevocably give away their wealth, at least until they see how their retirement shapes up and if they can actually make it work with what they have."--JA

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