From the March 2007 issue of Boomer Market Advisor • Subscribe!

Exclusive 2007 boomer lifestyle survey results

Yet another retirement survey, you might think? Not quite. We teamed with Mathew Greenwald & Associates for a comprehensive look at all things boomer -- from finances to family, technology to travel.

Not unlike the boomer generation itself, two of the most prominent findings of the 2007 Boomer Lifestyle Survey contradict and confound. The first is their dynamic nature. Whether it's hippies, yuppies or -- dare we say -- retirees, boomers continue to evolve, adapt and ultimately reinvent themselves to fit technology and world events. The second point, however, finds a glaring hole in the first. The sad reality is that boomers have not adapted to the financial realities they face as they head for retirement. They need help, and financial advisors are in prime position to ensure boomer clients have an affordable quality of life in retirement -- whatever the term retirement might mean.

Adapting to change

When boomers came of age, touch-tone phones were a luxury, computers occupied entire rooms and only three television stations served most areas. Considering how ingrained older, obsolete technology was in boomer lives, it's surprising how quickly they embraced the new. Our survey indicates that three in five boomers use either cell phones (34 percent) or e-mail (24 percent) as their primary means of communication outside of work. The Internet (29 percent) has surpassed newspapers (21 percent) as the primary medium to monitor current events; less than half use television as their primary news source.

The Greatest Generation feared boomers would reject traditional family structures. Many boomers postponed marriage, preferring to stay single far longer than their parents. Some tried communal living, and rates of cohabitation without marriage soared. This has changed. As they enter retirement, boomers are clearly family-oriented. According to the survey, only 9 percent have never married, and 10 percent are divorced or separated. When asked which one of 12 activities is most important to them, a clear majority (54 percent) say spending time with family members. Further, most say they plan to spend more time with family members once they retire.

Boomer concerns

Boomers express satisfaction with their lifestyle, although 25 percent describe themselves as less than comfortable. There is an expectation that affordable lifestyles will decline after retirement. Fully 33 percent expect to be less comfortable financially once they retire, and only 13 percent expect to have a luxurious lifestyle. Judging from their accumulated assets, even these modest expectations might not be realized.

Not surprisingly, as they look ahead, most are concerned by what they cannot control. Health care costs top the list. One-third say they are extremely concerned and another one-third are very concerned. Social Security and Medicare follow closely, with more than half extremely or very concerned about each. Nearly 40 percent express concern about the way in which inflation will affect their retirement finances.

They are less concerned with issues over which they have some control. These include missing their jobs, feeling bored in retirement and experiencing a lack of companionship if a spouse is outlived.

This response, taken together with a wish to spend more time with family, indicates they may not have considered the social ramifications of retirement. Many boomers will retire to find their adult children busy with work and their grandchildren in school, necessitating new activities that bear a cost not factored into their original plan.

Financial responsibilities

While 66 percent of affluent boomers anticipate their retirement income will be lower than it is now, 59 percent believe their expenses will either remain the same or increase in retirement. Moreover, boomers have not addressed even the most basic aspects of a financial plan. Roughly 50 percent do not have a will, 60 percent do not have a living will or health care directive, and 60 percent do not have a rudimentary financial plan.

Most surprising -- and concerning -- is their lack of commitment to a financial strategy. Only 27 percent will stay with a strategy through a volatile market environment, despite a recent industry-wide educational push in behavioral finance. A plurality (49 percent) say they will stay with a strategy as long as it is doing well. This may explain why only 16 percent have accumulated investable assets of $500,000 or more.

Their view of financial advisors

Their overall impression of the character and role of financial advisors is encouraging. A large majority works with at least one financial advisor on a regular basis. Only 25 percent describe themselves as do-it-yourself investors.

When asked how well certain terms describe themselves, boomers are somewhat modest. They were positive about their own level of caring, and 36 percent say it describes them very well. Practical (29 percent) and a good listener (29 percent) follow. The term "financially disciplined" describes them the least.

By contrast, boomers think highly of their advisors. Thirty percent say the term "financially disciplined" describes their financial advisor extremely well. Boomers rated themselves over their advisors in only two of eight positive attributes. These were "caring" (36 percent vs. 23 percent for the advisor) and "good listener" (29 percent vs. 28 percent for the advisor).

Affluent boomer profile

Boomers with household incomes of $100,000 or more represent 34 percent of all survey respondents. They have different attitudes than their less-affluent counterparts. As expected, affluent boomers are more inclined to describe their current lifestyles as luxurious or well-off and are more likely to expect the same lifestyle in retirement. Additionally, they're more likely to describe themselves as both analytical and optimistic and less likely to express strong concerns about Social Security and Medicare. They are also less concerned about losing their home to financial hardship.

Affluent boomers also take a different approach to their financial and investment planning needs. Roughly 60 percent indicate they stay with a financial strategy as long as it performs well, significantly higher than lower income respondents. Additionally, affluent boomers are 75 percent more likely to say they are willing to take some risk with their investments compared with 27 percent of those with lower income.

They're three times more likely to say they have considerable experience with stock investing. Interestingly, annuity ownership is not affected by income level. However, boomers with a financial advisor are more likely to own an annuity product than those without.

Affluent baby boomers are more likely to have a financial plan in place. They are significantly more likely than those in lower income brackets to have a will, a living will or health care directive, and both a formal and informal financial plan.

What it all means

Our findings raise a number of issues and opportunities for advisors. Boomers rate advisors more positively than themselves in a number of areas, describing them as financially disciplined, analytical and optimistic. Yet boomers rate themselves higher in the area of caring, indicating they look for advisors with the same characteristic. While most advisors care deeply about their clients' well-being, advisors should explore new methods for communicating this attribute.

Far too many boomers do not have wills, health directives or even informal financial plans. Advisors who sound the alarm will not only serve their clients, but demonstrate their level of care, as well.

Boomers who wish to spend time with family in retirement should realize their families will not retire with them. Their children will work and their grandchildren will go to school. New activities will be needed -- some with a significant cost. If this is not proactively addressed by advisors, longevity risk will increase.

Lastly, there is deep-seated concern about the cost of health care in retirement, and with good reason. Health care costs continue their stratospheric rise and Medicare entitlement is a major concern. The method by which boomers continue to receive quality health care is a key question. It's prudent for target accumulation amounts to include resources for higher potential Medicare premiums and the possibility of benefit cuts.

In the coming months, we'll analyze more results and provide topical information for your business. Specifically, watch for in-depth analysis on concerns affecting boomer women, as well as overall boomer spending habits.

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