Retirement Income Questions? See A Planner, Speakers Say

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Washington

“I should have consulted a financial planner to help figure out how much money to save and how much money my wife and I would need when we retired,” said a speaker here.

He should have done that, he said, but he didntso “I made a lot of mistakes.”

As a result, the Maryland resident said he now devotes some of his retirement time to urging others to plan aheadpreferably with the assistance of a professional advisor.

Those comments fell on receptive ears. The speaker was addressing the first retirement income conference ever to be sponsored by the National Association for Variable Annuities, Reston, Va.

Industry research has repeatedly shown that many people dont know how to manage their money in retirement, so NAVA had organized the conference to provide a forum for members to explore solutions–using annuities–that could help. The speaker laid out the financial issues for the group plainly, from a retirees point of view.

A sobering note: The retiree was not a financial neophyte. He was Stan Hinden, a seasoned financial journalist who, despite having written about stocks and mutual funds for 12 years for The Washington Post, found that, once he retired, I didnt know as much as I thought I did about personal finance.”

He and his wife did have 401(k)s, he allowed, “but we had no strategy for us as individuals or as a couple.” Furthermore, “I knew nothing at all about Social Security, Medicare, Medicare supplement insurance, long-term care insurance, IRA rollovers,” and the like.

“Why didnt I know?” he asked, addressing a key concern on everyones mind.

In Hindens case, the answer was threefold: “I was too busy with my job, I was not yet retired, and no one came around saying I had better look into this.”

No longer uninformed, he now writes “Retirement Journal,” a monthly column in The Post on retirement issues. He has also published a related book, How To Retire Happy.

“Its important to save for retirement,” he concluded, “but its also important to know in advance what its going to cost to live in retirement.” Thats where planners can help. “I would like to see people going to visit their financial planners once a year” for a checkup, as they do their doctors, he said.

Several other speakers likewise saw the role of the advisor, and of sales and marketing departments, as pivotal to helping retirees meet their income needs.

The baby boomers are aging, they are living longer in retirement, they have retirement savings from their defined contribution plans to manage, and they must deal with shifting market returns, pointed out James S. Riepe, vice chairman of T. Rowe Price Group Inc., Baltimore.

Many do expect to have enough money to live in retirement, he allowed, but he said most people are not saving enough to do that. As a result, they face an “unprecedented era of self-insurance.”

Yet “60-year-olds are more active, vital, attractive and richer than we ever imagined,” said keynote speaker Ken Dychwald, founder and president of Age Wave, LLC, Emeryville, Calif., and author of two books on aging and the mature market. In fact, he said, many retirees are going back to work, volunteering, starting new businesses, going to school, providing regular care for grandchildren, and so on.

They will “transform retirement” and concepts of maturity, he said, calling the new lifestyle of adulthood “cyclic.” Now, instead of progressing from birth, marriage and parenthood to retirement and death, many see their retirement years as a time to reinvent themselves, he said.

Retirement is “about to get much more interesting,” Dychwald said. But how retirees will finance this is a concern.

Right now, he said, about 25 million baby boomers have less than $1,000 in savings; they are living on credit cards. And many are spending their 401(k) money, rather than rolling it over, when they leave an employer.

In short, “boomers dont save, they leak their 401(k)s, and they dont plan for their retirement,” he said. “We need a financial wake-up call.”

His suggestion? “The more complicated and exciting the path of adulthood becomes, the more people will need people like you to help them manage.”

But to serve this market effectively, he said, “your industry needs to be equally excellent in people as in products.” Focus on helping people have the financial freedom to live the lives they want to live in retirement, rather than on selling products, he said.

Richard M. Reilly, president and CEO of Allmerica Financial, Worcester, Mass., added some other suggestions for the variable annuity industry. “We should focus on making the investment necessary to drive our future,” he said. This would include upgrading archaic systems and addressing certain problems that consumers have with variable income annuities (like fluctuating payments, and little liquidity).

Furthermore, he said, VA insurers need to address the complexity issuesfor instance, by offering sales tracks that help producers understand and explain the product.

But even with technological improvements, retirement funding will be a challenge, predicted Jeffrey M. Green, first vice president and product manager-Estate & Trust Services for SalomonSmithBarney, New York City. “Technology doesnt make thing easier; it makes things more difficult,” he said.

For instance, he predicted that retirees wont be able to keep track of all the moving parts in their financial plans and products. Therefore, clients will need advice and expertise, he said. “Advice will rule the day.”

And that, Green said, “will be good for us all.”


Reproduced from National Underwriter Edition, June 22, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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