Talk With Older Boomers Now About Income Planning, Experts Say

By

Brokers need to be talking with their baby boomer clients about their retirement income needs, and they need to start the discussion now, according to Moira Moldenhauer.

She is owner of Seniors Financial, a Buffalo, N.Y., division of Moldenhauer Advisory Services, which is owned and operated by her husband.

Combined, Moldenhauer and her husband have 500+ clients who “are moving closer to retirement and who need advice and counsel about the financial aspects of living in retirement.”

Older boomers, now aged 47 to 57, are in greatest need of help. “These clients have to start dealing with retirement issues now, so they can get their money and their financial plans in place while they are still working,” says Moldenhauer. They need to look at not only income protection plans but also protection for the unexpected, such as long term care expenses, she adds.

Based on calls and e-mails sent to National Underwriter, advisors in various parts of the country–and financial services companies as wellare starting to embrace this thinking. This article reviews why and also looks at some strategies to consider in broaching the topic with boomer clients.

Future articles in NUs all-new Advising Boomers section will cover specific income planning needs that boomers have. If you have suggestions to offer, send them along to advisingboomers@nuco.com.

Why broach the subject now? Many seniors and boomers do not have enough assets to retire comfortably, says Matthew Greenwald, principal of Matthew Greenwald & Associates, a Washington, D.C. research firm.

“For instance, in 2000 the median household wealth for workers age 55-64 who have a retirement account was only $273,760,” Greenwald says, citing a census data analysis. For boomers age 45-54, the number was lower–only $201,690. Yet both groups have household debt–$36,400 and $63,200, respectively–and the most valuable asset for each was home equity.

“Thats scary!” Greenwald says. “At best, most people will be financially stretched.”

Compounding matters is the fact that many people will live 20 or more years in retirement, according to Rick Carey, managing director-professional services at VARDS/Info-One, Roswell, Ga. Many people realize that, he says, but “most dont know what their current assets will look like (in terms of income) once they retire, or how inflation will erode its value.”

Another reason is that consumers have tremendous need for income planning assistance–a need that advisors and providers can meet, suggests Jim Sholder, a principal of The Diversified Services Group Inc., a Wayne, Pa., consulting firm that tracks demographic trends.

For example, pre-retirees surveyed by DSG expressed a high level of discomfort about how they will manage in retirement, says Solder. In one survey, 39% said they “dont know” how they will manage paying for unexpected events that may happen when they are retired.

Currently, he adds, many people are uninformed about their retirement needs. In 2000, for example, a DSG survey of annuity owners age 60 and up found that only 23% of the polled group expressed concern about outliving their assets–even though people now live so much longer than they used to.

Whats more, adds Solder, of that group, “41% said they did not know how to deal with” outliving their assets.

Moldenhauer of Buffalo recommends that advisors talk with boomer clients about these issues. “Often, the broker needs to bring up the subject of income and retirement planning,” she says. “You have to translate for the client what the future might hold if they dont plan.”

Dont use retirement as a ploy to get people to buy, she stresses. But do “help clients get in touch with what they are already feeling, so they can use their heads to do the planning now” when they still have time.

Income annuities have the potential of serving this markets needs in a highly efficient way, says Carey. “But many income annuity players have not yet cracked the code on consumer education, broker education and product design.” To help turn that around, Carey and Greenwald recently formed the VARDS/Greenwald Strategy Service, a boutique provider of research, analysis, consulting and other services in this area.


Reproduced from National Underwriter Life & Health/Financial Services Edition, July 28, 2003. Copyright 2003 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.