How can financial advisors nudge mid-income baby boomers to start thinking aboutand doingincome planning?
“One way is to help them realize that they do not have to be multi-millionaires to work with a planner,” says Thomas Mengel, regional support coordinator with GE Financials Independent Accountants Network.
Based in St. Louis, Mengel regularly advises blue-collar workers and mid-market people in dual-income households. “Many are earning $80,000 to $90,000 a year in combined incomes and they have significant income planning needs,” he says.
However, some of these earners believe income planning is only for the rich, Mendel adds. Others arent sure what income planning is.
Therefore, he says, when working with clients, he makes it a point to show what it will cost if they use a “spend-down” strategy (withdrawals from assets) to finance their retirement years. The numbers often are compelling enough to convince people to start thinking about doing something more than spend down, he says.
His comments coincide with findings in a new survey GE Financial has published on consumer attitudes about income planning. It was conducted by Opinion Research Corporation and completed in March 2003 (see chart).
The findings show that many Americans have unrealistic expectations about the money they need to retire comfortably, says Frank Gencarelli, executive vice president of GE Financial in the Richmond, Va., office.
For example, two-thirds say that, during retirement, they would need 75% of their working income. Yet, in another 2003 survey, Gencarelli continues, “fewer than 25% of Americans age 40-59 indicated they had saved at least $100,000 toward retirement.” (This other survey is from the American Savings Education Council and Employee Benefits Research Institute.)
The GE survey also shows that many Americans are “woefully uneducated” about retirement income planning concepts, Gencarelli says. “For example, 41% are not familiar with the term retirement income planning, and they appear confused about the difference between traditional retirement investment vehicles and retirement income planning vehicles.”
GE intends to use these findings as a “call to action,” says the executive. That is, the companya provider of retirement income products–wants to get the word out to consumers and their advisors about what income planning is and about how it can help people fund their retirement.
“Wed like to create some space in the industry on this, to get more companies on board,” Gencarelli says. “We want to create some buzz.”
One way to do that is to reach advisors about the importance of income planning, says Norm Mindel, executive vice president of GE Financials Independent Accountants Network in Schaumburg, Ill.
Many advisors still shy away from income planning, even if they know about the products and strategies, he says. This can be due to their own confusion about income products and strategies, uncertainty about how to present the subject to clients, or concern that the advisor will be unable to make a living in income planning.
This will change as advisors learn more about income planning and how it can benefit clients and their own practice, says Mindel. “You need to know that this will help you do well for your client.”
Many producers today still are focused on helping people save for retirement, he points out. “So, as word gets around that you are focusing on income planning, you will be able to distinguish yourself from other planners. This becomes your value-added proposition.”