Boomers Need To $tart $aving

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Many planners working on retirement plans for baby boomers are finding the same resultsmost boomers havent done enough retirement planning, if theyve done any at all.

“They have to be a lot more serious than they are right now because the majority of boomers havent done any planning,” says Frank Dunaway III, a planner with Compensation-Benefit Systems in Carthage, Mo.

“Between having the big house, two or three cars, a place on the lake, a nice vacation every year and putting two kids through college, there hasnt been enough discretionary income to save for retirement,” Dunaway says.

As a result, boomers thinking about retiring in the next five to 10 years will not be adequately prepared to do so.

“The major issue is theyve never sat down with anyone and planned for retirement,” adds Michael Blau, an agent with Farmers Financial Solutions, Kansas City, Mo.

Blau estimates that less than 30% of the boomers he speaks with have done any retirement planning.

“Its a small minority that has actually done a plan,” adds John Ladley, a partner with the insurance and actuarial advisory services within Ernst and Young, Philadelphia, Pa.

Planners need to encourage members of the boomer segment to focus on saving for retirement, says Dunaway. Those boomers who may be facing retirement in the next five to 15 years really need to “batten down the hatches,” he says. “With a serious effort, saving for the next 10 or 15 years could have a significant impact on their retirement. Every year is critical.”

Blau encourages his clients in this situation to maximize their savings by stepping up qualified plan and IRA contributions. “The new rules with IRAs help.” Boomers also need to save as much as they can afford to in addition to these qualified contributions. “Were trying to save the maximum, just make it affordable somehow so they can retire without having to work at McDonalds,” he says.

But even for those boomers who have done some saving, many have been forced to be heavily concentrated in certain funds and investmentsthey havent diversified their risk enough, according to Ladley. Some of these boomers have been restricted to invest more than they should in their company stock or have been forced into a limited fund offering by their companys 401(k) plan.

And for boomers who were able to roll their 401(k) assets into an IRA, “they may have rolled them into one specific investmentthere are a lot of situations like that,” he says.

Ladley explains that many boomers are hoping to have to same type of lifestyle when they retire that they enjoyed in pre-retirement. “Baby boomers envision themselves doing a lot more interesting and stimulating things in retirement, like going back to school, traveling more, maybe buying a second home,” he says.

“Most of them arent going to meet the objectives theyve set, theyve undersaved as well as underplanned,” says Ladley.

Boomers need to recognize that there are going to be shortfalls in their retirement, he says. Part of the planning process involves making some trade-offs today in order to have the kind of retirement they want. “They really need to look at this while they still have some time to recover and can still do something about it,” he says.

“Better late than never,” adds Blau. “Get something going now, get a plan in place.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, October 24, 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.