Right from the beginning, baby boomers have been different. Never had America seen so many children being born in such a short period of time. As theyve grown through coonskin caps and the Woodstock Nation, to self-actualization training and minivans, this unique generation has insisted on setting its own course and style.
As the tsunami of baby boomers now approaches retirement, its clear that it will again ignore tradition and do things its own way. What does this bode for the financial services industry? It means financial advisors must open themselves to some fresh thinking and be prepared for the changes that might be afoot.
Not like their parents retirement. Any experienced financial services professional knows that retirement for baby boomers is going to be a lot different than that of their parents. Heres a look at some of the reasons why.
New retirees will continue to live a lot longer than past generations. Add to this the possibility of an extended period of low returns in the financial markets that could slow the growth of retirement nest eggs, and its easy to understand why the fear of outliving their assets is a very real concern. Even with investments, annuities, IRAs, life insurance cash values, pensions, defined contribution plans and Social Security, many baby boomers arent so sure they will have enough. Thats one reason why an AARP study of 2,000 baby boomers found that 80% expect at least part-time employment in retirement.
Baby boomers arent looking forward to taking it easy on the front porch swing. My clients are looking forward to an active and vital lifestyle in retirement that, in many cases, will be more exciting than what they have today–and might be more expensive.
Boomers will play their fair share of golf, but they have other things in mind, as well. For example, Ive talked to a number of people who are interested in experiential travel. That means everything from gourmet institutes and swimming with whales, to elder hostels, historical walking tours and spiritual journeys.
Boomers, in general, will be more aggressive with their retirement assets. Several factors point to the idea that the “mutual fund and 401(k) generation” will be more at ease with balanced portfolios than the “savings account generation” that preceded them. Assets will need to provide more and last longer, so a balanced approach to risk and return will most likely be a positive for baby boomers in their retirement years.
There is a declining “Bequest Ethic” in America today. Research of people over age 65 shows a drop in those who believe “Its important to leave an inheritance,” from 56% in the early 1990s to 47% in 2000. This means that baby boomers will spend more of their assets during their own retirement than previous generations did.
Keeping this in mind, I feel it is important in any retirement planning discussion for my clients to include a legacy discussion to make sure the right balance is struck among all of the clients priorities, including lifestyle, heirs, charities and other bequests and, of course, the potential unintended beneficiary, the government. In many cases, clients have not thought through how much they might like to leave and to whom. Talking the issue through always adds value to the relationship.
Turning gross assets into cash. As baby boomers forge their own unique way to retire with new expectations, priorities and concerns, financial advisors face a number of challenges to make sure their business remains relevant and positioned to help these clients for the next 30 years. As pointed out above, this will include considering a number of ideas for adapting your business, some traditional and some not so traditional.