Some boomers plan to be entrepreneurs when they retire from full-time work.
For example, they plan to do consulting, set up a small photo or art studio, or start a small business, says Thomas Brueckner, president of Senior Financial Resources Inc., Nashua, N.H. That raises a question for financial advisorsnamely, what financial arrangements to recommend?
Say, for example, that a 54-year-old employed boomer has $70,000 in liquid assets and wants to start a photo studio at age 60.
In that case, Brueckner says, Id recommend he put $20,000 or so into short-term interest bearing instruments [T-Bills, CDs, etc.], and the remaining $50,000 into an equity index annuity.”
David M. Leber, president of Leber Financial Group Inc., Allentown, Pa., says he would recommend reverse dollar cost averaging. That is, gradually pull money out of traditional longer-term investments and put it into liquid holdings that the boomer can use when the time comes to make the move.
“Also, urge the boomer to start developing relationships with lenders,” he says.
Leber does not favor using deferred annuities for such boomers because the money is not liquid. As for immediate annuities, he says the interest rates are too low today to make them attractive.
But Brueckner says a deferred EIA, combined with the $20,000 liquid account, would be well- suited to many such boomers. Here is why: