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June 24, 2004 at 08:00 PM
For Some Boomers, Income Planning And Travel Planning Go Together
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If a baby boomer client is planning to do extensive traveling once he or she enters retirement, the financial arrangements can be quantified well before the time the person books the first trip, contends David Shapiro, founder and CEO of Retirement Solutions Inc., Los Gatos, Cal.
In fact, just about any goal the boomer has for retirement canand shouldbe quantified well in advance, he says.
Most boomers will not be able to do this alone, he cautions. They will need the advice of an advisor who takes the time and effort to do the planning with the client.
National Underwriter is exploring the relationship between travel and income planning because many researchers are finding that a lot of boomers are setting their sights on extensive travel in their retirement years.
Various travel media have picked up on the trend. The Travel Industry Association of America, Washington, D.C., notes that boomers travel more than other age groups (see chart). Also, other travel sources indicate the airline and ticketing industries are expecting a substantial rise in boomer travel in the near futurethe year 2005 is often cited as the tipping point.
Meanwhile, financial planners are starting to notice that more and more boomer clients are voicing interest in becoming travel buffs once they retire. They want travel that goes beyond the usual trips to see the kids and grandkids. Some want to take a string of world class tours before their health declines; others want exotic adventures and safaris; and still others want to make extended stays in various regions and even other countries.
The question for the advisor is how to help the clients get there, financially speaking. The answer has to do with structuring an income plan for retirement, say experts like Shapiro.
His recommendation is to build a GORP, or a goal oriented retirement plan. Shapiro says he uses that term to refer to a logical, goal oriented process. This process entails quantifying the goals the client has, framing out the expected costs, and then backing those costs into the assets needed to generate the income to pay the costs in the future. The income plan is structured, and adjusted, according to the framing process.
Advisors might start by refreshing themselves on what is important to the boomer. Those who want to travel a lot tend to feel youthful, empowered and optimistic about their future, says Ronald Barrett, vice president of practice management at Allianz Life of North America, Minneapolis, Minn.
At our company, we call such individuals the ageless explorers, he adds.
The research his firm has done indicates that these boomers love freedom and flexibility. And they want their financial plan to reflect those qualities, Barrett says.
Advisors need to keep these things in mind as they work with travel-minded boomers, he adds.
Such clients are going into retirement planning with optimism, he says, and they know what they want. They usually want to protect their assets so funds will be available to them when they need them the most; and they want to create an income stream that will last through their lifetimes so they will not have to worry. They want to set things up now, so they can move forward and travel and do other things when they retire.
In short, they want safety of principal, security of assets and flexibility to ensure financial freedom, he says. They want to set it up and get on with their lives.
The advisor needs to structure a plan that achieves those goals, say experts.
Doing income planning for any client is not a cookie cutter kind of thing, stresses Robert Fagan, an independent agent and registered representative in Lencadia, Cal. You have to get to know the person and the goals, needs and objectives.
Many boomers come to the planning table with a lot of unknowns and fears, he says. The nation is at war, there have been terrorist attacks and there is talk of more such attacks. They worry about this and about the impact on their financial investments.
They also come to the planning table wanting to see growth in their portfolios, especially the boomers who want to travel a lot during retirement. They will tell the advisor, I want to spend my money, but I also dont want to run out of it, so I wont have to depend on my kids, Fagan explains.
All of this creates a lot of uncertainty, he says.
A change he says is occurring today surrounding this uncertainty is that a number of insurers are starting to target these issues in new products they are designing. They are building in flexibility, income, reasonable returns and inflation protectionso the clients can spend their money (on travel, for example) but still have money for later on.
Not every producer has clients who name extensive travel as a targeted retirement activity for which they want to plan. And not every advisor thinks it is important to develop strategies for travel-inclined boomers as opposed to boomers with other inclinations.
Take John LeCheminant, for example. A financial consultant with Equity Services Inc. in Baltimore, Md., he says he never encounters the travel plan as the isolated need. Nor does he encounter boomers or any other clients who say they are looking for a worry-free portfolio.
People come wanting objective recommendations, he says, and if theyre in the pre-retirement stage, we look at all their retirement goals, what other income they have, and go from there.
