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Educating The Boomers

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The 76 million baby boomers are heading into their golden years.

Most will have to do without traditional defined benefit pension plans, and few grasp the effects that general inflation, medical expenses and shortfalls in Social Security benefits might have on their retirement income.

Researchers working for Mainstay, a unit of New York Life Insurance Company, New York, found that 42% of the boomers surveyed believe that they will “need the help of professionals when it comes to managing (their) money,” but that only 13% of the boomers expected to go to an advisor for help in the next 3 to 5 years. Meanwhile, 90% of the respondents said their financial situation was very or somewhat secure.

What can benefits advisors do to help their clients help the boomers?

about retirement planning may be part of the solution.

Experienced retirement services advisors may be familiar with efforts by a Minneapolis-based financial services company to expand its 401(k) plan participant education program for participants who already have retired. The company makes representatives with Series 7 licenses available via a toll-free number, and the reps are making outbound calls to educate participants who are retiring.

Another provider has organized successful pre-retirement seminars by pooling participants from several different plans in a single market. That company supplements the typical retirement-oriented financial education and advice with information about related topics, such as estate planning, wills and health care proxies.

Advisors who want to help employers develop or buy boomer education programs of their own should focus on recommending customized communication materials and tools such as Web-based decision support tools that produce personalized results. Some studies have suggested that customized information may be able to increase retirement plan participation by as much as 21%. Customized information also has an impact on contribution rates: Tailored information can increase the annual plan contribution rate to 9.8%, from an average of 7.8%.

Here are some educational efforts that you could recommend to your retirement plan clients:

? Customized enrollment kits. The kits could include the employee?s date of birth, estimated retirement date, current salary, examples of various contribution percentages and how each rate would affect his or her take-home pay, and projections of what that will amount to at retirement. The more customized, clear and succinct the package is, the more likely it is to engage the employee.

? Annual retirement benefit statements. Once involved, participants need a simple way to measure their progress and make any necessary changes. Annual benefit statements that track progress toward a specific income replacement goal are a valuable tool that is now available from many providers. Newer versions of these reports are generally available online or as hard copies. These statements are much more comprehensive than the traditional “quarterly statement” and may include total savings to date, suggested asset allocation charts based on age, and projections at retirement informing the participant if they are on track, and if not, providing suggestions about how to get on track.

? Segmentation of the employee population. Technology allows providers to track a vast amount of data and run customized reports at any time. With this data, the employee population can be segmented and specifically targeted. For example, providers can send a targeted message to participants over age 60 with 100% of their assets in one very aggressive investment option or to those participants not deferring enough to receive the full company match. These targeted messages are more likely to hit home with a participant and can be delivered via e-mail, a postcard to the participant?s home, or even via a telephone call from a phone center representative.

? Online decision support tools. Although not new, online tools have not seen as much utilization as one might have expected. However, they do provide practical advice to those that make use of them. Unfortunately, many participants do not take the initiative to use these tools and many find them too complex. As these tools evolve, we can expect to see them become more user-friendly and for providers to introduce versions of the tools that appeal to investors who have different levels of sophistication.

Robert F. Clark is a partner and Kristen Ryan is a consultant at Spring Consulting Group L.L.C., Boston, a company that provides strategic consulting services for insurance companies and other financial services companies. Clark can be reached at [email protected]. Ryan can be reached at [email protected].

Reproduced from National Underwriter Edition, October 14, 2004. Copyright 2004 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.