Will boomers “spend it all” by the time they die? Many think they will do just that, according to a recent survey from AXA-Equitable, New York. This has important implications for financial advisors and planners, experts say.
Even if boomers plan to spend their entire nest egg, they will still need–and want–information, education and ideas to help make financial decisions, says Gus Catanzaro, a financial planner and partner at Professional Planning Services, LLC, Melville, N.Y.
But their objectives will differ from legacy-minded boomers, he indicates. The planning conversations may be different, too. This article examines the planning implications of this trend.
In the survey, 64% of 435 American workers indicated they expect to spend their entire nest egg in retirement.
That “may be a shocking thought,” says Catanzaro, who represents AXA Advisors. But many workers “are realizing they can’t give their assets away or spend assets quickly, because they may need the money longer” than previous generations, he says.
Furthermore, people are realizing they will need a lot of money in retirement, says Kenneth Gelman, vice president-market research (U.S.) for AXA-Equitable, New York. They are becoming aware of long term care and medical costs, longevity realities, and inflation, for example.
For them, “leaving a legacy to the children is [becoming] a secondary or tertiary issue,” he says.
(The survey was part of the 2005 AXA Retirement Scope, a probe of retirement issues faced by 6,915 people in 11 countries. AC Nielsen conducted the U.S. part of the survey, sampling 435 workers and 413 retirees by telephone.)
Norm Mindel is not a bit surprised to hear the survey finding. A financial planner with Genworth Financial in the Schaumburg, Ill., office, he says retirement is “the No. 1 concern of boomers. It takes them a while to get to the estate planning.”
Boomers often tell Mindel, ‘I’m not that concerned about my kids. I had a good job; I raised them and paid for their college education. Now, I want to be sure there is enough money to last the rest of my life.’
This isn’t coming from greed, he says. “It’s coming from fear and survivability.”
If people have large estates and no retirement income issues, they tend to be “more interested in estate planning,” he says. So are boomers who have special needs children.
But most of the rest want to spend and enjoy life, Mindel says. They also look at their mortality and morbidity risks, and “they don’t want to end up bankrupt.”
Even relatively affluent boomers are thinking more about spending on themselves than legacy planning, adds Gelman. AXA focus groups have found that many such boomers who delayed having children ended up paying for college late in life, he notes. “Now, they can’t even think about retirement expenses,” let alone estate planning.
Other affluent boomers are simply big spenders. Planners tell Gelman it is difficult to get some of them even to sit down and make a budget, let alone to plan.
Therefore, even though affluent boomers are the ones most expected to leave money to children, that doesn’t always happen. “Some would like to,” Gelman says, “but many worry about having enough for themselves. They say, ‘maybe my kids will have to do things on their own.’”
What are advisors to do when working with boomers who plan to spend it all?