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May 24, 2006 at 08:00 PM
The entry of AARP into the field of private retirement saving vehicles has received a mixed reception from professionals in the retirement industry.
The recently launched funds have been designed as simplified, low-cost savings vehicles for baby boomers who are not saving enough for retirement, AARP Financial says. But while some believe that the funds will indeed help to fill a gap in the retirement space, others believe that there are already enough avenues available for people–even those from middle- and lower-income strata–to save adequately for their retirement, and that other than adding to its own revenue stream with the new products, AARP is not serving a greater purpose.
According to certified financial planners like Bob Mecca, founder of Robert A. Mecca, LLC, an independent life-planning consulting firm in Mount Prospect, Illinois, what baby boomers really need is proper financial planning advice. “The problem is not one of providing affordable saving vehicles to baby boomers, but more of getting them to recognize the importance of financial planning services,” he says. “People need to be educated as to their retirement needs and goals, and they need proper asset allocation models to meet those goals. Whether these include indexed funds like the AARP is offering or non-indexed funds is beside the point.”
Mecca believes that it is only through sitting down with a financial advisor that an individual can really know what is right for them. Once that has been achieved, proper asset allocation is the way to go. But while there is no refuting the value of sound financial planning advice, not everyone has access to it–even if some advisors like Mecca will tailor their fees to suit the income bracket of their clients–and there are some for whom the concept itself is extremely intimidating. Indeed, there still remains a large segment of the baby boomer population that needs help with the simplest and most economical solutions for retirement, argues Lauren Prince, an independent financial planner in New York City, and founder of Prince Financial Advisory. She says an organization like AARP is perhaps best positioned to offer such help.
“The middle-income and lower-to-middle income population is underserved by the retirement finance industry, and people in that strata do feel intimidated by the idea of investing for their retirement,” Prince says. “If the AARP can grab their trust and attention and come up with a product suited for them, that is great.”
