Certain things that baby boomers say drive some financial advisors wild–because the statements make no financial sense at all.
Some of these statements–call them boomerisms–are shown here. So are some suggestions agents can use to redirect the thinking and planning.
Boomers do have sayings and concepts that help in the planning process, say advisors contacted for this story. However, the more productive statements often don’t surface until the advisor can get past drive-wild statements such as these:
Live for today. Boomers always are telling Larry Brown that “they’re living for today,” especially since they “don’t know if they’ll be around tomorrow.”
His response? “I tell them that’s all well and good, but let’s look at reality,” says the managing general agent for Brown, Brown and Gomberg/CPS, Skokie, Ill.
Then Brown takes out a compound interest table and calculates what the boomer will have by retirement age, annually compounding the money they now earn at 5% to 6%. He also tells the boomer to be prepared to spend, in retirement, what he/she spends today–”because boomers will have more time and they like nice things”–and to factor in inflation, too (he uses a Consumer Price Index factor of 4% a year).
If a boomer plans to retire at age 62, Brown does the same thing, being sure to factor in the impact of the perceivable 30% cut in Social Security benefits that will result.
The numbers usually work, Brown says. “The boomers will say, ‘Oh! We need to start saving more.’” That opens the door to deeper inquiry into spending, saving and related issues.
If the numbers projected at retirement look like they’ll fall short, he says he always asks, “Where is the money you will need to live?”
I’ll kill myself first. A lot of men (not women) say they don’t want long term care insurance because, if their health gets that bad, they will kill themselves, says Paul Devore, chief executive officer of FMS Financial Partners Inc., Encino, Calif.
“I find that amusing since those clients won’t likely have the capacity to take that action at that point,” he quips.
The real issue is that men don’t want to think about being incapacitated in this way, Devore continues. “They can imagine being dead but not this.” Many men also think the wife will take care of them.
In response, he points out that, in the unlikely event LTC does happen, having money to continue to support the family is critical to avoiding the destruction of everything the man worked so hard to build. Devore also inquires if there is a guarantee that his wife will be able and willing to provide the LTC. “Wouldn’t it be better to hedge some of that with insurance?” he asks.
In general, he adds, the LTC sale must be made to the wife and then let the wife sell the husband–because “the wife has a better grasp on it and also knows that the statistics favor her outliving him.”
I can afford to withdraw 8%-10% a year for my retirement income, because I’ll only live to age 75. Harry Horn, retirement income planner with Lincoln Financial Advisors in Baltimore, Md., says he hears that “quite a bit.”
“I try to circumvent that by talking about how Ibbotson’s new longevity study shows that men and women now age 65 have average life expectancies of 88 and 92, respectively.” That’s for the whole U.S. population. People having good health, medical care, etc., could live longer.
“That seems to get through,” he says. “Then, they start getting nervous; they see they need to think through managing their money for a longer period.”
Everything is in order, so I don’t need to do anything now. Such boomers might say they already have a 401(k) at work or a pension, so they’ll “be just fine,” says Dale Lazzarone, a financial services professional with New York Life in Reno, Nev.
That’s procrastination, he says. When he hears it, he tries to get boomers to come in for a fact-finding session, just to be sure. If they do, he continues, they often are “shocked” to see that what they have will not get them very far in retirement.