What do baby boomer men and women want for their retirement finances?
Women value a “steady stream of income” and “guarantees (of) the principal,” says a recently published survey. Meanwhile, men focus on “death benefit” and “estate for heirs.”
Such opposing goals can make for some bumpy planning sessions when couples are at the financial advisor’s office. So, how are advisors handling this?
“I become a counselor,” says Matthew Rettick, chief executive officer of Covenant Reliance Producers, Nashville, Tenn.
“It’s a classic case of men being risk-takers and women looking for the bird-in-the-hand,” he says, referring to the finding, which came from a study of older boomers published by the Guardian Life Insurance Company of America, New York.
To address the divide, he insists on both spouses coming to planning meetings. The first session focuses on gathering facts, goals, etc. The second session puts the issues on the table, he says, and that’s when the differences come to light.
Many times, the husband is emotionally tied to his investment choices and doesn’t make logical decisions concerning them, observes Rettick. “He still wants to hit a home run,” even though retirement is approaching, there is a limited time horizon, and there are many years ahead of no earned income.
On the other hand, wives often push for financial security. “They’d be happy with 4%-5% returns to get” that security, he says.
The sessions can become emotional, he allows. Still, most couples stick with it. Rettick believes that’s because “they want my assistance. They’ve already been to my workshop or seminar, and now they’re here because they believe it’s important.”
They’re actually very open to input from a third party, the financial advisor, he says.
“Boomer wives know they are likely to live longer than their men,” points out Joseph Graziano, vice president of Future Financial Planners Inc., Bayonne, N.J. This may be why the survey found they are more concerned about income and guarantees than are men, he says.
By contrast, boomer husbands typically expect to pre-decease their spouses, Graziano says. Hence, “they often want to do things to take care of the family.”
His approach is to offer such couples a variable annuity with living benefit features–such as the guaranteed minimum accumulation benefit or the guaranteed minimum income benefit. This addresses both concerns–the desire for guaranteed income and a death benefit, he says.
If a couple doesn’t want the guarantees, and if the husband is not pushing hard for a death benefit, then he suggests investing in a bond mutual fund for income, plus some stock funds for growth.
The final choice often depends on the decision-maker, Graziano points out.
Many couples have only one decision-maker, notes Christopher B. Barnthouse, a long term care insurance specialist with Northwestern Mutual, Indianapolis, Ind. That makes dealing with the opposing views a bit easier.
“The hard part is figuring out who that decision-maker is,” he laughs.
Sometimes, identifying the decision-maker is actually easy. “They just identify themselves that way,” he says. “Then again, sometimes a spouse will claim to be the decision-maker, but I later find out it’s the other spouse.”
Barnthouse has noticed that men do tend to be riskier in investing and tend to prefer high-end death benefits, while women tend to be more conservative. But this might be more a function of being actively-at-work than anything else, he says.
“A number of boomers are already retired,” he explains. “In general, the ones at home tend to be more financially conservative, while those who are still working tend to accept more risk.”