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.”
Still, among older boomers (in their 50s), the women tend to make less money than the men, Barnthouse points out. So, even when they are decision-makers and still working, these women tend to be more conservative. That might help explain why the surveyed women were more interested in regular income than the men, he says.
Individual couples do vary in their approaches, stresses Kevin Vozar, senior vice president at Covenant Reliance Producers LLC, Nashville, Tenn.
The pattern depicted in the survey does occur, he allows. This may be because older boomers are emulating their parents, who in turn were influenced by the post-Depression era and World War II, Vozar suggests. For example, male boomers “may want to pass on to their children the same kind of legacy they received from their own fathers, who usually were workers and breadwinners.” And the women may prefer living on a fixed, disposable income, as did their homemaker-mothers, who often lived on funds provided by their husbands.
But Vozar also sees other “variables and distracters” affecting boomer couples, with the result that not all boomer women focus on daily details and not all boomer men focus on the big picture.
To illustrate, he notes that family dynamics have changed: Boomers often live in different demographic areas than their parents; they have different lifestyles; and both boomer spouses often work or have worked, making it so couples increasingly share financial responsibilities and “function as if in a partnership.”
Individual personalities impact the decision-making, too, he says.
For that reason, “advisors need to be diligent in fact-finding,” Vozar says.
“Find out the individual feelings about money. Was this influenced by how the clients were raised? What about their history and values? Who is the primary controller of the money, in their parents’ households as well as their own?”
In short, let survey findings inform the advisory process, “but get the unique information, too,” he says.
In his own case, Vozar always asks clients how they want to be remembered, and by whom. “This question sets their minds on what they want their money to do for them,” he says, and it opens the conversation to more than talk about numbers and surface level things.
Graziano notices that, compared to pre-retiree couples 10 years ago, boomer couples increasingly prefer to take the plan home to evaluate.
Then, in the follow-up session, he goes over their questions and they hash it out. “We review where they’re at, where they want to go, and what they need to do (to make it through) the next 30 years. I ask a lot of questions, read their faces, judge from their reactions, show them actual numbers.” Both spouses have input, he stresses, but eventually he urges them to reach a joint decision.
He says: “Let’s come to a middle ground that we all can deal with.”
Some clients never reach that middle ground. Graziano says one couple actually put everything in CDs rather than do a plan on which the spouses could not agree.
But in many cases, the give and take does work, he says. The couple compromises and they do a plan. That works for the practice, too, he adds, because couples who decide things mutually “stay with us longer.”
Sometimes, getting there takes some work. Rettick of Nashville recalls how one man had most of the family money in the stock market, and how the wife wanted a secure retirement income.
In the planning sessions, “we looked at how much money was at risk and where the couple should be, given their goals, age, funds, fees, investment performance and other factors,” he recalls. They also examined what it would take to produce a guaranteed income the couple can’t outlive.
The husband was in an emotional frame of mind, he remembers, so Rettick was careful not to insult him. Instead, he says, “I showed him how it is realistic and prudent to have a nest egg working for you, not against you.” And he pointed out that, “when you retire, the game changes from accumulation to preservation.”
That helps couples see that their strategies need to change, too, he says.
“Usually, there is a good coming-together of logic and emotion,” he concludes. “What helps is the third party–the advisor–who injects wisdom, shows reports, and brings information the couple did not previously know.”