New York – “There is a problem in this country and it is called consumerism,” warned Jeff Daniher, a certified financial planner with Ritter Daniher Financial Advisory, Cincinnati. “People are spending too much money.”
It is the job of advisors to be “educators, motivators and implementers,” he said during a panel discussion on winning the retirement income challenge hosted by Jefferson National Life Insurance Company, Louisville, Ky. Part of that job is to tell clients that “the numbers are the numbers,” Daniher said, explaining that “clients can be shocked now or later.”
His view is that it is better to shock them now, so that they have sufficient retirement income. As the “silver tsunami” of boomers starts, it is increasingly important to get the savings message out, asserted Daniher.
The problem is that boomers are not accumulating enough, he said, noting that nearly two-thirds of households in the U.S. have no individual retirement account. People are not taking advantage of tax-advantaged options such as Roth and regular IRAs, he said. “Who is to blame?” he asked. “Each person has to look in the mirror. If you don’t take care of your own retirement, no one else will.”
He allowed that there are individual circumstances which may prevent some people from saving, but said advisors need to “help people ask the tough questions.” In his case, Daniher recommends that clients save at least a fifth of what they earn. It really comes down to the issue of whether “we need the direct TV and flat screens,” he said. “We all want things but the question is whether we want them now or later.”
Chris Cordaro, a certified financial planner with RegentAtlantic Capital, Chatham, N.J., compared controlling spending to a diet, noting that the formula is straightforward: “save more, spend less.” Saving in a tax efficient way is another solution to putting away more for retirement, Cordaro added, explaining that “tax is a huge enemy to saving.” Because of this, IRAs and 401(k)s become more important to the retirement plan.
Making people more aware of how long they will live, as well as how much they will need, will help make it easier to encourage savings, according to Neal Cutler, PhD., executive director of the Motion Picture & Television Fund’s Center on Aging, Woodland Hills, Calif. There has been a major shift in “wealth span,” Cutler noted, describing this as the part of the life span in which boomers are saving.
Because boomers have had families later, “there are fewer years to accumulate retirement savings which will have to last a longer period of time.” In order to help people see how their choices will affect their retirement, Laurence Greenberg, Jefferson National’s chief executive officer, said that a greater emphasis will need to be placed on educating consumers. For instance, he noted that there are some annuities that are good for consumers and some that are not, and education of both consumers and advisors is a way to differentiate products that can help secure retirement.