With little confidence in their ability to plan for retirement or in their knowledge to navigate through a sea of investment vehicles, middle-income baby boomers are in dire need of retirement income advice. Underserved by financial advisors, this untapped market of age 60-plus boomers earning between $30,000 and $75,000 presents an opportunity for financial planners to provide meaningful retirement planning while expanding their client base.
Additionally, two-thirds of all boomers will receive an inheritance during their lifetimes, according to the “MetLife Study of Inheritance and Wealth Transfer to Baby Boomers,” conducted by the Center for Retirement Research at Boston College in December 2010. Furthermore, this report estimated that $8.4 trillion is expected to pass via bequest to boomers, of which $2.4 trillion has already been received and $6 trillion is anticipated. Managing this infusion of wealth effectivelywhich may make a material difference in a boomer’s retirement yearswill require the expertise that a financial advisor can provide.
As the population ages, we expect there to be an ongoing and a substantial transfer of wealth over the next decade within the age 60-plus population. However, research shows that, in most cases, that inheritance won’t be enough to sustain individual boomers throughout their retirement years. Therefore, it is critical for anyone nearing retirement to have a plan in place and to fund it on a regular basis.
Research from the Insured Retirement Institute (IRI) found the average inheritance per boomer is an estimated $64,000. For middle-income boomers, the range jumps to between $100,000 and $200,000. Even so, 23 percent of boomers expect a bequest to comprise only a small part of their retirement income, making it critical to have a retirement savings plan. An inheritance, combined with median retirement account holdings between $11,000 and $35,000, and median stock holdings between $9,000 and $13,000, presents a chance for an advisor to make a difference in the retirement lives of middle-income boomers.
According to an IRI survey, 57 percent of boomers have not used advisors or planners to help them coordinate their disparate finances for the long term. And, while this group tends to look toward Social Security and employer pension plans to fund their retirement years, they understand that those funds, plus any inheritance they anticipate receiving, will most likely not be enough to live comfortably long into the golden years.
The IRI survey also notes that only 35 percent of middle-income boomers gauged their own prospects for having enough saved for retirement as extremely or very likely. They have every reason to be concerned. Current research from the Employee Benefit Research Institute (EBRI) shows that 51 percent of households in the second income quartile, and 35 percent in the third income quartile, are at risk of having insufficient resources to cover basic expenses and uninsured health costs.