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Boomers in Retirement: Why They Need Your Experience and Knowledge

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The percentage of Baby Boomers who are confident they will have enough money to live comfortably throughout their retirement years has dropped from 37% in 2011 to 33% in 2014.1 Boomers will clearly have to find ways to make their retirement dollars last for the remainder of their lives. Financial Advisors are now faced with the challenge of guiding millions of these investors into the next stage of life. Your challenges include the behavioral instincts and actions of clients who believe they can do it on their own or with the marginal help of low-cost providers who fail to address the tendency of impulsive investor behavior in a volatile marketplace. 

If a lack of retirement savings isn’t enough of a roadblock to your clients’ secure future, then the uncertainties of inflation and market conditions loom along a retirement journey that could stretch for several decades. Your clients’ assets will have to work smarter to produce income and earn the real returns that could produce long-term positive outcomes. Many clients are in a quandary because they fear another market downturn, yet they cling to the standard definition of diversification—which forces them into levels of volatility that their instincts simply cannot withstand. This belief that financial management strategies that work on a spreadsheet but fail on Main Street will somehow succeed next time a crisis arises is not only misguided, but irrational. This is where the value of a knowledgeable Financial Advisor becomes indispensable.

Boomer Retirement Income Risk:

  • Inflation
  • Negative Real Rates of Return
  • Traditional Definition of Diversification
Average Annual Inflation by Decade

Inflation Risk and the Boomer Cohort

Inflation has shadowed the Baby Boomer cohort that emerged in the 1940’s. The trend of inflation eroding the real rate of return in your clients’ portfolios will likely continue throughout the decades of their retirement. When you consider the rate of return in your clients’ portfolio, does that return take into consideration the erosion of purchasing power due to inflation?

Reaching for Real Rates of Return in a Low Interest Rate Environment

Retirees with money in savings accounts or bonds that pay current low rates of interest are very likely losing in terms of the purchasing power of their savings, due to inflation.

As Financial Advisors, we have to open our clients’ eyes to the real rates of return they are earning. Here’s a simple formula you can use to show your clients how the “real interest rate” of an investment is calculated as the amount by which the nominal interest rate is higher than the inflation rate.

Real Interest Rate = Nominal Interest Rate – Inflation (Expected or Actual)2

An investor cannot control inflation, but a Financial Advisor can suggest investments in a range of asset classes, such as alternatives, that have the potential for long-term protection against inflation.

Traditional Definition of Diversification*

Portfolio construction can make a significant difference in performance, particularly during the retirement drawdown phase. If a retiree expects to have their retirement nest egg last a lifetime, or maybe two lifetimes, it’s critical to look beyond the standard 60-40 Stock/Bond mix and 4% inflation-adjusted withdrawal each year during retirement. As more investors begin to realize that the old ways aren’t working, Financial Advisors have to look to alternative investments to assist in producing potentially positive portfolio outcomes and reduce negative do-it-yourself investor behavior.

One Solution: Construct a portfolio that targets a real rate of return by accounting for inflation and expands beyond traditional stock-and-bond asset classes by looking to investments in private debt and equities, for example. The biggest threat to retirement wealth is withdrawing too much money from a shrinking nest egg and not being left with enough assets positioned to benefit from the inevitable market rebound. Construct a portfolio mix of investments that curbs fear-based withdrawals and extends the long-term growth potential for real returns. Investment portfolios that allocate to a certain level of expected volatility and also have the required real rates of return must, by definition, include assets whose correlations are widely dispersed and with a causality of those correlations related to different economic environments.

Caveat: One of the biggest mistakes we can make is assuming that correlations are self-evident when, in most instances, they are random. It is only through the lens of causation (notably by paying attention to different economic and market environments) that one can begin to allocate capital appropriately.

Alternative investments may involve higher fees, more limited liquidity, and greater risks, including higher volatility and the opportunity for significant losses, compared to traditional investment strategies. Alternative investments are not suitable for all investors.

More Information for Financial Advisors

With do-it-yourself investment services on every virtual corner, financial advisors must find new ways to demonstrate value. In our latest white paper, “Five Ways to Provide More Value for Your Clients,” we discuss specific ways to support your clients that impersonal technology can never match. To find out more, download this informative white paper at

About Behringer

Behringer creates, manages and distributes specialized investments through a multi-manager approach that presents unique options for allocating capital, managing risk, and diversifying assets. Investments sponsored and managed by the Behringer group of companies have invested into more than $11 billion in assets. For more information, call toll-free 866.655.3600 or visit

1 “Boomer Expectations for Retirement” Investment Research Institute (2014)

2 Investopedia.

*Diversification does not ensure a profit or guarantee against a loss.

Past performance is neither indicative nor a guarantee of future results.


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