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There's 'Never Been a Worse Time to Retire': Ron Surz

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There are 10 threats to baby boomers’ retirement — and a market correction during this decade “is at the top of the list,” argues Ron Surz, industry veteran and author of the recently published book “Baby Boomer Investing in the Perilous Decade of the 2020s,” in an interview with ThinkAdvisor.

For two years now, Surz has been sounding the alarm that boomers are in the retirement “Risk Zone” — the five to 10 years before and after retiring — a period that imperils their hoped-for golden years.

“The risk of loss in normal times becomes the risk of ruin in the Risk Zone,” says Surz, whose career spans a variety of financial services arenas.

In the interview, he discusses the threats to boomers’ retirement against a backdrop of 70% of the cohort having less than $300,000 in retirement savings.

Surz contends that boomers aren’t getting the most advantageous retirement-planning advice from professionals, as evidenced by a too-risky average 60%/40% asset allocation and many investing in target date funds that hold “excessive risk.”

“The target date industry is failing people,” he says. Surz recommends that boomers flee to safety and, in the interview, offers some specifics.

He started out as an engineer at Northrup, then switched careers to financial services. For 13 years he was with A.B. Becker pension consultants before he left to start an investment advisory, Becker, Burke. 

In 1992, he sallied forth on his own, developing into what he calls a “serial entrepreneur.” This includes forming Age Sage, a robo-advisor that debuted in 2017.

He has managed target date funds for 401(k) plans since 2008 and has a two-year-old firm, GlidePath Wealth Management. It will open its doors as soon as he finds the right chief investment officer and CEO, he says.

Another of Surz’s projects is co-hosting the livestreaming “Baby Boomer Investing Show,” which focuses on education and is the basis of his book.

ThinkAdvisor interviewed Surz on Dec. 15; he was speaking by phone from his office in San Clemente, California.

“This is a perilous time,” he says. “There has never been a worse time” to retire. 

“We’d be really lucky if the baby boomers made it through the decade without suffering a big market loss,” Surz says, adding, “At least they can look at the risk they’re taking.”

Here are excerpts from our interview:

THINKADVISOR: You write that “we’re living in a perilous time to be retired” and that a big stock market crash is coming. Please elaborate.

RON SURZ: We’ve never had so many people simultaneously in what retirement researchers call the “Risk Zone,” the five to 10 years before and after you retire will make or break your retirement.

The risk of loss in normal times becomes the risk of ruin in the Risk Zone.

There has never been a worse time. I’m worried.

If you’re lucky and make it through the Risk Zone without losing money, you’ll probably have a pretty good retirement.

There are 78 million baby boomers, and most of them are spending the decade of the 2020s in the Risk Zone. Of those, 70% have saved less than $300,000. It’s awful.

It’s called the retirement crisis, and it’s real.

But if they can live on Social Security, in some states, like Arkansas, they can rent a decent place for $300 or $400 a month.

Except that might not be what many boomers would choose for retirement. Why has it come to this crisis point?

Here are five reasons:

No. 1: Interest rates have never been lower. That’s bad because people who want to save can’t be safe and make money — you’ve got to give up returns on your investments.

Bonds have never been riskier; the duration has never been higher. Interest-rate risk is as high as it’s ever been. So you’re taking a lot of risk to own bonds for very little return. It’s ugly.

No. 2: Stock prices have never been higher. That’s ugly too.

No. 3: We’ve never, ever printed so much money — not even close [for QE, COVID relief, infrastructure, etc.]. We’re definitely at $13 trillion.

[The government] has spent more than twice what we spent on World War II, if you turned all those 1945 dollars into 2021 dollars.

No. 4: The wealth divide has never been larger. A lot of the money for quantitative easing went to rich people! The wealth divide is about social unrest — what we see on the news every day.

No. 5: We’ve never had so many people in the Risk Zone simultaneously.

You’ve been warning baby boomers about this for two years now. On your “Baby Boomers Investing Show,” you’ve discussed 10 threats to their retirement. What did they include?

A market correction is at the top of the list.

More on this topic

There’s also the threat of nuclear disasters [initiated by] North Korea and Iran; the Federal Reserve’s being out of ammunition; entitlements running out of money; the world debt crisis; baby boomers being in the Risk Zone.

Yes, and COVID and trade wars.

So when is the big crash coming?

Jan. 14. No — that’s my birthday! Some guys have called a day, and it’s come and gone. But I do think it will be during this decade. 

We’d be really lucky if the baby boomers make it through the decade without suffering a big market loss.

What can they do to avoid that?

They can at least look at the risk they’re taking. Solutions like a 60/40% asset allocation have become so entrenched in the consulting industry.

But if you’re at 60/40% today, you need to consider moving to safety, and safety isn’t cash anymore — we have inflation.

When you’re working with an advisor and you trust them, you need to trust and verify.

What do you consider safety?

Probably Treasury Inflation Protected Securities — TIPS — precious metals, maybe even cryptocurrencies, commodities, farmland.

You’ve cautioned against “excessive risk in target-date funds.” Please explain.

When employees get their 401(k) plans, they’re asked to make a decision on how to invest. If they can’t decide, they’re defaulted into an investment, and the most popular one has become the target-date fund.

So be aware that most investors in target-date funds are people who don’t know how to invest. Plan sponsors make the decision for them, and it’s grown to an industry of $3 trillion.

It’s an oligopoly because 65% of that $3 trillion is managed by just three firms: Vanguard, T. Rowe Price and Fidelity.

All three have excessive risk at the target date, in my opinion. They’re in 90% risky assets.

Don’t the employees know that?

Surveys have shown that employees think their [401(k)] money is guaranteed. They have no idea they can lose money. 

No one [seems to] remember what happened in the 2008 financial crisis. And that’s terrible.

Sounds like these investors are living in fantasyland. Not in their best interest, is it?

People [investing in excessively risky target-date funds] think that when they’re about to retire, they can be confident that their money will be there.

That’s where I think the target-date industry is failing people. The wake-up call of 2008 didn’t do anything. Nothing has changed.

Now with bonds becoming riskier, target-date funds become riskier at the target date.

You’ve been managing target-date fund portfolios for 401(k) plans since 2008. How risky are the ones that you manage?

I’m anti excessive risk at the target date. My target-date funds are 20% risky assets. I have 80% in Treasury bills and intermediate TIPS.

To sum up, what do you suggest pre-retiree baby boomers do to protect themselves from what you foresee as an oncoming meltdown?

No. 1: If they’re in a target-date fund, they should probably get out and get safe by moving into the safety assets we just talked about: TIPS, precious metals [and so on].

No. 2: If they’re in an IRA account or running their own money under a 401(k), they need to take a close look — even if they have an advisor — at their asset allocation.

On average, they’re going to be at 60/40%. That’s too risky at this time because they’re in the Risk Zone. They need to move to safety.

What else should they bear in mind?

You want to believe that someone else can take care of you. But when the money is lost, it’s not going to be [their advisor’s] money, and the advisors will get paid regardless.

(Pictured: Ron Surz)