Re-inventing Retirement

10/10/2007 12:00 am EST


Deena Katz

Co-Chairman, Evensky & Katz

Deena Katz, president of Evensky & Katz, told attendees that the 77 million baby boomers are the “can do” generation, but that spirit often fails them when contemplating retirement—the point at which they realize they may need some additional help. They face unique challenges for which they will need assistance:

  • They spend more and save less than previous generations.
  • Many won’t have pensions or a company-paid defined-benefit plan.
  • By 2040, Social Security payouts per recipient will drop by 39% and more people than ever will be  receiving benefits.  
  • Longevity rates are increasing, with the average life expectancy now at 78.4. A recent study reported that 50% will outlive that number.

One often-cited solution in many surveys and studies is that baby boomers will not retire, or at least won’t retire at the “normal” age of 65. The millions of boomers are such a large part of the work force that that would create a huge labor shortage in the country.

Secondly, boomers will probably need to work to make their money last, as many baby boomers may live 35 years or more in retirement! A recent Gallup poll reported that 21% of boomers will consider their job wages a major source of income in retirement and 52% count them a minor source.

Consequently, Katz says boomers will reinvent their lifestyles, family focus, careers, financial resources, and environment to create this new retirement picture for themselves.

But boomers will need an advisor to help them create a plan that incorporates earned income into their current assets to fund their retirement years and allow them to develop realistic distribution estimates.

Advisors will need to develop assets that will produce a steady income for their clients’ near-term expenses and provide for the long-term growth of their investment portfolios. Advisors will need to become experts in “accumulation” strategies, employing financial products like viaticals, life settlements, and immediate annuities, as well as various hybrid products.

Advisors also will be called upon to help boomers manage their debts, cut expenses, do terminal and living-estate planning, and find and fund long-term care. She suggested that advisors expand their networks with experts such as family coaches and geriatric managers to build a complete support system for clients.

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