Boomers Lost In Transition Offer An Opportunity For Financial Advisors

By Cyril Tuohy

InsuranceNewsNet

With few employers offering much in the way of transition assistance for preretirement baby boomers getting ready to leave the workplace, big opportunities await financial advisors willing to fill that gap, a new survey finds by the Transamerica Institute and Transamerica Center for Retirement Studies found.

These days it’s not unusual for workers, even those with 20 or 30 years of experience, to go from being employed full time and benefiting from the protective generosity of an employer, to being on their own the next.

Most baby boomers have enough assets but it’s how they position those assets that can make the difference between a comfortable or a more strained retirement, said Catherine Collinson, president of the Transamerica Institute and the Transamerica Center for Retirement Studies.

Most boomers are underestimating their needs.  When asked what steps workers have taken to ensure they’ll be able to continue working past the age of 65, as many say they want to do, 41 percent said they intended to keep their job skills up to date, the 15^th annual Transamerica Retirement Survey found. 

But when asked how many would be going back to school and learning new skills, only 5 percent of the respondents said they would do so.

Baby boomers were born between 1946 and 1964. They are retiring at the rate of an estimated 10,000 a day, and as a group is roughly 87 million strong, according to census data. For the most part, boomers have benefited from the generous defined benefit retirement plans provided by corporate employers and are financially secure.

Most of them envision a “phased transition into retirement,” Collinson said, but few employers are seen by employees as facilitating that kind of retirement, according to the survey.

The survey found that 21 percent of baby boomers perceive employers as enabling employees to reduce work hours and shift from full-time to part-time employment.

Far more workers – 34 percent – say employers don’t help with the transition to part-time work, nor do they encourage workers to participate in succession planning, training and mentoring. Workers also say that employers don’t help employees to take less demanding positions, offer financial counseling about retirement or provide seminars about the transition into retirement, the survey found.

Planning the transition into retirement means planning for income. That’s the cue for the financial advisors to step in and conduct a “reality check,” with regard to both individual retirement assets as well as Social Security, Collinson said.

“Where the financial advisor plays a role is that they plan future sources of income,” Collinson said in an interview with InsuranceNewsNet.

Depending on the needs of the employee, financial advisors should also plan for best-case and worst-case income and distribution scenarios – a Plan A and a Plan B – so that clients have an idea of “where they stand,” she said.

Part-time jobs often don’t work out, injuries sideline older workers for longer than they thought, family commitments and emergencies mean postponing plans to work in retirement. Each of these challenges has implications for income.

The survey also revealed just how much of a guessing game many pre-retirees play when approaching retirement.

Half of all workers indicated they have to guess their retirement savings needs. Little more than one in five (22 percent) have estimated this goal based on current living expenses, 11 percent used an Internet calculator or work sheet and 5 percent said they used an amount calculated by a financial advisor, the survey found.

Collinson said retirement budgeting presents “another opportunity” for advisors to sit down with clients and talk about clients’ dreams and aspirations for when they are liberated from full-time employment and the many commitments it entails.

“Only two in three boomers have factored in ongoing living expenses and half of boomers have factored in health care costs, and even fewer have factored in inflation and that goes down for tax, estate and long-term care planning,” she said.

The majority of boomers – 62 percent – have a retirement strategy, the survey also found. Only 14 percent of boomers have a written plan, however, while the remaining 48 percent have a plan but it is not in writing.

Putting a plan in writing and having clients agree to it, “that will inspire greater levels of action,” Collinson said.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].