Baby Boomers (Late 1940’s to early 1960’s)

There are 78 million post World War II baby boomers. They are having a profound impact on U.S. retirement social structures. It all starts with: "Can I afford to retire and live the way I want to?" This question is followed by: "Will I run out of income or assets in my lifetime?" Boomers are faced with five unique challenges that their parents did not have to deal with:

• Boomers retired from companies that sponsored 401k plans
• Upon retirement, boomers roll assets from 401ks into IRAs
• Wall Street predators aggressively seek IRA assets
• Boomers are accountable for their own performance
• There is no safety net of a company guarantee

Longevity

Boomers will live longer than their parents thanks to medical science and healthier lifestyles. In fact, one study produced data that showed a 65 year old spouse (healthy couple) had a 75% probability of living to age 95. 

There is a second reason. Whereas the parents of boomers may have had physically demanding jobs the boomers may have spent 30 years sitting behind a desk. There most demanding physical challenge was a game of golf on the weekend. 

Investment Horizon

The above example produces a 30 year investment horizon. A lot can happen in 30 years: Recessions, stock market crashes, war, inflation, and other events that impact the financial well-being of boomers.

Low Savings

At least 60% of boomers have not saved enough assets to retire when they want to and live the way they want to and be financially secure late in life. They will be even more dependent on performance to help them accumulate assets.

The Sharks

There would be a feeding frenzy if Wall Street advisors knew you retired from your company with a $1 million IRA rollover. In fact, the frenzy may start before you retire. A lot of advisors provide free retirement seminars to meet you. They have to meet before they can sell you their investment products.

Performance

The more assets you need for retirement, the more performance you will need to produce the assets. And, the need for performance does not stop when you retire. You may need to accumulate more assets or you need a rate of return that offsets all forms of erosion from your retirement assets.

• 4% Distributions: The amount of money you distribute each year
• 2% Inflation: Erodes the current purchasing power of your assets
• 2% Expenses: Money that deducted by advisors, managers, custodians
• 8% Return: The return you need to break-even

You cannot invest 100% of your assets in the bond market and expect to earn this return.

Risk

You are going to have to take more investment risk than your parents to accummulate adequate assets and preserve them for all of your retirement years.

You cannot adopt a low or zero investment risk strategy until you are 100% certain you cannot run out of income or assets during your lifetime.

Investment Expense

Because you need more performance and you have to take more risk to obtain the performance you will need expert financial advice during your retirement years. No sitting at home clipping bond coupons. You will incur more expense because you need more advice.

Paladin says.....

Boomers are facing some unique retirement challenges. You cannot afford to make any major mistakes when you make financial decisions for your retirement years.