5 Challenges of the new boomer

The nearly 78 million baby boomers in America have long been a huge target for life insurance professionals, as well as everyone else seeking to sell to this unprecedented demographic. Better educated and more successful than any other generation, boomers have enjoyed the enormous benefits of the burgeoning ranks of those known as "professionals."

They were the first of the "non-traditionals," those who were open to new ideas and experiences and who ventured farther in their thinking and living, made possible by new technologies.

The boomers were major benefactors and perhaps the impetus for a new financial services industry that made them owners of American business with the advent of mutual funds. Life companies responded to this challenge with new products, i.e., the universal life revolution.

That was then, but this is now. With unexpected events that have affected their financial priorities, the world of the boomer has changed. In effect, the firm ground where millions of boomers have lived so long has shifted with earthquake force.

Without question, an extended recession is changing the way boomers see their situation, and therefore, the future. Long the keepers of an "endless optimism," they are far more cautious and concerned, particularly as they see age 65 staring them in the face and realize that the next 30 years of their lives may not be as work-free as they had long thought.

The decimated real estate markets in Florida, California, Nevada and Arizona, all boomer enclaves, dramatize the shattered dreams of a fantasy retirement lifestyle for millions of those born in the late 1940s through the mid-1960s.

While the boomer situation has changed dramatically, it has opened new opportunities for advisors to help the members of the nation's largest single generation re-invigorate their dreams. It will take advisors who are willing to work with clients who are going through a variety of life-altering experiences and whose thinking is being shaped by new and unpleasant circumstances. As always, reality shapes opportunity and it's no different with the following challenges of the "new" boomers.

Challenge #1: Change in financial circumstances

While those age 20 to 40 face employment and financial challenges, the boomers' situation is different. They have far less time to recoup lost resources due to the drop in the real estate market, decline in the stock market or the loss of a job.

Many boomers, including the highly affluent, are going through a tough period as they reassess their lives, as well as their financial circumstances. For many, the shock is leaving them reeling. As one blogging boomer writes, "After the shock wears off, baby boomers will take the necessary steps to manage with less. Those of us who fondly recall the '60s will not be taking trips around the world or inviting the children to our luxury ski chalet for the holidays, but I don't know many people who find such amenities essential."

Those words form the mission of any advisor who wants to serve boomers. The task is to serve as an understanding and patient counselor who helps boomer clients sort out their responsibilities, hopes and needs. Call it what you like, but it's earning the business.

Challenge #2: Care providers for elderly parents

Arthur Giddon of Connecticut celebrated his 100th birthday as honorary bat boy at a Boston Red Sox game, hearkening back to the day when he was a bat boy in 1922 for the old Boston Braves and chatted a moment with Babe Ruth. He was pictured wearing a Red Sox shirt with "100" on the back and his daughter at his side.

More than a human interest story, it's a sign of the times -- the middle-aged "child" caring for the aging parent. It's also the story of how they are going to support themselves and provide for their parents at the same time. It is how they are going to manage the double demands of caregivers and managing their own lives.

Until now, many boomers not only believed their parents had adequate financial resources for retirement, but could also help them, if necessary. That picture has changed dramatically, due to diminished investments, loss of jobs and fading home values.

More than ever, this is the time to be talking seriously with clients about long-term care protection. Perhaps for the first time, boomers can see that they will have fewer funds available should they face some time of costly extended care. The question on many minds: "Where will the money come from?"

Challenge #3: Overcoming loss of assets

With the sizable loss of assets in the recent market downturn and the reality of a long climb back, the monthly Social Security check is taking on new significance as far more than merely a convenient potential hedge against inflation.

The use of life insurance to fill the gap is now vital for the boomer pre-retiree. Ironically, perhaps, term insurance, which has long been the product of choice for the "young family," can be the preferred product for boomers. An inexpensive 30-year term insurance plan with good convertibility, for example, makes sense if the gap needs to be filled longer for the surviving spouse.

Challenge #4: A re-nesting of the family

Many boomers are experiencing something of a boomerang, as grown offspring return to the nest, primarily for financial reasons. It is a situation that's becoming more of a concern for this group. Just when they were looking forward to more freedom for themselves, they are stuck in the middle between the obligation of an older parent and the lack of financial independence from their own offspring.

This can place greater cash flow pressure on their portfolio than it was designed to accommodate. It was meant to provide for the retirement years of two persons, not six or eight. The loss of one or both working spouses could make the whole house of cards fall.

For those facing this type of situation (and others), boomers are coming to terms with a longer work life, because that's what it will take to gain a financially secure retirement.
This situation offers advisors an opportunity to help these boomer clients. For example, a combination of indexed annuities and long-term care insurance can be wrapped around a client's remaining portfolio to increase its stability.

The indexed annuities offer safety, a tax shelter, the possibility of a higher rate of return, based on an index without investing in the stock market and, at the same time, a guaranteed rate of return. At the same time, long-term care insurance can help avoid the unnecessary use of retirement funds to pay for costly nursing home bills.

Challenge #5: Wealth transfer to kids and from grandparents

One of the priorities of "the Greatest Generation" has long been passing on the fruits of their success to the next generation, a goal that has been realized to an extraordinary extent.

Is that dream coming to an end? Will a combination of attrition and estate taxes dim it? Ironically, it was life insurance that formed the inheritance that boomers' parents delivered to their children. The proceeds of life insurance policies helped start businesses, provided down payments for homes and paid for the kids' education.

Advisors can help restore the boomer dream of providing for their children by using life insurance to offset their portfolio losses and investing in 529 accounts to help their grandchildren pay for a college education.

As boomers move through the experience of a severe loss of asset value, life insurance emerges as a logical investment to become an unexpected opportunity for advisors.

Today's boomers are far different from those of even a few years ago. Bain & Co. partner Eric Almquist makes clear how they have become more financially conservative: "One of the unique things in the Western world is that you have a huge group of pre-retirement baby boomers, a huge number of people who are asking, 'Can I live off my savings and Social Security for the rest of my life?'"

Life insurance professionals can offer what their boomer clients need so they will have sufficient funds for an adequate retirement lifestyle.

Patrick Herndon is National Sales Manager of First American Insurance Underwriters Inc., a life insurance brokerage based in Needham, Mass., specializing in coaching growth-oriented producers. Herndon has 26 years experience in financial services. He focuses on estate, wealth, charitable and business insurance planning.