For today's boomers, the news on the "retirement" front remains bleak. We have intentionally put "retirement" in quotation marks in fact, we don't recommend you ever use the term. Try replacing it with "no longer working" or "no longer earning a regular income" instead. In any event, the news isn't good. Recently the Center for Retirement Research at Boston College issued a new report on their National Retirement Risk Index. The key finding was that some 51 percent of pre-retirement adults are considered "at risk" for not having enough money for when they are no longer working. This is the highest the "National Retirement Risk Index" has ever been.
A combination of factors is driving the figure higher and higher:
- While the retirement age hasn't shifted significantly in the last two decades, the number of years one lives after retirement age has increased. That means there are simply more years to "fund" now than ever before.
- The days of a defined benefit plan are over, and most workers do not maximize contributions to their defined contribution plans and have made poor decisions about that money time and time again. The average pre-retirement 401(k) account holds only $78,000. Yikes.
- Until very recently, most working Americans saved next to nothing outside of their employer-sponsored plan.
- The rate of return on assets and bond yields in particular declined so that one's retirement assets will not likely generate as much income as previously thought.
- The housing market collapse has shrunk the one asset most Americans assumed would continue to grow unabated.
Looking deeper into the data, the Center calculates that 41 percent of older boomers (over age 55) and 48 percent of younger boomers (ages 45-54) are "at risk" for not having enough money for retirement. The Center tries to factor in rising healthcare costs, but with all the activity in Washington these days, the ultimate impact is impossible to predict.
What does this mean for financial advisors? Your boomer clients today know the economy is not in great shape, but you need to help them focus on what they could or should be doing to get their own personal economic picture, especially as it relates to income for when they are no longer working, in better shape.
That means encouraging them to put money away for "retirement," no matter what. Even if they tell you their plan is to just keep working, circumstances beyond their control (illness, job loss, another recession) could leave them without an income stream.
