Financial planners are ignoring the elephant in the room. My biggest beef is that advisors, planners and sales people are not telling Boomers the truth about their prospects for their own future.
Tens of millions of “baby-boomers” (born 1946 – 1964) are headed toward retirement age with either no clue or no care that they are almost completely unprepared for the decades ahead of them, with little or no real financial resources to see them through to age 90, or even 100.
Most boomers are headed for…
certain disappointment, anxiety, even poverty.
There, I said it.
How many things can we boomers think of to do WRONG?!
(Yes, I’m a boomer, but grateful to be fully engaged in a career/vocation that I love, and no plans to retire…ever.)
Herd mentality
Most boomers have been conditioned since their youth – because their parents taught them – that you work from your teen years, to age 65, then you retire with a pension. Perhaps from a union or a big corporation.
Problem is, true pensions are obsolete, except for a lucky few, and most of those are enjoyed by government employees.
The herd mentality also nudges many to follow their neighbor (the Jones’s) who may have a completely different financial profile.
The Jones’s may have a lot more in personal savings; they may have started earlier; they may have absolute discipline; they may have inherited; they may have worked multiple jobs, etc.
But at the end of the day, is your formula for financial success to follow the Jones’s? Who cares what they’re doing, really?
Bad Math
The Social Security administration tells us that more than half of boomers retiring today are electing to receive their retirement benefit at age 62,
instead of waiting until age 66, the normal retirement age for retirees today, or even to age 70. If they had waited until age 70 not only
would they have been able to build more equity in personal savings, they would also have the opportunity to create wealth in other assets.
And they would earn an additional 8% PER YEAR in increased S.S. benefit from age 66 to 70.
That takes a $ 750. monthly benefit at 62 up to $ 1,000 at 66, and all the way up over $ 1,300 monthly at age 70! That’s almost double the amount at 62.
Why would someone with few resources make the choice to quit work at 62, knowing full well that they will be short every month for the rest of their lives?
Have you done the math for yourself?
Have you done even the most basic calculations to come up with a number for forty years of increasing financial needs in retirement?
Have you bought into the lie that you’ll be in a lower tax bracket in retirement?
That your living expenses will be lower than they are today? How’s that going to happen? Is your grocery bill or your power bill going down?
Isn’t the idea of retirement to enjoy more? To travel more? To give more?
Bad Choice
Maybe they worked in a job they tolerated, even hated, for the last 30 or forty years, just because they chose that job “for the benefits” – and they can think of nothing better than to get out as soon as they can! Sad. And for the most part, irreversible.
Bad Example
Leading their children to do the same…
If these boomers’ kids don’t figure it out for themselves – and there is not indication the children are doing anything different –
the kids will indeed follow the example of the parents. So it will be a generational problem.
Then the children will inherit the inevitable legacy of a dependent parents… and the circle continues.
Bad Advice
Most advisors want nothing more than to make a sale today: an annuity, a mutual fund, a wrap account, a fee for “advice”… do you think they’re going to tell you that, No, you will not be able to retire in the next fifteen years? But, Yes, you should buy my portfolio anyway?
Fresh Thinking
Maybe you’re in this very large majority. Maybe you’re not. If you are, maybe a good dose of honest reflection would be refreshing.
Just maybe you should share the truth about your situation with your kids today, so that they can help you prepare while there is time.
If your kids are going to be helping you in retirement, shouldn’t they purchase a long-term care policy for you to help with those expenses?
Shouldn’t they purchase a life insurance policy on you, so that they can be reimbursed for the tens of thousands of dollars they are going to be spending to help you?
Perhaps they should be looking at a bigger house with grandma quarters. Maybe college will have to wait until these critical issues are addressed?
I know that’s harsh, but better to be realistic today, and consider sacrifices on everyone’s part, than to be confronted with worse events down the road.
Surely, the very first step is to have that dreaded family meeting. It will get easier. You all love each other. Be honest. Get help figuring out first steps.
Speak the truth in love.
-Joe Pantozzi
