‘Where did my retirement go?’

by Maria Wood for the May 01, 2012 issue of Senior Market Advisor

The Boomer Issue

sWhen the stock market turned their 401(k)s into 201(k)s and with private pensions going the way of Oldsmobiles, baby boomers now wonder if they will ever be able to retire at all. And that is where the aid of an advisor comes in. And more and more advisors are counseling boomers on the ways they can enjoy their golden years as their parents did.

In a recent survey conducted by Senior Market Advisor, more than 90 percent of the respondents said boomers were a growing part of their business. That’s not surprising, considering as a group there are some 76 million to 78 million boomers in the U.S., depending upon which estimate you use, providing advisors with a fertile prospect pool.

Yet the boomers come with a unique set of concerns and circumstances that their senior parents never had to deal with, such as a stock market crash that devastated their retirement savings and the absence of private pension plans. They are also faced with the probability that government programs like Social Security and Medicare will be vastly altered in the coming years, leaving a once solid bedrock of their retirement income on shaky ground.

Consequently, advisors have tailored their marketing, product mix and message to suit this somewhat bewildered demographic.

Work & play & safety

Dee K. Carter, owner of Carter Financial Group in Midland, Texas, says that most of his boomer clients seek to combine retirement with some type of work. “These guys aren’t looking at permanent retirement anymore,” he says. “They are thinking, hey, if we want to retire that’s fine. But what we’d really like to do is have enough money to run and play for a month or two at a time and work for a month or two.”

For about half of those clients, that’s due to financial necessity; they are looking to recoup the losses they suffered in the 2008 market tumble, Carter finds. Unlike their parents, who expected to live on reduced income in retirement, the boomers “don’t want to take a discount” from what they are living on now, he adds.

Therefore, products with guaranteed income riders are popular with this age group, Carter says. Boomers also know their life expectancy is greater than their parents, so products with long-term care benefits are attractive to them.

“They are more concerned about income,” Carter says. “That is the number one thing they are looking at—products with income riders and the ease of getting their money out of the products if they need it for an emergency.”

Jim Cadle, manager of Guaranteed Retirement Solutions, LLC, in Virginia Beach, Va., agrees that after the battering their portfolios took in the stock market, boomers are looking for safety with a measure of upside potential. “They like the ups of the stock market, but they don’t like losing money,” he says. His solution? Fixed indexed annuities. “A good fixed index annuity with a bonus helps them to capture some of the losses they had in the market,” Cadle says.

A questioning generation

Perhaps it’s because of those market losses or simply the times they came of age in, but boomers inquire more intently than previous generations about the financial products they are about to buy.

“With seniors if they see your credentials and you give them a good presentation and you act like you know what you’re talking about, they trust you,” Cadle says. “But boomers want to check it out on their own and they question you more. It’s just a different generation. It’s the way we grew up. Older people looked at people who knew what they were doing as experts. But the boomers, I think, want to be their own expert.”

Carter says his boomer clients will frequently ask for a copy of a contract to bring home and study. “Even when they’ve read it, they come back ask what does this mean,” he says. “They are much more aware of what is going on around them and they want to make sure. They have seen their parents struggle and they’ve also lost a lot of money in the market themselves in their 401(k)s so now they are much more keenly aware of what is going on out there.”

The Social Security conundrum

One area that boomers may be less informed about is when to actually dip into Social Security. Richard C. Murphy, owner of Richard C. Murphy Insurance and Financial Concepts in Syracuse, N.Y., has built a portion of his practice around helping clients decide the right time to drawn upon their Social Security benefits. “People spend more time planning a vacation than they do when to take Social Security,” he says. Murphy runs seminars and has produced a software program on the topic for other advisors.

Although some financial gurus expose that everybody should take Social Security at age 62, Murphy says that may not be the best fit for every individual, leading to many misconceptions about the program. “It’s not a one-size-fits-all proposition,” he insists.

If someone has the financial wherewithal to delay pocketing Social Security, then that’s what that person should do, Murphy says. He points out that by law, a person’s Social Security benefits go up 8 percent a year. “And if the trustees of the Social Security administration declare a cost of living adjustment like they did last year of 3.6 percent, by delaying one year, your Social Security annuity has just grown 11.6 percent,” he says.

Once the Social Security equation is determined, then Murphy structures a retirement plan with other products, such as permanent life insurance, SPIAs (single premium immediate annuities) or a term certain annuity. Then, before Social Security kicks in, the client can make selective withdrawals to gain income when they are no longer working.

“Our goal is to find out what the boomer’s financial goals are and then if you have the knowledge of Social Security claiming strategies, you can use a product to let them maximize Social Security,” Murphy says.

Where the boomers are

Not so much at seminars, Carter says. “Seminars worked much better with the older group than the boomers,” he finds.

He’s found success in rounding up prospects through his radio show. “They don’t listen to music anymore unless it’s an oldies station,” Carter says. “They listen to talk radio because they are by and large conservative, and concerned.”

Through the radio show, prospects can call in and ask questions. If they like the answers, they will give him their name, Carter says.

Murphy, meanwhile, conducts Social Security planning seminars in conjunction with mostly nonprofit organizations. How many attendees become clients depends on the targeted audience. “Seminars are a wonderful way to reach a well-informed group of people,” he says.

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Yet when doing a seminar Murphy ditches the hard sell. “They are waiting for the commercial, they are waiting for the interest card to be signed. I don’t do any of that. If you are good they will find you,” he says. Instead he gives them a pamphlet detailing four Social Security planning disasters and offers a free one-hour consultation with him or a member of his staff as a courtesy to the sponsoring organization. And in a bow to today’s technology, “I get more emails than phone calls,” Murphy says.

Because so many boomers work, reaching them to make an appointment can be difficult, Cadle admits. Most even screen phone

 

calls. The most likely introduction comes via their parents—his senior clients—when matters such as beneficiary designations on policies are discussed or a death claim needs to be completed, he says. “If it’s an IRA, they can do an assumption,” he says. “If they have a nonqualified annuity, there is no good safe place to put it right now except a fixed indexed annuity, which gives a good rate of growth because the banks aren’t paying anything. And they’ve been burned by the stock market so they want to get out of that.”

Make no mistake, the boomers are out there. “And 10,000 of them turn 65 every day,” Murphy says. “If you are selling financial products, if you just had one one-hundredth of those people that’s more than 7,000 prospects a year, you’d be doing really well in this business.”

 

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