This content is from: Wealth Management

Facing Retirement, Boomers – Gasp! – Need to Get Conservative

The massive wave of baby boomers reaching out to advisors for retirement planning portends a huge shift towards more conservative portfolios.

They grew up listening to Elvis and the Beatles. They swayed with hula hoops. And now, as hard as it may be for them to fathom, baby boomers are headed for retirement in droves.

Between now and 2030, roughly 10,000 members of this generation - born between 1946 and 1964 - will reach retirement age daily. In short, whether they’ve saved a mint or merely a breath mint, there’s an undeniable boom in boomers seeking retirement help.

Adding to their potential disorientation of approaching retirement, many boomers may be surprised by the extent to which they will need to quickly drop their spendthrift ways and embrace conservative principles. Hip or not, bonds will likely be on the menu even with global yields near record lows.

Boomers present substantial challenges in other ways, too. They have fewer retirement assets than those born in the generation before them, the so-called silent generation (born 1945 and before) and many are saddled with significant debt.

In 2018, the Stanford Center on Longevity released a report that detailed the state of boomers’ overall financial health (as of 2014). Boomers had less home equity, financial wealth, and total household wealth than those a decade older. A third had nothing saved for retirement, and of those who saved, the median amount was a hair above $200,000 and heavily weighted in stocks. Debt averaged $110,000.

The good news is that the generation that embraced revolution and protested social injustice is finally more serious about dealing with retirement despite lingering resistance.

“A lot of people know they need more planning and help with retirement,” says Jamie Hopkins, Director of Retirement Research of Carson Group of Omaha, NE. “There’s a big hesitation on their part to hire somebody to help.” (Hopefully, the admonition to “never trust anyone over 30,” famously uttered by 1960s political activist Jack Weinberg, isn’t having a residual impact.)

When the call comes, “The conversation should be less about what they are invested in and more about their sustainable income,” says Hopkins.

Once the emotional component has been addressed, Hopkins says, investors are generally realistic, favoring a pragmatic approach after reaching a desired threshold. “They tend to have a more conservative view of income,” he says. “In retirement, safety is more desired than higher returns.”

In seeking safety for clients that can benefit from it, Hopkins favors mixing simple-term annuities into portfolios. “[Annuities] have given a higher payout to bonds over the past 90 years,” he says. “Moving out of equities and into more conservative assets, like a simple-term or income annuity can help with a retirement portfolio.”

Related Content