As the baby boomers passed through each stage of life, they redefined common practices and perspectives. Boomers will likely retire in an equally unique way because they will live longer and healthier but without the generous retirement benefits their parents experienced.
Traditionally, when people would go into retirement they would move more equities into bonds and expect a steady stream of interest to live on. But in today’s environment, boomers may have to be more aggressive than their parents when investing their money, said Jeff Grange, a financial advisor at Crowell, Weedon & Co.
“The problem right now is bond yields are so low and the stream of interest is low, concerns of inflation eating that up is paramount and a longer life expectancy is requiring the allocations to be more aggressive,” Grange said.
Boomers need to maintain a long-term view despite the fluctuation of today’s volatile market, he added.
One way to beat inflation and make sure one doesn’t run out of money is to invest in stock-related equities because the long-term return is so much higher than bonds and CDs. But it’s better to do so with guaranteed growth and withdrawal protection, said Gary Strom, founder of PS Wealth Management Group. It’s best to establishing a balanced, globally diversified portfolio, he added.
Those who haven’t saved enough must either save more, work longer, curtail their lifestyle or take more risk with their investments, said Brad Stark, principal and co-founder of Mission Wealth Management.
“We’ve got to be prepared to expect less support from government and social services and expect to save more,” Stark said. “The money just doesn’t exist and in all arguments that go after the rich, you can’t tax those people enough.”
Retirees must take more risk such as selling more mutual funds and depleting their accounts that are competing with longer life expectancies and long-term inflation, Strom said.
Strom recommended for retirees a safe withdrawal rate of 4 percent with the cost-of-living adjustments.
It’s important to consult a professional but, when dealing with a financial adviser, Grange had several words of advice:
» Ask questions on anything that could be relevant.
» Don’t be afraid to ask for client’s names who are in a similar situation.
» Ask how the adviser gets paid and whether it’s fee-based commissions or other means. Transparency is a huge long-term relationship builder, he said.
— Noozhawk staff writer Alex Kacik can be reached at akacik@noozhawk.com. Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Become a fan of Noozhawk on Facebook.