Published: August 30, 2008 10:28 pm      

DON C. HALL II | For retiring baby boomers, planning vital

The title “baby boomer” applies to nearly a third of all American – 76 million people who were born between 1946 and 1964. That translates to more than 10,000 people a day turning 62 in 2008 alone and will continue for the next several years.

This boom in babies between World War II and Vietnam is only part of the demographic challenges of the new century.

The second challenge is that people are living longer.

According to the National Center for Health Statistics, life expectancy at birth has increased from age 47 (circa 1900) to older than 77 (year 2000). This is due to advancements in medicine and quality of life.

The third leg of these age-related challenges is the fact that births are down – and have been since the late 1950s.

This decline means fewer native-born workers entering the work force to replace older retiring workers.

Ken Dychtwald, in his book “Workforce Crisis,” calls the 1946-1964 baby boom, longevity and fewer births today an “age wave.”

You might get a better picture if you think of a python having swallowed a pig. That big bulge is the boomer generation and it will have a profound impact on the next several decades and generations.

Since the first of the boomer generation is now eligible for Social Security benefits, the age that a boomer applies becomes critical. Factors to consider include health-care benefits from the employer, additional contributions to an employer-sponsored retirement plan with employer-matching contributions and the increase of Social Security benefits by waiting to age 66, 67 or 70.

The No. 1 concern cited by most boomers is the fear of outliving one’s resources. And there is a good reason for that concern.

According to a recent study by the Society of Actuaries nearly one-third of all women and almost 20 percent of all men will see their 90th birthday. If boomers retire in their mid 60s, their financial resources may have to last three or more decades.

Other concerns include inflation, long-term care, adequate health care in retirement and maintaining a reasonable standard of living. All of these concerns are affected by the economy.

Since individuals cannot control the economy, the only answer is to prepare for any contingency.

To say that the baby boomer generation is facing both opportunity and challenge is a gross understatement. It is vital to plan for these challenges.

A good financial plan – in its simplest form – should accomplish three goals.

nAccumulation

nDistribution

nLegacy

Accumulation goals must incorporate risk tolerance, asset allocation and management.

This is an area where professional advice is imperative.

There is no such thing as “starting too soon” to accumulate a retirement block of money.

Distribution includes funding the retirement lifestyle.

Factors that impact distribution include inflation, health issues, caring for parents and/or adult children or grandchildren and taxes.

A good plan will be flexible enough to provide for these contingencies.

Legacy is all about leaving something for others. Legacy planning considers heirs, charities and the community foundation. It is your way of saying that you care about others in your family, in your circle of fellowship and for the community at large.

As the baby boomers near retirement, the need for financial advice becomes even more necessary. Consider these questions:

• Do your retirement income expectations match reality?

• Are you prepared to shift from “asset accumulator” to “spender?”

• Will your retirement income meet or exceed the double challenges of inflation and taxes?

• Which assets should you tap first?

• Should you delay retirement?

• Will you work another job?

• Will your rate of withdrawal allow you to maintain your retirement lifestyle beyond your age 90?

A sound financial plan and periodic review with your professional financial adviser can assure the best opportunity to meet and exceed retirement goals. A good plan has a sound strategy. Without a plan there is only hope, and hope is not a strategy.



Don C. Hall II is an investment adviser with Securities and Investment Advisory Services, Johnstown.