Confidence in Retirement Planning Wanes among Baby Boomer Generation

A recent report by the Insured Retirement Institute (IRI) revealed that baby boomers’ confidence in their retirement preparations have declined year after year, with high confidence levels in retirement planning dropping steadily from 44% to 35% in the past four years. To coincide with this waning confidence, IRI’s report also showed that the greatest number of baby boomers surveyed planned to retire at the record-breaking age of 70 years old and that 25% of baby boomers had to postpone their plans to retire in the past year. To augment this disheartening trend, one in ten of the 800 baby boomers surveyed in the report had to prematurely withdraw assets from their retirement accounts due to financial challenges, and 21% said they stopped contributing to their retirement plans in the last 12 months.

In 2014, baby boomers gain more clarity in retirement goals

Although the initial results of this report may seem discouraging, more baby boomers are proactively saving for retirement and are even cautiously optimistic about their five-year financial outlook. Another positive trend revealed in the report is that more baby boomers are gaining clarity about their specific short- and long-term financial goals, retirement age and savings plans. Collectively, these clearly-defined goals and precise plans of action give baby boomers the financial blueprints they need to retire comfortably.

“One of the most striking developments since we began this research series is the decline in boomers who did not know when they would retire,” said IRI President and CEO Cathy Weatherford. “That number has been cut in half. While the research shows that they are deciding to retire later in life, the important thing is that they are grappling with important aspects of retirement planning and beginning to develop a clearer picture of where they are and where they intend to be.”

Armed with these definitive goals and realistic savings plans, baby boomers’ low confidence in their retirement savings plans may deviate from its downward trend in the coming years.

Working with a financial advisor boosts retirement planning confidence and savings

One segment of the baby boomer population that appears to be faring better than the rest in terms of retirement savings confidence levels, savings goals and retirement planning behaviors are those who work with a financial advisor on their retirement plans. Baby boomers who have been working in concert with a financial advisor are twice as likely to be highly confident in their retirement preparations and savings compared to those who are planning for retirement alone.

“This is a striking call for action,” said Nevin Adams, education and external relations director at the Employee Benefit Research Institute. “Those who have a financial advisor set higher goals for themselves and are more confident about hitting their goals. More than half of workers have never figured out what they need for retirement savings.”

According to a study by the Centre for Interuniversity Research and Analysis on Organizations, researchers found that professional financial advisors play a significant role in baby boomers’ retirement planning behaviors, such as utilizing more tax-advantaged savings methods, improving asset allocation, and incorporating greater portfolio diversification in their retirement accounts.

Unmarried baby boomers account for most vulnerable demographic

Those who are at the highest risk of having low confidence in their retirement planning and poor financial health after retirement are unmarried baby boomers. According to a report by the U.S. Government Accountability Office (GAO), married couples pool resources and risks, share costs and incomes, and acquire survivor and spousal benefits from Social Security and employer-sponsored retirement plans. This combination of factors helps protect each individual’s financial health upon retirement. The IRI study supported the findings in the GAO’s report, showing that only 27% of unmarried baby boomers were confident in their retirement preparations, compared to a 40% satisfaction rate among married individuals.

Retirement expectations are divided by baby boomer age groups

The IRI’s “Boomer Expectations for Retirement 2014” study surveyed a random sampling of adults between the ages of 51 to 67. Among this sampling population, however, a clear divide existed among the younger portion of this age group and the older one when it came to expected sources of post-retirement income and anticipated retirement age.

According to the report, younger baby boomers – those aged 51 to 65 – are more likely to overestimate their ability or desire to work during retirement. Sixty-two percent of young baby boomers expect to generate income from gainful employment during their retirement, while only 43% of older baby boomers – those aged 62 to 67 – share the same view.

At the same time, however, younger baby boomers are more likely to undervalue Social Security benefits as a source of income upon retirement, while their older counterparts are more likely to count on Social Security as a major source of their retirement income. This divide is a likely explained by the widespread shift among U.S. employers transitioning from traditional pension plans to contribution-based plans, such as 401(k)s, over the past few decades.

Age, marital status and the enlistment of a financial advisor all play significant roles in influencing retirement plans, savings and expectations among the baby boomer generation. Establishing clearly-defined goals and a specific plan of action to reach those financial goals are two of the most important steps that should be taken to start building confidence in your retirement planning. As shown by the report, enlisting the assistance of a financial advisor to help define these goals may be the greatest investment you can make to ensure you enjoy the utmost comfort and financial security throughout your golden years.

Michael Lewis’ “Flash Boys”/HFT “60 Minutes” Segment

This blog post was contributed by Grant Blindbury of FMB Wealth Management.  Grant can be reached by email by clicking here

Who would have thought, amidst a relatively quiet quarter-end, that the splashiest market news would come from the launch of a book tour? As Michael Lewis promoted his book “Flash Boys” on “60 Minutes,” he called for a major overhaul to our trading exchanges. His aim is to combat what he believes is a “rigged” U.S. stock market, brought to us by high frequency traders.

To the extent that Lewis is generating renewed scrutiny of market costs and efficiencies in a fair market, the conversation is worthwhile. We have been as vehement as Lewis about minimizing hidden trading costs and conflicts of interest such as those found within traders’ black-box relationships. Our emphasis on promoting a level playing field is one of many reasons we turn to alliances such as Dimensional Fund Advisors and other fund managers who demonstrate a transparent track record for managing underlying trading costs.

Is the U.S. stock market a model of perfection, with all high-frequency traders being perfectly honest? Clearly not. At the same time, there is considerable evidence that the market is continuing to handsomely reward those who adopt a patient, evidence-based approach to participating in it.

Put in proper context, Michael Lewis’ work is an interesting perspective on the inner workings of a messy market. It may also contribute to renewed steps toward the ideal of a market where all players receive a fair shake. But achieving perfect trading technique is nowhere near the greatest factor that will contribute to or detract from your own success as an investor. What still matters by a landslide is how you manage these and other market risks – confidently maintaining your low-cost, globally diversified portfolio according to your personal goals.


Is your 401(k) Choice “Badly Broken”

This blog post was contributed by Evan Miller of FMB Wealth Management.  Evan can be reached by email by clicking here The attached article “401(k) Choice Is Still Badly Broken” (Click Here to View) is one of many recent articles that points to … [Continue reading]