This page contains a Flash digital edition of a book.
LIFESTYLE


MONEYWATCH By Matt and Tom Reynolds


Why Baby Boomers’ Retirement will be much different from their Parents’ Retirement


1. Much Longer Retirement: Due to the increase in longevity, today’s retirees that retire in their 60’s may be retired for 30 years, whereas their parents’ life expectancy at age 60 was fifteen years or less. Being retired potentially twice as long as their parents’ means Boomers need more money saved.


2. Savings Instead of Pensions: Although the Boomers’ parents had a much lower per capita income, many had corporate pensions. Boomers were the first generation to demand higher salaries and the freedom to change employers and, for that flexibility, saw their pensions phased out for 401(k)s. Many Boomers don’t have enough saved in their retirement savings plans and do not have the corporate pension to fund their basic needs.


3. Loftier Retirement Goals: Boomers’ parents lived more simply than their offspring. Many Boomers’ parents were Depression-era babies who were much more economically disciplined than their children have become. Many Boomers want their retirement to include travel, new cars, dining out often, etc. These goals are achievable, but only if retirees have amassed enough wealth while working to fund this type of lifestyle.


4. Different Interest Rate Environment: When the Boomers’ parents started to retire in the 1980’s, interest rates were much higher than they are today. Over the next thirty years interest rates began a steady decline and provided a great total return for bond investors. Boomers looking to retire today face just the opposite scenario. Interest rates are at all-time lows and bonds will most likely not supply a great total return, at least not over the next decade. Boomers’ parents that were


investors tended to decrease their equity exposure in retirement and increase their fixed income exposure as a way of reducing the overall risk of their portfolio. For the reasons described above, this may not be the right strategy for Boomer retirees.


Rather than take an equity versus fixed income approach to retirement, we assist our clients in establishing a sustainable withdrawal rate in the 4-5% range and building a diversified portfolio built around a total return concept rather than a bond versus stock focus. The key to any retirement plan is to develop it early (preferably in your 30’s and 40’s, as opposed to your 60’s), review it annually, make changes as neces- sary and treat your retirement funding as important as any other recur- ring bills like your mortgage. If someone comes to us in their 60’s and has inadequate savings for their desired retirement, the only thing we can do is tell them to work longer and save more. However, the earlier you start to save, the less painful it will be and the better off you will be in the long run. As with most things in life, planning and discipline are crucial to a successful retirement plan.


Matt & Tom Reynolds (Co-Managing Partners - CRA Financial)


This article is for informational and educational purposes only and should not be relied upon as the basis for an investment decision. Consult your financial adviser, as well as your tax and/or legal advisers, regarding your personal circumstances before making investment decisions.


njlifestyleonline.com LIFESTYLE | Spring 2012 29


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32  |  Page 33  |  Page 34  |  Page 35  |  Page 36  |  Page 37  |  Page 38  |  Page 39  |  Page 40  |  Page 41  |  Page 42  |  Page 43  |  Page 44  |  Page 45  |  Page 46  |  Page 47  |  Page 48  |  Page 49  |  Page 50  |  Page 51  |  Page 52  |  Page 53  |  Page 54  |  Page 55  |  Page 56  |  Page 57  |  Page 58  |  Page 59  |  Page 60  |  Page 61  |  Page 62  |  Page 63  |  Page 64  |  Page 65  |  Page 66  |  Page 67  |  Page 68