Even Boomers With Pensions Will Retire With Debt

The famous baby boomer generation is a generation of spenders. Their philosophy is to live for today and forget tomorrow. Hopefully, subsequent generations will learn a valuable lesson. Baby boomers needed an investor coach to help them save their future self from their current self.

retirement (Photo credit: 401(K) 2012)

While baby boomers with pension plans are more likely to retire at or before the traditional age of 65 than those without pensions, they still wish they had done more to save for retirement, according to a survey from Fidelity Investments.Nearly half (48%) expect to retire with debt, primarily mortgage payments followed by credit cards, car payments and student loans for either themselves, their spouse or their children.

Among all retired boomers (those with and without pensions), seven in 10 have what Wendy Foster, senior vice president at Fidelity Investments, calls “retiree remorse.” They regret not having saved more, she said.

“Our research uncovered the fact that even the small population of baby boomers who actually receive a pension payout today feel they should have saved earlier than they did for their income in retirement,” Foster said in a statement.

One in five retirees with pensions acknowledged they did no planning before retirement, with half indicating they only began planning about 12 months before they retired.

The research also found that 63% of employed boomers would roll all of their pension assets into an IRA or 401(k) plan if given the choice or required to take a lump-sum distribution. More than one in six (16%) would roll some of it into an IRA or 401(k) and use some to purchase an annuity and just 6% would purchase an annuity with the entire amount.

This is the most shocking statistic regarding the retiring baby boomers. Most will live far below their working standard of living once retired.

Please comment or call to discuss.

Posted via email from Curated 401k Plan Content

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401k Plan Sponsors and the Risk of Fiduciary Liability

Many plan sponsors have a ‘so what?’ attitude about their fiduciary risks regarding retirement plans. When you consider the majority of baby boomers ill prepared for retirement many will be looking for someone to blame. And why not their ‘rich’ employers? Plan sponsors do have the fiduciary responsibilities and risks. These fiduciaries are personally liable in that they are not protected by the corporate veil. Most plan sponsors would be well advised to hire professional fiduciaries to manage their plan. This includes hiring an ERISA 3(38) investment manager to assume the risks and responsibilities of investments in the plan and the monitoring. They will continue to have fiduciary responsibilities to monitor the investment manager.

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With trillions of dollars tied up in corporate retirement plans, there’s no doubt trial lawyers see a ripe target for both class action suits as well as individual actions. And it’s the plan sponsor that typical wears the bulls-eye for any perceived sleight. Borror predicts “participants will continue to claim their account balances have been materially reduced due to failure of the fiduciary to either ensure the fees charged were reasonable in relation to the services provided, or to select and to monitor the retirement planservice providers with the skill of a prudent professional.”With the potential of claims coming from so many directions, what’s a 401k plan sponsor to do?

“The costs of responding to any of these claims are astronomical when compared to the costs of making affirmative corrections,” says Borror. He offers this conclusion: “In short, any employer that even mildly suspects his or her plan is vulnerable to such a claim should have the plan reviewed by an independent professional.”

Plan sponsors will be required to follow the new fee disclosure regulations beginning August 31, 2012. At this time plan sponsors must inform all plan participants of the fees the participant pays for their plan. This will increase complaints by participants partly because law firms will be promoting their services. With many baby boomers unprepared for retirement some will look to litigation to correct their shortfall.

Please comment or call how you can protect yourself and your company.

  • 401k Sponsors Increasing Focus on Investments (401kplanadvisors.com)
  • A Closer Look at Fiduciary Status Under ERISA (401kplanadvisors.com)
  • Pension Plan Sponsors (401kplanadvisors.com)
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Steps Every Boomer Should Take Before Leaving the Workforce

The best advice I can give to boomers is to seek and pay for the advice of an objective professional adviser. A fee only financial advisor will most likely follow the fiduciary standard. In other words an adviser who puts the interest of the client first.

FORTUNE Brainstorm
FORTUNE Brainstorm (Photo credit: jurvetson)

5. Know the difference between a brokerage firm and an advisory firm.A lot of baby boomers don’t understand the difference between a broker and an advisor. A broker is someone who sells something for a commission,  and sells products like  mutual funds, variable annuities, etc. An advisor provides investment recommendations.

Brokers and brokerage firms don’t have a fiduciary standard to the client, they only have a suitability standard to the client. That means whatever they recommend must be suitable for you, but it doesn’t have to be in your best interest.

On the other side, an advisor has a fiduciary standard to the client. What an advisor recommends to the client has to be in their best interest.

When anyone is preparing to retire they should seek the advice of an adviser following the fiduciary standard. Most people do not understand the difference. By working with a brokerage firm you will have to wonder if there is a conflict of interest.

Please comment or call to discuss.

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401k’s not working for Gen Y

retirement presentation
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Plan sponsors can help their employees with their retirement plans by providing risk adjusted model portfolios as a default. This essentially provides the plan participant with a pension fund like plan. I believe a vast majority will remain in the model portfolio and will be on track to successfully retire. Unless of course your employees can predict the future.

The average Gen Y investor has 30% of his or her assets in cash, the highest of all demographic groups, according to the latest MFS Investing Sentiment Surveyresults. This would be fine for a baby boomer or even a Gen Xemployee, but not for young employees starting out. They might feel better today with a high cash balance, but the risk is that they will feel worse down the road when their assets haven’t even kept up with inflation. Moreover, they may be missing out on a once-in-a-lifetime opportunity to accumulate shares of growing companies at low share prices during a weak economy.They haven’t learned some time-tested investment strategies because they have been too busy playing defense. When you are being punched in the face, it is difficult to think about anything other than moving to safety. You just want to get away from your attacker and retreat to nurse your wounds. Because of their focus on defense, something is missing for the Gen Y investor — a piece of the puzzle they either were never taught or aren’t open to because they are too skeptical after their bad experiences.

The model portfolio is the ideal solution for all investors saving for retirement. As the employee ages the portfolio needs to become more conservative. Your retirement savings have no place speculating.

Please comment or call to discuss how to improve the results for your plan participants.

  • 89% of 401(k) Investors Want Allocation Help (401kplanadvisors.com)
  • Tips 401k Plan Sponsors Can Use to Help Employees Avoid Risk Aversion (401kplanadvisors.com)
  • Gen Y Saving More for Retirement (money.usnews.com)
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Pensions: Retirement crisis hits Boomers

EVERGLADES, FL - MAY 28: United States Senator...
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Beginning a disciplined plan to save for retirement can never start too soon and it is never too late. All Americans should recognize that only they are responsible for their own future.

“Florida has always counted on a big chunk of the baby boomers retiring down here and buying property over the next 20 years,” said Jack McCabe, a veteran Florida-basedreal estate analyst.“We’re not going to see this big influx of full-time senior citizen residents,” McCabe said. “Home builders may need to re-analyze what they see as demand over the next five to 10 years.”

Baby boomers are members of the first generation since the 1930s who will be worse off in their older years than their parents, says Teresa Ghilarducci, a retirement specialist and economics professor at the New School of Social Research in New York.

“According to our projections, it looks like most middle-class workers, not just low-income workers but most middle-class workers, will be living at or near the poverty level in their old age,” Ghilarducci said in an interview.

“This is the first time since the Great Depression we are looking at poverty rates increasing among the elderly.”

The Occupy Wall Street movement, and street protests staged by mostly younger people in major cities across the United States have grabbed the media spotlight in recent weeks.

But income inequality, bank bailouts and bad markets are issues resonating throughout the gated communities of traditional retirement havens like Florida as well.

Older Americans, a powerful voting bloc in the 2012 presidential election, are keenly aware of the economic downturn that has left growing numbers living in poverty.

Hopefully Future generations will see what happens when an entire generation does not save for retirement. Many baby boomers will never be able to fully retire.

Please comment or call to discuss how this affects you and what to do about it.

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Most Baby Boomers Will Work for Life

Retirement savings for various periods with sq...
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There is no substitute for disciplined saving and strategies. A certain portion of your earnings should be deducted for retirement before you start spending. The question becomes’What if I live?’.

Many baby boomerswill continue to work after retirement. The decision to work during the traditional retirement years may be a choice or beyond our control. We may want to work in order to stay busy or we may need to work to replace savings lost in recent years.Retirement USA recently calculated a very scary number representing the gap between where retirement savings should be and how much Americans actually have. The total deficit was estimated to be $6.6 trillion dollars. In many cases, senior citizens will have no choice but to keep working past traditional retirement age.

This should be a wake up call for baby boomers as well as the generations that follow. If you do not save for your own retirement you may have to work for life.

Please comment or call to discuss how this affects you.

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