Despite all the financial gloom recently, at least two experts feel it should be a time of optimism as the baby boomers and their advisors carve out a new definition of retirement.
Instead of retirement planning, people should be thinking of longevity planning, and advisors should be preparing themselves to deal with new products and services for this kind of planning.
The conclusions were reached by two financial experts who elaborated on The Hartford's 2010 Investment and Retirement Study, the fifth annual study produced by The Hartford. This year's study included 764 men and women ages 45 and up.
According to the study, the number of Americans who identify Social Security and other government pensions as their primary source of retirement income has increased from 26.7% in 2006 to 38.8% this year.
More people say Social Security will not provide enough income for them to continue their lifestyle in retirement. In 2010, 85.4% said they were less than confident that Social Security alone would meet their needs, compared with 81.1% in 2006.
"If baby boomers are going to leave their fingerprints on the future in any way, it is that they are the first to have a 'consumer driven retirement,'" says Joe Coughlin, founding director of MIT AgeLab. "The financial industry is going to have to make these solutions up as they go along." The percentage of respondents who feel they must rely on themselves for retirement resources is growing, according to the study, from 71.2% in 2006 to 75.2% today.
Most of the new services and products that are going to get boomers to enjoy their longevity, as opposed to entering what is traditionally defined as retirement, have not even been invented yet, say Coughlin and John Diehl, CFP, senior vice president of The Hartford.
One example of an existing product that can help people enjoy longevity is a 529 plan, Coughlin said. Traditionally used to save for children's educations, the plans also can be used to fund education for a retiree who wants to switch careers, says Coughlin.
At the same time, "most consumers have no idea what is available to them. Most do not even know what an annuity is, let alone what the different types are, so this a great opportunity for advisors to educate consumers," says Diehl.
"I am very optimistic, if we stop and rethink this as a longevity issue, said Coughlin. "Working longer and feeling connected and useful is going to be important."
"I agree," says Diehl. "I am optimistic. The yacht is not goal of retirement anymore. Advisors need to be talking about the issues of living longer. Some of the new things that are emerging are managed income funds or a different definition of long-term-care health insurance."
"We have had a lot of interest from advisors who want to be more longevity planners, rather than retirement planners. They want to understand the issue of money for aging," says Coughlin. "The level of income at retirement is not the issue as much as the shock the happens if there is an abrupt change in the level of income."
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