By SA Gil Weinreich :
A new survey of CPAs who serve as comprehensive financial planners breaks no new ground in revealing that baby boomers' biggest fear is running out of money in retirement. We discussed that very issue last week here , here and here .
But coming from this elite group of CPA planners (who are credentialed as both CPAs and personal financial specialists, thus marrying the critical tax dimension to financial planning considerations), the survey of 500 of these practitioners may carry more weight in underscoring the imperative to plan. The American Institute of CPAs (AICPA) put it this way in its press release announcing the survey :
What do you get when you have 10,000 baby boomers retiring every day, at an average retirement age of 62 with a life expectancy of about 22 years, and retirement savings of only $104,000? If you answered a recipe for fiscal disaster, you'd be right.
The thrust of my commentary last week was that retirees - and of even greater value, pre-retirees - ought to stress the liability side of their balance sheets, i.e., their personal spending. One reason is that individuals have an ability to control how much they spend and how much they save (which is tantamount to deferred spending), but they have no influence on market conditions and results - witness all those retirees who have waited fruitlessly for a return to higher yields on savings.
Another key finding of the CPA survey is the degree to which retirees, and particularly older ones, fear the onset of dementia and diminished capacity. After 10 years of retirement, Americans start to fear running out of health more than running out of wealth. The implications of the survey are far-reaching: Namely, that some form of planning (individually or with the involvement of a professional advisor) is called for. Obviously, the sufferer of dementia has lost the ability to make such plans and is dependent on his family. All sorts of difficulties can be avoided by planning for contingencies early on.
As always, I encourage readers to share their thoughts on this in the comments section, and below please find today's advisor-related links.
- John Lohr offers some simple things advisors can do to be compliant with the new fiduciary rule.
- Tariq Dennison: Don't pay 5 bps for an index fund - cut out the middleman and save on those fees!
- Victor Haghani colorfully illustrates just how unlikely it is to choose a winning active manager .
- And here he suggests that passive index investors are actually active ones , according to MPT.
- Russ Thornton on how to hire a financial advisor and not get taken to the cleaners.
- ColoradoWealthManagementFund argues that index funds and ETFs could get a major boost should the Supreme Court decide a current case in a certain way.
- The IMF quantifies global debt , which now reaches the record high of 225% of global GDP.
- Elazar Advisors, LLC: The Fed's recent asset sale , its biggest in four years, may be a signal to traders to take profits.
- Brad Thomas investigates Donald Trump's approach to real estate investing .
See also Retirement Risk: A Better DG Portfolio Tells A Different Story on seekingalpha.com