It’s Friday. Do You Know Where Your Retirement Plan Is?

Photo credit: graur razvan ionutPhoto credit: graur razvan ionut

You are probably reading this on a Friday afternoon, with weekend plans crowding your mind. What needs to be done around the house? Do I have time to visit a friend for lunch? What do I need at the grocery store? Your clients are probably doing the same. With so many short-term plans to be made, it’s sometimes easy to overlook our long-range goals, like how will I fund my retirement?

So you, and your clients, probably didn’t know that this week was National Retirement Planning Week, did you? The event was sponsored by the Insured Retirement Institute (IRI) and a group of financial industry and advocacy groups to promote awareness of funding a secure lifestyle when our working days end.

I listened in on a conference call to kick off the event on Monday. The statistics were pretty sobering: 62 percent of baby boomers believe their financial situation over the next five years will be either the same or worse and 70 percent of middle-income boomers say they will not have enough money to make ends meet when they retire. And fewer than half of boomers have consulted a financial professional. The situation is worse for women as they enter their retirement years.

Further, more than half of workers have yet to calculate how much money they need to live comfortably in retirement, said Nevin Adams, co-director for the Center for Research on Retirement Income, Employee Benefit Research Institute. What’s more, the percentage of workers who report they plan to retire after age 65 has increased to 37 percent this year, from just 11 percent in 1991. “Yet half of the retirees we surveyed this past year report having to leave the workforce unexpectedly due to health reasons or downsizing or closure” of their workplace, Adams noted.

Yet if the general public needs to be educated on retirement planning, maybe advisors do as well. One of the speakers on the call, Katie Libbe, vice president of consumer marketing and solutions for Allianz Life, said advisors are “extremely hungry” for knowledge about how to map out a retirement income plan for retirees and pre-retirees. Advisors are well versed in helping their clients build their assets in the accumulation phase of their financial lives, but may lack the knowledge about how to handle the distribution of those assets when clients are in or near retirement. “Do you take a bucket strategy? Do you build a floor? How do you sequence out the distributions? Do you start with non-qualified or qualified money? Do you keep the Roth until the end for legacy planning for heirs?” Libbe said. “It is actually so much more complicated than just building a portfolio.”

Libbe cited a survey by Retirement Income Industry Association that indicated only 20 percent of financial advisors are knowledgeable in retirement income planning. Allianz, she said, sponsors seminars on the topic. “They are usually standing-room only.”

One area where consumers lack sufficient information is when to take Social Security. As Rob Kron, director and head of investment and retirement education at BlackRock, said, most people are ill-prepared to make that important decision. “We bought Social Security in ignorance. There is no user or buyer manual when making this purchase with your first job, so we don’t know how to redeem it,” he said.

But there is some good news. Surveys suggest retirees and pre-retirees feel more confident about their future when they consult a financial professional. And they want your advice: Libbe cited a survey that showed 61 percent of boomers fear outliving their money more than death.

And awareness campaigns, like this week-long event, can help. But as Libbe suggested, perhaps it could be longer.

“Maybe National Retirement Planning Week should be a month. There’s a whole month for life insurance awareness, so maybe we deserve a month, too,” she said.

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