PLANADVISER - March/April 2021 - 25

Baby Boomers
* Birth Years: 1946 - 19641
* Age Range: 57 - 752
* Generation Size: 69.6 billion3
* Target savings amount across all savings: 8 times salary by age 60; 10
times salary by 674
FINANCIAL CHALLENGES
As members of essentially the oldest working generation, Baby Boomers confront
an array of choices as they head toward and into their post-work years, says Steve
Vernon with the Stanford Center on Longevity. " The decisions they face as they
transition into retirement are complex, and they have higher stakes than the
saving and investment decisions along one's career, " he explains.
Aside from worrying about replacing income and their current standard of
living, more Boomers are reaching retirement with debt, says Lori Lucas of the
Employee Benefit Research Institute (EBRI).
According to a Pew Research Center study, Boomers carry an average household
debt of $272,849.
This upends savings, especially as 46% of this group reported accruing less
than needed for retirement, an EBRI survey found. " Only 36% of retirees said they
believe they've saved the right amount, " Lucas says. " Closer to 50% said it was
less than what they needed. Baby Boomers are more apt to have credit card debt,
housing debt, all kinds of debt that prior generations of retirees were less likely
to have-the whole financial picture is different for [them] coming in, " she says.
Boomers say they will need to work longer to pay off debt, yet research shows
they do not. A Pew Research Center study found that, instead of working to their
full retirement age, many are leaving the workforce due to layoffs or fears brought
on by COVID-19, or caregiving needs.
EFFECTIVE PLAN DESIGN ELEMENTS TO IMPROVE OUTCOMES
Financial advisers who work with this demographic can offer solutions to prepare
and ease the retirement journey for near retirees. Offering an in-plan retirement
income menu organizes assets and elevates the defined contribution (DC) plan
from a savings plan into a true retirement vehicle, says Vernon. According to
the Stanford Center on Longevity, in collaboration with the Society of Actuaries,
retirement income solutions that use institutional pricing can grow retirement
income by 10% to 20% compared with other retail solutions.
Vernon says, " A 401(k) is a great savings plan, but until participants have a
retirement income menu and communications, it's not a retirement plan. "
Building a retirement income menu and tracking different savings strategies
may lead participants to decisions that will free up other sources of money.
Convincing your sponsor clients to include installment payments in their DC
plan will allow for participants to strategize how to best draw down their money
and receive their Social Security at the highest rate. One such strategy is a " Social
Security bridge. " A 65-year-old retiree would delay Social Security benefits until
70 to receive the maximum benefit and instead collect regular distributions from
his 401(k) for those five years.
Another way to arrange for installment payments is through an annuity
bidding service. The sponsor subscribes to a service that bids out, at a participant's
request, an out-of-plan annuity to a handful of insurance companies and grabs
the best deal. " That's a great way for a plan to offer annuities without getting into
all the quagmires that annuities seem to have, " Vernon notes. -Amanda Umpierrez
1Pew Research Center. 2Pew Research Center. 3Statista. 4
Fidelity Investments.
In the third quarter
of last year, about
28.6 million Baby
Boomers reported
having left the
labor force due
to retirement-
3.2 million more
than in the third
quarter of 2019.
- Pew Research Center
The 65-and-older
population grew
by 34.2%, or
13,787,044, over
the past decade,
and by 3.2%, or
1,688,924, from
2018 through 2019.
- U.S. Census Bureau
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PLANADVISER - March/April 2021

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