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Financial advisors: How to reimagine retirement strategies for the boomer generation

Paid for by iShares

Do you have clients approaching traditional retirement age but are still not sure if they can or should retire soon? Rest assured, you are not alone. Research shows that 45 million working Americans don’t have access to a retirement account, and 40% of Americans will run out of money during retirement.

Today, life expectancies are longer, and the number of individuals over the age of 65 participating in the workforce is projected to double by 2026.

Ultimately, the age when an individual retires should be a personal decision that can involve several factors, which can be divided into three core questions:

  1. What does retirement look like for me?

  2. How must I organize myself to retire?

  3. How much time will it take to organize my life towards that goal?

The financial case

Whether boomers expect to receive income from a private company pension plan, or have zero personal funds set aside for retirement, the decision to delay retirement may be fueled largely by money matters.

The challenge of shifting from accumulation to decumulation requires a delicate aligning of financial goals with individual values. Even if clients have been adept at saving towards a retirement goal, tightening budgets to maintain or preserve finite assets for an unknown period may require an altogether emotional process. 

A retiree may need to pare down their lifestyle as well as sell off memory-laden possessions, such as a beloved family home to buy a smaller unit. Only your client will know when they and their family are ready to make these transitions of mindset. 

This is not your parents’ retirement plan

Trusted financial advisors also have an unprecedented opportunity in advising this age group, whether their clients need to make up for time lost or they just want to add to a substantial nest egg. The prospect of 20 to 30 years without income can be a prime reason to guide a client toward longevity in reconsidering their investing outlook.

Letting portfolios continue to grow while delaying retirement may be the best option for many clients. But it also might require clients rethinking the asset allocation of their portfolio so that they have the growth needed to get them through the next 30 years.

Another thing to consider is that clients may want to start using the tactics and tools at their disposal that weren’t available to prior generations, such as investing in socially sustainable funds, or looking into megatrends (after all, boomers have witnessed firsthand how taking advantage of changes in social demographics and other areas of tech innovation can pay off).

Additionally, boomers stuck on mutual funds may want to consider ETFs, which can be used to pursue a variety of strategies and risk management goals. If clients delaying retirement have not saved enough, they can still invest strategically with ETFs for income and growth goals using variable or flexible time horizons.

Clients close to retirement may want to focus on capital preservation rather than growth, and therefore may seek to increase asset allocations to fixed income, such as with cost-efficient bond ETFs. And if there are concerns that moving from mutual funds might trigger capital gains taxes or other tax implications, you may want to assist your clients with finding ETFs that fit with tax mitigation strategies as well as connect to professional tax planning resources. 

Lifestyle considerations

Work can be a source of purpose and rewarding social connections, two valuable emotional needs that may go unmet after retirement. 

“We call it in psychology a flow activity — something that is challenging that you can immerse yourself in,” says Brad T. Klontz, an associate professor of practice in financial psychology at Creighton University Heider College of Business and the cofounder of the Financial Psychology Institute. 

Klontz, who has a doctoral degree in psychology, says that senior workers may want to hold on to the extra career years to reap the personal satisfaction of mentoring the rising generations, and adds that remaining active in the workforce can provide a sense of purpose and offer rewarding social connections, which can be key to personal satisfaction.

Delaying or gradually phasing into retirement can also allow spouses and family to gradually adjust to the dynamics and ramifications — both social and financial.

“There is a lot of stress that happens in relationships when people are around a lot more, and this takes adjustment,” Klontz says.

While your clients facing retirement may think that time is no longer a luxury, you can help them see the real benefits of investment longevity. 

“Many boomers are envisioning retirement as their next chapter rather than their final one,” Klontz says. As a trusted financial advisor, you can help them with the difficult challenge of writing the opening line.

From iShares:

Championing investor progress has been at the heart of iShares’ mission from the very beginning, relentlessly pursuing better ways to invest. That’s why iShares is bringing you Macro Mindset, a series that equips financial advisors with psychological knowledge to enlighten their clients about the myriad factors that come into play when in tricky investment situations. To learn more about why ETFs should be considered in building a strong strategy, visit iShares.com.

Important information about iShares ETFs:

Visit www.ishares.com to view a prospectus, which includes investment objectives, risks, fees, expenses and other information that you should read and consider carefully before investing. Investing involves risk, including possible loss of principal.

Investing involves risk, including possible loss of principal.

Diversification and asset allocation may not protect against market risk or loss of principal.

This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change.

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