Americans have seen their savings plunge during this economic downturn, causing them to lose confidence in their ability to enjoy a secure retirement. The market's nosedive has forced people to confront their shortfall, and to build or rebuild their retirement wealth. The average retirement portfolio lost roughly 27% of its value by the end of 2008, according to Fidelity Investments. But even before we entered the deepest recession since the Great Depression, many experts were already viewing retirement as a crisis in the making. You know the drill: Most Americans were simply not saving enough—or they had unrealistic expectations about the kind of lifestyle they would be able to sustain.

Although Financial Planning has always covered retirement extensively, we thought it was time for a talk. So on March 26, we gathered a panel of the industry's most creative thinkers for a teleconference to discuss how people are rethinking their life plans and whether the economic crisis has altered the very meaning of retirement for generations to come.

Our panelists: Bob Curtis, CEO of PIETech and creator of financial planning software MoneyGuide Pro; Neal Cutler, PhD, dean of the American Institute of Financial Gerontology at the University of North Carolina at Greensboro and executive director of the Center on Aging of the Motion Picture & Television Fund; Deena Katz, president of Evensky & Katz and associate professor of personal financial planning at Texas Tech University; Sandra Timmerman, PhD, gerontologist and director of the MetLife Mature Market Institute; and Elvin Turner, managing director of Turner Consulting, a research firm that works with financial services companies. The roundtable was moderated by FP's Senior Editor Paul Menchaca and Editor in Chief Marion Asnes.

 

Paul Menchaca: Are planning clients really processing how their situation has changed?

Bob Curtis: The short answer is no. Clients are reacting emotionally, and emotional reactions tend to be extreme. So where a few years ago we were worried about clients' irrational exuberance for the market, now they're unreasonably afraid. They quickly believe that everything has gone down the tubes and they're not going to be able to retire. They're dealing with a core fear of going broke.

The other problem is at the advisor level. I've never experienced so much lack of confidence from advisors. Rather than taking a leadership position and redirecting clients in a positive way, we see them also getting caught up in the market and the losses.

So we're trying to teach the need to reevaluate. You have to do that client by client. Clients want to know, "How does this affect my personal future lifestyle? Am I going to be okay?" This approach is different from what most of the industry has done.

Marion Asnes: Can you address the difference in the approach you are taking now?

Curtis: Most advisors tend to focus on the investment side. When things are good, that's an easy path. Obviously, that hasn't worked so well lately. So now there is this need to address the true reason clients invest and what that money means to them, which is their goals for the future.

What needs to change is how we look at those goals. We have all created a single-point set of goals for people. Say that you, Marion, want to retire at 62. Anything else looks like a poor result.

We need to have in-depth discussions with clients, where we look at a range of outcomes. Look at ideal goals and then add what they'd like to have. But also identify their acceptable goals. Acceptable means results that are satisfactory to them.

People's expectations have adjusted. If you have that goal conversation with them today, you'll get much more realistic goals than you would have a year ago.

Menchaca: Does anyone have any follow-up thoughts?

Neal Cutler: I would pick up on the phrase "unreasonable fear." I think there's a second set of victims out there. There are obviously the direct victims of the financial crisis, those who lost their homes, lost their jobs, have seen their 401(k)s and other accounts go down dramatically. The second set of people are victimized by the constant drumbeat of doom and gloom. This is not to be unsympathetic to people who have lost so much. But there is a group of people who are being victimized by the news.

Financial advisors have to take that into account. I focus my research on generational differences in financial attitudes and behavior, and I think that ought to be brought into play. There's an older generation that has defined benefit pensions and probably are not as negatively affected as people who have defined contribution pensions in IRAs and 401(k)s. Some of those with defined benefit plans may be victimized by fear. There may be a demand to financial advisors: "Don't just stand there; do something." But in fact, the best thing is not to do anything.

Sandra Timmerman: I was thinking about what's happened with the economy in terms of the Elizabeth K bler-Ross stages of death and how we go from anger and denial to acceptance. There is a bit of lemons-to-lemonade. We did a study of the "boomer bookends" at the Mature Market Institute, and 24% of the oldest boomers-the ones who are turning 63 now-had no concern about retirement. Either they're in denial or they're a little bit better off.

But what I wanted to talk about was the lemonade-out-of-lemons situation. Advisors can talk about work. This is a wake-up call. For example, for some people who have lost their jobs, this is an opportunity to retrain, to think about what they really want to do. We know that boomers want to do something more meaningful. Maybe they will think of work as a way not only to generate income, but also to do something that has meaning.