The stunning decline in property values across most of the country, a prolonged recession and plain-old negligence and shortsightedness on the part of American workers have all combined to make retirement more a fantasy than a reality for tens of millions of Baby Boomers who are will soon turn 65 years of age.
In fact, the number of people age 65 and older will increase 79% between now and 2030, meaning another 75 million new retirees -- or people who would love to be retired -- will be looking for help with retirement income and investing and most are terrified they'll run out of money long before they die.
Financial advisors charged with getting all these Boomers back on track and hopefully headed toward a comfortable retirement need to stop looking in the rearview mirror and open their minds to new investment strategies that defy the conventional wisdom that's prevailed for decades, according to Dave Paulsen, chief sales officer at Transamerica Capital Management.
"The retirement landscape is unlike anything we've ever seen before, with new challenges that are changing the way retirees receive retirement income," Paulsen said.
Paulsen said financial professionals need to appreciate that there is no one-size-fits-all approach to any one individual's retirement plan and traditional methods that advisors have relied on for years -- including the so-called 4% rule or the "bucket" approach to retirement planning -- need to be augmented with diverse and more creative tools and investment products to help bolster investors' retirement income for the long haul.
"This is especially important if you consider the state of the equity markets over the past decade," he said. "Most clients can't afford another market downturn."
As if the housing market implosion, stock market volatility and high unemployment and wage stagnation wasn't enough, this bumper crop of retirees also must contend with rapidly escalating health care costs exacerbated by the fact that people are living longer either alone or at an assisted-living facility.
According to the U.S. Department of Health and Human Services, the average long-term care insurance premium for someone between 65 and 69 years of age is $2,500 a year. For anyone over 70, the average premium is more than $3,000 a year. And for those who can't qualify for long-term care insurance, all of those long-term care fees have to be paid in full out of pocket.
"Financial professionals will have to familiarize themselves with these new challenges in order to find effective ways to help their clients pay for these growing expenses," Paulsen said.
Finally, Paulsen said financial planners and advisors, especially the growing ranks of those specializing in retirement planning, need to become experts at knowing and explaining social security rules and guidelines because it's such an integral part of most Americans' retirement income.
"[Advisors] must be well-positioned to help their clients navigate the often confusing aspects of the nation's Social Security system, and discuss the potential advantages of delaying these benefits," he said.
Paulsen said investors and advisors need to bone up on new investment products, especially the growing variety of variable annuities, to help bridge the gap between retirees' expenses and their social security benefits.
"Variable annuities offer guaranteed lifetime payout options, guaranteed death benefit options and tax-deferred treatment of earnings," he said. "Variable annuities can play a substantial role in a retirement income strategy, whether it's used as a method to supplement income for health care costs, or even to fill the income gap Social Security leaves behind."
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