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Baby boomers transitioning to retirement

Local commentary

Posted: July 25, 2008 1:07 a.m.
Updated: September 25, 2008 5:01 a.m.
 
The nearly 80 million Americans born between 1946 and 1964 may pride themselves on being different, but they have at least one thing in common: They are all “baby boomers,” the largest generation in American history. The oldest of them are now reaching an age commonly associated with retirement, and each day over the next two decades thousands more will follow.

With boomers beginning to celebrate a new chapter in life, what are the obstacles facing them in retirement or in the near future?

All Americans are concerned with the declining value of their retirement plans, reducing value of their homes and real estate, and escalating cost of energy. Last week, Mortimer Zuckerman, editor-in-chief of U.S. News & World Report, stated in his editorial that according to the U.S. Census Bureau, more than a million homes were in foreclosure at the end of the first quarter, and the portion of loans at least 30 days overdue climbed to a record 6.35 percent. Foreclosures that began in the sub-prime mortgage area have now pulled more and more borrowers with higher incomes and good credit down in the undertow.

Since many boomers downsize homes after retiring and use part of their equity for retirement, this is causing concern in their retirement plans. Another issue in transition is corporate pension plans and Social Security is no longer a sure thing. Unlike their parents, most boomers won’t be able to live on payments from traditional corporate pension plans. A quarter of a century ago, more than six in every 10 U.S. workers were covered by such plans. Now it is only about two in every 10.

Meanwhile, Social Security is anything but secure because the overburdened program was implemented at a time when recipients didn’t live as long as they do now. As noted in previous articles, for a couple reaching age 65 today, there is a better than even chance one spouse will live to be at least 90.

So boomers are likely to need more of their own resources to pay the bills, especially if they are drawing from funds when values are down, like in our present crisis.

According to recent AARP survey, roughly 80 percent of boomers say they will keep working. And some boomers will work until they are 75 or older according to research analyst and telecommunications expert Brad Vogt when he said, “Boomers are not a homogeneous group, all planning to hang up their hats at age 65.”

All these factors make it imperative to make an investment plan that is well-diversified and allocated in quality stock and bond funds, cash, and variable annuities with guaranteed growth and income riders.

The only thing that is constant is change, so you should review periodically your plan with your financial advisor. Another important reason to review your portfolio is when you have life changes that affect your beneficiary designations, such as marriage, divorce, new children and business changes.

Jim Lentini, CLU, ChFC, IAR is president of Lentini Insurance & Investment, located in Santa Clarita. His column represents his own views and not necessarily those of The Signal.

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