They may have money, but lots of affluent baby boomers don't have enough to live the way they want to in retirement. And it's becoming the job of many financial advisers to tell them so.
Demographics and the way the advice industry operates are making frank conversations between adviser and client, or prospective client, more frequent.
The generation born after World War II is reaching retirement age. This is forcing stock brokers and investment advisers to go from helping people accumulate assets to helping them stretch what they've got through the decades of leisure time ahead. In many cases, this means advisers have to tell clients that their retirement assets and aspirations don't match.
"One of the hardest jobs an adviser can have is delivering bad news," said Stephen Langlois, head of strategic development for LPL Financial.
Although firms' investment minimums vary, a common hurdle for becoming a client of many brokerages and advisory firms is $250,000. But that's often not enough to fund a comfortable retirement.
Uncertainty has increased with the volatility that financial markets have displayed in recent years. Other factors that come into play are where you live, how long you live, how long you're infirm before you die, how your investments fare and how high or low inflation is.
StanCorp Investment Advisers of Ann Arbor, Mich., has a $250,000 minimum, but it still hears from people who want help doing the impossible —say, like funding a $40,000-a-year lifestyle with $150,000 in savings. "You need a certain amount of assets to achieve a given income level," said StanCorp's Paul Messiter.
A quarter-million-dollar minimum is Bank of America Merrill Lynch's starting point for one-on-one retirement advice.
And Jack Sharry, head of strategic development at portfolio-technology maker LifeYield, pegs it as the bare minimum for being able to do meaningful retirement income planning.
For Sharry, this planning would include aggregating and tracking household finances, dividing and allocating assets to short-term and longer-term needs and investment strategies, and tax strategies. For anyone with less than $250,000, the effort probably isn't worth it, he said. Sharry said he believes you're better off simply putting savings into a lifetime annuity.
It may help that Americans are starting to recognize that retirement won't be easy. A new retirement confidence survey by the Employee Benefits Research Institute finds workers less confident about their chances for a comfortable retirement than at any time since the annual survey began 21 years ago. Not good news, but it may reflect a new realism among workers.
Even millionaires have their worries about retirement, according to Gordon Tudor of the San Diego investment adviser Wealth Analytics. "Two or three million dollars aren't what they used to be," he said.
Tudor spends a lot of time helping clients "reinvent retirement on their own terms." On one level, that's a device for delivering bad news and making the remedies stick. If your plans would deplete your nest egg too quickly, then you can just keep working. "It can be a part-time job, perhaps consulting on something you're expert in or passionate about," Tudor said. Similarly, clients can be urged to put off taking Social Security until they're 70, when these payments are as high as they get.
And at this stage, advisers must have complete pictures of their clients' financial holdings. "That includes Social Security, and whatever pensions they have, everything —because if they need $30,000 [a year] that can help them get it," Tudor said. "It's about being open and transparent, on both sides."
It can also involve urging seemingly well-to-do clients to cut back in surprising ways. "We're talking to our clients about eating out less and entertaining more at home," Tudor said. "You can have a lot of fun with friends, a bottle of wine and a silly old board game."
