Like a turn in the game of Life® that engaged Baby-Boom children in the ‘50s and ‘60s, the clicking wheel is stopping at… Retirement. Financial planning experts agree it’s about time the Baby Boom generation get serious about retirement planning. After all, its oldest members are in their mid-50s, just 10 or 12 years away from traditional retirement age.
Yet saving among Americans remains a matter of concern among policymakers. Recently, the savings rate (after-tax income minus outlays) reported by the Department of Commerce fell to negative 0.4%. Others raise concerns that even as workers put significant pre-tax dollars in their 401(k) plans, consumer debt is at near record levels.
Small business owners and professionals with their own practices sometimes put off saving for retirement, choosing instead to focus time and money on current company and client concerns. Like closing the door on a closet that badly needs organizing, the attitude seems to be out of sight, out of mind. They also may not have the knowledge they need to create and follow a retirement savings plan.
Underscoring this point, a 1999 survey of Certified Financial Planner practitioners indicated that financial planners think their clients have limited knowledge of retirement issues. Responding CFP practitioners ranked clients’ knowledge about retirement planning third among seven financial areas, following money management and investments, at nearly the same level as establishing and evaluating financial goals, and ahead of taxes, insurance and estate planning. Clearly, the core issues of assessing financial goals and building retirement resources are too important to sit in the uneasy middle of consumers’ knowledge about financial issues.
Interestingly, the Social Security Administration last year began mailing itemized benefits statements to qualifying U.S. citizens. This snapshot of what Social Security payments could look like may be the reality check many Americans need to seek financial planning advice focused on retirement.
With retirement concerns edging forward in Baby Boomers’ thinking, now might be the right time to talk with a qualified financial planner about financial goals, including retirement. The financial planning process takes a holistic view of your financial resources, obligations and goals, resulting in a personalized financial plan.
To know if you are truly getting financial planning advice, look for the following six steps:
- Establishing and defining the client-planner relationship. The financial planner should clearly explain or document the services to be provided to you and explain both his or her responsibilities and yours. The planner should explain compensation fully — how he or she is paid and by whom. You and the planner should agree on how long the professional relationship should last and how decisions will be made.
- Gathering client data, including goals. The financial planner should ask for information about your financial situation and retirement interests. Working with the planner, you’ll want to mutually define your personal and financial goals, understand your time frame for results and your risk tolerance. Your financial planner should gather all necessary documents before giving you the advice you need.
- Analyzing and evaluating your financial status. The financial planner should analyze your information to assess your current situation and determine what you must do to meet your retirement goals. Depending on what services you need, this could include analyzing your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.
- Developing financial planning recommendations. Your financial planner should offer recommendations that address your goals — whether retirement-focused or all-encompassing — based on the information you provide. The key at this step is helping you understand options so you can make informed decisions. The planner should also listen to your concerns and revise recommendations as appropriate.
- Implementing the financial planning recommendations. You and the planner should agree on how the recommendations will be carried out. Your planner might carry out the recommendations, serve as your “coach,” or coordinate the whole process with you and other professionals such as attorneys or stockbrokers.
- Monitoring the financial planning recommendations. You and the planner should agree on who will monitor your progress toward your goals. If it is the planner who is in charge of the process, your planner should periodically review your situation, report to you and adjust the recommendations, if needed as your life changes.
For America’s Baby Boomers, it’s time to square retirement hopes with the reality of saving. With expert financial planning help, Baby Boomers can maximize the income of their highest earnings years — right now — and create a productive financial structure that will support their retirement goals.