Baby Boomers Dealt Late Round One-Two Punch

by Matt Pavich

Most know the Baby Boomers are the largest demographic group in the US. They have been sometimes deemed the pig in the python generation due to their size and obvious impact. Their lifestyle and habits (spending mostly) have impacted our culture, mores, education system, housing market, economy and financial markets among other dynamics over the last sixty years. As they approach the last third of their lives they have been confronted with a potential one-two punch that could have them bobbing and weaving into retirement.

The first body blow comes from the low interest rate environment that has unfolded due to the financial crisis. The Federal Reserve has lowered the Fed Funds rate to near zero in an attempt to spark housing and other industries. That has left the usual and dependable retirement income vehicles like 1-Year Certificates of Deposits yielding only about 1%. Five years ago typical CD’s were paying over five percent to investors.

The next jab comes from an already underfunded Social Security Trust compromised further by the financial crisis. Many have been left wondering if there would be any cookies left when it became their turn to reach into the jar. The number of workers supporting SS beneficiaries is dropping and eventually may threaten the solvency of the Trust. The good news is that recent projections have the SS Trust making all beneficiary payments through 2033. I imagine those in or near retirement will not have their benefits reduced…I hope I’m right as I am one of them.

So retirement planning has become a little more challenging, but not impossible. Replacing CD’s requires stepping out on the risk curve, but with a little homework and regular monitoring dependable streams of income can be created. A combination of the following instruments can be used for an income strategy.

• Corporate and Municipal Bonds

• Dividend Paying Stocks

• Income Annuities

• Real Estate Rentals and Investment Trusts

• Other Lending Programs

Remember these do not provide FDIC backing so understanding what stands behind and generates the income stream is important; investments of any type involve risk. One traditional key risk-reducing strategy is to diversify the portfolio with investments not correlated to each other. For instance a rental property has a very low correlation to the stock market. Another important consideration is to coordinate your Social Security benefits with your pensions, IRAs, 401ks and other investment assets. Because of the fear of an empty cookie jar some folks have been taking their SS benefits at age 62 without looking at the money they may be leaving on the table if they wait. Understanding the breakeven analysis of your benefit stream is important before applying for benefits. Accessing a program that can perform a number of “what ifs” can enhance the effectiveness of the decision when to apply for benefits.

So to summarize, the late round blows delivered mainly by the financial crisis on the Baby Boomers does not need to take you to your knees. Doing some detailed planning, understanding the investment landscape, and coordinating your Social Security Benefits with your pensions and other assets could help you land on the right side of a unanimous decision. America’s Retirement Store is teaming with the Mission Valley YMCA for an educational Savvy Social Security Workshop Thursday August 30th at 6pm. Attendance is free and you can RSVP with Tina at 619-684-5205.

Matt Pavich is Vice President of Investments at America’s Retirement Store a division of Presidential Brokerage. Matt’s website www.mattpavich.com and can be reached at 619-684-5204 or mattpavich@ presidentialbrokerage.com.

Category: Local News