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Catching up with retirement: a guide to getting your baby boomer clients back on track.


With the future of Social Security in doubt and pension plans a thing of the past, there is more responsibility than ever on the individual to ensure a comfortable retirement. Yet many Americans are approaching retirement without any significant retirement savings.

In fact, a recent survey by The Hartford found that 45.4% of Americans over the age of 45 do not have a financial plan for retirement. This presents a tremendous opportunity for you as a financial professional to help your clients do something instead of nothing, and get back on track for retirement. Consider this three-phase plan to free up your clients' cash flow so they can maximize their retirement savings and be on their way to successful retirements.

Phase 1: Analyze cash flow

If your clients need to catch up with retirement, the first step to getting back on track is to start with a cash-flow analysis. A detailed cash-flow analysis should cover every dollar that goes out on a weekly, monthly or even annual basis to help your clients understand where their cash flows. Walk them through their income sources and expenses to find out if there is an imbalance. If there is, the gap needs to be filled by generating additional income, either with a second job or by sitting down with their employers to discuss the possibility of adding hours or responsibility in order to increase income.

But, if boosting income is not an option for your clients, use the cash flow analysis to find opportunities to reduce expenses. Once clients understand their spending habits, help analyze needs and prioritize wants to eliminate unnecessary spending. Use the extra dollars from additional income or reduced expenses to increase retirement plan contributions.

Phase 2: Examine insurance protection

Don't let your clients leave themselves or their family exposed to risk; make sure their wealth is protected, and their insurance coverage is streamlined and cost-efficient.

Life insurance is perhaps one of the most important products for boomers in catch-up mode. They need to replace income and replace the nest egg that should be there for their loved ones. Many clients are confused about the right type and the right amount of life insurance, but refer back to the cash-flow analysis to help your client understand how much income is necessary to replace day-to-day living expenses. Permanent life insurance, term life or a convertible term policy can be important for pension replacement or Social Security replacement down the road if your clients still have a need for coverage beyond retirement.

Beyond life insurance, however, your clients need your assistance as a holistic advisor, helping them examine other types of asset protection insurance to make sure they are being as cost-efficient as possible.


Health insurance. Whether your clients have personal or group plans, there could be opportunities to save money on health care expenditures. One of the most popular ways is to take advantage of Health Savings Accounts (HSAs), which can help your clients reduce what they spend on health insurance and make their non-reimbursed medical expenses more tax-effective. Compare deductible and co-pay options; there may be a more cost-effective way to structure the plan for more savings.

Disability income protection. Your clients should understand their disability insurance coverage before they become sick or injured, income stops, and it's time to make a claim. Many people assume they have coverage at work without reviewing or understanding their benefits, which could range from nothing, to short-term coverage for several months, to long-term coverage for several years.

Long-term care insurance. Boomers still in the workforce may not have considered this subject yet, but there have been a number of recent changes in this area. Many states now have a LTCI partnership program that allows residents to protect one dollar for every dollar paid out by a qualified LTCI policy. And now, they become immediately eligible for Title XIX without necessarily having to spend down all of their resources. Sit down with your clients to analyze how the new rules fit together in the overall planning strategy to protect what they already have.

Auto and homeowners' insurance. This area may be outside your comfort zone, but it is important that your clients review these policies on an annual basis. You may be able to identify opportunities to save, such as consolidating several policies under one company to take advantage of substantial discounts.

If these areas fall too far outside your area of expertise, consider creating a network with other local insurance professionals so you can refer your clients to experts you trust. There are many areas across the insurance spectrum where your clients can save money that can then be diverted to retirement.


Phase 3: Pay down debt

After exploring their insurance portfolio, your clients' next area of focus is to pay down high interest debt. Many Americans are currently carrying balances on their credit cards. According to a Nilson Report released in March 2009, the average credit card debt per household in the U.S. at the end of 2008 was $8,329. It's hard to focus on saving for retirement when you're continuing to pay credit card interest. Your clients can use savings from the cash flow analysis or insurance review to bring some of those debts to zero. In addition, they may be able to free up cash by restructuring or consolidating larger debts, such as home mortgages, and take advantage of today's more favorable interest rates.

Maximizing retirement sources

Once you've completed the three-phase financial triage, it's time to examine what would be best vehicles for your clients to accumulate a retirement nest egg. The first place to look is their employers.


Many companies have discontinued their defined benefit pension plans, but are now offering 401(k) s or Roth 401(k)s. One of the big advantages of a 401(k) is the high contribution limit, and many offer an employer-match program, which can help your clients catch up and close the gap between where they are in saving for retirement and where they need to be. Contributions to a 401(k) are tax-deductible, while Roth 401(k) contributions are made on an after-tax basis.

Depending on your clients' circumstances, it might make sense to get the deduction now, get tax-free withdrawals later, or mix and match. Contributions don't have to be all or nothing; a portion can be pre-tax and a portion can be after-tax. The IRS sympathizes with boomers quickly approaching retirement and for those age 50 and over, the tax code provides for catch-up contributions in addition to the basic contribution limits. In 2009 for example, the maximum contribution for a 401(k) is $16,500, and an additional $5,500 for those 50 and older. For IRAs in 2009, the maximum contribution is $5,000 with a catch-up contribution of $1000 for those 50 and over. These additional contribution amounts are a valuable opportunity to help your clients catch-up with their retirement funding goals.

You might also think about the saver's credit, which may help offset part of the first $2,000 that workers voluntarily contribute to workplace retirement programs. Like other tax credits, the saver's credit can increase a taxpayer's refund or reduce the tax owed. The government has expanded the limits again this year to qualify for the program. If your client has a lower adjusted gross income this year, he could take advantage of this dollar-for-dollar offset of his tax liability.

If your clients' employers do not offer a 401(k), it might offer a Simple Plan, which is designed for smaller employers with under 100 employees. The significant difference between that and a 401(k) is the contribution limits and catch-up amounts, so it's important to work with your clients to determine the limits in the year they are participating, so they can maximize savings. If your clients' employers offer a simplified employee pension plan, or SEP, the contributions will be directed by the employers, so your clients will have less control over the money.


Whether your clients are participating in a traditional pension plan, 401(k), Simple Plan or SEP, they still may have the ability to save additional dollars in another retirement vehicle--the IRA. If so, they should take advantage of this savings plan to maximize contributions as they tries to catch up to their retirement goals. Once the cash flow is there, the sky's the limit on how much your clients can save to ensure that they have the retirement they've always dreamed of.

At the end of the day, even if your baby boomer client is behind on his retirement savings and needs to catch up, don't let him throw in the towel. It's never too late. With some careful planning, including a careful assessment of your client's liquidity needs, you can get him back on track in no time. Help your client find ways to free up cash flow and squirrel away more money for retirement so when he decides it's time to retire, he is ready with a plan for a secure, safe and enjoyable lifestyle.

James Silbernagel and Anthony Jasen are managing partners of Silbernagel & Jasen Financial Services in Kewaskum, Wis., and have conducted their radio show, Real Wealth[R] Radio, since 1990. They are active members of International Forum, NAIFA, AHIA, FSI, MDRT and the Society.

Silbernagel and Jasen are investment advisor representatives of Woodbury Financial Services Inc., members of FINRA, SIPC, and Registered Investment Adviser. Woodbury Financial Services is a subsidiary of The Hartford Financial Services Group Inc. Real Wealth Advisors[R] and Woodbury Financial Services are not affiliated entities.

While the tax or legal guidance provided is based on our understanding of current laws, the information is not intended as tax or legal advice and should not be relied upon as tax or legal advice. Neither Woodbury Financial Services Inc., nor its registered representatives or employees, provide tax or legal advice. As with all matters of a tax or legal nature, you should consult with your tax or legal counsel for advice.

By James Silbernagel, CFP, and Anthony Jasen, Silbernagel and Jasen Financial Services
COPYRIGHT 2009 Summit Business Media
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2009 Gale, Cengage Learning. All rights reserved.

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Title Annotation:THE BOOMER MARKET
Author:Silbernagel, James; Jasen, Anthony
Publication:Life Insurance Selling
Date:Jun 1, 2009
Previous Article:Analyze the 'need', not the 'want'.
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