Retirement is one of the ten most stressful life events, psychologists say. It involves major change and uncertainties, often accompanied by financial concerns. A US financial firm that specialises in retirement products conducted an interesting exercise that helped to underline the major concerns of retirees and pre-retirees.

The firm invited pre-retirees to consider having a conversation with their future selves what questions would they ask themselves. Sixty-six per cent said they would question themselves whether their financial planning strategies had been successful - Did they save enough and invest wisely? Thirty-eight per cent would want to know if they had made the right investment choices in terms of financial products. Another sixteen per cent would want to know, before retirement, if their retirement planning was on the right track in terms of their objectives.

The total percentages exceed one hundred because they reflect the frequency with which the questions were posed.

When the same group was asked what advice they would give their younger selves, twenty-seven per cent said they would advise their younger selves to plan how they will meet rising health costs. Twenty-five per cent said they would advise themselves to start planning for retirement earlier than they did. Fifteen per cent said they would advise themselves to pay down high interest debt, such as credit cards, faster than they did and twelve per cent said they would tell themselves to invest more aggressively than they did.

Financial retirement planning

The fact is, financial retirement planning is a life-long process. An essential feature for us as financial advisors is to assist our clients to build portfolios that can make the transition from an emphasis on wealth accumulation in the earlier years to income generation in the later years.

In order to do this successfully, it is back to the basics that apply to every type of investment planning. We need to know our clients. We need to assist them to establish realistic financial objectives and to calculate their financial targets. We need to assist them to develop portfolios that are diversified by asset class, sector and by country, with an overall objective to achieving long-term, tax-deferred, compound growth. We need to be able to assist them to realign their portfolios, as need dictates.

Sometimes, we may even find it necessary to learn how to be supportive when emotional stress emerges.

Some key rules of thumb for the impending retiree are already contained in the exercise that I mentioned earlier in this article - Save more and spend less; Pay down and off as soon as possible, high interest debt; Invest regularly and aggressively. Think ahead. Anticipate as best as possible, the emotional, physical and financial realities of the world in which you are about to enter.

The boomers' retirement revolution

In the nineteen years following the end of World War II in 1945, birth rates spiked in various countries around the world, but particularly so in the United Kingdom and in the United States. In the US alone, the birth rate is said to have more than doubled during the period 1946-1964, peaking at 31.5 live births per 1,000, before beginning to trend back down in 1965. By way of comparison, today's birth rate in the US is about 14.2 live births per thousand and Jamaica is at 20.4 per thousand.

As I stated in my last article, persons born during the period 1946 - 1964 have become known universally as the, "Baby Boom Generation," or merely the, "Boomers," for short. These are the people who are or will be retiring over the next three to four years, using age 65 as the retirement benchmark.

Whether by need or by choice, this generation has definitely cut ranks with tradition. In the first place, the vast majority of them - up to 80 per cent - say they plan to work in retirement. Several have or will negotiate part-time or consulting relationships with the companies they are leaving. In this way, they not only strengthen the workforce in the country in which they are located by way of the skills and experience they bring but they also ease the stress they would otherwise have faced with the change from the work environment and activities to which they had become accustomed. Some say that just the continued feeling of being needed or necessary for productive activities is worth it.

Baby Boomers, as a whole, are somewhat more independent than the preceding generation and often find themselves caring for aging parents and growing-up or even grown-up offspring at the same time. Hence, they are often referred to as the, "Sandwich Generation." Whether for this or for other reasons, continued work is frequently a function of need. Retirement packages are often seen as supplements to or to be supplemented by other remunerative activities. Those who do not become extended employees or new consultants may convert some hobby or long-time wish into a business and join the entrepreneurial stream.

Generally speaking, perhaps because of their spirit of independence, Boomers tend to respond favourably to Self-Invested Personal Investment (SIPP) opportunities such as Unit Trusts and open-ended investment companies in the UK as well as the 401(k) s and Individual Retirement Accounts (IRAs) in the US. As a direct result of the continuing work ethic of Baby Boomers as well the overall ageing of populations, most actuaries and planners project a benchmark retirement of age 70 within the next five years. This has strong implications for future products and services to be offered by financial service organisations.

Gary Peart is the chief executive officer of Mayberry Investments Limited. You can email him at gary.peart@mayberryinv.com

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