More wealthy graybeards postponing retirement

With their portfolios squeezed by major declines in global markets over the last year, scores of aging millionaires are choosing to overhaul their investments and scrap any imminent plans for retirement.

It’s an alarming sign of just how severe the current recession is, when even the nation’s most-affluent individuals over 60 believe that they no longer can afford to stop working — but it’s become a growing reality in recent months, according to advisers.

“It’s a conversation that a year ago, I never had with any of my wealthy clients,” said Joe DeDomenico, a financial planner at DeDomenico Wealth Management LLC in North Haven, Conn., which manages $40 million in assets. “Now it’s the first thing many of my older clients want to discuss.”

Mr. DeDomenico said that anywhere from one-third to half of his clients who are approaching the end of their careers — or at least thought they were — have recently ex-pressed concerns about the health of their financial portfolios and their ability to retire anytime soon.

His experience is hardly unique for advisers, of course. A survey released this month by Bell Investment Advisors Inc. found that half of the 500 millionaires it polled who were 60 years old were in the process of revamping their plans for retirement — twice the number who were looking to tweak their retirement plans just one year earlier.

In addition, one-third of those who were postponing retirement expected to keep working for another five years to rebuild their depleted portfolios, according to the survey, conducted in January.

“There’s been a complete shift in focus,” said Matt King, chief investment officer at Bell Investment Advisors in Oakland, Calif. “They used to think retirement was a given, but now that’s clearly not the case.”

With clients’ portfolios shrinking anywhere from 25% to 40% in value over the last year — depending on their exposure to the equity markets — advisers said that many older high-net-worth investors have shifted out of stocks over the last several months in a bid to hold on to what’s left of their assets.

“They feel they can’t take a wait-and-see approach if their retirement’s around the corner,” said Jerry Murphy, principal of JDM Financial and Investments Inc. in Bowie, Md., which manages $15 million. “They want the certainty of cash instead of any more losses that they could experience in the stock markets, because more losses would push their plans to retire back even further.”

To Mr. Murphy’s point, another survey of millionaires approaching retirement — conducted by Spectrem Group of Chicago last month — found that more than 50% of baby boomers planned to dedicate a more significant portion of their retirement portfolios to cash.

This may protect them from more losses in the short term, but advisers noted that by allocating substantial portions of their portfolios to cash, clients are sacrificing any opportunities to revive their portfolios — and essentially are delaying their plans for retirement even more.

“Clients are panicky,” Mr. Murphy said. “You can’t blame them if they aren’t thinking rationally right now.”

As an alternative to cash or equities, some advisers are encouraging their retirement-ready clients to annuitize a significant portion of their assets or perhaps allocate a more considerable chunk of their portfolios to fixed-income investments.

“Advisers and clients have been conditioned over the years to think that annuitization is a bad thing because it could create liquidity issues or there’s only limited potential for growth,” Mr. DeDomenico said. “But more people are starting to understand the importance of having a source of guaranteed in-come during retirement.”

Indeed, a survey released last week by Washington-based NAVA Inc. found that more than 30% of the 1,500 advisers it canvassed recently were expecting to see a major in-crease in their clients’ desire for guaranteed-income products as they decreased their equity allocations. More than half of these same advisers also indicated that their clients were likely to work longer and delay their retirements.

Mr. DeDomenico said that he “has no problem” telling his clients that they should start thinking about allocating anywhere from 25% to 50% of their portfolios to funding a lifetime benefit such as fixed annuities or guaranteed-income funds.

“The world we now live in has become much too vola-tile to just think in terms of buy and hold,” he said.

E-mail Mark Bruno at [email protected].