The key to enjoying retirement? Start saving early, use an adviser

If you want to enjoy your golden years, start saving in your 20s and use an investment adviser to help you afford life after work, according to financial industry officials and retirement savings experts.

“The No. 1 way consumers can increase their retirement security is by starting to save early,” according to a report released last Monday by the Financial Services Institute Inc. and the Financial Services Roundtable.

The report was issued to kick off National Retirement Planning Week, an education program sponsored by the National Retirement Coalition, an organization comprising 17 retirement savings organizations and trade groups headed by the Insured Retirement Institute. The initiative is being held in conjunction with National Financial Capability Month, which is sponsored by the White House.

DON’T DELAY

The report is a primer on the benefits of compounded interest and the dangers of putting off building a nest egg. It acknowledges that even diligent savers can be buffeted by other factors, such as the volatile markets that accompanied the 2008 financial crisis.

The report, however, advises investors to stay in the markets even during turbulent times. It cites a study by the Employee Benefit Research Institute that shows that more than 90% of 401(k) retirement accounts have more money now than they did at the top of the market in 2007 because of increased contributions and market growth.

“Retirement investors must recognize the importance of investing for the long term when it comes to retirement savings,” the report said. “The vast majority of private retirement accounts have recovered lost balances.”

The recent market collapse, the uneven economic recovery and rising health care costs have baby boomers worried about whether they can afford retirement.

A separate report released by the IRI on Monday shows that just 36% of boomers think that they will have enough money to live comfortably through their retirement years, while 41% said that they are preparing well for retirement. In addition, 62% said they think their financial situation will remain the same or deteriorate in the next five years.

The survey of 803 Americans between 50 and 66 was conducted from Feb. 26 through March 12.

People are better prepared for retirement if they work with an investment adviser, said Richard Aneser, chief marketing officer at Lincoln Financial Distributors.

The IRI survey shows that 46% of boomers have an investment adviser helping them with retirement planning.

“Advisers and individuals can take control together by looking at the challenges and opportunities in a realistic way,” Mr. Aneser told reporters during a conference call. “Those who are doing the things they should, working with an adviser, tend to feel more confident about … their retirement.”

The baby boomer retirement wave is forcing advisers to shift their thinking from wealth accumulation to wealth distribution, and they are looking for help with the transition, according to Katie Libbe, vice president of consumer marketing and solutions at Allianz Life Insurance Co. of North America.

Advisers “are extremely hungry for knowledge” about issues such as the most tax-efficient ways to make distributions and how best to schedule claiming Social Security benefits.

“You can make your portfolios last five to seven years longer if you have a good strategy for drawing them down. It is so much more complicated than just building a portfolio,” Ms. Libbe said.

“That's where we're seeing a lot of demand for our education programs. It's usually standing-room-only,” Ms. Libbe said.

Retirees need more money because substantial advances in health care have raised both costs and longevity, transforming the post-work years.

The IRI survey shows that 35% of baby boomers don't plan to retire until sometime between 66 and 70, or later.

“Retirement is an ongoing life stage,” Mr. Aneser said.

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Related Topics: Financial Services Institute Inc. (FSI)