BOOMERS CHANGE RETIREMENT PLANS DUE TO RECESSION FEARS, BELL INVESTMENT ADVISORS SURVEY REVEALS

Lifestyles of affluent sixty-year-olds take hit

Oakland, California—(May 1, 2008)—The economic slowdown is hitting affluent baby boomers hard, just as they are preparing for retirement.   One in four affluent 60-year-olds are changing their retirement plans and 40 percent “downsizing” their lifestyles, according to a national survey from Bell Investment Advisors, conducted in April.    

The results released today are the first in a series of reports based on Bell’s third annual Affluent Boomer Survey of 500, high-net-worth individuals who turn 60 this year.  The survey revealed that almost 30 percent of affluent boomers say they feel more financial stress now than just six months ago.  More than a quarter of all respondents have either lost jobs in the last 12 months -- or know someone 60, or over, who has.   Affluent boomers who have made lifestyle changes due to the economy are contributing less to charity (22%), cancelling, shortening or postponing a vacation (21%) and reducing retirement savings (18%).   Eleven percent report that they will postpone retirement altogether.  

“The current economic slowdown is not a cause for panic among those with a clear retirement plan and sound investment strategy,” says Jim Bell, founder and president of Bell Investment Advisors. “The key to navigating the slow-down is to remain rational and stick to a plan, rather than letting emotions steer you off track,” he said.  “An economic slow-down is measured in months in contrast with retirement, which will last several decades for most boomers.” 

In addition to cutting back on spending, nearly one in four (23 percent) affluent boomers say they are planning to change their investment strategy in response to a potential recession.  Of those planning a change, the vast majority (69%)  plan to invest in more conservative investments such as money market funds and bonds and only 21 percent plan to invest more in stocks or stock mutual funds.

“Unfortunately, these investors are actually putting their retirement at greater risk, since bonds and money-market funds have trouble keeping pace with inflation,” Bell said. “Bonds and cash have the false allure of ‘safety’ since their principal fluctuates less than that of equities, but equities, along with commodities, will better allow boomers to maintain their standard of living over decades,” said Bell.  “Boomers must learn to live with the volatility of equities, if they want to keep their purchasing power in tact.”  

More details of the survey highlights include:

Financial Stress Increases for One in Three Affluent Boomers
Survey findings revealed that almost 30 percent of affluent boomers have more financial stress now than they did six months ago.  Affluent female boomers report considerably more stress than men (35% vs. 24%), while affluent boomers on both coasts--in the Northeast (36%) and West (34%)—report more stress than those in the Midwest (27%) and South (25%).    

One in Four Affluent Boomers Affected by Job Loss
Over a fourth (28 percent) of affluent boomers have either lost their job in the last 12 months or know someone who is age 60 or over who has.  The job losses have been more acutely felt by affluent boomers in the Northeast or Midwest (both 38 percent) and have had the least effect on those in the South (19 percent).  More than one third (35%) of the most affluent boomers surveyed—those with more than $3 million earmarked for retirement—were affected by job loss, compared with just 24 percent of those with $1-3 million saved, and 30 percent of those with under a million saved for retirement.     

Changes in Retirement Plans and Spending
Of the one in four boomers who are changing their retirement plans due to the economy, more women (31%) than men (19%) say they are making changes.  Regionally, those in the Midwest are most likely to make changes to their retirement plans (31% vs. 25%).  Male respondents are more likely than women to have decided to push their retirement plans further into the future, with those in the Northeast and West more likely to postpone retirement than affluent boomers in the Midwest and South. 

Of the 40 percent of boomers who are reducing spending in response to the economy, the highest proportions are in the Northeast (50%) and the West (46%), compared with 38 percent in the Midwest and 33 percent in the South. Based on the survey, 47 percent of affluent boomer women are making lifestyle changes, compared with just one-third of men.  Only four percent of the affluent boomers surveyed report having downsized housing in response to changes in the economy.       

Affluent Boomers’ Seeking Higher Returns
Based on the survey, more than half (54 percent) of affluent boomers cited higher returns on investments as a primary goal for the next five years. “This finding underscores the fundamental lack of understanding many investors have about risk and return.  Boomers will not achieve higher returns if they shift to more conservative investments as the survey findings suggest,” said Bell.  He recommends that boomers retain a healthy portion of their assets in growth-oriented equities, so that their nest egg continues to grow. 

Survey Methodology

The Affluent Boomer Survey was conducted by Opinion Research Corporation from April 1-6, 2008, among a random sample of 500 adults comprised of 250 men and 250 women who were born in 1948 and have investable assets of $1million or more.

©2008 Bell Investment Advisors, Inc.