How CPAs Can Protect Baby Boomers' Nest Eggs from Derailers

By Jason Bramwell
 
Unexpected life or economic events are causing both short- and long-term damage to the retirement savings of baby boomers in America, according to a recent survey by Ameriprise Financial Inc. But there are strategies CPAs can implement to stop the bleeding and allow their baby boomer clients to live comfortably in their retirement.
 
Ninety percent of Americans ages fifty to seventy with $100,000 or more in investable and retirement assets have experienced at least one event, or "derailer," that has made an impact on their retirement savings goal, according to Ameriprise Financial's Retirement Derailers survey. The average respondent experienced four of these events, which range from effects of the recession to family and lifestyle choices that have lasting financial consequences.
 
These derailers have set baby boomers back an average of $117,000; in fact, nearly two in five respondents (37 percent) experienced five or more unanticipated events, costing them approximately $144,000.
 
While the percentage of baby boomers who have faced five or more of these events may seem surprisingly high, it's really not all that uncommon, especially when potential derailers occur from sources outside of the family's home, Jeff Magson, vice president of sales and platforms for 1st Global in Dallas, told AccountingWEB. For example, nearly one in four (23 percent) of survey respondents are supporting a grown child or grandchild.
 
"When you start involving kids or kids-in-law or even businesses that are outside of the household, you're taking on a lot more risk in having all of those relationships," Magson said. "I can think of a handful of people who I know in my life who have had their kids move back in with them or have had to step up to help a child or family member who was involved in a lawsuit or some sort of legal proceeding that exhausted their resources because the legal costs were staggering."
 
According to the survey, the top three most cited derailers are, not surprisingly, related to the recession. 
  • 63 percent say low interest rates impacted the growth of their investments.
  • 55 percent say their savings were significantly lowered due to market declines.
  • 33 percent admit their home equity isn't going to help fund retirement as much as they expected.
Additionally, one in five respondents' retirement goals have been thrown off track due to making bad investments (22 percent); taking Social Security before retirement age (19 percent); and/or experiencing a job loss (18 percent).
 
"If you've experienced a derailer in your thirties or forties, you've got plenty of time to make up for it. But baby boomers have given up their ability to save money because they're retired," Magson said. "Baby boomers need to do whatever they can to save, because they simply don't have a lot of options for recouping that money. Entering the workforce in their sixties would be challenging  both emotionally and for actually finding a job in this economy."
 
Three Strategies to Protect Baby Boomers' Savings
If CPAs want to make a difference in the lives of their baby boomer clients and protect them from possible derailers, Magson said they should do the following three things:

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