In a conversation with PLANADVISER, Cyndi Hutchins, director of financial gerontology for Bank of America Merrill Lynch, talks about the different financial needs of Baby Boomers compared with past generations of retirees (hint: it’s a numbers game) and why there is a need for the position of financial gerontologist. (PLANADVISER’s questions are in boldface.)
Do Baby Boomers think differently about retirement?
For years when we thought about retirees, pre-Baby Boomer, it was thought of as a life of leisure. You had your career; you stopped working; and you never worked again. Not much attention was paid to the aspects of aging that affect retirement.
But Baby Boomers are transformers. The trend is to maybe retire from work temporarily, lead a life of leisure for a couple of years. They exhaust their bucket list, and they think about re-engagement. So financial advisers can talk about the role of work in retirement. Is it just the money or does someone see it as a way to stay engaged connected, stay relevant? Before retirement, people don’t necessarily understand that staying relevant is as important as money. They’re still thinking of a traditional retirement. I use the line, “They don’t know what they don’t know.” We help them to consider the other aspects of working in retirement besides the paycheck.
What retirement costs do Boomers need to think about?
Probably the more glaring one is health care and how to provide for out-of-pocket health care costs. What do I need to consider about long-term care? But the life priority of home is a big one for Boomers: Five out of six want to age in place, in the home where they’ve raised their family. What issues should they consider down the road? If aging in place is a big priority, we can bring to light factors, such as is the home elder-friendly? Will it require renovation to make it elder-friendly? If that’s a concern, we need to quantify that and project when that might have to take place, because that’s an important part of the financial plan.
Consider the community we live in. Does it have adequate medical
resources? Is it close to transportation? Does it have senior services that
will keep us from experiencing isolation?
What's the main thing financial advisers should know about Boomers and retirement?
Advisers need to think outside the merely financial picture. When we think about the interaction between my work and my Baby Boomer clients, we are really going out and finding out from them what they want to talk about and what they need to be enlightened on, based on what they want in retirement. My charge then is to enlighten financial advisers about these issues so they can go deeper with their own clients.
How does the retirement of the Baby Boomers affect the retirement industry?
This generation faces two big challenges from a financial and a planning perspective. First, the death of the defined benefit (DB) plan. This is the largest generation to date bearing the responsibility of their financial wellness in retirement almost 100 % individually. They have Social Security, but we know that doesn’t provide a secure retirement income to meet someone’s lifestyle goals. The other big thing is longevity, and how do they live in retirement? Baby Boomers are looking at 20, 30 or 40 years of retirement. How can we help them live the lifestyle they want, and put the financial pieces together?
What makes this generation so different?
From the moment they came into existence, this generation is a
generation that has transformed their world throughout their lives. Woodstock
transformed music. Blue jeans used to be worn only by farmers; they transformed
fashion. The mass exodus out of cities and into the suburbs might not have been
done by them, but it was done because of them, to benefit this generation.
What made you decide to go into financial gerontology?
First thing is, I am a
Baby Boomer. I have one daughter, age 24, who moved out when she was 20, and
I’ve been an empty-nester since. I started as an adviser in 1985, and I was a
successful adviser, part of the Circle of Excellence,
and I did that for
20 years. In 2005, I changed roles, gave up my practice and became a retirement
specialist at Merrill Lynch. This division provides financial advisers with
advice and guidance so they can support individuals in retirement.
I just wanted to learn more about the issues of aging, perhaps with the idea that I could have more meaningful, deeper conversations with my clients if I had a better understanding of the world they were living in.
I got a master’s degree in gerontology from the University of Southern California. When our firm leadership found out I was doing this, it was at the beginning of developing Merrill Lynch Clear, and they saw a need for someone who could connect an individual’s lifestyle desires with their finances. I’ve been in this role for the past nine months, and the focus continues to evolve.
What is most important to Boomers in retirement, and will it change any policies?
An individual’s No. 1 priority is always very personal. The seven life priorities are universal, but the level of importance differs from person to person. A major concern about retirement (72%) is the ongoing cost of health care and how to cover this expense. We might see policy changes, around Social Security and Medicare, and the fact that resources have not kept up with the pace of retirement of this generation. As an example, take the medical field and the number of doctors with a geriatric specialty. In this country, just 7,500 doctors specialize in geriatric medicine. We need about 75,000. There is a scarcity of resources, and we are trying to catch up.