Financial Security In Retirement: Q&A With Bankers Life President

by Alicia Caramenico

August 2, 2016

Scott_Goldberg_2015_COLOR_240x240Baby boomers are expected to live longer than previous generations. They’re also facing more complex retirement challenges and opportunities than previous generations. As Boomers are preparing to exit the workforce, there are things they can do today to be financially prepared, according to Scott Goldberg (pictured), president of Bankers Life, which offers a variety of products, like Medicare Supplement and Life Insurance. He recently spoke with AHIP about how Boomers can find peace of mind about their financial security.

Why is retirement financial security important?
Scott Goldberg: Boomers have told us they expect their retirement experience to be different from previous generations. Whereas retirees may have once seen their retirement as “a time to slow down and be taken care of by family,” Boomers say they want to spend their retirement “keeping up with technology, staying active and physically fit, and traveling.” So aside from providing peace-of-mind to know that one’s everyday financial obligations can be met, financial security also allows Boomers to live the retirement lifestyle they want and expect.

According to the new study from Bankers Life’s Center for a Secure Retirement, the Boomer generation is in the midst of a significant transition to retirement. What steps should middle-income Boomers take to plan for their approaching retirement years?

Goldberg: There are several steps middle-income Boomers can take to help them prepare for their retirement:

  1. To start, consider remaining in the workforce in some capacity as long as possible. Employment income, in of itself, can be helpful. But it also can help delay the timing of asset withdrawals, which can make a meaningful difference in how long retirement savings can endure.
  2. Research Social Security options to develop a plan for when to begin collecting Social Security benefits. Delaying the collection of benefits can lead to higher monthly income.
  3. Before fully retiring, strive to reduce debt and monthly fixed expenses to gain more financial flexibility and be able to better adapt to changing needs and unexpected expenses.
  4. Put an informed plan in place. Working with a financial professional with experience in retirement planning can be extremely helpful in determining how to maximize your resources while minimizing your risk.

What did the study reveal about the challenges middle-income Boomers face as they move closer to retirement? How do these challenges differ from their parents’ generation?

Goldberg: When Boomers entered the workforce – and this is true for their parents’ generation – public employers commonly absorbed the challenge of providing post-employment income to their retirees through defined benefit pension plans. Today, most of these same employers have curtailed those programs in favor of defined contribution plans, which offer no guarantees. As a result, the financial burden of achieving a secure retirement has shifted from institutions, which could professionally manage a pool of risk, to individuals who are largely on their own to navigate their financial future.

According to the study:

  • Nearly two-thirds of middle-income Boomers have less than $100,000 in investable assets.
  • Nearly three in 10 Boomers devote more than 40 percent of their monthly income to debt, and nearly two-thirds are devoting more than 20 percent to paying down debt.
  • Over 60 percent of middle-income Boomers are relying on (or will rely on) Social Security to provide at least half of their retirement income, which is not a great deal of income considering that of Americans who currently receive Social Security benefits (excluding disability), 88 percent are receiving less than $24,000 per year and nearly one-third are receiving less than $12,000 per year.

What does it tell you that Social Security is a primary source of retirement income for many Boomers? How else can — and should — they maximize their income?

Goldberg: The fact that Social Security remains many middle-income Boomers’ primary source of retirement income tells us that they may not have done enough when they were in the workforce to prepare for their new retirement responsibilities. Delaying Social Security benefits is generally one of the most sensible things that someone can do to maximize their future income. Doing so can lead to increased monthly benefit amounts of approximately 8 percent increase for every year that one defers claiming a benefit up to age 70.

Interestingly, many middle-income Boomers say that they will wait to start collecting their Social Security retirement benefits, but in reality, most people begin collecting much earlier.

As general advice, when should individuals start to plan for their retirement?

Goldberg: The miracle of compound interest suggests that the sooner people start saving, the better off they will be. Young people should begin as soon as they start earning wages. They can contribute to an IRA or, if available, participate in an employer’s 401k plan. By saving early, maintaining a tax-efficient diversified investment portfolio with low fees, and using protection products to mitigate unexpected expenses, working Americans can put themselves on good financial footing. But it requires thought, discipline, and often times, even a touch of good fortune.

Keep these statistics in mind:

  • Nine in 10 retiring Boomers do not have a written retirement plan.
  • Three-quarters of middle-income Boomers have not calculated a monthly retirement income number goal that they need to reach.
  • Eight in 10 middle-income Boomers do not know what percent of their preretirement income they could comfortably live on during retirement.

There is tremendous value that industry professionals can bring to this segment of hard-working Americans.