January 17, 2010

USA: From retirement planning to lifelong planning

. BOSTON, Massachusetts / The Boston Globe / Business / Personal Finance / January 17, 2010 On the Hot Seat From retirement planning to lifelong planning Maliz E. Beams is executive vice president, client services, at TIAA-CREF, the retirement-investing giant to universities, hospitals, and other nonprofits. She spoke recently with Globe reporter Beth Healy about last year’s market rally, on the heels of the historic decline in 2008, and the challenges facing retirement savers. By Beth Healy, Globe Staff Do you have a sense of how your customers are feeling about their retirement security? It is very interesting. We’ve seen a difference over the last number of months. There was a lot of anxiety. Clients kind of woke up. A significant amount of the world population’s retirement savings disappeared. Over the last eight months, nine months, what we’re finding is the need for advice and counsel has not abated. Maliz E. Beams is executive vice president, client services, at TIAA-CREF. Jodi Hilton for The Boston Globe What are people asking about? One group wants to know, “Am I in the right place?’’ The tone there is a validation, feeling very, very good. The other folks that are calling, what they want is a road map. What we’re seeing is a shift toward more of a concern about - what is my game plan, my flight plan, for the next 30 years without a paycheck? A year ago, it was “Do I have enough to retire on?’’ Now it’s, “What’s my game plan for the next 30 years?’’ Are people planning to work longer than they were before? Most of the folks do no want to change their lifestyle, income, and expenses at all. The idea of retirement has shifted. People are planning to do what they always wanted to do. The fact that they now know “I’m going to live for another 30 years’’ - they do not want their lifestyle to change. And I’ll be healthy enough and vigorous enough to enjoy it for some time. What about younger workers? We’re also seeing a shift with the younger generation, where the word retirement does not resonate. They don’t believe in it. They believe that they are going to stop this line of activity and move onto another line of activity. The recession has definitely shifted what retirement means to the younger generation. In many of our counseling sessions to younger folks, we don’t even use the word retirement. We talk about lifelong planning. I’ve been in the industry 32 years; that’s a crossroads. That’s a remarkable change in attitude. Why do you think that is? They’re thinking, “I’m going to fund something that I love’’ - you save to fund almost a dream, as opposed to you save to fund retirement. These are 20-somethings up to 35 to 40s. They have a ways to go toward retirement. They have seen their mothers and fathers, their uncles retire. There has been some movement afoot, politically, to make signing up for a 401(k) or 403(b) retirement plan automatic at work. Are you pushing for that? Two-thirds of baby boomers are moving into retirement without enough to live on. We have a real retirement crisis here. We are proponents of automatic retirement and savings systems. Right now, in many organizations, you wait for a year, you wait two years, three years to be vested. That was a wonderful benefit when people stayed and stayed and stayed at companies until they got that gold watch. People are portable now and we have to rejigger the retirement system to help that. The 2008 stock market collapse was the second sharp decline for many retirement savers in a decade. Is the promise of these retirement plans tarnished after that? Are people really going to be able to realize their goals after such big setbacks? I think right now, to look where we are today is sobering. Retirement has changed fundamentally. People are in a brave new world of retirement planning and security. Two-thirds of the folks moving into retirement haven’t saved enough. The 401(k)s were never meant to be the sole means of savings - they were meant to support pension plans and Social Security. What can people do? There are steps employees can take, like going and getting financial literacy and being able to go someplace to get objective counsel - advice that’s in your best interest. Our parents didn’t have to think of longevity risk. We need advice that has a sophistication around “What’s your flight plan for those 30 years when you don’t have a paycheck?’’ People should look at getting some kind of guaranteed payment option. It may not take care of your Red Sox tickets or your Patriots tickets, but you don’t have to worry about your mortgage and your electricity bill. The Obama administration is now looking at a United States plan where guaranteed income is an option. Is it realistic to assume that Social Security will be there for people now in their 30s or 40s? Quite frankly, the whole Social Security system has cracks in it right now that have been very well publicized. We’re spending a great deal of time with the administration, looking at how to make that a viable system. There’s no question that there have to be higher contribution rates to [private] retirement plans than there are today from both the employer and the employee. Half of the workers in the United States are not in a retirement plan in their current job. Twenty percent of the folks that actually are eligible from day-one don’t sign up. We need some sort of incentive to reward that contract between the employer and the employee. [rc] © Copyright 2010 Globe Newspaper Company.