USA: Generation Rushing Towards Retirement Is Short on Cash

Retirement warnings - We need to get smarter Reports LORE CROGHAN in THE NEW YORK DAILY NEWS NEW YORK (NY Daily News), May 3, 2006: Every seven seconds, a baby boomer turns 60. A generation that's long on confidence but short on cash - and knowledge - is rushing towards retirement age. "We have very low levels of financial literacy," said Maureen Mohyde of The Hartford Financial Services Group, which hosted a retirement forum yesterday at the New York Stock Exchange. "Boomers will learn just enough, just in time" about planning and investing for retirement, predicted Mohyde, who's director of Hartford's corporate gerontology group. Financial advisers traditionally focus first on picking specific investments for clients, second on building a balanced portfolio - and leave for last the issue of how to save clients from outliving their assets during retirement. They need to flip this priority list upside down, said John Diehl, another Hartford exec. "America needs our help," he said. Worries about whether boomers - a massive group of 75 million Americans - will outlive their assets are well-founded. In 1955, a worker who retired at age 65 had a life expectancy of four more years, said chairman/CEO Ramani Ayer. Now, a 62-year-old retiree has another 18 years life expectancy. Free-spending boomers face trouble because the Social Security system is strained, companies and state governments are gutting pensions and employers are eliminating retiree health care coverage. It doesn't help that boomers are a "sandwich generation" that spends simultaneously for elderly parents' care and kids' schooling, Ayer said. Financial advisers need to come up with innovative ways to educate boomers - fast - and not just sell them stuff. "We need to look outside the box - like Apple and Whole Foods - and blur entertainment with knowledge," said Joseph Coughlin, founding director of the AgeLab at Massachusetts Institute of Technology. Five steps to financial literacy Baby boomers need a crash course in financial literacy - pronto. "The time is now," said Karen Altfest, a certified financial planner at L.J. Altfest in Manhattan. Here's how to get started: 1. Learn about your employer's retirement plan. Go to your Human Resources department and find out if there's a 401(k) or 403(b) retirement plan. Ask what firm manages the plan. Are there choices for how the money is invested? What do you have to do to sign up? What are you locked into if you sign up? Some employers at least partly match the money you put into this savings plan - and even if they don't, the money you sock away is tax-deferred, Altfest said. If you are participating in your workplace 401(k) program, you need to review its current offerings to see what you might be missing out on. Altfest has clients who signed up 30 years ago and haven't reviewed their plan since then. If you discover your employer doesn't have a retirement program, set up an individual retirement account (IRA). 2. Figure out what it actually costs you to live now, month by month. "You can't go forward without this knowledge," Altfest said. Write out everything you spend, and every bill you pay. Use a pad and paper if you don't like doing calculations on the computer - or if you do, use easy software like Quicken, which is available at www.quicken.intuit.com. 3. Determine how much money you really will need when you retire. You can't set investment goals unless you know this. Use your current spending as a baseline. If you aren't planning to live in your current home, you need to find out how much housing will cost where you'll be moving. What do groceries cost? Will you be using a car? What activities are you planning, and how much will they cost? 4. Take courses on the ABCs of personal finance and investing. Schools - including CUNY, NYU and The New School - offer continuing-education courses, by the evening or the semester. 5. Go for a financial check-up. See a financial planner to find out if you're headed in the right direction for retirement. "You don't want to be 65 and asking questions for the first time," Altfest said. All contents © 2006 Daily News, L.P.