Understanding the boomer mindset

(April 2007) Baby boomers know precisely how to secure their retirement: save more (way more!), invest wisely, and perhaps consult a professional advisor. The problem is 31% of U.S. boomers would rather scrub their bathrooms than work on their financial plans, says Lee Eisenberg, author of The Number, a current bestseller about retirement planning.

Eisenberg, a former editor-in-chief of Esquire, interviewed thousands of boomers about their money and retirement issues for his book. He found that few people really wanted to address the subject at all. “Money may be one of the last taboos of our society,” he told attendees of the Million Dollar Roundtable Boomertirement Conference in New York. “We tend to talk about anything — prescription drugs, sexuality and so forth — but with money I noticed that people would suddenly clam up.”

And their silence doesn’t just extend to perfect strangers. “They are also not willing to speak about it with their spouses, or even face [the reality] themselves.”

So what gives? In countless surveys, boomers are three times as likely to believe their best years are ahead of them. They also believe money will give them the freedom to do what they want, on their own terms.

However, they have what Eisenberg calls “inspiration deficit syndrome” — no idea what they are planning for. “Until the person knows what the number is really good for, it’s useless,” he notes. “Each of us are being asked to be the captain of our retirement ship, but most boomers will tell you, ‘I don’t know how to get there because no one ever taught me navigation, how to sail.'”

Ken Dychtwald, founding president and CEO of Age Wave, a firm that helps companies to understand the boomer mindset, suggests advisors ask more open-ended questions of people early on. And the probing must go beyond the traditional linear life plan (spending the first 25 years of life on education, the next 40 years working, followed by years of retirement). But more people are mixing up this life plan, wanting to go back to school at age 45 to learn a new career and perhaps taking a few years of leisure time before heading back to the workforce. And they don’t necessarily mind if these decisions mean they have to work much longer than to age 65, Dychtwald says. “The biggest mistake we make is we assume when people reach 65, they have nothing left to give,” he says.

Consider these possibilities and boomers will stop seeing you as a “blur” and instead see you as someone who can help shape their financial future, Eisenberg says. That said, advisors will still have their work cut out for them. Eisenberg found the baby boomers he interviewed tend to fit into one of four categories:

Procrastinators: Once upon a time, Eisenberg would classify himself in this category. He put off saving for retirement and spent his twenties and thirties (what he calls “the lost years”) not thinking about the future and just concentrating on the present — which was spending and generally having a good time. “I see [procrastinators] as blind to the idea that they have to get their second-half plan going.”

Pluckers: These investors simply “pluck” a retirement savings number out of thin air, such as $2 million. But the minute pluckers achieve their number, they immediately null it. Suddenly $3 million is needed. Eisenberg recommends not using the word “golf” when trying to engage pluckers about their retirement dreams. Most will say, “I want to play golf 24/7 for 30 years” and won’t entertain other possibilities. “You’ll need to bring the plucker down to earth.”

Plotters: These investors are more number crazy. They spend all of their time trying to figure out the perfect digits. Do they need $5 million or $4.5 million? They subconsciously entertain questions such as, “What about inflation?” “What if I live to be 92?” “What if I assume a 6% rate of return?” “What about 7%?” Unfortunately, plotters don’t spend enough time thinking about what would give them a deeper level of satisfaction during the retirement period. Your challenge will be “to get plotters to start dreaming more and loosen up,” says Eisenberg.

Probers: They believe the retirement age must be devoted to spiritual satisfaction. These people, unlike pluckers and probers, are uncomfortable around numbers and need help understanding the financial repercussions of taking that “fascinating, exploratory” two-year trip to India to study yoga.

Filed by Deanne Gage Advisor.ca, deanne.gage@advisor.rogers.com