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Boomer Retirement Crisis: How To Avoid It

The approaching retirement wave can be disastrous, with many retiring boomers expressing distress over being unprepared financially. According to a new survey, many boomers find themselves in a retirement crisis as they struggle to compete with the cost of living. 

(Berger, C. (2024, February 8). Boomers believe they don’t have enough money to retire. Signs point to them being, sadly, rightfortune.com).  

The numbers are not pretty. Amid uncertain economic conditions, baby boomers aren’t feeling confident in their retirement plans. In fact, 70% of baby boomers expressed uncertainty over whether their retirement savings were healthy enough to carry them through retirement, according to a study from Retirement Living. Retirement Living also found that 69% of baby boomers are worried about a potential recession, and because of this, 22% of baby boomers plan on delaying their retirement and staying in the workforce for another five years or more. 

(Bending, E. (2023, June 23). 1 in 5 Boomers are Delaying Retirement Due to Concerns of Recessionkiplinger.com).

Rising boomer anxiety is not unfounded, as shifting economic landscapes, rising healthcare costs, and longer life expectancies present complex challenges for potential retirees. However, all is not lost. Seasoned financial and investment experts suggest that shifting your retirement strategy can take the stress out of your retirement. They suggest that instead of fretting over the performance of a portfolio that is vulnerable to market forces and volatility, investors should consider an alternative allocation approach—one involving a mix of fixed-income assets as well as private investments.

Avoiding retirement stress starts with understanding the issues involved.

The Reality

As baby boomers transition into retirement, retirement anxiety comes into focus. Surveys and reports have consistently shown a majority of boomers feel ill-prepared for retirement. These fears are magnified by volatile markets, geopolitical unrest, health concerns, unforeseen circumstances and expenses, and so on, which can contribute to eroded retirement savings as well as confidence.

Why Fixed Income?

There is fixed income, and there are fixed income-producing assets. Traditional fixed-income investments such as CDs, savings accounts, money market accounts, bonds, and treasuries are not the type of assets sophisticated investors allocate to in order to secure financial peace of mind. These traditional fixed-income assets fail to even keep pace with inflation. Instead, smart investors favor income-producing real assets that can generate cash flow as well as appreciate over time.

Cash flow, appreciation, and the peace of mind of having a hard asset that can never lose its value entirely are why income-producing real assets are ideal for designing retirement portfolios capable of withstanding market forces while relieving retirees from the stress of economic uncertainty.

Private Investments

Investments in private companies (i.e., private equities) can offer the potential for higher returns at reduced risk. In the right hands of seasoned experts and professionals, income-producing private businesses can offer above-market returns with reduced risks. That’s because private companies are insulated from market volatility because they aren’t traded publicly. In addition, private companies with experienced professionals who are able to incorporate management efficiencies are able to mitigate risks that public companies fail to offer because of their correlation to the broader markets.

While private investments are illiquid, they have the potential for significant growth, which can be particularly beneficial for those looking to cover a retirement savings shortfall.

The Balanced Approach

The ultra-wealthy consistently allocate more than 50% of their portfolios towards an even mix of real assets and private equity. A mix of real assets and private equity offers consistent cash flow along with growth opportunities at potentially reduced risk.

The Key to Avoiding Stress

For baby boomers concerned about their retirement readiness, taking a proactive approach to investment will be the key to avoiding stress. Leveraging your portfolio away from vulnerable public equities towards a balanced mix of real assets and private equity is not only a good start but also a smart long-term strategy.

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