But they also feel that they don’t know enough about investing to protect themselves and that the financial services industry isn’t looking out for their best interests, according to a recent Financial Engines report based on 300 interviews with near-retirees and retirees between March 2008 and February 2011 and reported by U.S. News & World Report.

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1. Assuming what went up, will continue to go up. Many boomers bought homes or upsized to McMansions during the good years, often using highly leveraged, high risk, and unconventional loans. They assumed that this was a low risk activity because of the equity they hoped would accrue from continued real estate appreciation. They were wrong to assume this. The era of continuously increasing real asset values, equity markets, and bond yields is over, perhaps for years or decades. Boomers didn’t figure this out in time.
2. Using dubious home equity as a primary retirement nest egg. For boomers who planned on using home equity as a retirement plan, their nest egg is now a cracked or empty shell. Homes are not investments. When they are paid for, homes deliver tax-free shelter services.
3. Failure to diversify. Some boomers didn’t establish a proper allocation of investments into non-correlated asset classes. This takes careful study and thought. Instead, many boomers were oblivious to risk or focused on chasing returns from the hottest funds.

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Individuals must wait until their full retirement age in order to draw non-reduced Social Security benefits. For Baby Boomers (defined as those born between 1943 and 1954), full retirement age is at age 66. The threshold is increasing gradually until it hits 67 for workers born in or after 1960. However, an individual may elect to receive Social Security retirement benefits at age 62, which is what approximately one-half of workers do elect. But if an individual elects to receive benefits at age 62, there will be a permanent reduction in the amount of monthly benefits the individual can receive.

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They found that boomers spend about 5 percent more than the rest of the population.

Their generation accounts for about $230 billion in sales of consumer packaged goods.

Experts say baby boomers tend to make more money and are less likely to feel the pinch of the weak economy compared to consumers with more moderate income.

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With over 75 million baby boomers looking ahead at uncertainty, more job shortages for older people, and a largely unfunded Social Security and Medicare system (especially Medicare), they will begin to consider how to get liquidity from their hardest to liquidate assets – their houses. Social Security checks now average about $1100, and for a large percentage of these people this is what they will have to live on.

Sustainability of the existing financial lifestyle among the boomer group will probably be restricted to about 10-20% of the overall group. The rest will need to liquidate assets, especially aging houses, to pay monthly expenses and cover rising healthcare premiums.

The biggest decision for most will be WHEN they sell their houses if they are homeowners. This could easily lead to a large increase in the number of listed homes over the next decade where, unlike before, the seller is not the buyer of another home. It could also lead to many who do have assets (the top 20% probably have around $800,000 in assets) selling second homes and not replacing these homes.

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Wall Street is currently in its worst bear market since the Great Depression, and its stunning destruction of wealth and retirement savings has sent a wave of distress through investors, especially older ones.

A native of Germany, Drapkin has lived in the United States for 26 years. Like many of her fellow Baby Boomers, those born between the mid-1940s and mid-1960s, she saved for her golden years in a 401(k) retirement account.

Such accounts are often heavily focused on equities and if the stock market doesn’t recover soon, this could also send further shock waves through an already weak economy as workers like Drapkin cut spending to offset the lost savings.

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It’s estimated that more than 16 million Americans face the financial challenge of balancing their own financial needs with those of their families. The stress of all these responsibilities may be putting you at risk for fraud. So how can you protect yourself while maintaining your children and parents? A new program from the North American Securities Administrators Association (NASAA)—the oldest organization dedicated to investor protection—offers a series of financial check-ups to help you get your financial footing.

“Nearly half of those in the Sandwich Generation don’t have enough money to finance their own retirement but consider paying for their children’s college tuition a parental responsibility, all while juggling the rising costs of care for their parents,” said NASAA President and Colorado Securities Commissioner Fred Joseph.

Joseph noted that many members of the Sandwich Generation don’t realize that the financial security of their children and parents can ultimately affect their own financial situation. “When you combine that fact with the reality that we are all living longer, you’re looking at millions of stressed families across America,” he said. “We’re concerned that this stress may make the Sandwich Generation more susceptible to fraud, depleting the financial resources they need to maintain their families.”

These facts prompted NASAA to “Sandwich Generation: Caught in the Middle” outreach program to offer adults sandwiched in the middle of competing financial responsibilities the resources to conduct a “Financial Check-up” in the following areas: Your Children, You and Your Parents. NASAA members also are available to conduct free presentations to help the Sandwich Generation understand and meet the financial challenges they face. Download your free brochure at NASAA’s Sandwich Generation Resource center here.

The project’s final report, “Boomers: The Next 20 Years, Ecologies of Risk,” paints a new picture of the Boomer demographic as it confronts a longer lifespan, the widest rich-poor gap in recent generations, a global energy shortage, new economic realities, and a Web-based infrastructure, according to a press release. The report concludes that Boomers will be resourceful and self-reliant, forming economic, health, and social collectives—and families of choice—to adapt to the future.

According to the report, Boomers will distribute the stress and burden of managing risk across networks of people, some based on kinship and others on affinity or interest. They will plan more, work longer, and become more entrepreneurial, as well as take part in peer-to-peer networks of people that will perform some of the financial services that banks and other financial institutions perform today.

Money Matters
The groups noted that Boomers will be the first generation to age in a truly global economy, giving them access to more learning resources, new ways to collaborate, financial products from around the world, and health care abroad (“medical tourism”).

In addition, the report suggests that an erosion of the trust people have had in institutions will bring new banking/investment vehicles, peer-to-peer loans, and new structures to manage new capitals. Financial security will be threatened by diminished government and employer safety nets and low personal savings.

Relationships Redefined
“Boomers: The Next 20 Years, Ecologies of Risk” projects emerging patterns of marriage, remarriage and childbearing, including alternative chosen family arrangements, will change the definition of family. There will be peer caretaking and social care matching services, the report said.

In addition, the report suggests greater distance between family members and greater responsibility for the financial well-being of children and grandchildren will contribute to slowed personal wealth accumulation.

Boomers will use new ways to build communities to close the gap created by decreased mobility, polarization, social fragmentation, and health challenges such as online social networks, virtual retirement communities, and community blogging. Challenges they will face include elder abuse, anti-boomer backlash, and ageist zoning laws.

Degradation of the environment will bring risks from new diseases and fewer sustainable food and energy sources resulting in food and energy collectives, do-it-yourself (DIY) products, and green technology.

Boomers will live longer, but will suffer from new chronic diseases and widespread depression from aging, illness, and other concerns. They will manage their health differently with biometrics and online tools that will challenge privacy, but will allow them to share and benefit from new information found on all parts of the globe.

Developed through ethnographic profiling of a diverse group of those born between 1946 and 1964, “Boomers: The Next 20 Years, Ecologies of Risk” is the result of a three-phased project of how Baby Boomers will age over the coming decades. The first phase mapped boomers’ 20-year horizon, identifying seven big stories that will shape their future (the Boomer map). The second phase consisted of interviews with boomers to define the 10 “Action Types” showing how different Boomers will make different choices as they confront the challenges of the future. The final phase, “Ecologies of Risk,” uses these insights to create focused forecasts of the boomers’ world.

Six organizations, including major corporations and the AARP, were involved in the project. To download a copy of “Boomers: The Next 20 Years, Ecologies of Risk” and the Boomer map, visit www.maturemarketinstitute.com, and go to “What’s New.”

The poll, conducted for Thrivent Financial for Lutherans in the midst of market turbulence Oct. 20-23, found:

• Nearly two in three boomers (63 percent) expect to cut back on overall spending now and for the holidays due to market worries.
• One in three boomers (33 percent) expect to cut back on giving to charity.
• One in five boomers (19 percent) expect to cancel holiday travel plans.

“Our survey suggests that retailers, nonprofits and the travel industry just might find a lump of coal in their Christmas stocking,” says David Heupel, a senior equity portfolio manager with Thrivent Financial. “Consumers seem to be motivated to make short-term sacrifices to protect themselves against further market and economic worries.”

Female boomers are slightly more apt than their male counterparts to report they will be cutting back on holiday spending (66 percent vs. 59 percent), giving to charity (37 percent vs. 29 percent), and holiday travel (21 percent vs. 17 percent).

Children living at home magnify respondents’ Grinch-like attitude. Boomers with children still in the household were more likely to report they planned to cut back on holiday spending than were boomers without children in the house (71 percent vs. 60 percent).

Boomer holiday travel plans were influenced by household income. Roughly one in four boomers with incomes less than $50,000 reported they had canceled their holiday travel plans (26 percent of those with household income of less than $25,000 had cancelled travel plans; 27 percent of those with income of $25,000 to $49,999). In contrast, roughly one in seven boomers with incomes of more than $50,000 reported cancelling their holiday travel (14 percent of those with incomes of $50,000 to $74,999; and 15 percent of those with incomes of $75,000 or more).

“Short-term financial adjustments can be helpful and necessary at times,” notes Jane Zilch, vice president of distribution strategy programs for Thrivent Financial. “But even decisions around issues like holiday spending, giving and travel should be weighed with a view towards one’s values and long-term financial goals. Having a formal financial strategy in place can help.”

Lisa DeAngelis and Randall Cobb look like investing geniuses right now. While the S&P 500 has dropped more than 40% since last year’s peak, the Atlanta couple’s retirement portfolio is sitting pretty, earning 4% or so a year.

DeAngelis, 45, and Cobb, 54, aren’t stellar stock pickers; they aren’t brilliant market timers either. They just have almost all of their savings in Treasury notes and cash. Always have.

“I can’t stand to see my portfolio go down,” DeAngelis says. “My mother, a Depression-era baby, taught me that Treasuries are the only investment that will never fail you.”

Sorry, Mom: History begs to differ. Though a 4% gain may look downright spectacular these days, the all-cash-and-Treasuries approach is far from fail-safe. DeAngelis and Cobb hope that slow but steady will guarantee them an on-time retirement.

But inflation – historically 3% a year and a projected 4.4% in 2008 – will erode the ultra-low rates they are earning now. Over the past 80 years, intermediate-term Treasury notes have returned about 5% a year on average and 30-day Treasury bills, a cash equivalent, have earned 4%.

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