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Older Investors Raring to Go

Feeling older and fully realizing they have to get serious about preparing for retirement, investors aged 50 and above are an ideal target for fund companies and their sales intermediaries.

Once a person turns 50, AARP research shows, they begin to grasp their mortality. And they have wealth they want to put to work. "Turning 50 is significant in people's lives," said Danielle Holland, vice president of communications and research at the Insured Retirement Institute, speaking during a recent AARP and IRI webinar, "Communicating With Older Clients." "Turning 50 is a trigger point in their physical and mental well-being."

And their assets can be the ammunition. "More importantly, this population holds 75% of all investable assets," said Jean Setzfand, director of financial security at AARP. According to, Americans have a total of $30 trillion in investable wealth.

Not only are older Americans ready to get serious about their retirement savings portfolios, they are a force to be reckoned with. There are 96 million Americans in this age group, making up 31.3% of the population.

Unretired Boomers cite retirement planning as the top financial advice they would like to receive in the next 12 months. And firms, such as Great-West Retirement Services and the AARP itself, are putting financial advice and answers for the over-50 set online.

Yet this age group expresses a clear preference for gaining that information in a one-on-one exchange with advisers.

While seniors are increasingly receptive to getting initial information via the web, they "still like that personal touch, that handshake, that referral from a friend," Holland said.

Among those within five years of retiring, 60% prefer to consult a specialist when making financial decisions, and 80% expect they will live on income alone, from Social Security, pensions and interest from their investments.

However, they don't know how much they will need or how to save.

That's where fund companies can effectively come in-by making the personal connections that combine awareness of the need and the steps to generate the income, Holland said.

"We have to help clients understand their income needs, and to really understand the difference between variable income, which can be achieved through withdrawal rates, and guaranteed income, which can come from Social Security or annuities, and how to modulate between the two," Holland said.

When dealing with a mature clientele, fund companies and financial planners must start treating each person as an individual, because the 50+ investor has complex needs; a preference for face-to-face, personal interaction; widely different views about what constitutes being old; various definitions of what it means to live "comfortably"; and complex family dynamics, IRI and AARP said.

Not only do adult children increasingly get involved in their parents' finances, but because of remarriages, there are extended families, AARP research shows. Seniors are also more active today, and thus more likely to find a new partner if they have lost a spouse. Complicating their finances even more, there are 4.5 million children living with a grandparent, with 2.4 million of these children relying on them as their primary responsible adult. Older clients also may have assigned someone power of attorney, should they become incapacitated.

"The more information you can gather about your clients, the better," Setzfand said, "because when servicing older adults, you're not just dealing with an individual. The family dynamics have a very important impact on investment goals and decisions and complicate a lot of financial decision-making."

That's why working with older people needs to become more personalized, Setzfand said. "Financial providers are faced with a massive challenge and opportunity," she said. "Traditional products and services, marketing and delivery, relationships and expectations of retirement have to drastically change to more effectively and holistically address the realities that Boomers face."

IRI has developed a life changes checklist of 27 events that affect older people that it recommends advisers to go through each year. These include inheritances, divorce, the marriage of a child, gaining or losing a business partner, and being afflicted by a serious illness.

Further, "older" is a relative term that is defined very differently by various laws and agencies. Older can be an actual age, a social status or a frame of mind. For instance, the Age Discrimination in Employment Act applies to anyone age 40 or above. AARP membership begins at age 50. Retirement savings withdrawals can start at age 59-1/2, but minimum distributions aren't required until 70-1/2. Social Security is available beginning at 63, yet Medicare doesn't kick in until age 65.

"Older is defined so differently by society and by clients' views of themselves. You need to be very cognizant of how you define older adults," Setzfand said.