Hindsight is 20/20. If we had known about the current retirement crisis 15 or 20 years ago, financial advisors around the United States could have warned their younger clients to start saving and stop spending.
Fortunately, although we can't go back in time, we can learn from our mistakes. By showing your younger clients — those from generations X and Y — the statistics from the current boomer generation's retirement crisis, you can help them avoid the problems that their parents now face.
Drew Denning, vice president of Principal Financial Group, thinks it's important to motivate clients who are in their 40s or younger to think about retirement as soon as possible.
"As an advisor in this industry, we're working with clients in their 40s, and we need to get them on the appropriate glide path. That, I truly think, is number one," he said.
Start by encouraging your clients to preserve all of their retirement vehicles. When changing jobs, 60 percent of all 401(k) participants cash out at least a portion of their 401(k) and spent it on something other than retirement savings. Not only are these investors hampering their ability to achieve long-term growth, they're subjecting themselves to an extra 10 percent tax that comes with early withdrawals from retirement plans.
Dr. Greg Salsbury, executive vice president with Jackson National, encourages younger people to make just small lifestyle changes and make sure that they think about retirement with every major purchase. These principles, he said, will ultimately help consumers meet their retirement goals.
"If you're a young couple who is considering buying a new vehicle for $30,000, you might be better off going pre-owned and putting $10,000 or $5,000 in a retirement vehicle," he suggested. "Now a lot of people might say, 'Oh, no, that's an automobile decision, that's not a retirement decision.' But that doesn't make any sense. We need a new way of thinking about retirement. All of their thinking about saving and investing and borrowing will change their quality of life in retirement, and I think that's been woefully absent over the last decade in particular."
