When baby boomers consumers are asked how their parents invested their retirement funds, many reply they only spent the interest and dividends and never touched the principal.
Why can't this method work for baby boomers, too? asks The San Francisco Chronicle article "Why Boomers’ Retirement Is Different From Their Parents."
The new boomer retirement
- Retirement is much longer, with life expectancies often 30 years after retirement.
- Boomers have higher expectations, with a desire for travel, vacation homes, new cars, dining out, and other pleasures.
- Boomers need to rely on savings rather than pensions, but many boomers haven’t put away enough money.
- Boomers can choose exotic investment options, but they also may lose a lot of money on them.
- Decades of deregulation have caused the financial and utilities industries to become less predictable and more risky, with the certainty of previously assumed dividends now extremely uncertain.
How boomer investing is affected
As for how boomer consumer investing differs from their parents’, boomers are giving up on stock gains and focusing on income investing, the article reports. Always hunting for higher yields means higher risk.
The article advises boomers to ask their financial advisors to "establish a sustainable withdrawal rate and build a diversified portfolio focusing on total return rather than focusing on dividend-producing, interest-paying securities."
