Evard Financial Advisors, PLLC

The Arizona Republic (Phoenix, AZ)

March 26, 2006

AS RETIREMENT NEARS, BABY BOOMERS ARE BUSY CALCULATING EXACT SIZE OF NEST EGG THEY'LL NEED - WHAT'S YOUR NUMBER?

Author: Susan Felt, The Arizona Republic

Edition: Final Chaser, Section: Front, Page: A1

Patti Hartley, 56, takes a break midafternoon and runs her numbers.

Hartley, who works for the city of Phoenix, is counting on revenue from rental homes to supplement her pension income when she retires. She's also finishing her doctorate, which she hopes will land her a college or university teaching contract. The money would help finance a second home in Prescott, an annual trip to Europe and family vacations with the kids and grandkids, all items on her wish list for the next 20 years.

For Hartley and her fellow baby boomers, lunchroom chatter and cocktail conversations are turning to numbers, and it's not just the one associated with age. It's the other number. The magic dollar amount determined by your age, income and plans for the rest of your life.

Accused of deep-seated denial about life on the other side of 50 (even the word "retire" doesn't seem to fit them), boomers are grappling with their own numbers and, in their quest to figure it all out, are zealously seeking the names of good financial planners the way they once collected the names of reliable baby-sitters.

With retirement looming, boomers are adding up the money they've managed to squirrel away in investments, savings and home equity, then subtracting liabilities such as credit card debt, mortgages, college loans and alimony. The bottom line is the money they'll have to support themselves for the rest of their lives.

What they've found is sobering.

In a Feb. 5 editorial, the New York Times reported that half the people with 401(k)s have saved less than $20,000, and 30 percent of households have saved nothing toward retirement.

For the estimated 78.2 million boomers born from 1946 to 1964, the reliable safety nets their parents could count on, including company pensions, Social Security and health insurance, are fraying.

In the mid-1980s, companies began offering 401(k) plans. At first considered an alternative to traditional retirement pension funds, they soon became the norm. In essence, employees were put in charge of their financial future.

But the switch happened under the radar of most boomers, at a time when they were busy with other issues, such as climbing the corporate ladder and raising their family.

"It's not like they sent out a press release," said Lee Eisenberg, a 59-year-old former editor in chief of Esquire whose book, The Number, cracked the top 20 of the New York Times' best-seller list within weeks of its January release.

And many were too busy buying so many things on easy credit that it distorted their own sense of wealth, he says.

But now, with an estimated 8,000 boomers turning 60 every day, the realities of longer life expectancies and no guaranteed retirement income are keeping many of them up at night scratching numbers on their mental notepads.

Listen to your heart

But before boomers can begin to figure out their own numbers, they must first answer the questions.

In the case of Scottsdale certified financial planner Kirk Kaprelian, it's three questions:

* What would you do if money were no object?

* What would you do if you had 10 to 15 years to live?

* What would you do if you had 24 hours to live?

He listens most closely to the answer to the third question.

This is where a person's feelings, regrets and longings emerge, says Kaprelian, who works for Ameriprise Financial Services Inc.

The first two questions usually produce a list of things to buy or places to go.

The third gets to what Kaprelian calls the "heart zone." If he doesn't know what resides there, then it's hard for him to understand what is really important to his clients.

Life coaches and retirement experts say that until people get to the heart of what they want to do for the rest of their lives, a number doesn't really matter.

However, dwelling on feelings and desires when it comes to money can seem too touchy-feely, even for counterculture boomers. But ignoring this step is a mistake, says life- and financial-planning expert George Kinder, author of The Seven Stages of Money Maturity and the person who came up with the three questions Kaprelian asks his clients.

If you don't work your way past the excuses -- which are usually about money and go something like "My husband would never let me" or "I can't afford it" -- you risk living the rest of your life with regret, Kinder says. Letting excuses derail you can also siphon energy.

"It's a vigor drain," he says.

Phoenix life coach JoAnne Musolf finds that for many, the thought of retirement and planning for the next 30-plus years is daunting.

"It's the first time in life when most people have a completely blank slate and they can do whatever they want," she says.

And financial institutions such as Ameriprise are marketing their services to boomers with a decidedly soft sell.

"It's more personal," says Julie Gionet, a marketing director for Ameriprise, which is targeting boomers who have between $100,000 and $1 million in an assortment of individual retirement accounts and 401(k) assets.

"Talking about hopes and dreams draws them (clients) to you more than a spreadsheet," she says. "Before, it was 'I'll tell you my hot tips' and 'How much do you have to invest?' "

Phoenix financial planner Michelle Evard says it's important to enter this phase with a plan.

And once broad goals such as traveling, or being with family, or writing a novel have been established, Evard urges people to be specific.

If you want to travel, decide where, with whom and how many times. How much will this cost?

"It's important to have a plan of what you want to do, because that's what is going to motivate you to save," she says.

"Most people spend more time planning for a two-week vacation than they do their finances," she says.

Years of bad habits

For many boomers, other money issues eclipse goal setting.

Namely, the bad habits of buying on credit and failing to save. Add to those the psychological and emotional minefields that sabotage money management, says Vickie Champion, a Valley business and life coach, and the result is a well-rehearsed dance with avoidance and denial.

"Most people my age (she's 54) have been struggling for 30 years in a job.

"They think 'I should have done more. I should have accomplished more. This was not my plan.' And they don't want to look at their number," she says.

Liz Perle, author of Money, A Memoir, says women are especially prone to a messy relationship with money.

"We're afraid," she says. "Men think of money as a river and women think of it as a lake that's going to evaporate."

It took a divorce to jolt her into action.

"I ran a corporation with hundreds of people and did I open my Visa bill? Did I open the Vanguard statement with my 401 statement?"

The answer was no. And Perle says she isn't alone.

To her, the number isn't as important as waking up and taking charge.

"Mastering the stock market is easier than baking a cake. Investing is not more complicated," she says.

Time to take charge

In two years, the oldest boomers will reach the early-retirement age of 62. According to AARP, many boomers say they intend to keep working. Some because they want to; others because they have to.

Eight years ago, older boomer men, born from 1946 to 1955, had a median of $26,000 in their 401(k) accounts and their female counterparts had $22,000, according to a 2004 research study by Duke University sociologists Mary E. Hughes and Angela O'Rand. (By this time, 401(k)s were barely a decade old.) The same study showed that younger boomer men, born from 1956 to 1964, had only $22,000, and younger boomer women had just $8,000 in their 401(k)s.

Regardless of whether boomers continue to work, planning is imperative, financial experts say.

"It's a different retirement world," Evard says. "You don't have other people taking care of the future for you."

She says some baby boomers will have pensions and Social Security, but the younger ones will need to worry about self-funding their entire retirement.

"You have to pay attention," she says.

Not surprisingly, financial planning is a growing market. More boomers are opting to have financial planners help them build a plan that maximizes investments and schedules their IRA and investment withdrawals to minimize taxes. But finding a financial planner can be as complicated as sorting through investment strategies.

There's also the issue of financial literacy, says Eisenberg, who has been surprised at the shaky grasp that otherwise sophisticated, successful people have when it comes to how financial institutions and instruments work.

So, the wake-up call to boomers is to take the blinders off and get their financial ship in order.

"The examined life is a lot less costly than the one you don't think about," Eisenberg says.

Questions to ask before hiring a financial planner

Experts may disagree about the retirement formula and rate of return you can expect from your nest egg, but they generally agree that hiring a financial planner is a sound investment.

But beware; anyone can call himself or herself a financial planner. Here are questions to ask to help find one suited for your needs and pocketbook.

How long have you been a financial planner and what credentials do you have?

Only financial planners who have passed a rigorous test, met education and renewal requirements, and have at least three years of experience are certified financial planners. Certified financial planners also are held to an ethics code that obligates them to put the clients' financial interests ahead of their own.

How are you compensated? There are typically three ways: fee-only, commissions, and fee-based, which is a combination of the two. Fee-only is paid by the hour (usually $75 to $100 an hour or more) or by the project, or with an annual retainer that can cost $1,000 or more depending on complexity. Commissions are paid on products sold to the client. This is where you want to ask if the planner has a fiduciary responsibility to you. Not all do.

What is your approach to financial planning? How will we work together? Will other members of your firm work with me? If so, what are their credentials? Will there be a written agreement of your services and a written report? (You want both.)

Sources: Patty Park, vice president of the Financial Planning Association, Greater Phoenix Chapter and director of financial planning Keats Connelly & Associates in Phoenix; Financial Planning Association

To find a financial planner

* Financial Planning Association Greater Phoenix Chapter: www.fpaofphoenix.org or (480) 483-9035.

* Financial Planning Association: fpanet.org or 1-800-322-4237.

* Certified Financial Planner: cfp-board.org.

Reach the reporter at susan.felt@arizonarepublic.com or at (602) 444-8246.