Top 5 Investment Considerations for Baby Boomers Waterville ME

The market gyrations of the past few weeks, including the uncertainty surrounding the government's potential bailout of Wall Street, serve as a stark reminder of why financial planning is important. Because of the timeline, this may be even more true for baby boomers than for their parents’ or children’s generations.

The closer boomers are to retirement, the more attention they should be paying not only to their investments, but to their financial plans as a whole. And with the emerging new-financial-world order, they are no longer confident that many of their previous plans for retirement will come to pass. As is generally true with financial planning, their considerations are interrelated, and most lead back to the same question: “Will we have enough money to live the way we want to for the rest of our lives?”

Against that backdrop, here are five investment considerations for baby boomers to be thinking about.

1. What’s in the cash-flow hole?

The first step is to have an honest look at cash flow, without which planning is a deep, dark hole. “Baby boomers are really bad at cash-flow planning, much more so than the silent generation,“ said Lisa A. Kirchenbauer, CFP, a registered life planner who practices in Arlington, Va. This may be in part because boomers have been sheltered from financial concerns by their parents, who were brought up in the shadow of the Depression, she explained.

Boomers may need to monitor their spending habits more than they may be accustomed For whatever reason, boomers have built up a resistance to keeping track of what they are spending. This assessment doesn’t have to be done in great detail, Kirchenbauer said—“you just have to learn what’s coming in and what’s going out.” Only then can investors form a realistic picture of how much they will need in retirement. And it’s possible that by looking at cash flow, boomers will find some sources of cash to invest to make the nest-egg grow between now and then.

2. Am I too close to the edge?

According to Larry Swedroe, principal and co-founder of Buckingham Asset Management, age and the approach of retirement should impact investors’ ability, willingness and need to take risk. As boomers look ahead to the next phase of their lives, they may need to revisit their asset allocation to ensure that it is aligned with their current risk profile.

Commentators and studies say that many older boomers are not making the transition from accumulation to capital preservation. In short, they are stuck on equities and won’t easily give up the lure of high returns. Nearing retirement, there is less time to make back big losses, so investors need to take less investment risk. That may mean putting a smaller portion in equities, which carry more risk than bonds, cash and some alternative investments. It also may mean investing in safer equities and diversifyi...

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