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How best to make up trillions of dollars in lost retirement savings

Post a Comment March 3, 2010 – 2:46 pm | Post Link |  Print This Post |

AARP Financial Inc. President Richard “Mac” Hisey: Millions of Americans Are Scared about Their Financial Future and Many More Are Unaware They are Unprepared.

Despite the market’s robust second-half recovery, the averages— and many investors’ portfolios— are only back to 1999 levels,leaving many Americans confused and looking for financial advice on how best to make up for lost time and trillions of dollars in lost retirement savings.

“A lot of damage has been done across income segments— to investor portfolios and psyches alike,” said AARP Financial Inc. President Richard “Mac” Hisey. “The recent market recovery notwithstanding, millions of Americans are still scared and confused about their retirement plans. Many others should be concerned, but aren’t because they are unaware of how unprepared they are.” AARP Financial research found that 65% of those surveyed lack confidence in the financial markets and consider the markets’ performance to be the biggest threat to their retirement.1 Most respondents (55%) said it’s hard to find financial information and guidance that they can trust.

“The reality is that, financially speaking, we are emerging from “a lost decade,” Hisey said. “There are distinct similarities between this ‘lost decade’ and the classic novel and film The Lost Weekend, which depicts an alcoholic’s struggle with blackouts and binge drinking. It can be argued that it was a combination of Wall Street’s own risk-taking and extreme over-leveraging, individuals spending way beyond their means, using their homes as ATMs, and borrowing to consume, and the Federal Government keeping interest rates too low for too long, that contributed to a binge that ultimately led to a credit crisis and the worst recession since the great depression– and we’re all dealing with the hangover. Now that the economy and the markets are bouncing back, perhaps the rest of us can begin our own financial recovery process.”

Half of those surveyed by AARP Financial indicated they either do not have, or do not even know if they have, a realistic financial plan. Even financial advisors appear perplexed over what they should be telling their clients. A recent survey of financial professionals found that nearly 50% of team-based advisors, and 62% of solo practitioners, lacked a clear recovery strategy that they could communicate to clients.2

“We talk to people every day and find there is a huge disconnect between what people think they need for a secure financial future and what they actually have,” Hisey said. “The good news is that fulfilling dreams of retirement is still possible, but will increasingly require scaled-back expectations and more expansive thinking about how best to invest to make even more modest retirement visions a reality.”

To address this situation, AARP Financial Inc. has developed a guide entitled “The Road Back: Eight Steps toward Financial Recovery” that includes simple basic actions people can take starting today to help put them on the road to financial recovery.

“While markets will recover, they are unlikely to make up for a chronic failure to rigorously and regularly save for retirement,” Hisey said. “The good news is that most of us do not need to dramatically overhaul our portfolios or adopt dramatic lifestyle changes. Retirement planning has been compared to diet and exercise. The comparison is an apt one. Small changes now can make a big difference later.”

Founded in 2005, AARP Financial Inc. is a wholly owned taxable subsidiary of AARP.

AARP Financial Inc. is dedicated to helping people age 50 and over prepare for a more secure financial future by providing access to products and services designed to help meet their retirement needs and supporting them with clear information and guidance.

AARP Financial provides access to a carefully chosen array of investment products and guidance, including mutual funds from AARP Financial, designed to meet the needs of investors at any life stage; auto and home insurance through The Hartford; credit cards through Chase; life insurance and lifetime income annuities through New York Life; and mobile home and motorcycle insurance through Foremost.

While AARP endorses the services provided by AARP Financial Inc., AARP does not offer financial products or services itself and cannot recommend that you or any specific individual should purchase any particular product or service. AARP Financial Inc. is an investment adviser and a subsidiary of AARP.

The Financial Advisors are investment adviser representatives of AARP Financial Inc., an investment adviser.

AARP is a nonprofit, nonpartisan membership organization that helps people 50+ have independence, choice and control in ways that are beneficial and affordable to them and society as a whole. AARP does not endorse candidates for public office or make contributions to either political campaigns or candidates. We produce AARP The Magazine, the definitive voice for 50+ Americans and the world’s largest-circulation magazine with over 33 million readers; AARP Bulletin, the go-to news source for AARP’s 39 million members and Americans 50+; AARP Segunda Juventud, the only bilingual U.S. publication dedicated exclusively to the 50+ Hispanic community; and our website, AARP.org. AARP Foundation is an affiliated charity that provides security, protection, and empowerment to older persons in need with support from thousands of volunteers, donors, and sponsors. We have staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands.