Marketplace: Reversing boomers' misfortune

Julia Anderson

Gary Brooks and Allyn Hughes use before and after photos of the eruption of Mount St. Helens to illustrate the massive meltdown of retirement savings of baby boomers — the 75 million Americans born in the years following World War II who now must adjust to the new economy.

"Prior to 2008, boomers thought they were doing all the right things to pursue a satisfying, financially secure retirement," say financial planners Brooks and Hughes. "They contributed to retirement accounts, lived within their means and looked forward to a certain lifestyle. Now, as a result of the losses from the bear market of 2008-2009, they must ReDesign their retirement planning and investments to align their money with their life goals and values."

Hughes and Brooks, who grew up in Battle Ground and now lives and works in Tacoma, have built a Web site at www.FinancialLifeRedesign.com offering psychological support and investment considerations for boomers whom they call "ReDesigners."

"As we've experienced over the past year, ideal plans are susceptible to eruption," they say. This destruction forces ReDesigners to make changes and develop new investment habits. They offer these considerations:

— Markets have historically rebounded strongly once they turn out of bear troughs.

— "Safe" assets can be misunderstood. A certificate of deposit may be safe, but over time you lose ground to inflation.

— Don't expect the average return — it doesn't exist. From 1974 to 2008, the average return of large-company U.S. stocks, was 10.02 percent. But in any given year, that return (or lack of it) can be far different. So consider pushing back retirement. Build a budget you can live with during good and bad years and consider how a part-time job in retirement might help bridge the gap between income and living costs.

— Hollow victories can be important. A loss of 30 percent of retirement investment value is far better than a 50-percent loss. Recovery time will be years shorter.

— Diversification and asset allocation are still the biggest factors in overall risk and return expectations. It's important to compare holdings and recognize gaps and overlaps.

— Investment strategy changes significantly when you flip the switch from accumulation to retirement distribution. Inflation, risk factors, life expectancy and steady cash flow must be taken into account.

— Maximizing Social Security can make a huge difference in lifetime income. It may pay to wait to retire.

If you face retirement in a few years, the Web site offers 14 "potential" recommendations for how to handle the situation.

Among the most obvious: Delay retirement, build an "ideal" and an "acceptable" retirement budget, determine how much you can save before leaving your job and re-evaluate your tolerance for future market fluctuations. Brooks and Hughes say the way boomers change their savings and investment habits as a result of the meltdown will change the American economy.

Julia Anderson is The Columbian's business editor. Reach her at 360-735-4509 or julia.anderson@columbian.com.