IBISWorld: The Retirement Planning Industry Is Booming

With estimated revenue growth of about 134%, the retirement planning industry comes in second on research-firm IBISWorld’s list of the fastest-growing industries for 2010 to 2019, right after Voice-over-Internet Protocol (VoIP). The alternative to traditional telephony, revenue from VoIP is expected to grow by nearly 150% over the next decade.

IbisWorld included in its retirement planning universe individual retirement accounts, 401(k)s, funds, and private and public retirement plans. “Early in the 10-year period, these plans probably will get a boost because financial asset prices will recover,” IbisWorld predicts. Add to that the “demographic effect of people needing to manage money better as they grow,” the firm adds.

Trusts and estates, an industry that is likely to grow by about 106%, is on the winning list for similar reasons, he noted. “It’s kind of a corollary to retirement planning.”

Industries or sectors expected to slump in the next decade include land line telecommunications; tank and armored-vehicle manufacturing; small-appliance manufacturing; and DVD, game, and video renters.

What about Younger Workers? TIAA-CREF Has Some Answers

The Executive Vice President for Client Services at TIAA-CREF, the retirement-investing giant to universities, hospitals, and other nonprofits, recently spoke with a Boston Globe about last year's market rally, on the heels of the historic decline in 2008, and the challenges facing retirement savers.

When the reporter asked about younger workers, the TIAA-CREF executive replied as follows:

“We're also seeing a shift with the younger generation, where the word retirement does not resonate. They don't believe in it. They believe that they are going to stop this line of activity and move onto another line of activity. The recession has definitely shifted what retirement means to the younger generation. In many of our counseling sessions to younger folks, we don't even use the word retirement. We talk about lifelong planning. I've been in the industry 32 years; that's a crossroads.”

Phased Retirement Impacts Employee Benefits

Phased retirement is getting a boost from the sluggish economy, as many people have discovered they can't afford to retire fully. Yet, in pondering phased retirement, there are other financial factors to consider. A recent article in The Pantagraph highlights some of them.

For example, when you reduce your work hours and salary, that reduction could have a direct impact on your employee benefits. That include:

• Life insurance, which is often tied to a multiple of your salary
• Long-term disability insurance.
• Pension and other retirement benefits, which are critical factors to look at when considering whether to retire gradually.

Phased retirement could have an unwelcome impact on a pension. Your earnings in phased retirement also could reduce your Social Security benefits if you start collecting Social Security before you reach your full retirement age because the government penalizes Social Security recipients who continue to earn income before their full retirement age.

Also, if you're thinking of reducing your work hours, be sure to determine whether you'll still be eligible for your employer's health insurance. Also make sure you will still be able to participate in your employer's 401(k) plan if you reduce your hours.

Lawsuit against StanCERA

Leaders in Stanislaus County, California, want to  defend its retirement board from a lawsuit brought by upset retirees. The lawsuit against the Stanislaus County Employees' Retirement Association (StanCERA) launched in December 2009 did not name the retirement board. But the board remains controversial. At stake are retiree benefits that were compromised in the spring of 2009 when StanCERA moved money among funds to protect the struggling county from a multimillion-dollar financial hemorrhage.

Three members of Retired Employees of Stanislaus County sued, saying StanCERA's first responsibility is to its 2,800 members, not the county, the retirement system's major contributor. The county and retirement board contend that the transferred money came from a fund that pays for benefits that were not guaranteed for the pensioners. Without the transfers, the county would be forced to lay off more workers and further slash public services, they say.

The county faces a $20 million deficit in the next fiscal year starting July 1, 2010. A court date for the retirees' lawsuit is scheduled April 12, 2010.

 Fresno County Chips In

The Fresno County of California expects to pay more than $140 million into its pension system next fiscal year up 13% from this year. The higher costs are largely the result of huge investment losses in a recession-battered market. When investment earnings aren't enough to keep the pension system adequately funded, the county must make up the difference.

Florida Re-employment Video

The Florida Department of Management Services has announced an informational Web clip for Florida Retirement System (FRS) retirees and the public. As the first in a series of clips, it addresses "Re-employment after Retirement."

The topic is especially relevant since the 2009 Florida Legislature changed the laws on re-employment with Florida Retirement System employers.

Effective July 1, 2010, the re-employment laws will require an FRS retiree to terminate employment and stay off the payroll of any FRS employer for six months after retiring. Returning to work in months seven through 12 of retirement requires the retiree to forfeit benefits for those months.

Conversion to a Roth IRA

In the past, the only Americans eligible to convert a traditional IRA to a Roth IRA were those making $100,000 or less. Starting in 2010, taxpayers at all income levels may make this election.

Necessities without Dreams

Ninety percent of Canadians feel they will have enough income to cover their necessities in retirement, but only 25 percent feel they will have enough money to fulfill their retirement dreams, according to a study commissioned by the Royal Bank of Canada.

Insights of the Rich and Wealthy

Bank of America has released findings from the latest Merrill Lynch Affluent Insights Quarterly, a survey of the values, financial priorities and concerns of affluent Americans and the challenges and opportunities they face. It shows that many affluent Americans are rethinking their vision of retirement and offers lessons-learned from retirees and what they wished they had done differently when planning for retirement.

Given the chance to do it all again, roughly half of retired respondents indicated they would have focused more on their "life goals" and less on "the numbers" and on hitting a specific nest egg dollar amount when planning for retirement, while the other half indicated they would have focused more on "the numbers."

Retirees who wished they had focused more on their "life goals" indicated they would have spent more time determining how they wanted to live in their retirement years (38%), not just on a number that would sustain them but on one that would help them live their ideal lifestyle. Additionally, 8 percent would have created a plan to better support their philanthropic missions.

Among those who indicated that they would have focused more on "the numbers," 23 percent wished they had started working with a financial advisor earlier in life and 18 percent would have given up more luxuries in order to reach their retirement goals. Among all retired respondents, three out of 10 worked with a financial advisor when planning for retirement, though, in hindsight, more than half wished they had started doing so sooner.

Affluent Lifestyle Changes

Reflecting on 2009, affluent respondents in the Merrill Lynch poll indicated various lifestyle changes they had made during the last twelve months. These included:

• Cutting energy costs (48%)
• Becoming more aware of day-to-day/short-term cash flow (38%)
• Vacationing less (30%) or closer to home (20%)
• Scaling back on recreational activities such as golf, skiing, and tennis(29%)
• Delaying capital expenditures, e.g., home improvements or automobile expenses (16%)