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Abstract
Approximately 78 Million baby boomers will reach traditional retirement age during the next 20 years. As the wave of baby boomers retire a shift in focus from asset accumulation to asset decumulation will occur relating to new retirement challenges. Financial advisors will continue to be an integral part of the asset decumulation phase as they are in the accumulation phase of retirement planning. The authors investigate the factors relevant to affluent retirees' utilization of financial advisors and the differences in planning activities undertaken by those utilizing an advisor using a proprietary dataset. The authors find the variables of gender, education, marital status, wealth, and debt all to be associated with the use of financial advisors. Utilization of advisors was also associated with an increased level of planning activities, awareness, and confidence. © 2010 Academy of Financial Services. All rights reserved.
JEL classification: D14; D12; D31; J26; 122
Keywords: Retirement; Retirement income; Financial advice; Financial advisor
1. Introduction
America is at the cusp of a large wave of new retirees as ~78 million baby boomers near retirement. Currently, the eldest baby boomers are about 63 years old, which means over the next 20 years more than 78 million Americans will be turning 65 years old (Paul, 2001). Much of the previous research focus has directly related to retirement preparation and preparedness. Because of the looming retirement of such a large generation, possessing such a large amount of wealth to both manage and protect, a new research focus on retirement income management will emerge.
There are compelling reasons driving this change in focus. Historically, retirees were provided retirement benefits that paid out as an annuity for their life through defined benefit plans. Today, the number of traditional private defined benefit plans has drastically decreased and are being replaced by the cheaper and participant investment directed defined contribution plans such as 401(k)s (Basse« and Rodrigues, 1998). In terms of dollars invested, in the second quarter of 2009, over $3.65 trillion was invested in defined contribution plans (and 3.74 trillion in IRAs) compared to only $1.97 trillion in private defined benefit plans. In 1985, $813 billion was invested in private defined benefit plans and only $509 billion in defined contribution plans (and $241 billion in IRAs)....