Greenspan calls on advisors to act (Part II)

We continue with Dr. Ken Dychtwald's analysis of Alan Greenspan's comments given at the Boomertirement Summit last April. Sponsored by the Million Dollar Round Table, the summit hosted financial planning experts from across the globe. The impressive speaker line-up featured Greenspan, Moshe Milvesky and leading boomer expert Dr. Ken Dychtwald. We asked Dychtwald to comment on what Greenspan had to say about boomer retirement prospects. Greenspan's thoughts and Dychtwald's "color analysis" are provided below.

Alan Greenspan: As far as the need to retire later, it's going to be a necessity for baby boomers, but ultimately, it will help the country and ease some of the problems we've discussed. The problem that's confronting us is not ambiguous, it's real. The longer we wait, the more difficult the solutions. On way to convince the public and political leaders is to involve organizations like yours that have large constituents and can persuade large groups.

Ken Dychtwald: One solution is going to be that the age of eligibility is going to be elevated. That's just obvious. Ask a nine-year-old for a solution and they're going to come up with that. Another challenge is going to be that we have committed a higher and more robust level of entitlement than makes sense with the demographic formula. Between now and 2040 the working-age population is going to grow by 20 percent, but the retiree population is going to grow by 120 percent. I could take that to a group of high school sophomores and ask them, "Okay, so what's going to happen?" And they'll say, "Well there's going to be less to go around." So telling people they're likely to receive less, which therefore means they'll have to save more, is a no-brainer. There was not one thing that Greenspan said that was anything different than what I said 18 years ago. It's not to say, "Aren't I clever, I saw this first." But when Greenspan says it -- who I think of as above the fray and clearly a formidable thinker not given to wild proclamations -- it gives the subject the gravitas it needs.

AG: You've got to have a proven and realistic approach to retirement. One thing is that if you are able to hold equities indefinitely, you will end up with a higher rate of return. I also think the future of annuities is bright. Removing the types of uncertainties that we've talked about is going to become increasingly valuable. Demand for annuities will rise as life expectancies rise. As far as long term trends in per-capita income, I would not plan as though the estate tax is going to be supported.

KD: Some people will say that if someone from a financial services firm makes this claim, he's obviously got ulterior motive. If a company is selling annuities and it says, "Don't count on your pensions and you need an immediate annuity," some part of you will think, "Well, they think they're a hammer and everything looks like a nail." Not so with Alan Greenspan. I immediately went back to my room and set my various search engines to track all the media that was going to flow out of what he said. I thought, "This will be the Paul Revere call that will turn the tide and create a wake-up call. I put on my search engines and waited for all the media to pick up on it. But it didn't happen. It was unbelievable. There was more about Paris Hilton going to jail. And for the next few days I kept thinking it's going to be a big breaking story. It's going to be the topic on Nightline, it's going to be front page, "Greenspan declares government has made promises it can't keep up with." But nothing happened. There has never been a moment where there was a greater need for not just the Rothchilds and the Kennedys, but for every man and every woman to be educated and counseled and guided towards a workable and doable financial plan. This is the time to roll up our sleeves and get to work.

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