5 ways retirement planning is like an NBA game

photo(6)Teamwork, timing, and execution are all part of retirement planning. And, as I observed last night, they are also important elements of a National Basketball Association (NBA) game.

Yes, it’s time for another of my analogies. This time, I was inspired by a game between the Boston Celtics and Orlando Magic, which the Celtics won by a score of 120-105.

The common features I noted were as follows.

  1.  Players are on both offense and defense. Granted, last night’s final score shows that both teams were somewhat short on defense. Still, staying one step ahead of potential obstacles is an important strategy. In retirement planning, this may be in the form of a contingency fund or low-risk investments. Handling the defense well may enable one to take more risks on the offense.
  2. Keep your eye on the clock. Although real-life retirement planning does not come in 24-second spurts, the execution of a plan should be undertaken as soon as possible. Use this time wisely; every moment counts. And, keep in mind that the window of opportunity may be cut short by an unplanned event.
  3. Rebound, rebound, rebound. If you make a mistake, there’s a chance to catch it immediately and try again. Don’t let one missed opportunity derail your run toward retirement.
  4. Understand the risk-reward trade-off. A three-pointer can be exciting; yet, just as in real life, rewards are not as easy as they look. Sometimes, it’s worth it to take a little longer to reach a more likely, but smaller, result. Sometimes, it’s not. That’s why investors should consult their advisors, as the latter have the skills to handle a variety of situations that may arise.
  5. Saving the most important for last, teamwork leads to strong results. In last night’s game, four of the five Boston starters scored at least 16 points each, and the team combined for 28 assists. Yet, not all of the teamwork is on the court. Even before the game, plans are developed, analyzed, and explained by expert advisors. Good coaching—or advising—continues throughout the length of the game, and provides expert ways to refocus as needed.

This is just a short list of comparisons I jotted down last evening. Please feel free to add to this list by using the comment box. (And, for those wondering, the photo was taken from the first row of section 303 in Boston’s TD Garden.)

Reasons to look beyond your industry when marketing your business

OLYMPUS DIGITAL CAMERAWhen evaluating marketing strategy and tactics, executives need to emerge from their silos and seek out and draw analogies from other industries. My latest example of this inter-industry inspirational technique was a set of case studies in my marketing class, where students presented service-related issues encountered by a company or industry. By happenstance, both presentations made last week focused on firms that, following high-profile negative incidents, launched marketing campaigns that sought to bring consumers back to basics. According to the presenters, Carnival Cruise Lines refocused on onboard fun while JetBlue emphasized customer service.

Immediately, I saw applicability to the retirement income industry, particularly the variable annuity industry.

In early 2010, while working at Cerulli Associates, I authored a research report called Evaluating Your Variable Annuity Product Line. Among the findings were that, in the wake of the financial crisis, the industry had entered a period of “stabilization and rationalization” and a return to basics would emerge gradually in the years ahead. These findings met with some controversy, as the prevailing belief was that, despite data to the contrary, the presence of comprehensive guaranteed lifetime withdrawal benefits (GLWBs) increased sales. Yet, let’s fast-forward three-and-a-half years: many insurance companies reduced benefit levels or increased the costs, some discontinued the GLWB, and some firms exited the business altogether.

That said, the annuity industry—primarily the fixed annuity industry, however—has started to return to basics with the introduction of the deferred income annuity (DIA), a lifetime annuity variation that provides an income stream that commences a couple of decades from the time of purchase. Beacon Research estimates that sales of fixed annuity market DIAs have increased during each of the past six quarters, culminating in a 40% increase during second quarter 2013. At the same time, however, several insurers continue to tweak VAs by offering new products in which both parties share any losses the policies might incur. While this makes the VA more palatable (to both consumers and insurers), it is also a complex notion, yet one can argue that it is a way to preserve the traditional function of the GLWB.

While it is too soon to measure the impact of Carnival’s September 2013 campaign, my classmate related that JetBlue had success with its You Above All™ campaign in 2010. Nostalgia? Perhaps. Yet it also showed how companies can, or can hope, to rebound from a disruptive event by returning to their roots.

How a conversation with Mom put the retirement crisis into perspective

During a conversation with my mom a few nights ago, she mentioned something that both resonated with me and validated a position I’d maintained for some time.

It happened as I detailed my difficulties in finding employment as I approached my 50th birthday. My mom responded – most assuredly in a helpful manner – that people my age are usually getting ready to retire. Perhaps, she said, that was something I should consider. When I replied that I still had 15 to 20 working years ahead of me, it was her turn to be surprised. For Mom, age 50 meant that retirement was approaching. For me, age 50 means that I am in the second half of my career.

And, my family is fairly representative of others. Among the findings in the recently released 2013 Retirement Confidence Survey by the Employee Benefit Research Institute (EBRI) and Mathew Greenwald & Associates was that today’s workers expect to retire at a later age than that of their counterparts of a generation earlier. Specifically, 36% of today’s workers expect to retire after age 65, up from just 11% in 1991. And, only 9% of today’s workers expect to retire before age 60, down from 19% in 1991 and 24% in 1998.

Even so, the EBRI/Greenwald survey reports that 37% of today’s retirees were younger than age 60 when they retired, continuing a two-decade-long trend of retirements occurring before they were expected. Many of these early retirements, according to the survey, were due to unexpected, negative events such as loss of employment. And, this leads us to an important point—one that I shared with Mom during our call. Today’s workers do not have the confidence that our retirement savings will sustain us for the rest of our lives. The EBRI/Greenwald survey found that 49% of today’s workers have little or no confidence that their retirement savings will be able to provide a comfortable lifestyle; this is up considerably from the 1995 survey, in which 27% expressed that same sentiment.

The selection of a retirement date is just the beginning. The retirement experience of my generation will bear little similarity to that of our parents, resulting in a population of trailing edge Boomers who will not be able to look to their parents for retirement advice. If we rely on the same strategies as our parents did, we will find ourselves in a critical situation when the time comes. The retirement crisis is very real, and education for advisors and individuals will be instrumental in helping Boomers forge a path to lifelong financial security.