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Editor’s note: the following is excerpted from InFRE’s Certified Retirement Counselor (CRC®) Study Guide, “Fundamentals of Retirement Planning.” As more people seek retirement counseling, it is critical for professionals to understand the underlying motivations, beliefs and money attitudes that are implicit in how clients and prospects make decisions. The more insight we have, the better we are able to meet their needs and more efficiently use our time.

Each generation has a unique set of experiences, marked by their common passage together in history. As each generation ages, it generally continues to respond to the world in ways it learned. From one generation to the next, distinctive differences arise because of each one’s unique historical perspective.

Each generation is therefore linked by the shared life experiences that occur in its formative years. Sociologists tell us common experiences create “a central tendency” that differentiates one generation from another. Knowing when people were born allows us to predict attitudes and behavioral tendencies of our clients.

For example, you might not necessarily emphasize team-play, duty, and frugality in dealing with Baby Boomer-age clients. But those are the kinds of things you might very well emphasize in dealing with the World War II generation.

Or, to get better results when discussing investments with clients in their 60s, you might need to anchor your explanation to their prior investing experience and possibly make firm investing recommendations. But, in dealing with Boomers, you are almost always better off offering choices.

In this section we will examine the two generational groups that are either at or in retirement: the Silent Generation, or those born before 1946, and the Baby Boomer Generation – both early Boomers (born 1946-1955) and late ones (born 1956-1964).

Personal and Shared Experiences

The most important time for building the life-experience base, which we use to understand the world, is during our formative years – generally, the period from birth to early adulthood. As we grow older, we generalize learned responses and continue to apply them whether or not they are appropriate to new situations. Baby Boomers and the Silent Generation base decisions on distinct and often contrasting values and attitudes developed during each one’s formative years.

Individuals draw on two kinds of experiences when making decisions – the personal and the shared. Personal experiences are those that are more or less unique to the individual. Shared experiences are those that other people in similar situations have. Those shared experiences allow you to look at a group’s responses and behavior while acknowledging that any individual may react and behave in a very different manner.

Our shared experiences are well-formed by our late teens and early 20s. German sociologist Karl Mannheim called those shared feelings of generations, zeitgeist – a spirit of the times. Today’s Silent Generation adults have a zeitgeist or personal history that included World War II, the Great Depression, and the stock market crash of 1929. These events shaped their lives and their attitudes about money. They are marked by those experiences and even as those become more distant memories, they continue to respond to the world in ways they learned long ago. Thus, it is to be expected from many raised during the Depression that saving money is emotionally satisfying, while investing in the stock market is emotionally threatening.

The Silent Generation: Duty and Obligation

Research psychologists and cultural anthropologists have characterized “The Silent Generation” as possessing the following traits:

Financial—The Silent Generation is less inclined to ask for, and is more resistant to, financial help. They are learning to live on limited resources. Women of this generation are far less financially literate and aware. They are being impacted financially by the changing dynamics of health care.

Work—This generation is more or less split between those who desire to continue working in their later years and those who believe that retirement is their due. They have more firmly and longer-held notions about work and retirement. They ascribe to a lifelong belief of “work hard – get ahead.”

Leisure—Members of this generation expect “leisure” in retirement but have limited experience in developing leisure activities.

Physical Health—Their self-reported physical health status is “high,” although they are experiencing the beginning of chronic health conditions.

Mental Health—This generation has the lowest suicide rate.

Relationships—Although they grew up with a belief in marriage as a long-term commitment, there is an increased level of divorce among the Silent Generation. Members of this generation are beginning to lose their spouses and, because of increasing mobility, may live long distances from adult children.

Family Matters—Although they experience it to a lesser degree than many Baby Boomers – who are the sandwich generation – younger members of the Silent Generation may be facing issues related to elderly parents, as well as new relationships with now-grown children.

Home Life—This generation also faces, among its members and their adult children, the complexities inherent in re-marriage and “combined” families.

Housing—Most of the Silent Generation are homeowners in the literal sense of the word. They are facing decisions on relocating, downsizing, and alternative housing such as assisted living communities.

Personal Growth—The Silent Generation doesn’t particularly embrace “personal growth” as important to one’s life. Life- or financial-planning discussions that use this terminology could create a barrier to reaching this generation. The notion of therapists and counselors to help them “fix” aspects of their lives is not something they’re used to, although they do tend to trust and rely on “experts” (e.g., a trusted doctor).

Problems and Surprises—Unfortunately, the Silent Generation has sometimes found that “work hard – get ahead” is not necessarily true. Widowhood is common and presents unique challenges and, often, crises. Members of the Silent Generation are uncomfortable with the term, aging. They face an extended life expectancy that may challenge their preparations for retirement, both financially and in other ways.

In summary, Silent Generation adults are driven by duty, by concepts of obligation to others. And they are driven more by concerns about what they owe to others. Demonstrate what you have in common with the Silent Generation. Show a patriotic attitude with them if you are personally patriotically inclined, and they’ll resonate with you. Wear an American flag lapel pin. Drop them a note on Memorial Day. Display a patriotic symbol in your office.

Boomers’ Distrust of Authority

As the majority of Boomers moved through their adolescent years and into young adulthood, they experienced radical societal changes. These included the Vietnam War, Woodstock, Watergate, the civil rights and women’s liberation movements, and the assassinations of John Kennedy, Robert Kennedy and Martin Luther King, Jr.

Boomers came away from those times distrusting and challenging institutions. They became more insistently individualistic, more “me-oriented” and more independent than any generation that preceded it. Their attitude contrasted with their parents. Their parents considered a large, established institution as credible, because it was a large, established institution. For Boomers, such credibility is not instantly accorded.

Cultural anthropologists and research psychologists have characterized Boomers specifically with the following traits:

Financial—While they are more financially savvy than their parents, they are more burdened with debt – both credit card debt and big mortgages – than their parents. They also have far more complex financial choices in their lives. They are simultaneously living with having to be much more self-reliant for financial security in retirement than their parents and with expecting significant inheritances from those parents and the implications of “sudden money.” Their status as the sandwich generation may require them to financially assist aging parents at the same time they are putting children through college.

Work—Because of the corporate downsizing phenomenon in the 1980s and early 1990s, Boomers have come to distrust company “stability” and have much less corporate loyalty than the Silent Generation. Their sheer numbers have resulted in many Boomers bumping up against the reality that they may never rise to the top in their career. Many are creating second careers or have become self-employed. Consulting or self-employment may lead to isolation and some disconnect from the rest of the working world. Boomers are still looking for “meaning” in their work. They expect, and often desire, to work far beyond “traditional” retirement age.

Leisure—Because of the demands of work and parenting, Boomers think of leisure as a foreign concept and often experience it only as short bursts of immediate gratification, such as a luxury trip to Europe. Time pressures lead to a lack of ritual or routine for leisure.

Physical Health—As parents age and die, Boomers are beginning to confront their own mortality and are taking steps to maintain physical health. The stress associated with mid-life career transitions or disappointments, high debt loads, and other financial obligations, is impacting their health.

Mental Health—As a generation, Boomers are coming to grips with mortality, struggling with both discouragement about whether this is all there is and empowerment that the best is yet to be created. Stress is high, resulting from career pressures, aging parents, and the financial obligations of raising children. Boomers are dealing with a creeping sense of fatalism as they hit mid-life and mid-career.

Relationships—Boomers are often losing parents and spouses, due to death or divorce. Blended or stepfamilies are common. Single status is not necessarily a stigma but presents unique financial planning challenges. Members of this group are trying to come to grips with what their obligations are to parents and children.

Family Matters—Heavily influenced by their diverse and changing relationships, Boomers are struggling with sandwich generation issues. Many began their families at an older age than prior generations so education is a priority, but financing that education coincides with funding retirement.

Home Life—Boomers place a high priority on home life but feel its quality is often compromised by competing demands on time.

Housing—Housing isn’t the comfort to this generation that it has been to the Silent Generation. Mortgages are high and will likely be carried into later life. Boomers who own second homes are under increased financial pressure. Many Boomers may desire to relocate or downsize housing as their children go to and through college. Conversely, some may actually upsize, to accommodate a live-in aging parent.

Personal Growth—Boomers are still trying to figure out “what it all means.” Because things have not always worked out as they envisioned in their earlier, idealistic days, Boomers are becoming very introspective about their lives. They are beginning to think about a moral or values-based “legacy” and want signs that their lives have personal significance.

Problems and Surprises—This generation believed they were entitled to a better world and have paid for it – but not with their own money – so they are now reaping the results of their spending habits. Divorce, unemployment, mid-life health problems, and the death of family members are frequent “problems.” Unexpected financial windfalls (inheritances) have been pleasant surprises.

For many Boomers then, “large institutions” may be synonymous with a feeling of “I can’t trust them.” For their parents, a figure of authority, such as a broker or an insurance agent or a banker, implies expertise. For Boomers, such expertise is not taken for granted; you have to prove it to them.

These core attitudes directly come into play in considering and choosing a financial relationship. If your core attitude includes a distrust of institutions, including government, then how much credence will you give the guarantee of having Social Security when you retire? The answer is, “not much,” and Boomers indeed are skeptical of having Social Security. In fact, many believe that Social Security is a promise that is meant to be broken. They are skeptical of any institutional guarantees, including company pension plans. That’s why they believe they need to take care of themselves financially when they retire.

On the other hand, financial security is apt to be an issue, but not in the same way it was for their parents. Boomers don’t worry much about having enough money to live in the style to which they have become accustomed. It is “future lifestyle security” that motivates their money decisions and behavior.

Because Boomers are individualistic and independent, their decision-making is different than their parents’. That has been the driving force for the increase in defined contribution retirement plans, such as 401(k)s. They want to feel in control of the decision-making. That means you must offer alternatives, options, choices, so it appears as customized recommendations.

Boomers are also different from their parents when it comes to investment risk. The oldest boomers (those born 1946-1954) were in their mid-30s when the bull market of the early 1980’s began. Like most people that age, they were more concerned with careers, family, and spending than investing. Whenever they finally began paying attention – 1982 or later – the market was going up. A bull market in equities is all they know: Even when the market goes down, it soon goes back up.

Aging Boomers’ outlook on investing in equities is essentially positive. It is something they believe they should be doing; that is not how their parents felt. Emotional acceptance makes it easier for them to say “yes” to an investment program incorporating equities even when risks are clearly outlined, as they should be in the sales process. Fear of loss is not experienced at the gut-wrenching level it was for their parents.

For aging Boomers, the potential for loss is evaluated against an experience background that says it isn’t likely in the long run, or maybe even the short run. In practical terms, an equity-oriented recommendation should tap this implicit belief. Connecting the recommendation to the market’s historical performance, including both gains and losses, is the linchpin.

From the aging Boomer’s emotional point of view, if equities as a class always go up in the long run and your recommendation is clearly part of that class, then risk of loss is not a significant deterrent. There may be other deterrents that get in the way of the executing a recommended retirement plan, but for most aging Boomers, risk should not be the issue if handled appropriately.

Understanding these factors, using them to construct investment recommendations, and playing them back in the course of the communication will capture and hold both interest and attention far better than anything else you can do.

 

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