The “New Normal” for Baby Boomers

Post crisis, steering clear of rash decision making

by Eileen Holzman, ChFC®, CLTC

Ms. Holzman is a financial advisor with Centinel Financial Group, LLC in Needham Heights, Massachusetts.  She can be reached for questions at  781-446-5007 or by email at

In today’s planning environment, the “new normal” for Baby Boomers can be quite anxious. For those Boomers who are just beginning their retirement, the ability to continue generating income while in the fragile first decade of retirement, regardless of market performance, is a crucial component of any successful retirement strategy.  It is tough to stay invested in a volatile market, and recent economic slowdowns may have steered individual’s investment plans off course. But…it is even more important now to dive deeper to one’s investment strategy and steer clear of rash decision making – particularly when fear is at its height.

The new normal in retirement planning is trying to have your savings compete in this economic climate, while having a clear path to help provide tax-efficient and sustainable retirement income. Diversification and asset allocation have their place, but an expanded focus will be necessary.

As we know, diversification will vary based on an individual’s unique needs and circumstances.  When we look at overall portfolio construction for retirees, the new normal will be deeper diversification – both asset diversification and product diversification.

The events of 2008 taught us that building portfolios that are narrowly diversified may not be sufficient, but that doesn’t mean diversification is a bad idea

The events of 2008 taught us that building portfolios that are narrowly diversified may not be sufficient, but that doesn’t mean diversification is a bad idea.  We know that it is historically possible to help manage investment risk by diversifying a portfolio among the major asset classes, such as stocks, bonds, and cash alternatives, but you can also recommend additional diversification by adding commodities, absolute return strategies, and alternative investment strategies, when appropriate.

A look at product diversification

Product diversification is the process of allocating financial resources to different kinds of financial products to help protect individuals against the new risks they will face as they transition into and through retirement. It is the process of looking at the overall diversification between traditional mutual funds, stock accounts and other accumulation-based accounts, as well variable annuities with lifetime income riders and defined benefit pension plans, Social Security and income annuity products.

Diversifying the product portfolio may help individuals ride out market fluctuations and protect investment portfolios from a major loss in any one asset class.

Today’s Boomers are living longer in retirement than any other generation.  With longer life expectancies and generally more active retirement living, it’s important for you to have a strategy that can adapt to changing needs and that can withstand the test of time.  This kind of deeper diversification is a way to help clients find direction in a volatile economy, and continue to have a meaningful dialogue in one’s long-term planning.

While diversification through an asset allocation strategy is a useful technique that can help to manage overall portfolio risk and volatility, there is no certainty or assurance that a diversified portfolio will enhance overall return or outperform one that is not diversified.