By ANNA PRIOR
When Merrill Lynch queried more than a thousand affluent Americans on their financial outlooks earlier this year, the firm discovered something rather remarkable: 72 percent of the surveyed baby boomers said they expect to enjoy a higher standard of living in retirement than their parents did. To hear such broad, sweeping optimism, after the past few years of drear and dread, is no doubt encouraging in itself. And, indeed, there are other numbers -- a few of which even go beyond the soft science of opinion surveys -- that seem to further support the sudden buoyancy in expectations. Total retirement assets in the U.S., according to the Investment Company Institute, had climbed back to $17.5 trillion by the end of 2010 -- just a few billion hairs below the mark reached in 2007 ($17.9 trillion). It's no wonder, then, with confidence brimming and nest eggs fattening anew, that many soon-to-be retirees are returning to an idea that feels so, well, 2007: Yes, the "bucket list" is back.
The notion, popularized by the Jack Nicholson-Morgan Freeman movie of the same name, is to compile a list of lifelong fantasies -- to coast through the Mediterranean on the Queen Mary 2, to tour the Pyramids on camelback -- and then fulfill them one by one. The idea, of course, is wonderfully aspirational. Life-affirming. Exciting. And, unfortunately, in need of a reality check, say many seasoned financial coaches. The very concept of the bucket list, it seems, has a little hole in it. Scott Hanson, an adviser in Sacramento, says he sees plenty of these lofty plans in his practice. "Most people," says Hanson, "just don't have enough financial assets set aside to meet their dreams." (That trip on the Queen Mary 2? Figure about $30,000 a couple.)
The gap between savings and cravings, in fact, is a lot bigger than either of the encouraging statistics previously mentioned would suggest. Retirement assets may be returning to pre-recession levels, but when one considers that some of the "increase" is due to both a growing population of savers and the contributions workers made to 401(k)s and IRAs during those three years, the feat is far more modest. "The numbers really understate the severity of what happened -- we missed out on three years of earnings," says Alicia Munnell, director of the Center for Retirement Research at Boston College. A more telling data point, it seems, is this one from Vanguard: In the three years since December 2007, the median yearly total return for participants in the company's retirement plans has been 0.1 percent -- which means that almost half of these account holders' investment performances have done worse than break even.
The statistic is sobering -- and that's good: While there's no harm in having a rosy outlook, there is a danger in being too cavalier -- both in setting spending goals and saving for them. Chris Cordaro, a wealth manager with RegentAtlantic Capital in Morristown, N.J., has noticed a shift toward the latter. So much so, it seems, he's having trouble getting a few clients on the phone. Too many, he says, have gotten too much positive reinforcement from the recent market upswing. "They don't come in to discuss things," he says. And many of them, frankly, need to. In the years leading up to the crash, say Cordaro and others, clients were happy to embrace a "set it and forget it" approach to retirement planning. Payroll deductions and so-called target-date funds that require no reassessing of asset allocations didn't help. But now, after the big shake-up and long run-up, it's especially important to review one's portfolio. In periods of upheaval, an automatic approach can leave allocations badly out of balance. Without addressing that, near retirees could find themselves having to scale back their bucket lists even more. Smart planning, which might include paying off a mortgage early, can also help. "The fewer payments one has at retirement, the less money is needed for bills," says Hanson. (Should you prepay?)
Simply prioritizing those fantasies can help as well, allowing some adventures to be crossed off the roster. Some pros recommend identifying the rationale behind each desire, to see if a less expensive alternative might achieve the same result. If you want to spend more time with your children, for instance, a long weekend trout fishing might give you everything you've hoped for -- without the fantasy price tag. Jon Beyrer, a VP at Solana Beach, Calif.-based Blankinship & Foster, puts it pretty simply: "Some realignment just has to happen." Otherwise, for many retirees, the bucket list might just become the bucket item.