The leading edge of the 76 million Baby Boomers are beginning to turn 59 1/2–the age when people can start collecting certain retirement benefits without penalty. To get a snapshot of how Baby Boomers who are executives are investing for retirement, Clark Consulting issued its Executive Retirement Report – The Baby Boomer Edition.
According to Clark’s Executive Retirement Report, Baby Boomers overwhelmingly favor large-cap stocks, with these funds comprising 36.9% of all assets measured. Money markets were a distant second at 13.2%, while fixed income was a close third with 12.7% of total assets measured.
« As part of the largest demographic group in our country, the investment choices of Boomer executives may be an economic bellwether, » said Tom Wamberg, CEO of Clark Consulting, himself a Baby Boomer. « My peers and I comprise nearly 26% of the U.S. population. We have impacted American society since the 1960’s youth culture and spawned the consumer-based yuppie culture of the 1980’s that still exists. » Wamberg continued, « Baby Boomers have become accustomed to a high standard of living, and where and how we invest for retirement will definitely have an impact. »
While there were many consistencies in investment choices for all Baby Boomer executives, the report found some differences in investment strategies or asset class choices based on age. The report looked at the executives in three different age categories: those born 1946-1951, those born 1952-1958 and the youngest of the Boomers born between 1959 and 1964.
Large-cap stocks were the most popular of assets measured, with the oldest group placing nearly 40% of their assets in that class (39.5%). Middle Boomers allocated 35.9% of their assets to large-cap stocks, and the youngest group had 35.0% of their assets allocated to large-caps.
According to the report, the number two and three most popular asset classes varied by age group, but fixed income, small caps and money markets were the favorites with Baby Boomers.
According to Ted Disabato, Chief Investment Officer of Clark Consulting’s Investment Group, « Baby Boomer executives certainly have more investment choices than their parents did. They have benefited greatly from the strong US economy over the last 60 years and are very comfortable with equities as a major portion of their retirement account. »
For the eldest group of Boomers (those born between 1946 and 1951), the second and third most popular asset classes were fixed income (14.1%) and small-caps (10.7%). For Middle Boomers (1952-1958), small caps were also third most popular, with 12.9% of assets measured. However, second-place money markets barely edged small caps (13.4%) by fewer than 60 basis points.
The youngest of the Boomers–those born between 1959 and 1964–differed from their elders; small-caps were not in their top three measured assets. Instead, they selected money markets (17.3%) and fixed income (11.2%).
« Counter intuitively, the youngest group of Boomer executives allocated almost twice as much of their accounts to the ‘safer’ investment of money market funds than did the eldest group with 17.3% and 9.6% respectively, » Wamberg continued, « even though it might be wise for them to take more risk. While we tend to presume that the closer one is to retirement age, the more conservative their investments will be, our report indicated otherwise. »
The Clark Consulting Executive Retirement Report is a quarterly report issued by Clark Consulting (NYSE:CLK), an executive compensation and benefits consulting firm. The report examines the investment selections of more than 17,000 executives with annual compensation typically in excess of $100,000, who have accounts in nonqualified retirement plans through Clark Consulting. The Executive Retirement Report looks at those investments across nine different asset classes including: balanced, fixed income, foreign, large-cap, mid-cap, small-cap, money market, specialty and world. The selection of asset funds and the allocations within those funds determine the investment return generated for an executive’s retirement account. Full results of the Baby Boomer report will be available at www.clarkconsulting.com/execreport .
About Clark Consulting
Clark Consulting (NYSE:CLK) is the leading public executive compensation and benefits consulting firm. Founded in 1967 and now with over 70 offices nationwide, Clark Consulting helps more than 3,850 corporate, healthcare and banking clients to keep their best people. Clark Consulting’s compensation consultants specialize in designing innovative programs that attract, retain, motivate and reward executives, employees and Directors. The company’s benefits consultants provide leading edge advice on the design, financing and plan administration of benefits programs. For additional information, please visit http://www.clarkconsulting.com/.