JOHN BITNER
‘Combination’ of methods

As the baby boomer generation prepares to retire in the next few years, many are realizing they don’t have enough savings. And banks are increasingly realizing that the situation presents opportunities for products and services to address the need and boost business.

A recent study conducted by the Massachusetts Institute for a New Commonwealth in collaboration with the Center for Retirement Research at Boston College found that many people on the verge of retiring are financially unprepared. “The Graying of Massachusetts: Aging, the New Rules of Retirement and the Changing Workforce” study was sponsored by Blue Cross Blue Shield of Massachusetts.

Daniel J. Forte, president and chief executive officer of The Massachusetts Bankers Association, said Americans do not have a reputation for keeping money in the bank.

“Consumers have never saved enough,” said Forte.

Gerard R. Lavoie, executive vice president of Dedham Institution for Savings, said people might not notice all the retirement products offered by banks until the need becomes acute, often when they are just a few years away from retiring.

Banks have been offering various retirement options for some time, but they have gained popularity in the last few years.

Thirty Massachusetts banks are part of 10-year-old Infinex Financial Group, owned by The Massachusetts Bankers Association, The Connecticut Bankers Association and a number of participating banks.

Forte, who sits on the Infinex board, said the program allows community banks to offer investment options, like mutual funds and annuities. Because Infinex and the bank employ a broker-dealer, it eliminates the competition between a bank and a primary business partner.

Bill Dunleavy, chairman and chief executive officer at Pittsfield-based Legacy Banks, said he has noticed an influx of people looking for financial advice in the last three years.

“People’s financial lives are more complex these days,” said Dunleavy.

He said the bank tries to counsel clients on saving regularly while contributing to an individual retirement account.

The Legacy Portfolio Management, part of the bank’s trust division, is another way Legacy Banks is trying to help people save. Dunleavy explained that the bank and client review how much money has accumulated, set goals and continue to add to the portfolio.

Eastern Bank’s Eastern Investment Advisors follow a similar strategy, said Senior Vice President John Bitner.

“We craft a plan for them,” said Bitner, “[and] monitor their progress.”

‘Pay Yourself First’

According to Bitner, successful retirement savings includes several components.

“It is going to be a combination of increase of savings and investing in a diversified, carefully thought-out portfolio,” he said.

Forte said it is possible to be creative with IRAs, but assuring there is enough money for retirement comes down to one simple action.

“One thing people need to do more of is save,” said Forte. “Just put more money aside.”

He suggests that as people save, they increase the amount by at least 1 percent each year.

MassINC’s study found that the reasons people have not saved enough as they approach retirement include Social Security benefits being delayed from age 65 to 67 and the fact that one-third of full-time Massachusetts workers do not have any form of pension coverage -including 401K plans – at their current job.

Lavoie said college tuition and materialistic desires are some of the reasons baby boomers haven’t saved enough.

“You see a lot of baby boomers in a lot more debt,” said Lavoie.

Bitner said it is part of the “carpe diem” philosophy that many boomers had and now they aren’t in the financial position they expected.

“Many baby boomers have not saved enough to retire when they hoped to,” said Bitner.

He also blames the dot-com phenomenon from the 1990s when many people invested, but ultimately did not profit.

Dunleavy said it has been difficult to get younger generations to think about IRAs, despite efforts to talk to them about saving.

Legacy Banks works elementary and high schools to teach students about financial literacy.

This year, Legacy Banks also offered a Federal Deposit Insurance Corp.-sponsored program, “Money Smart,” which offers curriculum developed with the Berkshire Community Action Council for people at risk of not being financially prepared for their senior years.

Eastern Bank has also taken steps into the classroom and offers seminars for financial planning.

Bitner said while schools teach subjects like history and math, it is important that students also learn about finances.

Forte said starting to save as soon as possible is important, but budgeting, watching spending habits and avoiding credit card debt are also factors.

“The more you stretch on the expense side, the less you have to save,” said Forte.

Lavoie’s advice to those who are years away from retirement is to “pay yourself first.” He said encouraging people to maximize their 401(k) plans by paying as much into it as possible, while taking advantage of an employer’s matching donations, is important. But, he said, it is even more crucial to leave that money alone once it is put into a retirement account.

As banks try to counsel consumers on how to better save their money in their retirement years, there will be some baby boomers who will continue to work longer.

MassINC found that Bay State residents approaching retirement are healthier, better educated and employed in jobs less physically demanding.

Forte said that the demand for baby boomers to stay in the workforce will increase because there are fewer people in the following generations.

One upside to being a baby boomer, said Forte, is the possibility of inheriting money from the World War II-era citizens, many of whom did not pay for tuitions or as high a percentage of their incomes for housing.

“Some future savings [in the form or an inheritance] may be hidden today,” said Forte.

The study recommends increasing access to retirement savings accounts for full-time workers by utilizing the purchasing power of business associations and Massachusetts state government’s 457 Deferred Compensation Plan for public employees, increasing employee participation in existing retirement plans through improved workplace-based financial education, increasing awareness of workers’ low savings rates and the challenges facing communities as the commonwealth’s population ages, and improving job training for older workers in anticipation of their increasingly important role in the state’s economy.

Ultimately, not doing anything about a retirement plan could be the worst move, said Lavoie.

“There’s no cost to sit down and talk about something beneficial,” said Lavoie. “There might be a cost in not doing it.”