We’ve noted a number of articles lately about the prospects for rising retirement ages for the baby boomer generation. Some articles now estimate many boomers may be working well into their 70s. The facts are pretty sobering:

• The Federal Reserve recently reported that the median household headed by a person age 60 to 62 with a 401(k) account has less than one-quarter of what is needed to maintain their standard of living in retirement.

• The Fed reported that the median 401(k) plan held only $149,000, according to the Center for Retirement Research, an amount that would be virtually impossible to retire on.

• AARP recently reported that one in four older workers exhausted all their savings during the recession with a growing number of older Americans facing bankruptcy.

• Recent studies have estimated Social Security will run out of money by 2033.

This situation has several implications from a financial planning perspective:

1. It is obvious that extending the retirement age will have to be an option for many Americans and that the notion of an easy life of leisure after age 65 is probably now a pipe dream for many, if not a majority of baby boomers.

2. “Radical” notion: traditional asset allocation models may be a thing of the past.  The traditional strategy of transitioning a portfolio to bonds in retirement will not provide the returns necessary to enable retirees to meet their spending goals. People will need more growth investments in retirement, which means (a) holding more equities in retirement than has traditionally been the case, and (b) stomaching greater portfolio volatility.

3. Global balance with emphasis on large, quality companies. The not-so-radical notion from an investment perspective is to increase portfolio emphasis on large, quality, globally diverse companies that can capture growth of faster-growing economies and translate that into higher earnings, dividends and cash flow for investors.

4. Increase cash flow from your investments. Cash flow has become a new mantra in the investing world and for good reason: it pays the bills. Creating higher cash flows in portfolios can increase spendable income, reduce portfolio volatility, and create a rising income stream through dividend increases.

5. Another “radical” notion: save more, spend less. This discipline will have to be embraced given the prospect of lower stock returns and Social Security cutbacks. Without a grasp of what is realistic, the American “dream” is turning into a nightmare for many. With proper planning and renewed saving and spending discipline, many people can achieve a comfortable retirement.

Bob Toomey is vice president, research, for S.R. Schill & Associates, a registered investment advisor located on Mercer Island.