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August 31, 2015

Posted by forwardfinancialplanning1 in Retirement Savings.
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There’s a biblical question, “Am I my brother’s keeper?”   And  while the spiritual learning intended from this question is aimed at pointing out the need to help our fellow man, I’m not sure that we’re supposed to help those that won’t help themselves.  Some discouraging statistics from Nielson Global Consumer Insights: (1) One out of four families making more than $150k per year lives “paycheck-to-paycheck”.  (2) The corresponding ratio is 1 out of 3 for annual incomes between $50K and $100k.  (3) The ratio is 1 out of 2 for incomes below $50k.

And we don’t stack up well versus the rest of the world as 22% of American households have no spare cash.  This percentage is 21% in the Middle East, 20% in Europe, 15% in Latin America and 8% in Asia Pacific.  There’s a truism that “nobody will care more about your money than you will.”  But, it appears that many Americans think somebody else is going to handle the job for them……………..


There’s no such thing as a “silver bullet” for retirement August 11, 2015

Posted by forwardfinancialplanning1 in Annuities, Retirement Savings.
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This country has a looming retirement crisis which will become more evident as more baby boomers (and eventually Gen X and Gen Y’ers) retire.  People are living much longer than previous generations yet many have nowhere near enough accumulated wealth to carry them through a potentially lengthy retirement.

Our so-called “leaders” in Washington talk about this issue frequently and like most politicians, they love to propose “painless” solutions to the problem.  Many, including our current President have suggested that more widespread availability of annuities would solve the problem.  And not surprisingly, purveyors of these products have chimed in as well.  A recent quote from Cathy Weatherford, President of the Insured Retirement Institute (the annuity provider’s trade group) claimed that a current Department of Labor proposal to amend the definition of “fiduciary” (as it relates to financial advisors) would, “limit access to annuity products at a time when we should be encouraging and promoting lifetime income strategies as a source of retirement income that cannot be outlived.”

Well, it is very obvious that “having a source of lifetime income that can’t be outlived” is a wonderful thing.  However, the proponents of these clean and simple solutions never tell you the whole story.  Purchasing an annuity that will cover the spending requirements of the average American household will require a great deal of money—far more than has been accumulated by the vast majority of American workers.  The average 401k balance is well under $50,000 and even the segment aged 50-60 averages less than $200,000.  A quick check at http://www.immediateannuities.com illustrates that $200,000 utilized by a 65 year old female to purchase an immediate annuity generates the princely sum of $1088 each month.  And, of course, using the entire $200,000 for the annuity purchase would leave the average 401k (aged 50-60) holder with nothing else in reserve and many years to live.

So, take a jaundiced view of these proposed “silver bullet” solutions to the impending national retirement challenge.  We would all be better served if we heard the truth.  Fidelity Investments Senior VP, Doug Fisher told it like it really is when he said, “Annuities are meaningless if savings are ‘practically zero””.