Donald Haas writes in his article, “A Wake-Up Call for the Financial Services Industry: Re-inventing Financial Aging”, that the financial service industry must become more aware of the fact that more and more older Americans have amassed a sizeable amount wealth and need advice on investing for retirement. Haas discusses the different life expectancy tables that are used by different industries and how none have been able to accurately predict any one’s life expectancy. With the unpredictability of assessing one’s life time, it is impossible for any industry to predict how much a person will need upon retirement.
Not only does this industry need to know how long a person will live, it also needs to know what other sources of income will be available to that individual. Haas states, “When President Roosevelt signed the original Social Security law in 1935, the statistical reports stated that a newborn could expect to live 61.4 years”. We all are aware there are a great number of people over the age of 65 still living today. With that in mind what about the Social Security Trust Fund, will it still be in existence? Although everyone is in agreement that Social Security is in need of an overhaul, no one can agree upon the time to get it done and the longer we wait, the greater the repercussions. Even if the financial services industry could make the prediction of life expectancy, other important factors must be considered, the cost of medical expenses, inflation and how active will the person be.
Inflation is another factor that cannot be accurately predicted. Haas refers to Ibbotson Associates’ 2004 Yearbook, Stocks, Bonds, Bills and Inflation that over the past twenty year s the rate of inflation has pretty much remained a t 3 percent, but that rate cannot be expected to stay the same. Haas says when looking over the past fifty years, inflation has ranged from +0.4 percent to +12.2 percent.
The baby boomers of today are at the age of retirement and Haas believes most do not have a great amount of knowledge for investing. With the baby boomers coming into retirement age, it doesn’t leave much time to invest for their future. Therefore, the financial services industry must come up with a plan for the late bloomers.
I have always been taught to be responsible for myself and to prepare for the future. So why does Haas believe that these late bloomers must be given the tools to prepare themselves for retirement? The tools are already out there, it’s up to the individual to use them wisely. There is constant advertisement on TV and radio about investment groups. The internet provides an enormous amount of material for anyone interested. Again, what must this industry do, take the person by the hand and lead them to financial security?
I do agree that there must be more educational material available and it should also be stressed that we all need to be more proactive in the decisions made regarding our retirement. Why do most people feel that the government is responsible for seeing that we are provided for? What happened to the pride in providing for ourselves? Sure the government set up the Social Security Trust Fund, but it was never meant to be the sole provider of income in retirement, just a supplement.
The learning of retirement should start from a very early age and taught continuously throughout school. I remember taking Economics in high school and the teacher gave each of us a certain amount of pretend money to splurge on the stock market. Over a period of time we were to buy and track our chosen stock over a period of time to see if we gained or lost our money. That was a very valuable lesson and it gave me an opportunity that otherwise would not have been learned. My parents were not investors. They believed that you should literally “sock” the money away for emergencies. With the lessons learned in high school, I’ve taken advantage of playing the stock market with a mixed outcome.
Haas provided a lot of useful information about how the financial services industry tries to set someone on a path to a successful retirement. But all in all, it’s still up the individual to see it through. The young people of today are in a state of what can I get now and don’t realize what can they put away for tomorrow.