Helen Keller once remarked, “Security is largely superstition; it doesn’t exist in nature.” Maybe not; but, if history is any guide, “The Greatest Generation” – the Depression & World War II generation – were far more secure than their children or grandchildren.
These people were the savers. They didn’t travel extensively during their working years. Nor did they eat in expensive restaurants or buy cars they couldn’t afford. This was the generation that hated debt and paid cash for everything, save a house or maybe a car. They were happy with one tv set. That generation had long term goals and saved for them. Their most important goal was to never be dependent on anyone but themselves. Ever.
My parents were typical of their friends. They saved during their working years and retired at a lifestyle that allowed them to travel spending the “fruits” of their investing years… a far cry from many in later generations who’ve become accustomed to spending their retirement money before they get there.
A recent survey reflects the growing gap. Here are a few interesting takeaways:
- Americans appear to believe their life insurance benefits should cover about 14 years of expenses after the loss of a breadwinner. How much protection do most Americans actually have in place? About 3 years.
- 60% of Americans believe they have enough life insurance in place. But, according to New York Life’s survey and computations, about 20% actually do.
- Today about 68% of Americans feel financially secure, down from 87% in 2008.
The last bullet point may be explained by the credit market meltdown that occurred in 2009. Nevertheless, there appears to be a huge disconnect between expectations and the realities of life likely grounded in the noticeable lack of personal financial planning education in our system; then again, maybe not. For many in the World War II generation, education came through the hard and bitter experience of the Great Depression.
While many believe their 401(k)s represent their total retirement plan, the growing reality is, especially for upper income earners, those 401(k)s and IRAs are simply and only a foundation – a starting point only, and a fact that represents another gap between illusion and reality. To understand retirement is to understand the tax code and how to create retirement ‘building blocks’.
Example: IRA guru Ed Slott (you’ve seen his retirement tv shows, some raising money for PBS) has called cash value life insurance one of the greatest benefits in the income tax code; and, he might be right. After all, it accumulates without current taxation and can be paid out while alive without taxation – it can also be paid to heirs tax-free. And, all of this occurs while protecting your family, business, and debtors from premature death. How else could anyone create an instant estate with the stroke of a pen? Yet, many, if not most people view life insurance as little more than an expense or gamble with an insurance company. It should be noted, however, that there must be a need for the death benefit – a need for protection – for life insurance to make sense as a building block.
While many advisors, yours truly included, do go out of their way to conduct educational sessions for clients so they will understand the reasoning behind the decision-making process in mapping retirement strategies, many people find it much of the “information overload” as confusing. Adding to the confusion is the proliferation of financial infotainment masquerading as education when, sadly, real education is usually found in rather boring textbooks and seldom in glitzy packaging.
Rather than waiting for the government to provide financial education to the masses – courses they could use themselves – it’s really up to all of us to take on the responsibility to educate ourselves and secure the future to ourselves and those in our family who will remember us as someone who cared – or didn’t.
 Retirement Advisor, August 2014; New York Life’s life insurance gap survey
 It should be noted that Ed Slott is one of the few – maybe the only – gurus on television that actually is a licensed and credentialed practicing advisor – and one who actually has real clients and accountable to the regulators.
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Jim Lorenzen is a CERTIFIED FINANCIAL PLANNER® professional and An Accredited Investment Fiduciary® in his 21st year of private practice as Founding Principal of The Independent Financial Group, a fee-only registered investment advisor with clients located across the U.S.. He is also licensed for insurance as an independent agent under California license 0C00742. IFG helps specializes in crafting wealth design strategies around life goals by using a proven planning process coupled with a cost-conscious objective and non-conflicted risk management philosophy.
The Independent Financial Group does not provide legal or tax advice and nothing contained herein should be construed as securities or investment advice, nor an opinion regarding the appropriateness of any investment to the individual reader. The general information provided should not be acted upon without obtaining specific legal, tax, and investment advice from an appropriate licensed professional.