One of our news-savvy clients alerted us to “The Retirement Gamble,” a PBS Frontline special on the challenges facing U.S. workers as they prepare for retirement.
So I made time to watch it over the weekend … it’s not often that personal finance and retirement planning are deemed sexy enough to make it on the national news.
One online commentator called the show a “sobering introduction to the American savings crisis” and a “concise introduction to the biggest shift in the retirement landscape in our lifetimes – the migration from a corporate pension model to a self-funded model that depends on personal savings and investments.”
So here’s my take on it.
I have very mixed feelings after watching the piece. There are some valuable nuggets in the program, namely the observation that saving for retirement has been shifted onto the backs of ordinary Americans, and it is perhaps a task too important and too complicated to tackle without professional assistance.
Much of the retirement and investment “assistance” out there suffers from conflicts of interest (those “helping” you are motivated by a commission, not your well-being) and few in the advice business are true “fiduciaries” required to put your welfare before all else.
As producer Martin Smith points out, it’s hard to tell if your so-called “financial adviser” is really just a glorified salesperson.
Says Smith: “Eighty five percent of all financial advisers and financial planners are really just brokers or salesmen. Their incentive is to sell you a product that makes them a higher commission, not necessarily a product that maximizes your chances of saving more. Only 15 percent of advisers are “fiduciaries” — advisers who by law must operate with your best interests in mind.”
(Note: Our firm is in that 15% minority. We are fiduciaries, and our only allegiance is to our client, not some investment or insurance company who just wants to sell you things.)
On other points, the show really misses the mark. It highlights the sad personal stories of people who have suffered financial hardship, either due to ill-advised investments in company stock, prolonged unemployment, or market declines.
While in real life there are, unfortunately, too many sad retirement stories like these, they are more reflective of bad luck and often bad decision making than overall systemic failures (for example, producer Martin Smith admits he himself raided his retirement 401(k) to put two kids through college, and later criticizes the high fees in the 401(k) plan he presumably had a hand in setting up for his own production company). Bad decisions, yes. Bad results, yes. But scarcely a condemnation of the entire retirement system.
The Frontline piece totally neglected what you can do to plan for a successful retirement.
Here’s better advice from Wall Street Journal reporter Kelly Greene. A recently released survey of 4,000 U.S. workers by Brightwork Partners, a research and consulting firm, concludes the following:
“If you want to retire with enough money, do these three things: Get a job with a retirement savings plan, contribute at least 10% of your pay to it and hire a financial planner.”
“Overall, workers are on track to replace 61% of their income in retirement. But workers saving through a workplace plan are on track to replace 79%; those who don’t are on track to replace only 41%.
“And those saving 10% or more of their pay are expected to replace 106% of their preretirement income.”
And that’s the story that Frontline missed. There are some crummy 401(k) plans out there. But if you save enough, through the plan or on your own, you should be OK. That’s where the financial planner comes in. He or she can help you set savings targets, invest well, and stay on course (not to mention stopping you from doing those really stupid things you might do on your own without professional advice!).
When you save and plan well, retirement is not a gamble. It’s a certainty.
Here’s the real secret. Success isn’t in the plan. It’s in you.