Our savings, retirement environment — why we need to plan

Let us discuss the current state of our savings and retirement in America.

Many individuals needlessly struggle before and after retirement. Many never attain their other financial goals simply because they were never exposed to the financial facts of life. “They didn’t plan to fail, but rather failed to plan” as the age-old phrase goes.

The need to plan

Some suffer financial upset and losses because they do not realize or do not want to accept the fact that our financial markets can go down as well as up. Many are not aware of or do not heed the timeless fundamentals like “Don’t put all your eggs in one basket” and “Buy low, sell high.”
Being well versed in the financial fundamentals makes a big difference in the quality of life for all of us. It also makes a big difference in the quality and overall financial health of our nation. In the US, numerous studies and surveys show that many Americans—especially young adults—are ignorant on the financial basics such as how our securities markets work, how to evaluate the risks and rewards of investment products, and how to calculate what they need to save for retirement.

Low financial IQ’s

Americans are buying more stocks, bonds, and mutual funds than ever before. Numerous studies show, however, at the same time many lack the financial basics to make sound judgments in this arena. Unbiased information can be of great help, and they need to learn more about the right questions to ask before investing, how to evaluate financial products and professionals, and how to protect themselves in the marketplace.

A well-educated investor provides the best defense-and-offense-against those who would take advantage of their lack of knowledge.

They also need to learn the basics, mechanics, and benefits of financial planning. Few have developed financial plans to save for their important financial goals, such as retirement or their children’s education. Yet those who do develop a plan, regardless of income level, consistently save more.

Here are some interesting facts according to the IRS that will give you a better sense and talking knowledge of the state-of-affairs in relation to America’s Financial IQ:

•  Only 5 % of investors believe they know “everything” they need to know to make good investment decisions.
•  Two out of three households in America, estimated at 65 million, will  fail to realize one or more of their major life goals because they’ve failed to develop a comprehensive financial plan.
•  More than half, 55 %, of all current workers have never even tried to figure out how much they need to save and accumulate for retirement.
•  An alarming number of high school students (66 %) flunked a basic economic literacy test. Among adults taking the same test, only one-third achieved a score of C or better, and nearly half (49 %) failed.

It’s a New World out there

One thing we have all witnessed and experienced are the far-reaching global changes that have occurred in the last few decades. The world has become smaller and has been transformed on almost every front. Governments and national boundaries have come and gone.

The widespread availability of credit cards and automated teller machines or smart phone payments (popular in Asia) makes spending much easier today than in the recent past. And the expansion and availability of “at home” and “online” banking and investing services allows us to act more quickly than ever before when making financial decisions. Sometimes this ease of access allows us to act more impulsively, as well.

These changes have an effect on virtually everyone in the US, from our youngest workers and students to our eldest retirees. Most young people in America begin their financial lives unschooled in the basics of saving and investing.

They find out quickly and frequently that they are unaware of how quickly “easy credit” can add up to big debt.
To get a sense of the challenges that face our younger citizens, their approach to spending money, and a preview of how they can potentially make  financial decisions in the future can be explained in the following statistics:
“45 % of students are likely to buy a pair of jeans (or something similar) they really want even if they do not have the money to pay for it. And 22 % would pay for it with a credit card.”

“Most adults have high expectations for retirement. Many will fail to maintain the lifestyle and standard of living to which they have become accustomed because they failed to plan and save. More than half of American workers—55 %—have no idea how much they will need to put aside on a regular basis to make their retirement dreams a reality.”

This information is quite scary. Seek help from financial professionals before this reality bites back.

Eliseo Jojo Prisno is a Chartered Retirement Planning Counselor (CRPC) who has managed the wealth of select families and business owners. He founded P/E Capital Investments, a State Registered Investment Advisory Firm (CRD# 172695) as the firm’s Managing Director and Senior Investment Advisor. He manages a Fund investment program with Ameritas and runs an All-Equity Growth and Income customized portfolios. For a complimentary analysis of your investment or retirement readiness, email [email protected] or Call 888-929-2825. Visit www.PEcapital.org and our Facebook page.