Streetwise
Lauren Rudd
Sunday, September 13,
2009
Adults Should Expand Their Financial Education
“We did not come to fear the future. We came here to
shape it.”
Barack Obama Sept. 9, 2009
I have often wondered why so many people are caught up in a
variety of financial difficulties, whether it is falling victim to a Ponzi
scheme, drowning in debt or simply following poor financial advice. However, the
recent torrent of abuse directed at the President of the United States over his
15 minute address to students made it abundantly clear.
Would someone please explain to me how in 15 minutes the
President could possibly convince students of any age to do anything, especially
when over a span of 18 years most parents have difficulty convincing their
offspring not to drink and drive, that smoking kills and that drugs are a one
way ticket to hell. Meanwhile, a Texas school district that declined to allow
students to listen to Obama will bus about 500 students to a function where they
will hear former president George W. Bush speak.
No, unfortunately what you are really saying to kids is that
there is no need to respect a constitutionally elected president, the law and
the rights of others. There was no clearer evidence of this than the tactless
and stupid outburst by Rep. Joe Wilson, R-S.C., when he shouted out "You lie,"
to the President during his televised address to Congress.
Many adults would be better served by expanding their own
level of education, particularly in the areas of finance and investments.
According to one survey, a third of all adults have no non-retirement savings. A
quarter of all adults have no savings for retirement. It used to be one in 10
had trouble with their mortgage payments. I believe the number is now closer to
one in seven. One in five people have said they can never afford to retire.
As a nation, we cannot afford to raise another generation
that's skidding toward financial disaster. Greeting jobs at Walmart should not
become a sought after form of employment. However, if you really want to put off
retirement until you can “call in dead,” then forego an intelligent investment
strategy.
One of the great retirement myths, assuming you can retire,
is that upon retirement you no longer have to pay taxes. Sorry, but the Uncle’s
tax collection department never retires. Add in the Pollyanna expectation that
just having a portfolio, even if it is unattended to, will save your bacon and
there is trouble in the Land of Oz.
Compounding is indeed a powerful force.
A small amount of money, plus a lot of time, can equal a lot of money.
However, those who vacillate in their efforts may find the time portion of the
equation so drastically reduced as to be ineffectual without the addition of
extraordinarily large sums of money.
Similarly, those who begin with a strong investment program at an early
age and then taper off could accumulate so much more just by consistently adding
to a portfolio of high quality stocks.
Failing to account for market volatility taught many a bitter
lesson. At the same time volatility is not a reason to abandon your portfolio.
The key is to never disregard the precept of investment quality and the
requirement for asset allocation.
Intelligent investing always does well against the
never-retire symptoms, while greed will restrict even the best of intentions.
Yet, some optimists continue to assume that one day their below average income
will exceed their above average spending. Great, we call that the ostrich
approach. That lack of foresight also lends itself well to the
work-until-you-die lifestyle. Do you want Walmart’s apply-by-phone number?
Oh, while you are deciding about the need for starting or adding to an
investment program, keep in mind that the upper range estimate of out-of-pocket
medical expenses in retirement for a 65-year-old couple is $235,000 to $376,000.
Those figures double for a couple with above average prescription needs and only
Medicare and Medicare supplements. You might want to think about buying a larger
piggy bank.
