The False Premise of Retirement Planning

The financial media is replete with articles about why more Americans are failing to accumulate enough wealth for retirement.  There are many seemingly viable answers, but the problem is that they all come from the monolithic perspective of the financial services industry: investment firms, banks, financial planners, investment counselors and corporate human resources departments.

These people have a vested interest in managing this critical conversation to benefit their own products, job security and their corporate sponsors.  Part of this is that these corporate vested interests want to keep their customer-investors disengaged from the political process and deprive them of their own empowerment to radically change their own circumstances for the better.

When millions of Americans are distracted from the real problems facing solutions to create their own financially secure retirements, the financial services industry benefits

The reason this discussion about ways to secure a financially secure retirement has been going on for years and posing the same limp answers to complex questions, is that it intentionally avoids the essential political component which is at the base of the answer about why one-third of average working Americans do not have enough to retire in comfort, including many who will suffer a serious decrease in their quality-of-life in retirement.

All the Bad Answers

Here are the standard reasons which have become stereotypical in most of the articles which deal with the failure of American workers to prepare for retirement.

1. Debt payments absorb too much of monthly incomes. Saving is difficult when you have spent money you don’t have.
2. People don’t understand the importance of retirement planning and think they will continue to work past retirement age at the same income they currently receive.
3. The federal government will provide for their needs.
4. Saving for retirement is hopeless. One study , by BankRate Monitor, found 26% of Americans aged 50-64 had not saved anything for retirement and 60% had less than $25,000. Many have abandoned the effort since they believe it is too late to accumulate the needed principal.
5. The power of consumerism to fulfill immediate wants outweighs the desire to save for future needs. In a consumer society, advertisers constantly work to create needs. Delayed gratification in a consumer-based society is un-American.
6. Procrastination.

There is truth to each of these reasons.  But the problem is that they all place the burden on individual workers and intentionally neglect much larger political facts about taxpayer resources are squandered on corporate welfare and waste and how individuals have very little input into the political system.

Americans are disenfranchised from the political process for many reasons, but their absence has been replaced by corporate interests which view taxpayers, including their own employees, as subservient and potential victims to their corporate interests.  These interests today are increasingly anti-customer and anti-taxpayer.

Consider the recently publicized debate of major corporations to avoid paying U.S. federal taxes by moving overseas.  This practice, cleverly termed “inversion,” so it is disguised to the majority of Americans, is intentionally designed to shift corporate tax burdens to individual taxpayers, who have no input into the political system to defend their own interests.  This includes those few tools which could enhance the prospects of receiving a secure financial retirement, such as universal health care, promoting job security or raising the minimum wage.

Instead corporate interests have hijacked government at the expense of average citizens.  The net effect of this is that the retirement planning message is that individuals have to be strong, tighten their financial belts, save more, work more, cut expenses, create their own portfolios and assume all financial risks in order to retire 30-plus years into the future with the needed amount.  And that “needed amount” is always in flux due to inevitable recessions, financial bubble, inflation, and personal emergencies.

These are all risks which corporations and their lobbyists have successfully avoided by capturing the political system.  Corporate-sponsored waste is legend.  Take the case of cow subsidies, which are part of the huge farm lobby.  Some nine million dairy cows in the U.S. got subsidies of $1.35 billion in 2009, which averages about $20,000 a year for an average herd size of 133 cows, according to the 2010 Congressional Research Service.  This compares to average annual payments off $16,800 a year to human families on welfare, as cited in The Upside of Down by Charles Kenny.

Of course there are many more extreme examples, especially in the defense industry which accounts for  4% of the nation’s GDP, while the U.S, accounts for 41% of the  world’s global military expenditures, according to Kenny.  And the average citizen can do their own research to find sites which list hundreds more examples of corporate-sponsored waste of taxpayer money

What Does Corporate Waste Have To Do With Retirement Planning?

But the obvious question is how does this corporate-enabled waste impact retirement planning?

The politics of retirement are complex, but the best examples are the constant Republican attacks on Social Security, Medicare, Medicaid, the need to privatize retirement, attacks against adopting the fiduciary standard in investments, bank and investment firm bailouts, and protecting large anti-customer financial institutions.

There is also the huge issue of how the housing debacle of the 2007 recession, which continues it ill-effects o the economy, has destroyed housing wealth for millions. Housing wealth is a key wealth-building engine and it was derailed in the recession.  Housing appreciation and home equity trump portfolio returns for millions of Americans and that key wealth engine failed to perform as a result of the recession.  This accounts for the financial insecurity of millions, while it hampers job mobility and fosters financial insecurity.  That recession marked the triumph of blatant corporate greed over the entire U.S. financial system.

The net effect of these efforts is that the average worker is going to assume more responsibility for their financial downside, while the corporations demand more guarantees for their financial upside.

If this perspective is adopted by average people planning for retirement, and a few intrepid financial planners who want to engage their clients and fellow citizens in the political-economy of financial planning, than millions of Americans will have a better chance of a more secure financial retirement.

For more about the political economy of financial planning, see How 401(k) Fees Destroy Wealth and What Investors Can Do To Protect Themselves.