Avoiding The Retirement Crisis | Falmouth Columns

May 14, 2021

Jill and I went down last Friday to pick up Maeve at college. You know, it is good to have Maeve home from college. I really missed the kid. Over last Saturday’s breakfast with the girls, we somehow got on the topic of funny stories of our girls when they were little. Jill, with her elephant-like memory, reminded Maeve about a time when she was about 6 years old or so and saw a Hannoush jewelry store commercial for Valentine’s Day, which was a full month away. Maeve had decided then and there that she was going to buy Jill a diamond necklace. I laughed and told her to better save up her money. But come allowance time over the next four weeks, she spent all of it at Ghelfi’s candy store with Phoebe and Sophie. Each week I reminded her that she needed to put something aside if she wanted to have enough for Jill’s “diamond necklace.”

Alas, it’s two days before the big day and the girls and I are shopping for Jill. And Maeve was in tears because she didn’t have enough. In fact, she could barely afford a red carnation, so I did break down and give her a few bucks to buy Jill some roses. Now, I’m not that cruel, so I didn’t use this as a teaching moment for a 6-year-old kid, but reminiscing about this story did bring to mind some very similar situations I see with folks every day—the inability to think ahead and start saving now for retirement. So this week with our time together, let’s talk about planning and saving ahead of time so we don’t come up short in retirement.

Now, there has long been talk that the America as we know it today is headed for a retirement crisis. Click on any news site and you’ll hear this theme repeatedly, and unfortunately there’s no “silver bullet” for fixing the problem. This should be obvious, because if there were such a thing, we wouldn’t be in the retirement predicament we are. Just how serious is this problem? Well, consider recent studies which show that one in four Americans have nothing saved for retirement—nothing! And a substantial number of other Americans have woefully under-saved and under-planned, as the median retirement savings for Americans ages 55 to 64 is $120,000. This translates into approximately $1,000 a month in income over the course of 15 years. I don’t know anybody who can get by on $1,000 a month in today’s dollars, let alone years from now, especially as inflation begins to heat up.

For far too many, their only solid plan for retirement is Social Security. Unfortunately for the typical American, Social Security will provide approximately 40 percent of their preretirement income. In contrast, an even marginally comfortable retirement would require most Americans to generate an income of at least 70 percent of their preretirement spending. Couple this with studies showing that Social Security is due to become insolvent by 2034 without any legislative changes, leaving beneficiaries receiving just 7 to 79 percent of their planned benefits, and things sound downright scary.

This should be a wakeup call for all of us to better control the things we can, specifically our own retirement. As Ben Franklin once said, “The failure to plan is a plan for failure.”

Hmmm....Folks, I have lived my life by that quote.

You see, I believe that much of the problem here comes from poor access to information and the lack of access to certain retirement vehicles. For example, people who work in small businesses often don’t have access to 401(k)s. While we are likely to get technology-driven texts from our bank or credit card company, retirement planning as a whole has not kept pace with that type of push-driven information to consumers.

So how do we solve for this? Well, first off, Social Security needs to be addressed by Congress and future administrations. And we must improve access for everyone to different types of retirement accounts and, most importantly, make it simpler for people to save. People are far more likely to engage in retirement planning if we add technology and automate the savings and investing process. We need to prioritize being educated on and engaged in the one thing we can control...our own retirement. In other words, we must develop our own sense of urgency. We must take responsibility.

It’s also important to note that people who have access to professional financial services may fare better than those that do not. Some incorrectly assume that the main benefit of having an adviser is that the adviser can predict the best future returns on investments. This is folly since no one can predict the markets consistently...I mean no one. In fact, a good adviser will help folks to see the big picture and to design and deploy a sound retirement system without the emotions that follow money. They make sure the details are attended to and your system is designed to remain steady during stormy times. In my opinion, good advisers often prepare for the potential downside risks that are inherent in the markets by incorporating quantitative data to help give the retirement system the highest probability of financial success.

And I also know it can be difficult to plan for retirement when day-to-day life occupies so much of our time. Heck, I’m 53 years old, been married to the same gal for 28 years, built a business, raised three great kids and coached their sports, I get it! Many young people are planning a family, or the purchase of their first home or car. People a little further along in life are setting aside money for their children’s college fund. The pandemic has many of us prioritizing building up our emergency fund reserves. Still, it’s crucial to start saving and building your retirement system as soon as possible. This will allow you to reap the benefits of compound interest, which is how money makes money on money over time.

As a country, retirement planning can seem daunting. But folks, the good news is that you can still exercise considerable control over your own individual circumstance. Take time now to save for your retirement “diamond,” so you don’t have to settle for the carnation instead.

And as always—be vigilant and stay alert, because you deserve more!

Jeff Cutter, CPA/PFS is president of Cutter Financial Group, LLC, an SEC-registered investment adviser with offices in Falmouth, Duxbury and Mansfield. He can be reached at jeff@cutterfinancialgroup.com.This article is intended to provide general information. It is not intended to offer or deliver investment advice in any way. Information regarding investment services is provided solely to gain a better understanding of the subject of the article. Different types of investments involve varying degrees of risk. Therefore, it should not be assumed that future performance of any specific investment or investment strategy will be profitable. Market data and other cited or linked-to content in this article are based on generally available information and are believed to be reliable. Cutter Financial does not guarantee the performance of any investment or the accuracy of the information contained in this article. Cutter Financial will provide all prospective clients with a copy of Cutter Financial’s Form ADV 2A and applicable Form ADV 2Bs. Please contact us to request a free copy via .pdf or hardcopy. Insurance instruments offered through CutterInsure, Inc. 1. https://tinyurl.com/ymazxr89 2. https://tinyurl.com/3368tdxd