Since the New Deal, government programs that support Americans financial success have been a consistent part of our social fabric until now. With the questionable solvency of Social Security and dwindling numbers of traditional pension plans, recent public policy has shifted toward greater personal financial ownership, simultaneously creating unprecedented individual savings opportunities. However, these new opportunities breed new responsibilities, and we must explore whether we, as individuals, are prepared for such a monumental societal paradigm shift. Unfortunately, in light of recent catastrophic events and current retirement preparedness data, it appears clear that many people are inadequately equipped to take full ownership of their financial futures. Retirement Preparedness According to the latest Retirement Confidence Survey (RCS), conducted by the Employee Benefit Research Institute, Americans have yet to handle their new responsibilities well. Statistics from 2006 spotlight some interesting points: The number of people who claim to have calculated the amount they must save for retirement remains relatively unchanged, at about 42 percent. More than half of all workers have less than $50,000 saved for retirement, and three-quarters of all workers with no savings have less than $10,000 in total assets. While only 40 percent of employees say they or their spouse has a defined benefit plan from their job, 61 percent of American workers believe they will receive income from such a plan in their retirement. A Look at the Past An examination of recent events further illustrates Americas lack of financial preparation and self-sufficiency. During the most recent bear market, millions of Americans lost their jobs, along with their retirement savings. As stock prices exploded during the booming 90s, financial literacy plummeted. Exaggerated exuberance and trust in an inflated stock market, coupled with the nave perception of an endless growth cycle, caused far too many investors to demonstrate ignorance of conventional financial wisdom. As a result, the nation paid and in many ways is still paying a hefty price. Some estimate that nearly $500 billion in wealth was lost soon after this age of irrational exuberance, not to mention the long-term psychological and emotional impacts. While fallout from September 11th and the ensuing economic recession were essentially unpredictable, a more financially literate population could have taken some basic steps to limit the severity of these effects. For example, many survivors of 9/11 victims discovered that their loved ones had not made adequate financial arrangements: insurance was insufficient or non-existent, and beneficiaries had not been designated. Additionally, many who suffered during the recession could have better protected themselves ahead of time by practicing a few fundamental financial principles: diversifying their investments, limiting their holdings of company stock, and having emergency reserves available. Had people been more financially literate, and capable of segregating their emotions from their personal finances, the economic impact would likely have been much less damaging. The question is not when the next crisis or recession will strike, but rather, how prepared will we be for that unpredictable moment? Looking Forward Given these facts, one could easily become steeped in the fear-based financial rhetoric often found in todays popular media; however, the very perpetuation of that culture of fear is a significant contributor to the overall problem. We must instead shift our intention to highlighting the need for enhanced financial literacy, realizing that the current financial images and messages are actually causing more paralysis than any significant forward movement. A few cursory observations suggest some potential solutions to our need to enhance and ensure financial literacy: Approach financial literacy from a less didactic, more emotional/psychological level. Avoid inflicting or inflaming poverty consciousness through fear-based dogma, while increasing prosperity and abundance rhetoric. Align and unite fragmented financial education efforts, and leverage nonprofit and community-based organizations, as they usually are the first to help those most in need. Educate our youth. Create a financial services industry that is less confusing, more transparent, and more accessible to people across all demographics. While it is clear we are experiencing a drastic societal transition, it is unclear whether American citizens will be adequately prepared for the shift that is underway. Therefore, it is imperative that education and financial literacy remain a paramount tenet of the ownership debate. Together, a financially literate, warmly secure, and enormously prosperous populous can be self-sufficiently prepared for unexpected events and in that preparedness, have the strength and power to improve every aspect of our communities.
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