Americans not ready yet for stock market
Most experts agree that growing a generation of financially responsible Americans is a great idea. Letting more Americans enjoy the rewards of investing in the stock market and appreciating the risks of investing and trading helps them become financially savvy. When average Americans understand the concept of portfolio management and retirement planning, it is good for everyone. (Related article: Retirement planning for those who hate to plan)
The debate, therefore, right now is not if private investments accounts are good or bad. Everyone agrees, they are good. The main point of difference between supporters and critics of privatization of Social Security is if this goal should be achieved by carving out the accounts from the Social Security funds. While investing in the stock market cannot be truly compared to gambling, all smart investors know that they should be ready to lose everything when they pick a stock. (Related article: Personal investment accounts means income instability)
The President said in the State of the Union that, "We'll make sure there are good options to protect your investments from sudden market swings on the eve of your retirement." Many financial planners and Wall Street brokers are joking that they would like to know the secret to investing that the American president has discovered to take advantage of the upside without getting exposed to the downside. (Related article: No net gain to younger Americans from personal investment accounts)
But jokes aside, is it possible to turn every American into a savvy investor? Nearly 30 percent of Americans have only a high school diploma or less and 44 million Americans read at first-grade level or below. Millions of Americans do not have even a checking account or a credit card and not even basic knowledge of Math. How can these people be trusted to invest in the stock market without spending some serious money on education? (Related article: Americans not yet financially prepared for their retirement)
Jeff DuFour, CEO of Tillit Group, a leader in fiduciary consulting, calls the president's idea to privatize Social Security "premature". "The average American is simply unprepared to handle their own investments, with neither the experience nor the discipline to do what is necessary to protect their future," says DuFour. "Even so-called experts often don't know what to do. Just look at the rash of lawsuits against 401(k) sponsors in the past two years. We need a huge increase in the financial planning knowledge base of all Americans before we can rely on them to handle any part of their own Social Security money."
Several surveys support DuFour's assessment. Not only are Americans not saving enough, they don't even realize how weak their financial situation is. Many have no retirement plan, whatsoever. (Related article: Americans careless about retirement planning)
"There is little doubt that real financial security requires the integrity of the private retirement system. Individual savings by an educated public is a necessity. Imagine how many Enron and WorldCom employees might still have their retirement savings if they'd had access to a qualified adviser who would have warned them in advance about the need to diversify. If the President and Congress don't first address the issue of fiduciary responsibility and education, the tragedy of lost retirement savings could occur on a national level and make the Enron and WorldCom scandals seem small in comparison," concludes DuFour.
But the Bush administration does not seem interested in educating Americans and securing their retirement. Instead it wants to take advantage of their ignorance. Deborah Pryce, Chairman, House Republican Conference, in a leaked memo, advises her colleagues on how to communicate the Social Security privatization message, "Personalization suggests increased personal ownership and control. Privatization connotes the total corporate takeover of Social Security; this is inaccurate and thoroughly turns off listeners, who are very concerned about corporate wrongdoing...Your audience doesn't understand financial jargon. Phrases such as 'cash flow deficits' and 'actuarial imbalance' don't normally crop up in conversation; avoid using them... Your audience doesn't know how trillions and billions differ. They know these numbers are large, but not how large nor how many billions make a trillion. Boil numbers down to 'your family's share.' Also avoid percentages; your audience will try to calculate them in their head - no easy task while listening to a speech - and many will do it incorrectly...to most Americans building wealth sounds unattainable - especially in the context of Social Security. But on the other hand, putting aside a nest egg sounds like common sense."
God bless America!
Recommended article: Retirement planning tips
The debate, therefore, right now is not if private investments accounts are good or bad. Everyone agrees, they are good. The main point of difference between supporters and critics of privatization of Social Security is if this goal should be achieved by carving out the accounts from the Social Security funds. While investing in the stock market cannot be truly compared to gambling, all smart investors know that they should be ready to lose everything when they pick a stock. (Related article: Personal investment accounts means income instability)
The President said in the State of the Union that, "We'll make sure there are good options to protect your investments from sudden market swings on the eve of your retirement." Many financial planners and Wall Street brokers are joking that they would like to know the secret to investing that the American president has discovered to take advantage of the upside without getting exposed to the downside. (Related article: No net gain to younger Americans from personal investment accounts)
But jokes aside, is it possible to turn every American into a savvy investor? Nearly 30 percent of Americans have only a high school diploma or less and 44 million Americans read at first-grade level or below. Millions of Americans do not have even a checking account or a credit card and not even basic knowledge of Math. How can these people be trusted to invest in the stock market without spending some serious money on education? (Related article: Americans not yet financially prepared for their retirement)
Jeff DuFour, CEO of Tillit Group, a leader in fiduciary consulting, calls the president's idea to privatize Social Security "premature". "The average American is simply unprepared to handle their own investments, with neither the experience nor the discipline to do what is necessary to protect their future," says DuFour. "Even so-called experts often don't know what to do. Just look at the rash of lawsuits against 401(k) sponsors in the past two years. We need a huge increase in the financial planning knowledge base of all Americans before we can rely on them to handle any part of their own Social Security money."
Several surveys support DuFour's assessment. Not only are Americans not saving enough, they don't even realize how weak their financial situation is. Many have no retirement plan, whatsoever. (Related article: Americans careless about retirement planning)
"There is little doubt that real financial security requires the integrity of the private retirement system. Individual savings by an educated public is a necessity. Imagine how many Enron and WorldCom employees might still have their retirement savings if they'd had access to a qualified adviser who would have warned them in advance about the need to diversify. If the President and Congress don't first address the issue of fiduciary responsibility and education, the tragedy of lost retirement savings could occur on a national level and make the Enron and WorldCom scandals seem small in comparison," concludes DuFour.
But the Bush administration does not seem interested in educating Americans and securing their retirement. Instead it wants to take advantage of their ignorance. Deborah Pryce, Chairman, House Republican Conference, in a leaked memo, advises her colleagues on how to communicate the Social Security privatization message, "Personalization suggests increased personal ownership and control. Privatization connotes the total corporate takeover of Social Security; this is inaccurate and thoroughly turns off listeners, who are very concerned about corporate wrongdoing...Your audience doesn't understand financial jargon. Phrases such as 'cash flow deficits' and 'actuarial imbalance' don't normally crop up in conversation; avoid using them... Your audience doesn't know how trillions and billions differ. They know these numbers are large, but not how large nor how many billions make a trillion. Boil numbers down to 'your family's share.' Also avoid percentages; your audience will try to calculate them in their head - no easy task while listening to a speech - and many will do it incorrectly...to most Americans building wealth sounds unattainable - especially in the context of Social Security. But on the other hand, putting aside a nest egg sounds like common sense."
God bless America!
Recommended article: Retirement planning tips
posted by eCreativa Media @ 2:53 PM
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