A chorus of financial experts have declared that Americans face a “retirement crisis.” Their long-standing warning: individuals are not saving enough. Their more recent concern: Financial ignorance and diminished mental capacity in old age leaves many retirees poorly-equipped to manage their retirement savings, and susceptible to all sorts of financial pitfalls, from unnecessary frugality to being scammed out of their life savings.
Ever heard someone say, “It’s not just business, it’s personal?” That sentiment is often at the heart of personal finance. It’s about us, our needs, our dreams, our money. We aren’t planning for someone else’s retirement, or making investment decisions for someone else’s gain. It’s personal.
This egocentric financial focus is understandable, but such a narrow view of “our” money may blind us to the satisfaction that can come when some of our finances have an “other” dimension. Consequently, we may miss out on moments of eudaimonia.
How would you pay $50,000 in medical bills, due over the next six months?
Much of the planning in personal finance is focused on the future, like how much needs to be saved to retire, and how much of what’s saved can actually be spent. But the future has a slim chance of coming to fruition if the financial challenges of the present aren’t adequately addressed. If today cannot be managed, any dreams for tomorrow will always be in jeopardy.
When the 401(k) was introduced a little over three decades ago, it was intended to supplement monthly checks from Social Security and employer-sponsored pension plans. Today, many pensions are gone, Social Security has a funding problem, and the primary responsibility for providing a steady retirement income falls to individuals and their 401(k) accounts. For the thousands of Americans retiring each day, there’s a growing sense that the task of turning their savings into monthly checks is one they either don’t want, or for which they are not well-suited. As Jennie Phipps puts it in a December 2016 bankrate.com article:
A fundamental purpose of life insurance is to replace an individual’s economic value should they die earlier than anticipated. Considering that the ability to earn an income is one’s greatest financial asset, it is logical to select an amount of life insurance that reflects this lifetime earning potential. Yet this logic is sometimes skewed by a misguided emphasis on reducing costs.
There is genius in the phrasing of that question. A respondent can say as little or as much as they want, yet whatever they do or don’t say will be revealing. It’s a question that shows both respect and concern, that prompts accountability while withholding immediate judgment. When it comes to your personal finances, who can ask you that kind of question – and have you answer it honestly?