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WTH is Wrong With America - Part 3

Re-Posted by Dr. Shanon Brooks on November 15, 2014  monticellocollege.org/

Read Part 2 of WTH is Wrong With America

Before we talk about how to increase personal financial autonomy, let’s be very clear on the current state of financial autonomy for the vast majority of Americans today.

A few Google searches produce a frightening collection of articles, books, newscasts, editorials, and government statistics all pointing to a condition never before experienced by the United States of America–WE ARE BROKE. WORSE, WE ARE IN UNRECOVERABLE DEBT.

The United States government has put the nation in debt several times before over the past 200 years. But it was always recoverable. Today not only are we swimming in a bottomless pit of national debt, the middle class has adopted the policy for their personal affairs. Over the past year, I have interviewed every couple in my classes and in other environments (over 150 couples now) to assess their financial health. These couples range from low to high middle-class income levels, which means anywhere from $40,000 to $500,000 gross annual income. Virtually every family I have interviewed has admitted to living at or above their income.


This translates to having no discretionary income and almost universally spending all income on consumer debt maintenance.

Few of these couples have any kind of retirement plan beyond a nominally preforming 401k and more than 75% of these couples have no will or revocable trust in place.

This phenomenon was the focus of a Forbes Magazine article in early 2013. I quote, “we are on the precipice of the greatest retirement crisis in the history of the world. In the decades to come, we will witness millions of elderly Americans, the Baby Boomers and others, slipping into poverty. Too frail to work, too poor to retire will become the ‘new normal’ for many elderly Americans. ”

The author goes on to say:
Corporate America and the financial wizards behind the past three decades of so­ called retirement innovations, most notably titans of the pension benefits consulting and mutual fund 401(k) industries, are down­playing just how bad things are already and how much worse they are going to get.
Americans today are aware that corporate pensions have been virtually eliminated and that the few remaining private, as well as the nation’s public pensions, are in jeopardy. Even if you are among the lucky few that have a pension, you cannot rest assured that it will be there for all the years you’ll need it. Whether you know it or not, someone is busy trying to figure how to screw you out of your pension. Americans also know the great 401k experiment of the past 30 years has been a disaster. It is now apparent that 401ks will not provide the retirement security promised to workers. As a former mutual fund legal counsel, when I recall some of the outrageous sales materials the industry came up with to peddle funds to workers, particularly in the 1980s, it’s almost laughable—if the results weren’t so tragic. 

The National Institute on Retirement Security published a report in June of last year entitled: The Retirement Savings Crisis: Is It Worse Than We Think?  

Here are a few highlights:
1. Account ownership rates are closely correlated with income and wealth. More than 38 million working-age households (over 45%) do not own any retirement account assets, whether in a employer sponsored 401k type plan or an IRA.
2. The average working household has virtually no retirement savings external to employer sponsored programs.
3. The collective retirement savings gap among working households age 25-64 ranges from $6.8 to $14 trillion, depending on the financial measure.  Based on recommended retirement account assets (retiring by age 67), 92 percent of working households do not meet targets.
 First we have to change our thinking. The definition of insanity is to do the same thing over and over again–expecting different results. We are going to have to take charge of our own financial futures and begin thinking for ourselves. This is much harder than it reads on this page.

It was Adler who said that, “Anyone who has done any thinking, even a little bit, knows that it is painful. It is hard work, in fact the very hardest that human beings are ever called upon to do. It is fatiguing, not refreshing. If allowed to follow the path of least resistance, no one would ever think.”

Herein lies a primal cause of much of our financial dilemma.

Too many of us have voluntarily allowed others to do our financial thinking for us.

Our first step then in taking control of our  financial thinking is to acknowledge that the retirement schemes that we have been taught in school and that permeate our culture and workplaces are misrepresentations as best — fraudulent and criminal at worst.

We find ourselves in this dilemma because we have forgotten our heritage and the principles that America was founded on.

The founders understood that financial standing impacts political standing. To be free politically you have to be free financially.