Month: June 2017

Book Review: IOUSA

by Gary L. Fisher

iousa-book-cover“We suffer from a fiscal cancer. It is growing within us and if we do not treat it, it could have catastrophic consequences for our country.” – David Walker, Former Comptroller General of the United States.

David Walker made this statement on a 2007 episode of Sixty Minutes. Walker used to be the nation’s #1 accountant. As head of the US Government Accountability Office or GAO, he was charged with “improving transparency, enhancing government performance, and assuring accountability for the benefit of the American people. “ The GAO is the non partisan office charged with telling us how we’re doing fiscally, from a national perspective.

Walker left that role ultimately to proselytize to the nation about the financial illness that was developing in the nation’s fiscal infrastructure. Believing as he did, that if he approached the message from an individual basis he could garner more interest and attention, since many people find GAO pronouncements about as exciting as a story problem.  His appearance on television was part of that process. Unfortunately, his message didn’t create much more action that it did when he was inside the government tent.

When Walker first started his outspoken crusade the federal debt was 8.7 trillion. Today that number has increased to a breathtaking 18 trillion under the Obama Administration. That’s right. The federal debt has more than doubled the amount it took nearly 232 years to build to.* You don’t need to be an economist to know that it simply isn’t a positive trajectory. Rather, it’s “categorically unsustainable”, as Walker said, when it was ‘only’ 8 trillion. The federal debt is the sum of two numbers. The first is $12.92 trillion in public debt, which consists of all the outstanding Treasury bills, notes and bonds held by individuals, corporations, foreign governments and others. By the time you read this that number will have risen precipitously. However, to obtain a real – time number simply go to www.usdebtclock.org. You can watch the numbers clicking away in a very rapid fashion.

IOUSA is the best book that I’ve ever read which addresses this situation, putting it in to layman’s terms. Authors Addison Wiggin and Kate Incontrera have assembled commentary and insight from Walker among others that helps illustrate the impact on the average person in America. Since it’s 2007 publication date until now, many of the issues discussed appear to be coming to fruition.

One of the key concepts that they illustrate is the idea of the federal debt as a percentage of Gross Domestic Product (GDP). GDP is the total market value of goods and services produced by labor and property located within a country in a given year. It’s useful to know the debt as it relates to GDP because it is highly indicative of any particular country’s ability to actually pay back the debt owed.  So to put this in to perspective, America’s GDP was 13. 5 trillion in 2007 when the federal debt was a mere 8 trillion. Today the GDP is approximately 17.4 trillion with a debt of 18 trillion.  That means our debt is nearly 95% of our GDP, and it’s predicted to get much worse.  (This quote is from the book. Sadly it was right on target. “US Debt to GDP was 101.5% in 2014 according to tradingeconomics.com. and Forbes “The US Debt; Why It Will Continue To Rise”, 9/18/2014.”).

The largest components of the debt are*:

Medicare :  923 billion

Social Security : 861 billion

Defense/War: 595 billion

Income Security: 310 billion

Net Interest on Debt: 238 billion

Federal Pensions: 250 billion

*Source: USDebtClock.org

What this means to the average American is disturbing.  The current portion of this debt per American citizen is $185,000, or an astounding $732,000 per family!  As Walker is quoted in the book, “The facts aren’t Democrat or Republican, the facts aren’t liberal or conservative. The facts art the facts…our financial condition is worse than advertised and we need to act; we need to act soon because time is working against us”.  Remember that Walker said this before the election of President Obama and the creation of an entirely new government program with the Affordable Care Act, and the increase of the federal debt by another 10 trillion.

The very first director of the Congressional Budget Office was Alice Rivlin. She discussed the current (as of 2007) state of affairs in the book. “ Deficits matter”, says Rivlin.  “Deficits occur when the federal government is spending more than it’s collecting in revenue, and that means it has to borrow money. We are not paying the government’s services we are asking our government to provide. The government then in turn, borrows money and passes the IOU or bill right along to the next generation.

Rivlin went on to say: “Increases in longevity and rising medical care spending are symptons of being a rich country. However, we have to do something about it. Unless we are willing to raise taxes and keep on raising them, or close down the rest of the federal government, we’ve got a very big problem staring us in the face.”

Ultimately, that’s the core message of IOUSA. While politicians on both sides of the aisle continue to kick the proverbial can down the street, future generations of bright-eyed young people, retirees, and the elderly face a future of rising taxes, diminished or vanished services, and extended waits for promised benefits. The Social Security statements that people have recently started receiving stipulate clearly that under current trend lines, they will only be able to pay a percentage of promised benefits by 2033. That’s most unfortunate news for millions who have been paying in to the system for decades.

Thomas Jefferson said “No generation can contract debts greater than may be paid over the course of its own existence.” While that sounds great, it’s fundamentally untrue. Our nation is in fact passing along this legacy of debt to future generations (as well as current ones). As for Jefferson, his public proclamations aside, he lived a lavish lifestyle, funded almost exclusively by debt. He died broke. His estate had to be sold off for pennies on the dollar. His grandson, Jefferson Randolph, paid on the remaining debt for most of his life. Luckily, we can’t experience that same thing today. When one passes on now, their debt passes on with them. However, on a national level, IOUSA makes it clear that we are following Jefferson’s example of letting our grasp exceed our reach fiscally. The ramifications of which may be manifest for years to come, unless and until some real action is taken by our political representatives. Until then, bracing for a future of lowered benefit expectations and higher taxes just might be a prudent financial course of action.

*Source: http://www.treasurydirect.gov/govt/reports/pd/histdebt/histdebt_histo5.htm

The opinions voiced in this material are for general information only, do not necessarily reflect the views of LPL Financial, and are not intended to provide specific advice or recommendations for any individual. 

Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through Oak Point Financial Group, a registered investment advisor. Oak Point Financial Group and MyRetirementMentor are separate entities from LPL Financial. 

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The Risks of Retirement

What Are the Challenges You Face? Knowing Them Helps You Prepare for a Happy Retirement

by Gary L. Fisher

Old Man Boomer with SS Chair.png

In the wake of the dot.com bubble bursting in 2000, many American companies stepped back and took a long, hard look at the structure of their pension obligations. For the first time in a very long time, the real risks of making long-term promises to employees in the face of plummeting asset values, increasing competition, and volatile markets became quite real, as many companies were either careening towards bankruptcy or already in the throes of a meltdown. Others feared that they might be next.

As a result, many firms chose to move the obligation (and risk) for retirement planning away from the rms and on to the backs of employees. is was a seismic shift, as retirement planning had always been referred to as a ‘three legged stool’, consisting of pensions, social security, and personal savings and investments.

When the next bubble hit in 2009, it only exacerbated the problem. Personal savings fell, and even more firms faced bankruptcy, went out of business, or laid people off.  Millions lost their homes, their jobs, and their pensions. The shift to defined contribution plans, instead of defined benefit plans, had finally reached critical mass. Many people started to understand fully that, if they were to retire as their parents and grandparents had, they would have to figure it out on their own.

The primary issue is one of education and understanding. What should we focus on when it comes to retirement planning? Just as important, what are the risks we face when doing so? An article in The Harvard Business Review, “The Crisis In Retirement Planning (Harvard Business Review, July – August 2014), summed it up nicely when it stated, “Our approach to saving is all wrong: We need to think about monthly income, not net worth.” This statement comes from the article’s author, Robert C. Merton, Nobel Prize winner.

My 23 years of practicing in the retirement planning arena had long ago convinced me that monthly income is indeed the critical factor in retirement success. I would also say that personal health and fitness, both mental and physical, is the second half of the retirement happiness equation.

However, having adequate monthly income is often the precursor to health and well-being. In fact, the American Psychological Association’s “Stress In America” survey results for 2014, shows that 72% of adults report feeling stressed about money at least some of the time, and 22% say that they experience ‘extreme stress’ about money. Top reported triggers include: paying for unexpected expenses, paying for essentials, and saving for retirement. (American Psychological Association, February 4, 2015; American Psychological Association Survey Shows Money Stress Weighing on Americans’ Health Nationwide).

According to APA CEO and Executive Vice President Norman B. Anderson, PhD speaking about the study: “Regardless of the economic climate, money and finances have remained the top stressor since our survey began in 2007. Furthermore, this year’s survey shows that stress related to financial issues could have a significant impact on Americans’ health and well-being. Indeed, stress about money and finances has a significant impact on many Americans’ lives. Some are putting their health care needs on hold because of financial concerns. Nearly 1 in 5 Americans say that they have either considered skipping (9 percent) or skipped (12 percent) going to the doctor when they needed health care because of financial concerns. Stress about money also impacts relationships: Almost a third of adults with partners (31 percent) report that money is a major source of coflict in their relationship. So, solving these retirement income challenges is crucial, if we are to have any expectation of a long, healthy, and happy retirement. There are seven key risks that retirement income planners have to take in to account if we are to properly prepare.

Seven 7 Risks Table.png

Each of these risks are real for each of us to varying degrees. e manner in which you approach solving them, and properly planning for adequate monthly income, can make all the difference when it comes time to make work optional in your life. Structuring a retirement income plan can have many moving parts, so it’s crucial that you have a thoughtful plan in place that takes each one of these risks in to account.

Let us help you navigate this mine field and create a plan that makes sense for you and your goals. For a complimentary consultation to review what you are doing to prepare for an appropriate retirement income, call us at:

810-603-9100
to set an appointment.•

 

 

 

 

 

The Sunscreen Song

The Sunscreen Song

by Gary Fisher

It was known as ‘The Sunscreen Song’. A hit song in 1999. by Baz Luhrman , it offered sage advice to the ‘Class of 1999’. The tune went to #10 in the states, and was #1 in the UK. To this day it stands as one of the most unusually catchy songs of a generation. The lyrics are the key, and they present a dramatic, yet understated line of thinking for the last class of the 20th century.

As I move through my 50th year on earth, and work with clients yet to know the joys of hitting the half century mark, and many who have long since passed that point, I am reminded of the song and it’s advice, and how spot on it was. In fact, I recently ran across a similarly conceived set of instructions purportedly written by 60 year olds. The comments essentially dovetail with the Sunscreen song which I found to be rather intriguing.

Quality advice can be particularly valuable when it comes to envisioning a life that includes business and personal success, raising a family, taking care of ailing parents, fluffy kitties, happy dogs, yourself, your spouse, and then planning for something called ‘retirement’ which might span 20, 30, and even 40 years.

So if you are near a computer, or you have the song on your ipod load it up and take a listen. You may find it moving, or fun, but its hard to imagine it won’t resonate.

Among the gems of advice are:

  • Don’t worry about the future. Or worry, but know that worry is as effective as trying to solve an algebra problem by chewing gum.
  • Don’t be reckless with other people’s hearts, and don’t put up with people who are reckless with yours.
  • Don’t waste time on jealously. Sometimes you’re ahead, sometimes you’re behind. The race is long, and in the end it’s only with yourself.
  • Floss.
  • Stretch.
  • Don’t feel guilty if you don’t’ know what you want to do with your life. The most interesting people I know, didn’t know what they wanted to do at 22, and some of the most interesting 40 year olds I know still don’t.
  • Be kind to your knees. You’ll miss those when they’re gone.
  • Whatever you do, don’t congratulate yourself too much, or berate yourself either. Your choices are half chance, and so are everybody else’s.
  • Get to know your parents. You never know when they’ll be gone for good.
  • The older you get the more you need the people who knew you when you were young.
  • Travel.
  • Don’t expect anyone else to support you. Maybe you have a trust fund or a wealthy spouse, but you never know when either will run out.
  • And of course….wear sunscreen!

And…in my opinion…here are some recommendations from the ‘Over 60’ crowd:

  • Eat and exercise like a diabetic heart patient with a stroke, and you’ll never actually become one.
  • Pay your bills and ‘stay the hell’ out of debt.
  • The joints you damage today will get their revenge later.
  • Stuff is just stuff. Don’t hold on to material objects. Hold on to time and relationships.
  • The most important person in your life is the one who agreed to share their life with you. Treat them as such.
  • No matter how long or how short you live, you’ll wish you took better care of your body when you were young.
  • A true friend will come running at 2am. Everyone else are just acquaintances.
  • Don’t take life so seriously. Even if things seem dark and hopeless, try to laugh at how ridiculous life is.

When it comes time for you to wrap up one phase of your life, and move in to the retirement phase you’ll find that this advice will be particularly resonant.

The formula for my Happy Retirement “Sunscreen” is based on countless studies, personal observation of nearly a quarter of a century in practice working with clients, and the words of those same clients it seems clear that your happiness in this phase of life will include four critical components:

  1. How healthy you are physically and mentally.
  2. The fun you have with your hobbies and most importantly, your passions.
  3. The depth and quality of your personal relationships.
  4. The level of contribution to others you are able and willing to make.
  5. The monthly income you have that facilitates the previous four points.

Interestingly the advice to the graduating class of ‘99, the wisdom of the 60 + crowd, all blend in to one neat package that serves as a nifty guide to what we should all focus on as we make our plans for the BEST of our life. Heed it well!

 

Making the Rest of Your Life the Best of Your Life

by Gary L. Fisher

Gary, Carolyn, Luke at Tiger game.png

For decades since it was invented, since retirement became a ‘thing’, it’s been perceived as a winding down and a wrapping up. That isn’t necessarily the case any longer. Thinking of the future, anticipating the good things to come are the very essence of a positive mental outlook. Social psychologists tell us that optimism, and enthusiasm both come from a forward thinking bias. Remember back when you couldn’t wait to turn 16 so you could get a license? 18 meant graduation and adulthood. 21 meant legal drinking! Then it gets a little hazy after that. 30 feels pretty mature. 40 is when the ‘getting old’ jokes start, and by 50….you can feel the rains coming as the saying goes. Then it’s wait for Social Security eligibility, and then Medicare eligibility. Not exactly the stuff of wild eyed anticipation and goosebumps!

The new reality is that being north of 50, 60, or even 70 can mean a time of maximum contribution . I know it was for my mom. We lost her super early and totally unexpectedly at age 71. But let me tell you one thing…she had never been more important to us. To our lives, our day to day comings and goings. She had never been any more vital, enthusiastic, and energetic. She was fully engaged in her life, and her family’s lives. She used every minute of the day. She was looking forward to my nephews 5th birthday, Tracy and my 20th wedding anniversary, and her and my dads 50th anniversary, as well as 50th birthday parties for Tracy and I. She worked for Tracy, she worked in our office, and she took care of my in-laws, neighbors, and extended family. She was continuing to make the rest of her life the BEST of her life.

This mentality is a choice! It’s there for the taking! You’ll read about some of the risks we face in achieving this in this issue of The Mentor, and some of the pathways to success. We call it ‘Finding Your Beach’, and it’s synonymous with making the rest of your life the best of your life. It’s not magic. It’s not alchemy. It just takes a great attitude, a dream, and a plan. That’s what we’re here to help you achieve. As your retirement mentor we offer strategies, and tactics to help you and your family reach your beach. Its our mission. It’s our passion. It’s what we do every day. And we do it very well! Let us help you make the rest the best!