When clients ask you whether the hodgepodge of social security programs, private savings accounts, and employer-sponsored retirement plans that we collectively rely on will be sufficient to provide them with a comfortable living after they stop working, you probably have an easy answer at the ready.
At least that’s what most advisers say. And statistically speaking they’re often right. Both public and private pensions and retirement savings plans around the world are in a sorry state, so there is little downside to counseling clients to save more money just in case these instruments won’t be enough to support them. The worst-case scenario is that clients will die without spending all their money.
But it’s time for the conversation between clients and advisers to level up. Though meeting the global retirement challenge is a daunting task, it’s also a nuanced one. Reflexive cynicism is not just unhelpful, it’s a missed opportunity.
Think about it: If you are in the business of advising clients and don’t have a working understanding of how their mosaic of private, employer-, and government-based programs works, can you even say you advise them? If you understand their situation but not the global ideal, how will you improve their outcomes?
It’s about more than just your clients, too. Whole countries need to come up with a coordinated approach to help ensure that their citizens don’t end up impoverished in old age.
If someone asks you what we can do as a society to confront the coming retirement crisis, how will you answer? With snark or considered thought? If it’s the latter, I’ve got a hot tip for you:
Keep Reading for the Next Six Minutes
CFA Institute thinks a lot about what a retirement plan should look like, and together with the consulting firm Mercer, developed a nice and easy 10-point list. Don’t
stop you from reading the whole report, but the list is pretty comprehensive.
If I were you, as I read through this, I’d keep in mind that it’s meant to be relevant at the global level. Every country has its own set of circumstances and the situation where you live might be very different from the lay of the land where I am. Here in the United States, the trustees of the Social Security program are not mincing words. Their 2014 report has, in its third sentence, the following quote:
Neither Medicare nor Social Security can sustain projected long-run program costs in full under currently scheduled financing, and legislative changes are necessary to avoid disruptive consequences for beneficiaries and taxpayers.
What kind of changes? Well, making sure we fulfill each of these 10 objectives is likely a great start: