Retirement nest egg cracks call for increased financial planning
How Since the beginning of the last century, how Americans planned for their golden years has changed drastically since the beginning of the 20th century. . Before the implementation of the Social Security Act of 1935, Americans who wanted to live comfortably needed to systematically put money away most often in a bank - to ensure that they wouldn't need to rely on the charity of others. Financial institutions were the trusted holders of people's dreams. Following the Great Depression, Social Security was implemented as a safety net backboard to prevent the poorest and most vulnerable Americans from slipping into poverty in during their old age. Through the 1950's, many Americans working for large and medium-sized companies could count on some type of pension plan - or defined benefit plan - to supplement their retirement savings. Until recently, defined benefit plans declined as defined contribution plans - e.g. 401(k) - began to increase in popularity. Relatively few Americans have company pension plans; - most are currently relying upon a combination of IRA's, 401(k) plans, and personal savings. With all of the recent discussion regarding the solvency of Social Security through 2010, most Americans had considered this benefit only a supplement to their personal savings and other retirement arrangements. Financial institutions became the engine that helped drive the growth of American's' nest eggs. All of this is well-known background for the current situation today. The number of companies offering 401(k) plans increased dramatically, and many companies not only allowed employees to purchase company stock, but often matched these funds in company stock as well. When the securities market began its recent decline, many Americans found themselves struggling to make sense of their retirement plans. Before the decline, even novice stock- pickers had some success , as a rising tided floated most, if not all, of the boats. Now, it became apparent that some amount of help - or patience - would be needed to achieve the goals previously made. Then came Enron: - the bankrupting company left thousands of retirement plan participants holding worthless stock in their retirement plans. Many employees had to come out of retirement to supplement the income they were counting on for retirement. The result of these blows? A recent Maritz Poll finds that one- third of Americans say they are uncertain they will be able to meet their retirement goals, and a similar proportion say they are uncertain if they can retire when they planned to. One in four Americans say they have saved nothing for retirement. Among those with the scarcest means, nearly half say they have saved nothing for retirement. Although some Americans hold financial institutions at least partially to blame for the current situation, do look at financial institutions, most fault the economy, the markets, or corporate America for the unsettled financial times. This presents an incredible opportunity for American financial institutions - the trust that their customers placed in them at the beginning of the last 20th century is still there.remains. Americans want and need direction on how to accomplish their financial goals. Who better to help, instruct and enable guide, instruct, and carry out this process this than companies that do this it for a living? The wealthiest Americans have known for a long time that planning and patience are the surest ways to building wealth and offer the surest path to financial stability. The financial planning community has worked hard to build tools, trust, and teams to help guide high net worth individuals toward better estate plans, retirement planning, and tax mitigation. Although some might argue that it takes money to make money, it is certainly true that planning ensures that goals can be set or and met, regardless of means. If financial institutions could place some of these tools into the hands of the average American, a vast economic disaster might be averted. Today, there are nearly 50 million Baby Boomers approaching retirement age, many of whom were counting on 15% or higher growth in stock values to help them meet their goals for retiring comfortably. With the incredible growth rates in values, a proportion of these Americans were even planning to exist exit the job market early. As many traditional financial institutions have discovered, Americans exiting the volatile stock markets have placed cash in more traditional, deposits-based products as safe havens for their crumbled nest eggs. Savvy institutions have anticipated this trend and have bolstered their dusty DDA and time deposit product offerings with new features. "No Risk" CD's are popular enhancements to many deposit product lines. But, when the market recovers - and history tells us it will - if nothing has changed those deposits will again fly out again as equities become attractive. If for nothing other more than enlightened self-interest, traditional financial institutions need to leverage their understanding of capital and growth on behalf of their customers, and teach them how to set and meet goals. Institutions who that can assist in the financial planning process not only learn about their customers' dreams, they find out who else shares in the customer's wallet. And, as in earlier days, they will once again work with customers from a strong position of trust, integrity, and expertise.