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Steve Gresham
Unsafe At Any Speed
Most retirement plans will fail . So who will tell the clients ?
I
N 1965 , A HARVARD-TRAINED LAWYER WORKING FOR THE DEpartment of Labor published a book warning Americans that their cars could kill them . Unsafe At Any Speed by Ralph Nader rocked the Detroit auto industry , and its damning revelations prompted the federal government to act with uncharacteristic energy to implement the National Traffic and Motor Vehicle Safety Act the next year . Nader ’ s message was that car manufacturers know of their vehicles ’ defects and in fact designed them , choosing profits over safety . The subtitle of his book is “ The Designed-in Dangers of the American Automobile .” His moral observation : You can ’ t trust the maker of the car you drive .
Now let ’ s take another industry that ’ s likely to face trust issues . Tens of millions of Americans believe they are going to be OK in retirement . But those of us in the financial advice industry know better . Most of these retirees will fail . Many will run out of money . They ’ ll have significant health issues . Many will be unable to manage the care they need .
But have we warned consumers about this ? If we cannot ensure that they thrive in their longevity , aren ’ t we responsible for telling them ?
If it is our responsibility , we cannot hide from it . The truth is starting to come out . People know there ’ s a problem .
What We Know
Consider that “ retirement savings crisis ” is noted 69 million times when you search Google . We also know who will be affected . The vast majority of our clients are baby boomers , the generation first born in 1946 . That group is 76 million strong , and together with their children and aging parents represent more than a third of the U . S . population . They own half the nation ’ s wealth and do 70 % of its consumer spending .
According to an Alliance for Lifetime Income report , 43 % of consumers believe the 2022 market setback represents a longer-term change that negatively alters their retirement outlook . And they are facing a different economy . Fifty-three percent of consumers say they retired for one of these reasons : health circumstances , job loss , mandatory age requirements or the impacts of Covid-19 .
We also know baby boomers are living longer . During boomers ’ lifetimes , their life expectancy at birth has increased 17 % to a blended 78.8
The National Council on Aging says 80 percent of households with an older adult are financially struggling today .
years , and their life span at 65 has increased 44 %. That longevity will demand more resources from them after they retire . Yet at the same time , the workforce supporting Social Security recipients has declined . The number of workers per beneficiary was more than 50 in 1946 . Now that ratio has fallen to 2.8 workers . Meanwhile , by 2040 , the number of Americans 65 and older will have doubled since 2000 , and the population of 85 and older will have doubled since 2020 .
We also know that people are vulnerable . The National Council on Aging says 80 % of households with an older adult are financially struggling today , or they ’ re at risk of economic insecurity as older adults age .
Those of us in financial services also know what most clients don ’ t know : Most Americans say they want to live independently in place as they age , but 60 % can ’ t afford more than two years of inhome care , while 45 % of people 60 and older don ’ t have enough income to cover basic living costs ( these were also findings of the National Council on Aging ).
JULY / AUGUST 2023 | FINANCIAL ADVISOR MAGAZINE | 23