The American Retirement Dream Is Not Dead

American retirees are screwed. The 401(k) experiment has failed. Social Security’s going bust. Savers haven’t saved nearly enough and don’t have the means to improve the situation.

However hyperbolic, this is the message that has been sent and, for many, is indeed the way it feels. But how do the facts feel?

Pension Facts:

  • Many companies have abdicated the role they once played in helping support employees’ retirements through defined benefit pension plans by promoting and then under-supporting defined contribution plans, like the 401(k).
  • Most pensions that remain — even those run by states and municipalities — are “upside down,” lacking sufficient funds to pay what they’ve promised. The entity conceived to insure underfunded pension plans is also underfunded.

401(k) Facts:

  • Some large financial firms have filled many of the 401(k) plans they manage with overpriced, underperforming funds, and offered little in the form of substantive education for the masses now left to their own devices.
  • After a six-year effort to ensure that financial advisors who manage retirement assets would be required to act in the best interests of their clients, there’s a corporate and political movement afoot for firms to reclaim potential lost profits if they were forced to do right by their clients.
  • Even some of the individuals who initially conceived the 401(k) concept and lobbied for it have recanted their support, regretting it ever started.

Social Security Facts:

  • The program intended only to be a safety net has become the primary financial resource in retirement for too many.
  • The surplus funds received when the huge baby boomer generation paid in — which are now being used to help replace the inherent shortfall of smaller generations — are projected to run out in 2034, thereby reducing the system’s ability to pay benefits by 25 percent.

There — how does that feel, now?

3 Ways To Spend Your Social Security “Bonus”

Yes, it’s that time of year again, when the air becomes cool and crisp; when football, jeans and sweaters are back in season; and when many working Americans blessed with higher incomes find more of their hard-earned dollars in their paychecks.  Why?  Because the maximum taxable earnings for Social Security (OASDI) taxes is capped at $110,100.  Everything you make over that number is still reduced for federal and state income taxes as well as Medicare, but the 4.2% Social Security tax is avoided.

So what to do with this “found money”?  We’re talking about amounts worthy of deliberation here, so the only real sin would be to do nothing—to be knowingly (or unknowingly) ignorant of the bonus and allow it to slosh around in your checking account earning .0000001% only to get incidentally gobbled up by the discretionary cash monster that is life.  I don’t care so much how you use it, but that you use it for a purpose.  Consider, then, applying your bonus to one or all of the following: SAVING, SHARING or SPENDING.

Sound elementary?  Like the advice your grandfather gave you when you were seven or the advice you’ve given your kids?  Simple, yes, but it’s not easy.  One of the timeless truths of personal finance is that a balanced approach to these three objectives benefits everyone, regardless of the number of zeros on your personal balance sheet or income statement.


The inverse of savings is debt, and in an interest rate environment where your cash savings is almost certainly earning less than you are paying on any debt, the primary goal of your Social Security bonus should be to accelerate your debt repayment on any bad debt.  There is no “good debt”—only bad debt and better debt.  Bad debt is a loan on a depreciating asset—like a car, couch or TV—and worse debt is that which is revolving, like credit cards.

If you’re fortunate enough to not have any bad debt, how are you doing on liquid savings—savings that is either in pure cash or invested in stocks, bonds and mutual funds outside of retirement accounts?  If you’re in a dual-income household with stable salaries, consider maintaining three months of living expenses in pure cash.  If you’re a single income household or your income is volatile, consider six months; and if you’re self-employed, I’d like to see you sitting on a year’s worth of expenses.  If you’re falling short in this category, your Social Security bonus is a great way to pad the financial margin that you WILL need at some point.


Giving is without a doubt the most underrated financial to-do on most of our lists.  Despite the inherent personal benefits, we tend to see giving as something that moves us backward financially, but the benefits of giving are not merely enjoyed by recipients.  Anyone who’s ever engaged in mindful giving can likely speak to the proverbial truth that “it is better to give than receive,” but this ancient saying is now growing toward consensus within the realm of financial pros and the medical community, as Carl Richards articulated so well in his recent article (and drawing), “Spending Your Money to Make Someone Else Happy.”

But in addition to the evidence that “it’ll make you feel good,” giving also has financial benefits.  When we better acquaint ourselves with the needs of others, we have a tendency to treat ourselves to fewer $6 coffees and $5,000 suits, and find more cash in the coffers.  But in the case of your Social Security bonus, spending some of that found money on a worthy charitable cause could—in addition to doing some good—put dollars back in your pocket around tax-time thanks to a deduction.


Spending is only listed last among these seemingly more virtuous options because of its relative alphabetical standing, not for lack of importance.  Indeed, spending is like fine wine, craft beer and single malt Scotch—overindulgence brings pain, but wise application is downright blissful.  Planned spending, some argue, lacks a certain exuberance that accompanies spontaneity—but not if you plan for spontaneity.  I recommend establishing a slot in your budget specifically designated for spontaneous expenditures for you and your family.  Then, in addition to the rush of impulsiveness, you can avoid the hangover of having to find a way to pay for it.

And remember, that time of year when many of us increase our spending on ourselves and others is fast approaching.  Your Social Security bonus is a great way to sock away money for gifts, Fraser Firs and holiday parties.

If you’re fortunate enough to have sufficient income to cross over the Social Security threshold, you have reason to be thankful.  Interestingly, some assume that the need for budgeting erodes as our income rises, but I do believe that “to whom much is given, much is expected,” and what better way to satisfy that maxim than knowing where your money is going.

Vacation Blues in 90 Seconds or Less

I’m on vacation this week, so last week, my buddy and media mogul, the venerable, Ben Lewis, and I laid down a quick 90 second video blog to help you best enjoy YOUR summer vacation this year, and the next, and the year after that…  I hope you enjoy it!

Guest blogger, Jim Stovall, on “Spending and Saving”

One of the most important things I've learned in educating and advising in the arena of personal finance is that no one person has the market cornered on wisdom… and I'm certainly no exception!  Therefore, in order to make the information in this blog as comprehensive and beneficial as it can be, I will be inviting guest bloggers of varying specialties on a semi-regular basis to share their wisdom with us. 
It could be no more appropriate, then, that my first guest blogger is Jim Stovall.  Jim has more illustrious titles than I have letters in my name, but my personal favorite is co-author.  Indeed I'm humbled that in addition to selling over 5 million copies of The Ultimate Gift, Jim saw fit to put his name beside mine in our recently released collaboration, The Financial Crossroads: The Intersection of Money and Life.  This week, Jim shares with us from his weekly column, Winners Wisdom.   

Spending and Saving

by Jim Stovall

Whether you make millions of dollars a year or earn minimum wage, there are only three things you can do with your money: You can spend it, save it, or give it away.
Your spending may range from absolute necessities to outrageous luxuries. Your savings may be prudent investments or coins in your piggy bank. And your giving may be coins you drop in a donation jar or launching your own foundation. But there are still only three things you can do with every dollar.
Financially successful people make sure that each dollar is divided between spending, saving, and giving. Traditionally, Americans have been a very giving and generous group of people. This generosity fluctuates some but remains strong, even during difficult economic times. If you’re not giving away part of every dollar you earn, you’re missing a great opportunity and one of the true joys in life. While, as a society, our giving can always improve, we seem to be doing fairly well overall.
The problem arises when we make the decision between spending and saving. Savings rates in America are dangerously low and, in some sectors of the population, the savings rate statistically actually drops below zero. You may wonder, as I did, how it is possible to save less than zero.
When I researched the statistics, I found that many people today are spending significantly more than they earn, and the disparity is showing up in their credit card balance, line of credit, or other debt instrument. This is a dangerous practice as without long-term retirement investments, your golden years may seem more like aluminum foil than gold. Without some emergency savings, you are like that pilot flying his plane 50 feet off the ground. While it might work for a little while, sooner or later, you will crash and burn if you don’t leave some margin of error in the form of a cash reserve.
When we look at global savings rates, we find that Europeans save 20%, Japanese save 25%, and the Chinese save over 50% of their income. This is fascinating when we consider that economic growth is thought to be fueled by spending, but China has one of the fastest-growing economies while their people are saving half of their income.
Global statistics are interesting for study or theoretical discussions but really don’t matter to you and me. The economic conditions on Wall Street or The White House should not concern us nearly as much as the financial picture on our street at our house. There are many ways to calculate the best way to spend, save, and give our money.
In my newest book, The Financial Crossroads, my co-author Tim Maurer and I explore a number of ways you and your family can win with money. We offer many calculators and other tools you can use to get the information you need so you will know what to do; however, it’s important to realize that financial information abounds. As in most things, with money we don’t fail because we don’t know what to do. We fail because we don’t do what we know.
As you go through your day today, commit to get the information you need to make quality financial decisions and then act.
Today’s the day!
Jim Stovall is the president of Narrative Television Network, as well as a published author of many books including The Ultimate Gift. He is also a columnist and motivational speaker. He may be reached at 5840 South Memorial Drive, Suite 312, Tulsa, OK 74145-9082, or by e-mail at