You’re Scared to Bring it Up

weber_bioBrad Weber AIF®, Regional Director, Retirement Plan Services

A 2004 survey conducted by the American Psychological Association says that 73% of Americans name money as the number one factor that affects their stress level. Number one. The New York Times reports that couples who reported disagreeing about finance once a week were over 30% more likely to get divorced than couples who reported disagreements a few times a month.1 So, in addition to being stress-inducing public enemy number one, money is also highly implicated in whether or not we stay married. It’s no wonder then that we tread lightly around retirement or don’t bring it up at all!

The most common behavior in response to the overwhelming anxiety of preparing for three decades of not working is that we may ignore the conversation entirely. After all, we erroneously suppose, “If I ignore it maybe it will go away.” As anyone who has ever put off a project can attest, it never goes away and anxiety is only compounded as a deadline approaches. In college this may have been as inconsequential as pulling an all-nighter and receiving a subpar grade. With retirement planning, it could quite literally have disastrous personal consequences.

A recent study by the American Institute of CPAs2 found that speaking to children about money to children was among parents’ lowest priorities. In fact, money issues were trumped by good manners, sound eating habits, the need for good grades, the dangers of drugs, and the risks of smoking in terms of perceived importance. Our reticence to talk about money is certainly not out of lack of need. An Accenture report states that Baby Boomers will leave $30 trillion to their children in the next 30 years. This doesn’t even take into account the almost $12 trillion that MetLife predicts that Boomers will receive from their parents. The fact is, money will be changing hands within families at an unprecedented rate in the years to come and we are ill equipped to make the exchange.

There are a number of reasons why talking about money may be so difficult. One is that there has been a vitriolic reaction against the wealthy in the wake of the Occupy Wall Street movement and the global financial crisis. This sentiment was illustrated quite vividly in the September 24, 2016 Fortune magazine cover article, “Is It Still OK To Be Rich In America?” Another reason for this taboo may have a higher source.

The Bible, the best-selling book of all time and a foundational text for a majority of Americans, mentions money no less than 250 times. While not all Biblical references to money are negative, there are certainly enough references to “filthy lucre” to give pause. To a nation founded on Protestant ideals about work and morality, the notion of wealth as potentially corrosive is one that is deeply embedded in the collective American consciousness.

John Levy, a counselor to people who have recently inherited money found the following reasons for the money taboo among his clientele (as cited in O’Neil, 1993):3

  • Good taste – “It’s just not done.”
  • Fear of manipulation – “It will give them power over me.”
  • Concern for spoiling children – “They will never make anything of themselves.”
  • Embarrassment – “I don’t deserve to be so much better off than others.”
  • Fear of being judged – “All they can see is my money.”

Perhaps some of the reasons above are resonant with your personal situation and perhaps not, but it seems difficult to deny that money is a subject that puts us all on eggshells. Consider a handful of your best friends. No doubt you could tell me much about their lives; joys and struggles, highs and lows. But I doubt if you could tell me their exact salary, savings or other relevant financial indicators, because we simply don’t talk about them. While this is fine in polite company, this tendency toward silence can extend beyond the cocktail party circuit. Conversations about money tend to be emotionally fraught and tinged with shame and as such, are best handled by professionals adept at de-stigmatizing and reorienting our sometimes misguided thoughts about preparing for our financial future.

Solution: Begin a dialogue around retirement preparedness today with a professional at your place of employment or through a trusted financial advisor. Just as silence leads to greater inaction, a simple conversation can lead to life-changing progress.

For 10 years, Brinker Capital Retirement Plan Services has been working with advisors to offer plan sponsors the solutions to help participants reach their retirement goals.  The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Holdings are subject to change. Brinker Capital, Inc., a Registered Investment Advisor.

Sources:

1 “Money Fights Predict Divorce Rates,” Catherine Rampell, The New York Times, December 7, 2009.

2  “Money Among Lowest Priorities in Talks Between Parents, Kids,” AICPA, August 9, 2012.

3 “The Paradox of Success,” John O’Neil. New York: Putnam, 1993.

Demographic Changes Looming (Part Two)

10.17.13_BlogRyan Dressel, Investment Analyst, Brinker Capital

Part two of a two-part blog series. Head here to read part one.

Urbanization
Another noticeable change has been the amount of people living in urban versus rural areas.  The world is undergoing the largest wave of urban growth in history.  For the first time in history, more than half of the world’s population lives in towns or cities.[1]  In 1970, 73.6% of the population lived in urban areas in the U.S., compared to 79% in 2012.  In China, the shift has been even greater; 51% of people live in urban areas today, compared to just 20.6% in 1982.  Other major nations have experienced similar degrees of urbanization (percentage of population living in urban areas below)[2]

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Cities provide numerous economic benefits and challenges; some of which include: entrepreneurialism, education opportunities, traffic congestion, pollution, and poverty to name a few.  Perhaps the biggest challenge as a result of this trend will be a spike in food, water and commodity prices, which are already high.[3][4]  Some Governments, scientists and environmentalists are already working on solutions to these problems (such as China’s plan for a massive new desalination plant[5]), but in many areas resources are limited and solutions are inefficient on a large scale.

Wealth Inequality
Finally, the trend of wealth inequality in the United States is approaching an all-time high.  For perspective, in 1928 the top 1% of the population earned nearly 20% of all income.  The wealth gap was at its lowest in the 1960s and 1970s, but has been steadily widening since then.

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This trend has been made public in the U.S. as demonstrated by the Occupy Wall Street movement in 2012.  Regardless of your opinion surrounding the subject, wealth inequality has created noticeable economic challenges.

Some of the nationwide problems associated with wealth inequality include deteriorating health,[6] the potential for corruption (in many different facets), and a relatively weaker middle class which has historically fueled the most economic growth in the U.S.

The income gap has been blamed on everything from computers, to immigration, to global competition, but simply stated there is no clear consensus regarding the cause.[7]  This needs to be kept in mind by investors, economists and especially politicians before we spend public dollars on initiatives that aren’t effective at reducing the problems previously mentioned.

These changing demographic trends will no doubt provide challenges, but can also present exciting opportunities for generations to come if they are properly prepared for.


[1] The United nations Population Fund.  http://www.unfpa.org/pds/urbanization.htm  May, 2007.

[2] Population Reference Bureau, 2012 World Population Data Sheet, 2012.

[4] New York Times Online.  http://www.nytimes.com/2006/08/22/world/22water.html?_r=0  Celia Dugger. August 22, 2006.

[5] China Daily.  http://usa.chinadaily.com.cn/china/2011-04/09/content_12298084.htm  Cheng Yingqi.  September 4, 2011.

[6] American Medical Association.  http://www.who.int/social_determinants/publications/health_in_an_unequal_world_marmott_lancet.pdf Michael Marmot.  December 9, 2006.

[7] The Great Divergence.  Timothy Noah,  2012