I enjoy my Saturday mornings. After an early morning workout, itís on to a bit of leisure reading. Oddly on this past Saturday, within a span of about 60 minutes, I went from haughty outrage to diligent introspection. Not quite the Saturday morning leisure reading session I had expected.
I was reading a summary of a University of Utah Health Value in Health Care study. The study was seeking to learn how patients viewed their role and responsibility in their own health. It found that 45% of those surveyed felt they are primarily responsible for their own health, while 44% of respondents believe their physicians are primarily responsible for their health.
At first glance, I was pretty sure I had just read personal responsibilityís obituary. Itís actually pretty easy to come to that conclusion. How could my health be someone elseís responsibility? You might feel the same way I initially felt. But then you remember everyone isn't like you. Somewhere thereís someone, who at no fault of their own, is sick ó dying, and their only hope is a physician taking responsibility for their health. Iím not a physician, but Iím pretty confident that exercise and healthy eating has its limits. I believe itís still fair to say we are responsible for our own health, in most cases, but absolutism does no good in addressing the problem. Personal responsibility, although personally one of my favorite concepts ever, can only take a person so far if their circumstances are dire.
Our finances, and our impact on them, arenít terribly different than the way in which we impact our physical health.
Who is primarily responsible for securing your successful retirement outcome? Here are your choices: yourself, your employer, or the government.
Itís important to acknowledge that within my own lifetime, the answer to this question has already objectively changed. Starting in the late 1970s, those Americans covered by defined benefit plans (pensions) began to fall. But prior to that, with a healthy pension and Social Security retirement payments from the government, a person could more or less retire successfully without an asset to their name. Did retirees covered by pensions and Social Security have assets too? Of course some did. But unlike today, you didnít necessarily need a pile of money to retire successfully. Therefore a person could retire, without having personally affected the outcome.
Alas, defined benefit plans were unceremoniously replaced with defined contribution plans such as the 401(k). Therefore the retirement onus shifted from the employer and the government. to the employee. That hasnít gone so well. Personal responsibility, which was once a way of life, is now a requirement for financial survival and debatably, in short supply.
This is not to suggest the previous generation, often wearing the mantle of personal responsibility champions, didnít have to scrimp and save throughout their lives to make ends meet, but from a retirement income perspective, todayís pre-retirees are climbing a much higher mountain. Personal responsibility was a positive, practical particularity. But now?
In the iconic words of Christopher Wallace: things done changed.
Accepting personal responsibility for your financial solvency isnít charming. Instead, itís just about the only way youíll be consistently able to make ends meet in the year 2018 and beyond. You have to fully accept responsibility for where you are and where youíre going, primarily because pensions have disappeared and generally speaking, government-based Social Security benefits arenít enough to fund a successful retirement. The only way you survive is to accept the daunting challenge in front of you.
Please donít mistake this for the all too classic ďtheyĒ should pull themselves up by the bootstraps refrain. I donít believe that. I used to believe that, but Iíve since realized some people donít have bootstraps to pull up. Sure, there are exceptions ó stories of perseverance and drive which materialized out of basically nothing, but for many families living at or below living wage, personal responsibility isnít the issue.
Yes, I believe it possible to both champion personal responsibility and empathize with those whom are proof that personal responsibility just isnít enough. However I do struggle with the question as to who then is responsible for this groupís financial future. Are we to classify this group into the health equivalent group which must depend on some other entity to survive? Social Security retirement was designed to be a retirement safety net back in the 1930s, but you have to wonder if the safety net provides enough money to actually live, when no other assets exist, especially when you consider the low wages which help determine the magnitude of the benefit.
The calculus gets trickier when you begin to weigh an employerís current role in all of this. The operative word here is obligation. Does an employer have an obligation, moral or otherwise, to ensure your financial success? I donít believe they do, but I do believe itís in an employerís best interest to care. In the spirit of not making this column about financial wellness in the workplace (which is my wheelhouse), weíll leave it at this ó would you rather have employees who are financially well or financially broken? The answer is almost always employees who are financially well.
You have to think the simplest solution to an employerís desire to keep you financially well is to pay you more. In fact, thatís the primary argument for those frustrated by the growing wealth gap. The argument certainly has its merits. But pragmatically, the burden of funding retirement shifted away from employers 40 years ago, and thereís absolutely no indication employers are looking to reverse that trend. Employers may start paying workers more, but that doesnít directly translate to more retirement success. Based on consumer spending numbers, it may actually result in even more consumption and lower retirement success numbers.
All of this back-of-the-napkin analysis leads me to one question: If you agree with the shift in responsibility in retirement planning today, have you fully embraced your role in the process? Maybe there isnít just one question, but two questions. Does the math support your claim that youíve embraced your role in the process? If you answered no, and you are one of the people fortunate enough to have bootstraps to pull up, you best start-a-tugginí. There is absolutely zero evidence that help is on the way.
If youíre saddened by this because of the pressure of being the only solution, I understand. But you are the solution. Itís in no one elseís hands. Thatís a good thing, not a bad thing. Tug.