Not only is the level of preparation for retirement different for each individual, but not many of us can even describe what it’s actually like.
Successful retirement planning requires a multi-layered exploration of our wants, needs, financial anxieties, and risk tolerance, along with sensitivity to what we really mean as well as what we actually say. There is a close analogy with psychotherapy.
This is why it is a pointless exercise for Wall Street firms to conduct their periodic retirement readiness surveys. Not surprisingly, these investigations often reach widely divergent conclusions.
Wall Street keeps trying anyway. Half a dozen such companies have already contacted me this year, publicizing their latest surveys. One of them released a report on February 13 announcing that the pension crisis in the United States is worse than ever, with two-thirds of workers not saving enough for retirement – and nearly one in four without enough savings to even pay funeral expenses.
Meanwhile, another survey – released two weeks earlier – found that 70% of US workers are confident they have enough saved for a comfortable retirement.
The inherent weakness of these investigations is that they seek to quantify the unquantifiable. Take, for example, the survey finding that two-thirds of workers aren’t saving enough for retirement. It reached this conclusion by measuring the size of respondents’ retirement portfolios, then comparing it to a single general dollar amount that inspectors said was needed to retire comfortably.
But when it comes to your retirement portfolio, there is no one-size-fits-all solution. Benjamin Graham, the father of fundamental analysis, made this point in his famous book “The Intelligent Investor”: “The best way to measure the success of your investment is not whether you are beating the market, but whether you have invested and set a plan. financial and behavioral discipline that will likely get you where you want to go.
How many of us can answer the question “where do you want to go” with more than bromides? This isn’t to say that having a sizable portfolio isn’t important for retirement preparation. But the relationship between money and happiness is surprisingly inscrutable. Take recent research by Matthew Killingsworth, a professor at the Wharton School, and Princeton University professors Daniel Kahnemann and Angus Deaton.
Researchers have found that more money brings more happiness, largely only if you’re a happy person to begin with. If you are an unhappy person, money helps you only to a limited extent. Even for the happiest people, the impact of more money is much smaller than you might think: a “quadrupled income gap is… less than a third of the effect of a headache” on people’s feelings of happiness. a person at a given time. day.
Financial advisors can play a valuable role in helping us resolve these thorny issues. Of course there are unscrupulous consultants who take advantage of vulnerable pensioners and semi-retirees. The presence of such advisors only reinforces the importance of carefully researching an advisor. However, don’t be dissuaded from research by the considerable complexity of pension provision.
Mark Hulbert is a regular contributor to MarketWatch. Its Hulbert Ratings tracks investment newsletters that pay a flat fee to be reviewed. It can be reached at mark@hulbertratings.com.
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