Slow growth doesn’t have to be ‘the new normal’

March 13th, 2015

James K. Glassman
March 9, 2015 10:14 am | USA Today

Three reforms could reboot the U.S. economy.


Today’s employment report shows 1.3 million net new jobs were created in the past four months, and the jobless rate, at 5.5%, is the lowest in seven years. That’s good news, but we’re not out of the woods. Not by a long shot. The new jobs numbers do little to allay fears that the long-term pace of the U.S. economy has slowed significantly. To reverse that trend, we need major policy changes, and the most effective places to begin are corporate taxes, trade and immigration.

Gross domestic product is the single best indicator of economic health. Since 1947, GDP has risen at an average rate of 3.3%, but since 2001, the rate has been just 1.9%. The last time GDP grew more than 3% was 2005. We seem to be in the midst of a secular, or long-term, slowdown.

The reduced growth rate means that living standards are increasingat about half their post-World War II pace for individual Americans. For low- and middle-income families, that’s not much better than standing still.

Echoing a growing pessimism among economists that a “New Normal” of tepid growth is developing, Robert Gordon, a Northwestern University scholar, published a paper in 2012 titled, “Is Economic Growth Over?” Gordon wrote that it was time to ask “basic questions about the process of economic growth,” including, “the assumption, nearly universal since (Richard) Solow’s seminal contributions of the 1950s, that economic growth is a continuous process that will persist forever.”

One danger sign is the lack of a quick rebound from the 2007 to 2009 recession. Usually, sharp declines produce sharp recoveries, but not this time. For the 10 downturns since World War II, it took an average of a little less than two years for employment to get back to the level at the start of the recession. But for the most recent recession, it took six and a half years.

Home prices are still lower than they were 10 years ago, unemployment rates for African Americans are still in double-digits, and the labor force participation rate has hit its lowest point since 1978.

Republicans say that high spending in the wake of the recession plus the introduction of Obamacare and regulations stemming from the Dodd-Frank law have been a drag on the economy. Democrats say government has not spent enough to give the economy a real boost. But neither of those analyses explains why sluggish growth extends to the start of the century.

Gordon and other economists in the New Normal camp cite longer-term problems: mismatched demographics (too few workers supporting too many retirees), poor education and disappointing productivity gains from the information revolution. But is a secular decline in growth really inevitable? I don’t think so.

There are three simple actions that both parties can agree on now to enhance growth:

1. Bring U.S. corporate taxes in line with the rest of the world. At 39%, including state taxes, we have the highest marginal rate among all 34 countries in the Organization for Economic Cooperation and Development. The OECD average is 25%. High rates put our companies are at a competitive disadvantage, with less money left over for capital investments, and high rates discourage foreign firms from putting plants here.

Unlike practically every other nation, we have a worldwide corporate tax system, which means that companies based in the U.S. owe taxes both abroad and at home for their foreign profits. Those taxes come due when our companies bring their profits back to the U.S.; as a result, they have a huge incentive to keep money abroad.

The answer is to cut the rate to 25%, the level of Canada and the Netherlands, and go to the more common territorial system, which would bring profits home. Short-term fixes, like a specially reduced rate if companies repatriate their earnings for a year or two, won’t change long-term behavior. Lower rates and an end to the worldwide system will.

2. Immigration involves another kind of global competition: for the best and brightest workers and entrepreneurs. Our current system discourages smart foreigners who have been educated in the United States from staying here to start or join businesses — to the benefit of the economic growth.

Again, the fix is relatively easy — end the limits on visas for skilled workers, such as the H1-B visas for skilled foreign professionals, currently capped at just 65,000 per year plus another 20,000 for graduates of U.S. universities with advanced degrees. That’s less than 10% of total immigration each year and less than one-tenth of 1% of total U.S. jobs.

3. The third element of a bipartisan growth agenda is an expansion of trade. Broader and deeper trade relations mean more exports for U.S. manufacturers and service providers and lower costs for consumers. After a lackluster record in its first six years, the Obama administration is getting close to deals with the European Union and a group of Pacific nations, including Japan, but Congress needs to give the president the same negotiating power it’s given his predecessors.

These are just three policy changes that can boost economic growth. Certainly, there are others with strong merit, including improving education, cutting the fat from the bureaucracy and encouraging greater contributions to retirement accounts.

The “New Normal” is not inevitable. But unless we make changes soon, we could face a sluggish economy for decades.

This article was found online at:

The Fed’s Effect on the Markets

March 6th, 2015



Source: PerTrac. Federal Reserve Bank of St. Louis. Index returns are provided for illustrative purposes only to demonstrate a hypothetical investment vehicle using broad-based indices of securities. Returns do not represent any actual investment. Past performance is no guarantee of future results. The illustrations are not intended to predict the performance of any specific investment or security. The unmanaged indices do not reflect fees and expenses and are not available for direct investment. For performance of the Hatteras Funds visit Correlation from December 28, 2005 to November 19, 2008 and November 26, 2008 to December 31, 2014.

Source: Hatteras Funds

Shelby Says He Will Seek Bipartisan Legislation Aimed at Fed

March 6th, 2015

The head of the powerful Senate Banking Committee signaled he wants to work with two Democratic critics of the Federal Reserve to fashion legislation aimed at the Fed after a hearing in which lawmakers of both parties attacked the central bank’s record.

“I do see some interests that might be put together hopefully in a legislative package,” Richard Shelby, Republican of Alabama, said Tuesday in a brief interview in Washington. “What we’re going to do is continue hearings and see what we can fashion or bring together.”

Continue reading the article here:

The 15 Happiest Economies in the World

March 6th, 2015

Feeling bummed about your economy? It’s time to pack your bags for Switzerland.

That’s one way to read the fate of 51 economies (including the euro area) this year, based on Bloomberg calculations of what’s known as the “misery index.” Inflation and unemployment, two factors that make consumers unhappy, are remarkably low in the 15 countries shown below, according to economists surveyed by Bloomberg News.

See the full article by Michelle Jamrisko here:

Co-Author of American Sniper will be joining me this Saturday on Your Financial Editor

March 6th, 2015

American Sniper

Co-Author of American Sniper Jim DeFelice will be joining me on Your Financial Editor this Saturday 2/14/2015. You can listen live from anywhere Saturday morning at 8am on AM 930 WFMD by logging on to and clicking the “listen live” button! If you can’t tune into the show, there will be a podcast available the week following the show here.

For those who are not familiar with this amazing story: From 1999 to 2009, U.S. Navy Seal Chris Kyle recorded the most career sniper kills in United States military history. His fellow American warriors, whom he protected with deadly precision from rooftops and stealth positions during the Iraq War, called him “The Legend”; meanwhile, the enemy feared him so much they named him al-Shaitan (“the devil”) and placed a bounty on his head. Kyle, who was tragically killed in 2013, writes honestly about the pain of war—including the deaths of two close SEAL teammates—and in moving first-person passages throughout, his wife, Taya, speaks openly about the strains of war on their family, as well as on Chris. Gripping and unforgettable, Kyle’s masterful account of his extraordinary battlefield experiences ranks as one of the great war memoirs of all time.

A work from Co-Author Jim Felice:

Jim Defelice

I was honored to attend the New York City premiere of the film “American Sniper” at Lincoln Center on Dec. 15th, 2014. It was an emotional evening. I thought Bradley Cooper did a fantastic job of portraying Chris Kyle, and Sienna Miller stole every scene she was in as Chris’s wife Taya. As Clint Eastwood said when he introduced the movie– this is an important story and I am happy and humble to have been a part of it.

The movie tie-in paperback of “American Sniper” (with Bradley Cooper on the cover) features wonderful stories from Taya Kyle about how much care the movie stars and crew took to get the details of their lives right for the screen. Screenwriter Jason Hall added his thoughts on writing the film.

The movie will be released on Christmas Day. And Chris Kyle’s legacy continues through his charity the Chris Kyle Frog Foundation, which works to help military families and veterans (at

More about Mr. DeFelice

Jim DeFelice is the author of over fifty books, including numerous best sellers and fourteen that have made the New York Times’ national best sellers list. He has written books for young adults and children as well as adult fiction and non-fiction.


In addition to books, DeFelice has worked on a number of video games as a writer and developer, most notably Ace Combat Assault Horizon and the forthcoming Afro Samurai: Revenge of the Bear.


Scott Mather Discusses PIMCO’s Total Return Strategy

February 19th, 2015

Bonds have continued to rally so far this year, even as the Federal Reserve contemplates raising interest rates. In the following interview, Scott Mather, CIO U.S. Core Strategies, discusses recent developments in the bond markets, the outlook for the year ahead and the investment implications for PIMCO’s Total Return Strategy. Mather co-manages the strategy with Mark Kiesel, CIO Global Credit, and Mihir Worah, CIO Real Return and Asset Allocation.

Q: Scott, you and the team took over the strategy at a challenging time, considering market volatility and client outflows, yet performance has generally been strong. Have you needed to make adjustments to how you manage the strategy in light of this backdrop?

A: The short answer is no. The important thing to recognize is that Total Return, as a high-quality core bond strategy, operates in some of the most liquid markets in the world. Whether there are inflows or outflows, every day we ensure that the strategy maintains the target exposures we have set for the portfolio in each fixed income sector. Flows are not a reason to change the way we manage the strategy.

Indeed, we are intensely focused on performance for our clients in Total Return, and flows have not been an issue in that regard. I think the generally strong performance across the strategy in the past few months proves that. We believe our performance reflects our time-tested investment process.

Q: Let’s turn to markets. Bonds have rallied since September, and long-term yields have fallen sharply. What’s been driving this move?

A: There are a number of factors drawing yields down in the U.S., including low yields outside of the country and the expansion of quantitative easing programs by the Bank of Japan (BOJ) and the European Central Bank (ECB). Those lower-yielding markets are exerting a gravitational pull on longer-dated Treasury yields.

Another factor is the market’s preoccupation – or maybe fixation – with the drop in energy prices and what that is doing to headline inflation. Unlike some market participants, we do not believe that the lower headline inflation stemming from energy prices might be an omen of a deflationary outcome for the U.S., or that it will push the Federal Reserve’s first interest rate rise out much further into the future. But those beliefs have undoubtedly pushed yields down.

Similarly, while some have pointed to isolated signs of weaker U.S. growth as a reason for lower yields, we do not think U.S. economic growth should have played a large part in the drop of long-term yields.

Q: Looking to the year ahead, what is PIMCO’s outlook for global growth and inflation?

A: In terms of the big picture, we think divergence will be an overarching market theme this year, within both developed and emerging markets. The big changes in commodity prices have created both winners and losers throughout emerging markets, and many will be wrestling with these changes. In the developed markets, we have the divergence between the U.S., which is shifting to a level of growth above potential, and most other developed markets, which are struggling just to reach their own, lower levels of potential growth. Finally, and not insignificantly, we have monetary policy divergence, with the ECB and BOJ on full throttle even as the Fed contemplates its first rate hike in this cycle.

For investors, the key is to take advantage of the divergences. It is going to be a riskier world in many ways, with higher levels of financial market volatility, but investors may be able to find opportunities in the market’s overshoots.

Q: Turning to the Federal Reserve, fed funds futures as of the end of January suggest investors expect only one rate hike this year and for rates to be only 1.5% by the end of 2017. That is a substantial lowering of expectations since September. Is the market too dovish on the Fed?

A: Yes, that appears to be the case; we think the market has overshot the mark in suggesting that the Fed will not move until the end of this year.

The Fed has been very clear that while the data and international developments matter in its decision-making, lower energy prices are positive for growth and should result in an improved labor market and wage growth. While the Fed would like to see faster wage growth and may thus be willing to allow the economy to “run a bit hot,” it is increasingly unwilling to keep rates at zero in the face of a strong economy and a labor market that will likely reach full employment levels in the second half of the year.

Leaving rates at zero would mean that monetary policy is getting more accommodative as slack disappears. This would raise the risk of a more urgent need to abruptly raise rates in the future, which is something the Fed should try to avoid. With respect to inflation, the Fed clearly looks through the energy-induced drop in headline inflation (even though the market appears reluctant to follow this commonsensical approach). The Fed knows that it is wages that ultimately matter most, and all indicators point to rising wage trends. Modest moves upward in interest rates are unlikely to alter the improving labor market and wage trends. Lastly, we do not think a move off of zero would damage economic growth prospects and such a move may actually help prolong and sustain the expansion. Zero percent rate policy is a distortion from equilibrium pricing with diminishing returns, and it increasingly represents a cost and risk to the economy rather than a stimulative benefit.

Monetary policy would remain extremely accommodative and supportive of growth with rates at levels below 2% (which we think is close to the New Neutral equilibrium rate), especially when one also considers the effect of the Fed’s still very large balance sheet, which undoubtedly will continue to ease monetary conditions well into the future. In addition, as foreign central banks ease policy, global financial conditions should also ease and thus allow the Fed to begin to normalize rates sooner than otherwise. So a move off of the “emergency policy rate” as early as this summer makes sense.

That said, given its desire to reflate the U.S. economy, the Fed is going to move at a slow pace and will make sure to continue to let the economy grow above potential and allow inflation to accelerate to target and perhaps beyond in the years ahead.

Q: Turning back to the Total Return Strategy, can you discuss the investment positioning in light of PIMCO’s macro outlook?

A: We have several investment strategies that we think will pay off in the year ahead.

First, we have moved our yield curve exposure out of what we think is the significantly overpriced front end and focused our exposure in seven- to 10-year maturities. Also, certain sectors are misvalued, in our view, including inflation-linked securities. In the TIPS market, for example, 10-year breakeven inflation has been priced as low as 1.5% recently, which reflects very low, and we think unrealistic, 10-year inflation expectations. Once oil prices have bottomed and headline inflation turns back up, we think the market will focus on TIPS as an underpriced asset class.

We also think the dollar is likely at the start of a long-lasting, upward trend, though it may experience volatility along the way. Not only did it rise from relatively cheap levels, but given continued divergences in the global economy, the dollar still has a significant tailwind.

By: Scott A. Mather

In general, more global divergence, more volatility and more overshoots will create great opportunities for active fixed income investors. But a good defense is required as monetary policy is likely to represent a headwind for all financial assets instead of the steady tailwind it has been for the past several years.

Q: With yields persistently low, how would you respond to investors who are wondering about the role of core bonds in their portfolios?

A: All financial assets, not just bonds, have seen their prices elevated over the past several years as a result of monetary policies around the world. Future returns have been pulled forward to today, and that means prospective returns on many financial instruments are going to be lower. Also, one should remember that interest rate rises will happen very gradually relative to history, and that the ultimate destination of equilibrium rates is going to be much lower than it has been at any other time in the past several decades.

Still, it is important for investors to remember why they own bonds: A well-diversified core bond strategy serves as an anchor to the portfolio. It has the potential to provide income and capital preservation and to generally perform well when riskier investments do not.

It is also important to distinguish between a strategy that blindly invests in the index, and is thus completely beholden to the ups and downs of the markets, and an active fixed income strategy. In today’s low-yield environment, the benefits of active management are more important than ever. Alpha will be a larger percentage of return going forward.

Original Article can be found here

Regulation of Shadow Banking Takes a Dark Turn

February 13th, 2015

Photo: Corbis

Written by: Peter J. Wallison- The Wall Street Journal- 2.9.2015

Recent statements by senior Federal Reserve officials show that the agency is stepping up efforts to investigate and ultimately regulate what they call the “shadow-banking system.” As the regulators define that term, it is nothing less than capital and securities markets—the industries principally responsible for the growth of the U.S. economy over the past 40 years.

In December, Stanley Fischer , the Fed’s vice chairman and head of its internal systemic-risk committee, told an asset-management group that the New York Fed is “mapping” the relationships between and among financial institutions with a view to determining the scope of the shadow-banking system. The Fed, he said, is considering whether it has sufficient authority to regulate shadow banks. If it doesn’t, he said, the Fed will turn the matter over to the Financial Stability Oversight Council—created by the Dodd-Frank law and made up of the heads of all federal financial regulators, with the Treasury secretary as chairman—for appropriate action.

And on Jan. 30, Daniel Tarullo , a Fed governor, told a conference of financial regulators that the agency was working to corral financial activities that “migrate outside the regulated perimeter”—that is, financial activities that are not regulated like banks. The Fed, he said, wants to “serve the macroprudential aim of moderating the build-up of leverage” in shadow banks.

Most people probably imagine that the term shadow banking refers to large nonbank financial institutions that do what regulated banks do—borrow short-term funds like deposits and turn them into long-term assets like loans. Maturity transformation, as it is called, can be risky, because a firm that has lent out funds it has borrowed short-term may be pressed for cash if its short-term creditors want their funds returned immediately. The fear is that large firms facing this difficulty could fail, creating a “systemic” event.

For this reason, Dodd-Frank is based on the idea that all large nonbank financial institutions, including investment banks, finance companies and insurers, should be subject to designation by the FSOC as systemically important financial institutions, or SIFIs. Once designated, SIFIs are turned over to the Fed for stringent regulation.

The regulators apparently want to cast an even wider net. A 2012 report by the international Financial Stability Board—made up of central bankers and bank regulators of which the U.S. Treasury and the Fed are members—stated that systemic risks are created in the shadow-banking system through “a complex chain of transactions, in which leverage and maturity transformation occur in stages.”

What is a “chain of transactions”? As former Fed Chairman Ben Bernanke explained that year, a finance company might create a pool of auto loans for securitization. Afterward, “an investment bank might sell tranches of the securitization to investors. The lower-risk tranches could be purchased by an asset-backed commercial paper (ABCP) conduit that, in turn, funds itself by issuing commercial paper that is purchased by money market funds.” In other words, a “chain of transactions” involving many different firms can create the same systemic risks as a single large firm.

These are normal transactions in the securities and capital markets. So when Fed officials say that they are investigating and hope to regulate shadow banking, what they mean is that they want to regulate what kind of transactions occur in the securities and capital markets. What is necessary, Mr. Tarullo noted, is a “significant building out of a regulatory regime” for shadow banks, “and so I think that’s where attention is going to be paid.”

One big, threshold question: Where do the Fed and FSOC imagine that they obtained the grant of such power? It can’t be from Dodd-Frank. As capacious as this legislation is, it doesn’t provide authority to regulate financial firms that by themselves are not systemic but become systemic because they participate in a “complex chain of transactions.”

The most likely possibility is the Financial Stability Board, an entity little known outside the financial industry. This group was deputized by the G-20 leaders in 2009 to reform the international financial system, and since then—with the explicit approval of the G-20—has made the regulation of the shadow-banking system a major objective. Perhaps the FSOC and the Fed see the decisions of the G-20—of which President Obama is a member—as authority for their actions in the U.S.

While this might be true in other countries, the U.S. Constitution provides for a separation of powers in which Congress makes the laws and the president carries them out. The fact that a president has agreed with other G-20 leaders to take international action of some kind would not give federal agencies the authority to act in the absence of explicit legislation.

And yet if Congress fails to insist on a recognition of its authority, the Federal Reserve and the Financial Stability Oversight Council will be free to take control of and regulate sectors of the economy that even the drafters of the far-reaching Dodd-Frank law saw fit not to include.


Mr. Wallison is a senior fellow at the American Enterprise Institute. His most recent book is “Hidden in Plain Sight: What Really Caused the World’s Worst Financial Crisis and Why It Could Happen Again” (Encounter, 2015).

The Stronghold: How republicans captured Congress but Surrendered the White House

February 12th, 2015

The Stronghold

Once the party of presidents, the GOP in recent elections has failed to pull together convincing national majorities. Republicans have lost four of the last six presidential races and lost the popular vote in five of the last six. In their lone victory, the party incumbent won—during wartime—by the slimmest of margins. In this fascinating and important book, Thomas Schaller examines national Republican politics since President Ronald Reagan left office in 1989. From Newt Gingrich’s ascent to Speaker of the House through the defeat of Mitt Romney in 2012, Schaller traces the Republican Party’s institutional transformation and its broad consequences, not only for Republicans but also for America.

Gingrich’s “Contract with America” set in motion a vicious cycle, Schaller contends: as the GOP became more conservative, it became more Congress-centered, and as its congressional wing grew more powerful, the party grew more conservative. This dangerous loop, unless broken, may signal a future of increasing radicalization, dependency on a shrinking pool of voters, and less viability as a true national party. In a thought-provoking conclusion, the author discusses repercussions of the GOP decline, among them political polarization and the paralysis of the federal government.

Thomas Schaller

Thomas F. Schaller is a professor of political science at the University of Maryland, Baltimore County, and author of “Whistling Past Dixie.”  He writes a political column for the Baltimore Sun and currently resides in Washington, DC.

Mr. Schaller will be joining me on Your Financial Editor this Saturday 3/14/2015. You can listen live from anywhere Saturday morning at 8am on AM 930 WFMD by logging on to and clicking the “listen live” button! If you can’t tune into the show, there will be a podcast available the week following the show here.

Is Fiscal Stimulus a Good Idea?

February 6th, 2015

The article, Is Stimulus a Good Idea? written by Ray Fair was featured in Business Economics. Below is the Abstract from the paper. Mr. Fair will be joining me on Your Financial Editor tomorrow 2/7/2015. You can listen live from anywhere Saturday morning at 8am on AM 930 WFMD by logging on to and clicking the “listen live” button! If you can’t tune into the show, there will be a podcast available the week following the show here.


The results in this paper, using a structural multicountry macroeconometric model, suggest that there is at most a small gain from fiscal stimulus in the form of increased transfer payments or increased tax deductions if the increased debt generated must eventually be paid back. The gain in output and employment on the way up is roughly offset by the loss in output and employment on the way down as the debt from the initial stimulus is paid off. This conclusion is robust to different assumptions about monetary policy. To the extent that there is a gain, the longer one waits to begin paying the debt back the better. Possible caveats regarding the model used are that (1) monetary policy is not powerful enough to keep the economy at full employment, (2) potential output is taken to be exogenous, (3) possible permanent effects on asset prices and animal spirits from a stimulus are not taken into account, and (4) the model does not have the feature that in really bad times the economy might collapse without a stimulus.


Ray Fair

Ray Clarence Fair (born October 4, 1942 in Fresno, California) is the John M. Musser Professor of Economics at Yale University.

Fair received his B.A. from Fresno State College in 1964 and his Ph.D. from MIT in 1968. He spent several years at Princeton University before moving to Yale. He is now a professor within the Cowles Foundation and the International Center for Finance.

Fair’s teaching and research interests include macroeconomic theory, econometrics, and macroeconometric modeling. He is the author, along with Karl Case ofWellesley College, of the economics textbook Principles of Economics. He has also authored several books pertaining to modeling, including Testing Macroeconometric Models(1994) and Estimating How the Macroeconomy Works (2004).

He is noted for his methods for predicting the outcome of presidential elections, and his record of success in doing so (a record respectable but blemished, as for example 1992).. (2000 was a special case). He has published on this subject, Predicting Presidential Elections and Other Things (2002).

Ray Fair maintains a macroeconomic model, data, software and forecasts on his home page and that are also available for free downloading for use on a personal computer. The Fair Model macroeconmic model forecasts for the United States and 38 other countries.

Fair lives in New Haven, Connecticut, with his wife Sharon Oster, a professor at the Yale School of Management. He is the father of Emily Oster, an economist at the University of Chicago.

U.S Retirement Worries Go Global

February 6th, 2015

Here’s the good news: In the past two decades, average life expectancy around the world has increased by six years, from 65.3 in 1990 to 71.5 in 2013, according research funded by the Bill and Melinda Gates Foundation and conducted by the University of Washington’s Institute of Health Metrics and Evaluation. The primary reason: improvements in health care.  In higher-income countries fewer are dying from heart disease; lower-income nations have seen a sharp decline in deaths from childhood diseases.

Now the flip side: Living longer costs more. Governments around the world have said they can’t afford it. Neither can employers. Thus, the responsibility for funding a longer lifespan is increasingly up to each individual.

Sound familiar?  Americans have been exhorted to save for retirement for thirty years or more.  “Social Security is not enough!” “Maximize your 401(k) contribution- at least up to the company match.” “Stash additional money in an IRA.” “Consider an annuity.”

Now, the rest of the world is finally catching up. And from Malaysia to Turkey to Brazil, they’re not happy. Based on a massive study by the global financial firm HSBC (HSBC), on average 25% of retirees around the world say their standard of living is lower than when they were working. There is wide variance. While 16% of U.S. retirees agree, nearly half of Turkish retirees feel that way, as well as 41% of those in France.  Retirees report they are coping by reducing their expectations about how they would spend retirement (less travel, for instance) and cutting back on daily expenses.

Their kids have noticed.  Globally, 34% of those who are still in the workforce are worried they face the same fate.  “Even among pre-retirees with household income of more than $80,000/year, about one-fifth are not confident they will be able to maintain a comfortable standard of living,” says Andy Ireland, Head of Wealth Management at HSBC.

The Problem: Words vs. Actions

Still, just like their parents, the majority of those in the global workforce are not seriously saving for retirement.  The reasons also sound a lot like their parents’: too many other, more pressing financial obligations, i.e. debt.

To Ireland, it sounds like a big e-x-c-u-s-e.

“Are you living within your means? Why do you have credit card debt to begin with? Individuals need to take responsibility and learn discipline. When you’re 25, 35 [retirement] doesn’t resonate,but you need to have a general savings plan so that if something occurs, you don’t need to “borrow” in order to pay for it.

Despite the fact that 69% of working adults around the world say they are actually worried they will run out of money in retirement, 38% admit they are not currently saving for their later years at all or do not plan to start. That includes a third of those who are over age 40.(1)

Listen To Your Parents

“What retirees are telling us,” says Ireland, “is ‘If I’d known then what I know now I would have done more to be self-sufficient financially.’”  Two-thirds of retirees around the world say they didn’t realize until they were already retired that they had not saved enough.

If they had a second chance, 38% of retirees say they would start saving for retirement at a younger age.  In Malaysia, Mexico and India, the number is significantly higher.  Nearly 40% say 30 is the latest age to begin.  However, only 26% of those in the workforce agree.

[Side note: American retirees are much more adamant. Nearly half think you should start saving for retirement by age 30 or sooner in contrast to 34% of working Americans.  Geography (or perhaps exposure to sunshine?) apparently makes a big difference. One out of three pre-retirees in Miami and Los Angeles thinks you can start saving for retirement after age 40 and end up with a nest egg large enough to maintain your pre-retirement standard of living!]

The Solution: Actions vs. Words

No matter where in the world you live, in Ireland’s view, the solution is the same.  “You have to have a plan. You can’t say, ‘The numbers are too large, so I’m going to ignore it.’”

It is a plan that is both simple and difficult:

1. Live within your means.

“Sort through your expenses and determine what is essential and what you don’t need to spend money on.”

2. Save as much as you can.

“Create a discipline of saving, even if you start small.”

In contrast, 25% of working Americans say they are not saving for retirement.  This includes 20% of those over age 40.


You can find the original article here.