We live in a new world economy. Globalization has produced huge benefits to all making products cheaper, quality better, and taming the beast known as inflation.That is not to say that individuals have not been hurt by this trend. Many workers, both active and retired, are waking up finding out that they are not worth as much as they thought they were. Just yesterday, GM announced they had reached an agreement with their union to slash health care benefits. GM claims it has a cost of $65 an hour for each hourly worker it employs (when health care, retirement benefits, etc. are factored in). In contrast, Delphi's operations (a fromer subsidiary of GM) in China cost it only $3 an hour per worker. We have moved from the industrial age to the information age and it just isn't cost effective to pay the guy who assembled the widget more than the guy who designed it in the first place.
Here is the reality. You can not depend on any one thing or entitity for your financial security. These people are dependent on the health of American auto industry for their livelihood and they are quickly finding out that the American auto industry simply can't compete. Those that are in retirement are now reliant on GM and Delphi to honor its retirement benefits (which they can shed if they declare bankruptcy). What happens to all these people who are too old to reenter the work force yet the benefits that were promised to them are all of a sudden gone?
Here is a lesson for everyone. Don't put all your eggs in one basket (by the way, I hate this advice when it is given to people and their 401K plans but that is another story). This is your financial well-being we are talking about. Don't plan on the government, your company, or anyone else for that matter to be there when you retire. Heck, I would be wouldn't depend on your 401K either. You need to have a broad comprehensive plan, not just a bunch of hope and prayers.
3 comments:
The Who plan: "...hope I die before I get old."
With bird flu, hurricanes, earthquakes, war, racial riots, flooding rains, terrorists, etc., that seems like a viable plan-John
So how/when can we start getting classes from such an honest and well read economist about good suggestions (as anything more concrete would require lots of laywer speak) about retirement savings?
-Mike
Mike. In my best consultant voice all I can say is, "It depends".
And in this case it really does. There is no cookie-cutter advice about retirement because all people have different needs. How much money do you make? How much will you need? Do you plan on having kids? How long will you work? What is your appetite for risk?
That's why it infuriates me some of the advice that is given out about retirement and 401ks in general. They treat it as if everyone is exactly the same and has the same goals but they don't.
I have my own plan, but of course I'm not your average person. I have less obligations and more resources than most. I am also not afraid of losing most if not all my assets which is something most people can't say.
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