On a New England stage a year or two ago, I had the pleasure of watching an amusing musical number performed by Arlene Violet, a former nun-turned former attorney general-turned radio talk show host who now sells "gutter helmets." She was singing about local politicians who had found themselves in hot water, and the chorus of the song was: "I didn't know!"
This classic excuse rings true for many Americans, at least in regard to financial matters. According to the 2006 Retirement Confidence Survey, 58% of American workers say that neither they nor their spouses have taken the time to determine how much money they'll need in retirement -- and among those who have taken the time, 8% got their number by guessing. Yikes.
Are these folks at least taking some action while they cross their fingers and hope for the best? Many are not. A recent Hewitt Associates
Our Rule Your Retirement head honcho Robert Brokamp gnashes his teeth at these kinds of statistics. He has explained that many of these folks are turning down free money from employers' matching 401(k) funds, and written about how vital it is to take advantage of options such as 401(k)s and IRAs.
Many Americans are simply shirking their financial duty to themselves and their loved ones. The likely reason they'll give? "I didn't know!"
Another explanation for negligence
Of course, ignorance isn't always the explanation. Many times, people do know what they should be doing -- they still just don't do it. Many people who read Motley Fool articles are in this group -- even I have been on various occasions. We know we need to open an IRA account, but we just don't get around to it. We know we need to decide which stocks or funds to buy into, but we'll do it tomorrow. We know we have to get some life insurance and have a will drawn up -- but we're busy right now.
What could explain this nearly inexcusable negligence that threatens our ultimate financial security? Oddly enough, I found a possible answer at ESPN.com. In a March interview with Bill Simmons, celebrated business thinker and author Malcolm Gladwell offered an interesting theory on why many people don't do what they should:
Why don't people work hard when it's in their best interest to do so? ... The (short) answer is that it's really risky to work hard, because then if you fail, you can no longer say that you failed because you didn't work hard. It's a form of self-protection. I swear that's why [golfer Phil] Mickelson has that almost absurdly calm demeanor. If he loses, he can always say: Well, I could have practiced more, and maybe next year I will, and I'll win then. When Tiger [Woods] loses, what does he tell himself? He worked as hard as he possibly could. He prepared like no one else in the game, and he still lost. That has to be devastating, and dealing with that kind of conclusion takes a very special and rare kind of resilience.
Most of the psychological research on this is focused on why some kids don't study for tests -- which is a much more serious version of the same problem. If you get drunk the night before an exam instead of studying and you fail, then the problem is that you got drunk. If you do study and you fail, the problem is that you're stupid -- and stupid, for a student, is a death sentence. The point is that it is far more psychologically dangerous and difficult to prepare for a task than not to prepare.
Interesting, eh? I think it rings true for many investors. We don't want to be responsible for ending up in a financial disaster -- so we do nothing, which will likely leave us with a financial disaster on our hands.
A call for bravery
What's needed, then, is more bravery on our part, and fewer excuses. Yes, we may fail, but we need to try -- and we can always learn from our mistakes and improve. If we don't take action, such as planning and saving for retirement, we stand an even greater chance of failing.
Many CEOs know the value of courage, and their successes can inspire us:
- Former WashingtonPost
(NYSE:WPO) CEO Katharine Graham demonstrated it when she decided to publish the Pentagon Papers. That risky move ultimately paid off, raising the profile and profitability of her newspaper. - After World War II ended, Boeing
(NYSE:BA) , which had made many terrific bombers for the military, was on uncertain ground. CEO Bill Allen bet the future of the company on a new commercial jet, the 707, and the rest is history. - In 1982, when some Tylenol was found to have been laced with cyanide, Johnson & Johnson's
(NYSE:JNJ) James Burke decided to yank Tylenol off the shelves immediately. His company lost $100 million in earnings.
Another inspiring example from the business world is Chester Carlson, inventor of photocopying, who doggedly spent many years trying to sell his idea. It finally caught the attention of the Haloid Corporation, which became Xerox
It's often easier in life to not take action, but to get ahead we usually need to take some, and keep at it.
No more excuses -- and let us help
So stop making excuses. Don't leave your retirement to chance -- odds are it won't be pretty if you rely just on some meager savings and Social Security. Make smart financial decisions today -- and follow through on them -- and you'll be thanking yourself profusely tomorrow. If you'd like some help with retirement planning, my own favorite retirement information resource is our Rule Your Retirement newsletter, edited by Robert Brokamp, which you can try for free.
Here's a sampling of some useful articles from past issues:
- In the February 2006 issue, the newsletter discussed the effects of inflation on one's retirement, along with tips on how to plan for it. The same issue also reviewed Joel Greenblatt's "magic formula" for investing, which has helped him achieve eye-popping average annual gains of 40% over 20 years.
- In the January 2006 issue, Robert tackled asset allocation and explained how we can "avoid Uncle Sam's grabby hands." He listed a host of popular investments, such as bonds and dividend-paying stocks, in order of tax efficiency.
- The October 2005 issue delved into dividends and offered some recommended dividend payers. (If you're looking for some strong dividend-payers, consider checking out 3M
(NYSE:MMM) and Diageo(NYSE:DEO) . 3M sports a dividend yield of around 2.1%, rising profit margins and a P/E ratio below its recent historic average. Diageo's yield is around 2.7%, with profit margins holding steady at around a very respectable 16%.)
Here's to a happier retirement! And hey -- consider forwarding this article to anyone you care about. Just click on the "Email this page" link near the bottom of the page.
3M is a Motley Fool Inside Value recommendation, while Diageo is a Motley Fool Income Investor pick.
SelenaMaranjian's favorite discussion boards include Book Club, Eclectic Library, Television Banter, and Card & Board Games. She owns shares ofJohnson & Johnson and Washington Post.For more about Selena, viewher bio and her profile. You might also be interested in these books she has written or co-written:The Motley Fool Money GuideandThe Motley Fool Investment Guide for Teens. The Motley Fool is Fools writing for Fools.
