WHAT, ME WORRY?
September 3, 2008
The last thing we want to do is think about our finances, but when we do, it can be a chilling experience, say authors Laurence Kotlikoff and Scott Burns, in their new book, "Spend 'til The End: The Revolutionary Guide to Raising Your Living Standard (Today and When You Retire)."
About one-third of the population is preliterate when it comes to their finances. It's not that they make mistakes in thinking about their financial future; the concept of a financial future simply doesn't exist for them. But how can this be? We just don't know, say the authors, all we can do is catalog the behavior:
- We borrow too much, too often, for too long.
- We gamble for pure fun, collectively losing billions that could have been saved and invested.
- At the same time, many of us fail to buy enough life insurance to keep our survivors functioning.
Some of these behaviors are mildly self-destructive. Some are spectacularly self-destructive. For instance:
- Roughly half of older households have never developed a financial plan.
- The average American has a credit card balance about $8,500, accruing 18 percent or more in interest, and less than two-fifths of Americans pay off their credit card balances monthly.
- Casino revenues surpass annual 401(k) contributions, and a quarter of American adults average one casino trip every two months.
- Some 20 percent of 401(k) assets are invested in employers' stock, and half of older workers throw away, on average, 1.3 percent of their salary by not capturing a 401(k) match.
- Nearly one-third of secondary-earning wives are severely underinsured against their spouse's death.
Source: Laurence Kotlikoff and Scott Burns, "Spend 'til The End: The Revolutionary Guide to Raising Your Living Standard (Today and When You Retire)," New York, NY: Simon & Schuster, 2008.
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