NCPA - National Center for Policy Analysis


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.


Browse more articles on Economic Issues