Financial Independence without Government Subsidies

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There are two confessions I need to make in this blog. First, I am generally a very positive person who likes to be realistic and at the same time, I’m always looking for trends that can rise above the bad news. Secondly, I am a book-aholic. Yes, I love to read and over the years, one of the philosophies I have developed is that if the author raises an issue that borders on the impossible, I probably need to pursue that idea to see if it has validity.

In 2008, Roger Lowenstein wrote a book entitled “While America Aged: How Pension Debt Ruined General Motors, Stopped the NYC Subways, Bankrupted San Diego, and Loomed as the Next Financial Crisis.” Lownestein explores how and why corporations and governments made disastrous pension and health care promises to American workers. These promises are now coming due and they threaten the twenty-first century America. Keep in mind that this book came out before our country experienced the financial meltdown with the likes of GM.

Fast forward now to 2010 as this month’s Economist Magazine highlights that in 2008, governments were the solution to the economic crisis. Now, they are the problem. Go ask Europe if you need additional information on that topic.

Yes, Lowenstein’s incredible research is becoming a gradual reality. On June 6, 2010, Bloomberg News reported with the headline, “States Shrink Retiree Benefits to Patch Finances” that the state of New Jersey, along with 20 other states, are urging early retirements, cutting benefits and demanding that government employees contribute more. The article reports that the Pew Center on States says there is a $1 trillion gap between available assets and what is owed workers. Some states have skipped payments to retirement plans or borrowed to make them which could hurt their credit ratings.

Go back and revisit my blog about Social Security (Social Security; How Secure is it?). I am in no way wanting to sound doom and gloom. However, it is all about economics even as governments cry that they are the solution. As a financial professional, I need to emphasize that even government employees, who thought their retirement was secure, are now facing a reality that their employer, the government, may not deliver on those retirement dollars.

Yes, Lowenstein does an outstanding job alerting the readers of the tsunami that is on its way. Unfortunately, most Americans respond that these are isolated incidents, but the reality is that it is widespread. It is also why I believe you should be having regular dialogue with your financial advisor on ways you can be financially independent on your own efforts without counting on Social Security or other government subsidies. Like any institution or service on a decline, it will have to be restructured to succeed or ultimately it will fail. Don’t let your financial future dissolve before your eyes because you were told it would be provided by certain benefits. We are proactive with our clients, and if you are not a client and your current advisor isn’t having that dialogue with you, then we definitely need to talk.

Greg Powell
Wealth Advisor

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