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A just published article in the Harvard Gazette touches on many of the concerns brought up by HD posters and commenters in recent months. It consists of an interview with John Y. Campbell, an economics professor and co-author, with Tarun Ramadorai, of a new book: Fixed: Why Personal Finance is Broken and How to Make it Work for Everyone. The article treats why it is currently so hard to save for retirement, how the complexity of the financial system fosters inequality, the psychology of saving for retirement, the debilitating suspicion many harbor toward the financial system, a proposal for a financial “starter kit” to demystify investing for retirement, and some practical ways to assess one’s preparation for financial security in retirement. Here is a link to the article.
Not much will be new here for frequent HD readers, but the information is based on solid research by top scholars.
The article says “People can really alter their fortunes by just putting in a little more effort to look around.”
Putting in the effort. That says it all. I spent decades of my working life trying to get 15,000 employees to do that in all areas of benefits affecting their money from health plan choices, using FSAs, using, even participating in the 401k to simply attending free seminars on all these topics plus SS and retirement planning.
I finally concluded it was a lost cause, although there were some successes and people who appreciated our efforts.
The article blames the system and its complexity. Nope, saving and investing is not that complex and understanding the basics is always possible with a bit of effort. Sure we can make it complex, but it doesn’t have to be. JUST DO IT.
Frankly, many of the financial nuances and strategies talked about on HD are foreign to me, I never heard of some, never considered others. I just kept saving and investing in mutual funds. Time was the key factor, but in the end my ignorance of the more sophisticated financial strategies didn’t keep me from a seven figure 401k.
Time and persistence and priorities with money are what matter.
I agree with your final observation, to be sure. But the prescription to “just do it,” like Nancy Regan’s “just say no,” hardly offers an adequate response to a tremendous problem in our society that is apparent to most everyone. You can’t really fault this article for its contention about “the system and its complexity” until you’ve engaged the arguments put forward in the book, which I suspect are well supported (Harvard professor and all), but I have not read the book yet myself. I call attention to it because it represents a serious attempt to account for an issue that you and most everyone else here on HD are aware of and concerned about to varying degrees.
Thanks for sharing the article, Chris. Earlier in the week I had just requested the mentioned book on hold at our library. As a regular person who had to learn about finances on my own, it was hard. It is easier to find information today with the internet, but you do have to vet the advice, just as I did back when. Chris
You are ahead of the curve! I hadn’t heard about the book until I saw the Gazette article.
Why is it so hard to save for retirement these days?
You argue in the book that the complexity of the financial system perpetuates inequality. How so?
It’s tempting to spend that extra $5 on a coffee instead of saving it for later. How much of the challenge of saving for retirement is caused by human psychology?
What are the consequences when the financial system does a poor job of setting people up for retirement?
You propose a financial “starter kit” to help people navigate the system. Can you explain that?
What are some practical ways to gauge the health of your retirement fund?
You need to read the book to answer your questions. The post only refers to an article, which in turn refers to the book co-written by the economics professor being interviewed.