I don't know which is worse: realizing you cannot keep a promise you made to someone who was important to you, or being the person who relied on the promise when you finally grasp that it is not going to be kept.
In 1973, I was 33 years old, just getting started as a public speaker in a career that would span another 30 years. I was asked to join the National Speakers Association and became a charter member. Our first president was the late Bill Gove. Bill was a terrific speaker and also a great salesman—one of the top life insurance salesmen in the country for many years.
One of his favorite lines was quite telling about selling life insurance. He would ask his prospect, "How much life insurance do you have?" The person would tell him. Bill would pause, get a funny look on his face, and deliver the punch line as a question: "You don't plan on being dead very long?" Every time I saw him deliver that line, the audience would roar.
Were Bill alive today, he would likely be selling annuities to those same clients. I don't understand why insurance companies don't call annuities "enjoying-life insurance." If they did, they would probably sell more. Somehow I can't see Bill in front of an audience telling a story of asking a prospect about their retirement portfolio, and then delivering the line, "You don't plan on being retired very long?" My guess is the audience would shift from one side to another in their seat and perhaps chuckle uncomfortably. What's the difference? An entire generation would know he is right; we are very uncomfortable about having enough money to truly enjoy retirement.
So what has changed since 1973? Most of us never thought too much about retirement when we were younger. In the 1970s, if you worked for the government, were a union member, or worked for a medium to large corporation, there was a good probability that you were guaranteed a pension if you worked there for any length of time. Couple that with Social Security and you could enjoy retirement. My dad had two pensions—one from the State of Illinois and another from the post office—and he did just that.
During my career, I trained salespeople and managers. One of my teaching points was emphasizing to salespeople not to exaggerate or overpromise to their clients. I told them: "Don't let your hippopotamus mouth overload your hummingbird ass!" That line certainly got their attention. The adverse consequences of being unable to keep a promise in the marketplace can be devastating. They can include the loss of a client, but also in many cases the loss of your reputation.
The corporate world, many unions, and federal, state, and local governments are all guilty of doing just that. They made pension promises to their employees that they just could not keep. I had a good friend who became a senior pilot at Delta Airlines and was quite proud the day he flew his last flight into Atlanta Hartsfield Airport. They had the customary fire hoses greeting his plane and a big retirement party. Less than two years later, Delta filed for bankruptcy, the government took over its pension obligations, and his pension was drastically reduced. Sad to say, he passed away within five years.
I found it interesting to read the current Employee Benefit Research Institute Retirement Survey. It reported that only 3% of employees in the private sector have a pension plan. The rest now have some sort of savings plan, like a 401(k). Corporate America has successfully unraveled from its pension promises in two ways: either companies bellied up and shifted the pension liability to the government; or they transferred the responsibility back to us as individuals. It is now our job to worry about our own well-being. In effect, companies are now just voluntary administrators of a voluntary savings plans for their employees.
While corporate America made promises it could not keep, at least most companies 'fessed up to the economic reality, explained that making good on their promises would force them into bankruptcy, and found a way to get out from under those commitments.
Our government is doing the opposite of 'fessing up. While corporate America is unraveling from economic promises it could not keep, governments big and small are doing the opposite. In addition to their generous pension plans, we all now have health care (even those who are not citizens), food stamps, longer-term unemployment benefits, etc. The list of promises goes on and on. It seems the government has its hippopotamus mouth going full blast in every election cycle, making promises to win elections.
Those who try to speak up (see Ron Paul) and point out that those economic promises are going to bankrupt us all are criticized and ridiculed. Unfortunately, there is one major difference between corporate America making promises and the government doing the same thing: the government is making promises it cannot keep with our money! It is driving us into bankruptcy. When that happens, normally the value of the currency will collapse, destroying the wealth of seniors and savers in the process.
While it may be bleak, it is not hopeless. I recently read John Stossel's latest book, No, They Can't: Why Government Fails—But Individuals Succeed. The book outlines our current predicament in very easy-to-understand terms. At the same time, it strengthened my personal resolve. It gave me hope... a funny choice of words, as I think about it.
Every day, more and more people are seeing these promises for what they really are: hollow and illusionary. There is no point in debating whether they were made in good faith or not. Who the hell cares? The real issue is: they are promises that are financially impossible to keep.
John's book reinforced what I already knew: Americans are a hardy lot, and a lot of us succeed in spite of horrible obstacles placed in front of us. The first step is to pop the illusion bubble, accept the responsibility for our own retirements, and get on with the job.
While it will take a lot more than a simple annuity to get the job done, there are always opportunities for educated, take-charge investors to survive when they put their minds to it.
Oh, and to address the question I asked in the first paragraph. Being concerned about having to break a promise you made is only important to those with a conscience—not the kind of people who will just tell folks whatever they want to hear. Guess what? We are on to their game and can thrive without counting on their phony promises.
I was so impressed with Stossel's book that I invited him to join us for an exclusive discussion on the challenges facing seniors. He'll be joined by a panel of experts including David Walker, former Comptroller General of the United States, and Jeff White, president of American Financial Group, to give you practical solutions to today's financial challenges.
Our event, which is titled America's Broken Promise: Strategies for a Retirement Worth Living, is free and premieres on Thursday, September 5. Click here for all the details and to reserve your spot.