Let me make a confession; some of my columns make me cringe with embarrassment.
No one is perfect, least of all me. Mistakes mortify me but more often my poorly conveyed thoughts. A literary demon pops up chiding me “You could have said that better.”
Thank the Lord, salvation is at hand, a child shall lead you.
In the aftermath of the election, a distraught teenager learned the hard way about missteps in the public domain. Her emigrating to Australia tweet because they have a Christian man as president went viral. No Virginia, Australia has a Prime Minister who is an atheist woman, STEE-RIKE THREE. Responses included comments outlining other aspects of Australian life, one erroneously citing gun ownership bans Down Under. While strict gun regulations exist in Australia, hunters and sportsmen can own weapons.
Since we are going international, Australia made changes to their pension system in order to serve retirees more efficiently. I do not pretend to be an expert on Australia’s Superannuation Guarantee program. With the magic of the Internet, someone can explain it better.
During the ’90s, Australia looked at demographics and realized the need to improve retiree pensions. In addition to a means-tested pension system, the Aussies began a mandatory program, where employers contribute (currently 9 percent) to investment funds. The compulsory "Superannuation Guarantee” is augmented with private savings and non-superannuation programs to provide a third leg for retirees.
While individually owned, stringent guidelines restrict participants’ access to Superannuation funds prior to retirement. Conversely, Americans have relatively easy access to retirement funds. Human nature and temptation being what they are, no one should be surprised to learn 50 percent of employees cash in 401(k) plans when switching careers. Outside dire circumstances, withdrawals before retirement should be verboten, a thought echoed in John Bogle’s “A Clash of Cultures.”
My good friend and Marine aviator Rick Ferri proposed a mandatory system modeled along the lines of the Thrift Savings Program (TSP) available for federal civilian employees and the military.
Our current hodgepodge of IRAs, 401(k), 403(b), et al, allows financial croupiers to rake profits from participants. Recently I found a 403(b) participant at Northwest Florida State College paid over 3 percent annually on their deferrals. The Class C shares used had an annual expense ratio over 2 percent and the advisor tacked on an additional 1 percent.
Here are a couple of takeaways: Don’t pay an advisor 1 percent to “manage” your 401(k) plan unless you enjoy giving your money away. 401(k) plans and the like have extremely high fees; adding another one is foolish. Unless you are taking withdrawals, the TSP is the best retirement vehicle bar none. Run like a scalded dog if any advisor recommends rolling your TSP into an IRA.
In addition to good wines, Australians appear to put more emphasis on financial literacy programs than we do. A sobering Securities and Exchange Commission report found Americans lack understanding of rudimentary financial concepts like interest rates, mortgages, risk and inflation. More advanced ideas like portfolio diversification or differences between stock and bonds flummox investors. The lack of basic fiscal knowledge inhibits your ability to retire comfortably.
Buz Livingston,CFP, is a fee-only certified financial planner. He operates Livingston Financial Planning Inc. focusing on hourly financial planning and investment management. Contact him directly at 850-267-1068 or at buz@LivingstonFinancial.net.