Our editor-at-large responds to the message below
that was sent to CFP certificants by CFP Board CEO Sarah Ball Teslik.

Preemptive Capitulation: Giving Up
On Impossible Retirement Models

By Sarah Ball Teslik

    It is difficult to turn on the TV, open a newspaper or surf the Web without encountering stern warnings that most of us will run out of money early into (if not before) the decades of retirement we envision.
    These warnings are based on plenty of facts. What seems apparent is that (a) Americans are not saving enough to support their vision of retirement, and (b) despite all the warnings, things are getting worse.
    Why are these warnings being ignored by so many people? It may be human nature.
    The advances the sciences are making in psychology and economics are producing evidence that people are hardwired to consume, not save. This trait probably assisted survival in past eras, when people lived on the edge of starvation and when it was nearly impossible to overconsume. But this trait creates big problems in an era where overconsumption is far too easy.
    If we are strongly predisposed to consume, then a plan to fill a giant retirement shortfall that relies solely on jaw-boning people to reverse hardwired traits seems na├»ve. Billions are spent encouraging people to eat healthily, yet the best-performing national restaurant chains are those famed for giant portions of high-calorie food. Although some people do take the necessary steps, too many do not.
    So what does this mean we need to do? Basically, we need to stop expecting the impossible and set the bar lower. We need to create new retirement models that are not as expensive as the ones most people currently contemplate. If we are going to push people to do something very difficult, we should at least try to minimize the difficulty.
    Offering people retirement ideas that cost less might actually encourage savings. Many people say they give up planning for retirement because the amounts they are told they need seem unattainable.
    How can we reduce the cost of retirement? There are many approaches, but they tend to rely on either shortening the period of full retirement or reducing its per-day cost (or both).
    A recent article in the Washingtonian discussed a retirement model-senior co-housing-that reduces the cost of an average retirement day. In senior co-housing communities, the seniors assume many functions other retirement communities pay staff to do, such as office staffing, lawn care, the use of younger seniors to help older ones and so on. Besides reducing overhead costs, these projects foster a sense of community and keep seniors active, both of which improve the seniors' health and reduce their health-care costs, further reducing the overall per day cost of retirement.
    Senior co-housing relies on a simple concept shared by other retirement-policy initiatives: it allows seniors to gradually diminish their working hours rather than dropping suddenly from full time to zero. It is much less expensive for society to support someone working part time than someone not working at all, and surveys suggest that most people actually prefer a gradual shift into full retirement. These shifts can be accomplished by reducing hours at the same job, by taking on less-demanding jobs or by becoming temporary, seasonal or pieceworkers.
    Unfortunately, there are numerous roadblocks to such "cool down" approaches to work. Age discrimination laws deter some employers from creating programs for older workers. Organized labor has historically opposed flextime , despite the fact that workers of all ages consistently say they highly value these arrangements.
    Another issue that senior employment raises is how to compensate an individual (senior or otherwise) who is able to work but whose capacity (or rate of work) is less than other employees. Jobs that involve piecework are easiest to adjust-employees are simply paid per unit of production. A Midwestern cosmetics company takes this approach with senior workers who can show up when they like and who get paid per piece of work. This company's model has proven extremely popular with some very senior seniors (people in their eighties), who find the job gives them meaning and spending money. This model also has proven to be good business for the employer. But it is much more difficult to accommodate reduced-capacity performance in other settings, especially without running afoul of discrimination laws.
    Clearly, more creativity is required to accommodate working seniors. For example, quite a few seniors would like a different type of flextime than the type most popular with younger workers: seniors have less need for variable work days (to take children to the dentist or soccer games, for example) but a greater desire for variable work years (more, longer vacations). Employers are slow to realize this difference and create work models that accommodate these senior needs. But doing so would significantly reduce the savings people need for retirement.
    Governments have a role to play here too. Policymakers should revisit entitlement program rules (such as those governing Social Security) to eliminate provisions that discourage people from delaying retirement or working part time after retirement. Instead, governments should create policies that increase benefits the longer a senior voluntarily postpones drawing them down. It seems very odd for governments to maintain policies that actively discourage seniors from working, in light of our looming crisis.
    There are many other examples of ways to extend a person's working years and allow for a gradual, rather than a sudden, ending to them. And there are other creative ways to reduce the per-day cost of retirement as well. The point is not that individuals should give up on personal financial planning-for most people, financial planning is one of the most important things they can do to improve their quality of life. The point is that policymakers cannot rely solely on individuals' personal finance habits to address our looming retirement shortfalls.
    Sometimes aiming for the impossible is helpful and inspiring. Sometimes, however, it results in greater failure to achieve the possible. Financial planners are on the cutting edge of personal finance issues. They are often alone in helping their clients address issues such as how to phase out of work. But they cannot make up for short-sighted employer or government policies. And they cannot help those who either choose not to seek help or cannot afford help.
    Financial planners need policymakers to begin assisting them more realistically and effectively. It will require legal and regulatory changes to achieve realistic retirement plans for most Americans. Preemptive capitulation-admitting the size of the problem and the inadequacy of current approaches-may go a long way to solving it. When grocery money in retirement is the goal, we should all prefer the possible.

Money, Hardwiring And Us

By Richard B. Wagner

    For the past several months, CFP Board CEO Sarah Ball Teslik has written monthly e-mail epistles to CFP mark holders. Her messages have been diverse and informative, ranging from administrative/political concerns to social theory to issues of financial literacy and promoting the values and importance of financial planning. They are cogent and well written.
    They also practically beg for push-back and conversation. She has strong opinions, as any one who knows her knows. She is also articulate and good at spotting issues. Too bad CFP Board's Web site does not facilitate such a conversation. Rather, it forces us to different media for point/counterpoint. However, we are resourceful. Hence this month's column.
    Here, we address Teslik's March 2006 letter, "Pre-emptive Capitulation: Giving Up On Impossible Retirement Models." This time, Teslik protected the public with an expression of concern over a human condition and our general expectation that people will save what they need to save for their own retirement. She looks at American's woeful current responses to anticipatable requirements for retirement savings, and then suggests that there are systemic difficulties with our current expectations. The reason? People are "hardwired" to consume their money, not save it for later life. Science tells us so. Agree. Huh? What?!  Yikes!!!
    Teslik makes a practical observation: Since we know now that folks are not giving this critical issue the attention needed for meeting their life's requirements successfully, a whole lot of folks will be running out of money before they die. Oops, bad idea. Accordingly, we need to rethink social policies. From her perspective, it is simply folly to pursue courses of action based on the unjustified premise that people will make prudent and reasonable personal economic decisions.
    In her own words, she claims,
    "The advances the sciences are making in psychology and economics are producing evidence that people are hardwired to consume, not save. This trait probably assisted survival in past eras, when people lived on the edge of starvation and when it was nearly impossible to overconsume."
    Translation: We just cannot help ourselves from helping ourselves to as much as we can possibly consume because that is what it took our ancestors to make it in our wild, wild prehistory.
    I found myself with a mixed response. Summary: Good conclusion, bad theory. Misses a crucial point.
    On the one hand, I was sincerely delighted to hear a CFP Board official recognize the innate money issues embedded in a social question. On the other, I was dismayed that she missed the critical operating issue and nixed free will. In assigning the issue to genetics rather than money itself, she confused "science" with culture. The distinction is meaningful. Science and "hardwiring" require mechanics and government programs. Culture, values and lack of understanding require education, sensitivity and the financial planning profession.
    "Hardwired" is a term of some precision. Houghton-Mifflin's American Heritage Dictionary tells us that "hardwire" in this context of human nature means, "To determine or put into effect by physiological or neurological mechanisms; make automatic or innate."
    If Teslik is right, suicidal consumption is part of our unchangeable physical nature, like breathing, eating and eliminating. If we do not do these, we die-but they are automatic for most of us. They do not require legislation or suffer moral hazards.
    Money is different. If our normal survival instincts do not extend to money and consumption, we have a problem. According to Teslik, we humans are simply "hardwired" to become willing victims in our very own predetermined biofinancial death march. Nothin' we can do.
    Accordingly, she tells us, "society" has unjustified, impossible expectations. It is just too much for "society" to "expect" so much personal prudence in the face of hardwiring. 
    This is where we need to be careful. Bad theory leads to costly, ineffective responses. When Teslik suggests that we cannot expect human beings to forego consumption, she moves from compassion to indulgence and potentially ruinous public policy.
    She mistakenly elevates "science" above its rational purview.
    Human beings have never before had trouble grasping the requirements of economic life. They may have failed, but they generally did their best without relying on systemic excuses. No. This is not about science so much as money itself. She confused the "its" of fact and science with the mucky imprecision of cultural values ("we"), personal decision-making and self-control ("I").
    The implications are huge. Arguably, since "we" cannot do anything about hardwiring, "we" must accommodate it. It is useless, even cruel, to expect human beings to act otherwise. Moreover, it is merciless to impose harsh consequences for uncontrolled consumption.
    However, this is not science. "Science" requires essentially unarguable facts. We know that all living humans breathe, eat and eliminate. Those functions are hardwired. We can also observe that at least some human beings have capacities for saving, deferring gratification and declining current consumption in lieu of future considerations. Poof goes the "hardwiring" claim. The consumption function is not hardwired. There is choice. Flawed premise; untenable conclusion.
    Yet, she has a point. People clearly do not grasp money's life and death aspects. Any rational look at the numbers reveals that personal savings are obviously insufficient to meet anticipatable life requirements. There must be reasons.
    Teslik's conclusions ring true. Homo Economicus is not planning as he ought. However, she has done so when otherwise enabled over the millennia. What is new? Money.
    The problem is not biofinancial determinism but our failure to grasp money and our systemic reliance upon it.
The problem is that we are unprepared, underinformed and undereducated about money and meeting money's challenges.
    It is hard to know how much to save, how to save it or how to spend it. Accordingly, pandemic savings insufficiency is a subjective, immeasurable interior issue. Money is a human concoction  to enable agreements, facilitate exchange and work as a primary self-organizing force. As the most powerful and pervasive secular force on the planet, we need to better usnderstand its full implication range, including foreseeable repercussions for late-life systems in the face of expanded life spans, fractured health care and unprecedented reliance upon money for all aspects of individual and collective life.
    Money, all sorts of money, represents something vital to a planet with six billion souls, and growing. It is humanity's most important collective agreement. It is also core to our primary modes of interfacing with each other. Unfortunately, we do not understand money very well at this level. This is where and why financial planning has emerged. Ostensibly, we know money.
    Financial planning is not about science or hardwiring so much as human beings and our attendant relationships with this intangible force. It is not about consumption. It is about addressing money's full implications for individuals and our various communities.
    Accordingly, Teslik seems onto something when suggesting we must address the sociological implications of systemic money reliance. Money skills are 21st century survival skills. By definition, "survival skills" are required for survival. Moreover, money's cultural implications are mutating quickly and dramatically. By questioning of our species' innate abilities to save, Teslik implies vital questions: Can people meet money's demands? If not, then what? The big-deal issue is whether people have any natural capacities to meet money's demands at all.
    Clearly, our retirement models are flawed. Their implicit expectations about grasping the financial realities of long life, the unpredictable costs of living such long life and the associated implications for current savings and investment are ludicrous on their face. Unfortunately, this retirement problem is only one example of far broader cultural problems grounded in our collective overreliance upon money as a broad solution. For millennia, money was about trading stuff. It was not until relatively recently that it began to serve as foundation for our social and physical fabric.
    It has always been error to assume that people make rational economic decisions. They do not and they never have. This error compounds when economic decisions increasingly engage money rather than natural resources and business.
    People learn what they must. Appropriate diet and exercise, training, preparation, spiritual maturity, responsible sexuality, professional achievements-all require consistent discipline and current restraint. They have had these qualities for centuries, and people learned. So must people learn about money.
    Compared to these, money is intangible and misunderstood. Of these, personal and cultural relationships with money have most certainly received the least thought and attention. Our problems with money have much to do with its relatively recent appearance as a cultural phenomenon and its consequent demands on us. 
    For too long we have been swallowing the pretensions of ersatz science, believing that Homo Economicus was rational and acting as though money could always buy cultural desirables as well as survival's necessities. Yet, until now, no generation's final years were as dependent upon the money they saved. Nor was any society as reliant upon financial assets for the care and keeping of its members and its cultural underpinnings. This is not hardwiring. This is historical reality and bizarre current nightmare.
    International trading currencies do international trade, not education, health care, physical infrastructure, aging or childcare. The "hardwiring" is in the money, its design and its demands.
    We are in social crisis. Our uses of international trading currencies are unprecedented. In fact, we are entering a new money era. It is different this time, and the implications are ferocious.
    Human beings are hardwired for survival. Money skills are 21st century survival skills that do not come naturally to human beings. Survival requirements and survival tools are changing rapidly; good money judgment is hard to find. We need help. We need advice and wisdom. We need contexts for making the sorts of decisions that our lives require. We need an authentic, capable learned profession. That is us.    

Richard B. Wagner, JD, CFP, is the principal of WorthLiving LLC, based in Denver. He is the 2003 recipient of the Financial Planning Association's P. Kemp Fain Jr. Award, which recognizes a member who has made outstanding contributions to the profession.