"The difficult we do immediately. The impossible takes a little longer."
David Ben-Gurion

PRE-EMPTIVE CAPITULATION: GIVING UP ON IMPOSSIBLE RETIREMENT MODELS

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 hard wired 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 over-consume. But this trait creates big problems in an era where over-consumption is far too easy.

If we are strongly pre-disposed to consume, then a plan to fill a giant retirement shortfall that relies solely on jaw-boning people to reverse hard-wired traits seems naïve. 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 piece workers.

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 flex-time 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 piece work 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 80s) who find the job gives them meaning and spending money. This model has also 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 flex time 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. Pre-emptive 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.

Sarah Ball Teslik

Registration is now open for CFP Board's 2006 Annual Meeting! Visit CFP Board's Web site at www.CFP.net/register to register online.

CFP Board's Annual Meeting offers a great chance for both financial planning professionals and financial novices to learn more about the benefits and practice of financial planning. The General Session of the Annual Meeting, to be held Friday, August 4, 2006, at the Los Angeles Convention Center, is open to the public, to CFP® certificants and to other CFP Board stakeholders and will include presentations from a varied group of notable speakers, including NASD's Mary Schapiro, Pfizer Inc. CEO Hank McKinnell, Queen Noor, Senator Kerrey and Wayne Gretzky. [On March 20, 2006, CFP Board learned Wayne Gretzky will not be available to speak at CFP Board's Annual Meeting.]

Breakout sessions during the General Session will provide CFP certificants with chances to earn up to 8 hours of continuing education, including a 2-hour program on CFP Board's Code of Ethics and Professional Responsibility and Financial Planning Practice Standards that is a requirement for renewal of CFP certification.

The General Session will also include breakout sessions for the general public that will provide them with information and resources about the benefits of financial planning. Among the consumer-oriented speakers are:

• Louis Barajas, a leading advocate for financial literacy and consumer advocacy for the working class whose books, media appearances and other activities have helped inspire people of all income levels to attain their life goals.
• Mercer Bullard, founder and president of Fund Democracy, a nonprofit advocacy group for mutual fund shareholders, and Assistant Professor of Law at the University of Mississippi School of Law, who is one of the nation's leading advocates for mutual fund shareholders.
• Elisabeth Donati, Executive Director of The Money Camp, a non-profit organization that teaches kids and adults personal money management skills.
• Robert Duvall, CEO of National Council on Economic Education, a non-profit organization that promotes economic and financial literacy in schools, who is spokesman for the cause of making economic and financial education a core component of the pre-college curriculum.

The Annual Meeting will have events of interest to everyone and could be a great occasion for CFP® certificants to attend a financial planning event alongside their clients. Plan to bring your clients and spend part of your summer learning more about financial planning with CFP Board.

More information about CFP Board's 2006 Annual Meeting is available on CFP Board's Web site at www.CFP.net/annualmeeting.

Education Task Force Update

As the policy-setting body of CFP Board, the Board of Governors (Board) reviews CFP Board's core operations on a regular, rotating basis. In 2006, the Board will review CFP Board's involvement in education, which encompasses both the educational requirements for initial CFP® certification and the ongoing continuing education requirements for renewal of CFP® certification.

To accomplish its review of education, the Board has formed a high-level Education Task Force, comprised of individuals both inside and outside the financial planning profession. The task force will review CFP Board's current educational goals, standards and practices, compare them to those of other certification bodies and to models of best practice, and decide whether to recommend any changes to CFP Board's current operations.

Because CFP Board reviews its operations on a regular basis, the Board does not presume, by the creation of this task force, that there are changes that need to be made; rather, the Board believes that a regular review promotes excellence.

For this task force, CFP Board has assembled a group with a broad range of expertise:

Bob Glovsky, JD, LLM, CFP®, Task Force Chair
George Dehne
Wade Delk
John Ebersole
Eva Kampits, Ph.D.
Al Niemi, Ph.D.
Gary Matkin, Ph.D., CPA
Carol Lee Roberts, CFP®
Deanna Sharpe, Ph.D., CRPC®, CRPS®, CFP®
Richard Stumpf, CFP®
Jerry Trapnell, Ph.D., CPA
Tom Warschauer, Ph.D., CFP®

More information about the Education Task Force members is available on CFP Board's Web site at www.CFP.net/aboutus/edtaskforce.asp. The Education Task Force will hold its first meeting at CFP Board on March 20, 2006, and is expected to report its initial views, findings and/or recommendations to the Board during its open session on Saturday, August 5, 2006, in Santa Monica, California.

2006 Financial Planning Grants Program Update

CFP Board received more than 100 applications to its 2006 Financial Planning Grants program before the application period ended on March 1, 2006. The enthusiasm of the applicants was very evident from the proposals, and CFP Board looks forward to awarding grant funding to some truly interesting programs that will help bring information about the benefits of financial planning to people who might not otherwise receive it.

Grant recipients will be announced at CFP Board's Annual Meeting in August 2006, and information about the programs receiving grant funds will be available on CFP Board's Web site.

If you missed the application deadline for CFP Board's 2006 Financial Planning Grants program, you may be interested in reviewing financial planning-related grant opportunities offered by other organizations, including the following:

Foundation for Financial Planning has grant programs that further its mission to help people take control of their financial lives by connecting the financial planning community with people in need. The Foundation accomplishes this through the support of pro bono advice and outreach activities. Read more about the Foundation for Financial Planning's grant programs at www.foundation-finplan.org/procedures.htm.

The National Endowment for Financial Education (NEFE) administers three grant programs as part of its effort to increase the financial education and literacy of Americans. Read more about the NEFE grant programs at www.nefe.org/pages/grantmaking.html.

NASD Investor Education Foundation has teamed with NEFE to offer several grant programs to further its mission to provide investors with high quality, easily accessible information and tools to better understand the markets and the basic principles of financial planning. The Foundation awards grants that fund educational programs and research aimed at segments of the investing public who could benefit from additional resources. Read more about the NASD Investor Education Foundation grant programs at www.nasdfoundation.org/grants.asp.