Middle class America is expecting to push out full retirement even later due to financial worries. We’re also expecting to have to save more. Yet almost half of us haven’t worked out how long we can last on what we’ve got already.

According to Wells Fargo’s new survey:

• Almost half said that they expected to continue in the same job or a similar job of similar responsibility (expecting the same income level, we presume).
• More than half said they need to significantly cut back on spending now to save for retirement.
• More than 25% of 20-30-year-olds expect no income at all from Social Security during retirement.

Another new report, “The Financial Recovery for Retirees Continues“, released by The Society of Actuaries, LIMRA and the International Foundation for Retirement Education offers this finding:

• The number of people who have NOT yet estimated how long their assets will last in retirement INCREASED significantly (to 46% from 38% last year).

Let’s review these results.

• We know we have to work longer.
• We’re hoping to make the same pay in the same jobs well into retirement.

But,

• We haven’t worked out if we actually have enough to retire based on what we have now.
• We think we need to save more than we are managing now in order to retire comfortably.

No wonder so many of us are worried and preoccupied. Except, of course, for the ones who are just burying their heads in the sand!

Sounds like a lot of us could benefit from a Financial Assessment and some Next Steps guidance.

Findings from the 2011 Aflac WorkForces Report highlighted the discrepancy between how companies and their workers view benefits communications:

• 85% of employers believe their HR departments are effective at benefits communication
• 27% of employees say their HR communications are not very/not at all effective
• 39% say the efforts are somewhat effective

And yet everyone agrees there is much needed improvement:

• 8% of employees say they are fully engaged in making benefits decisions
• 63% of companies say their workers need to be more engaged

What’s at stake? Not surprisingly, workers who are unprepared and under-protected against an accident or illness are highly vulnerable to the financial implications of an unexpected health event.

As more and more organizations realize, the health and financial wellness of an employee has a direct effect on the company’s productivity and retention levels.

As a company focused on improving the financial health of employees, it’s good to see BusinessWeek covering small business examples, as it shows the depth of the problem.  While larger companies like IBM, Pepsi and Home Depot have received good press coverage over the past few years for their financial education and literacy programs, smaller companies are also taking notice and implementing programs.  I think this section from the BusinessWeek article sums it up the problem well:

As the recession grinds on, more companies find themselves managing workers facing personal financial crisis. And while employers like Humanix treat workers like family, taking care of them makes business sense as well. “I don’t want to make it Pollyanna,” says Humanix’s Nelson. “If an employee has a stressful financial situation at home, they’re not going to be fully engaged in their job.”

Very few of us have ever trained for or thought through a financial emergency…or any emergency for that matter.  My wife is a chaplain for the local county Sheriff’s department and through her experience, I have gotten a taste of what it means to be mentally and physically equipped for tough situations.   Last year, after 4 months of preparation, she was a part of the response team at a simulated school shooting.  Everything was planned to look like a real event.  Yes, it’s tragic that this kind of training is necessary and all involved hope they never have to use what they learned that day, but she is convinced that lives will be saved if…

Similarly, commercial pilots spend about 80% of their training time on emergency procedures. A recent example is the remarkable “Miracle On the Hudson”, where 155 airline passengers were saved in January due to Captain “Sulley” Sullenberger’s superior preparation and crisis management skills.  Sullenberger drew upon four key attributes during that eight minute flight which we can borrow to help us manage our money in tough times.  More about those in upcoming posts.

So what’s the problem? Evidence suggests that economic and financial stress is damaging health across gender lines but apparently affecting women to an even greater degree. According to 2008 American Psychological Association’s Stress in America survey more women than men (84 percent to 75 percent) expressed fear about the economy, and many reported new physical and emotional symptoms, such as headaches, irritability, insomnia, fatigue, overeating and chest pain.

With this kind of evidence, why aren’t we more proactive in preventing this stress from taking such a toll on our health and well-being? We know that the medical side of the health/wellness movement took a dramatic turn as they discovered it was both healthier and less expensive to prevent disease than to treat it after onset. Similarly, ask anyone who has ever tried to dig themselves out of a financial hole, it is always more stressful and expensive to dig out of a money pit that stay out of one in the first place.

I’m convinced that much of the problem can be attributed to a couple of reasons…first, there’s too much financial information for us to process and secondly, the communication of money concepts are often overly complicated.  In the past few weeks, I have been discussing pros and cons having tons of data within clicking distance.  Information, and even education, is only valuable only if we have a simple way to determine its relevance to our personal situation and forge a confident, clear path toward decisive action.

So taking off from last week’s example where we looked breaking down a complex topic like Estate Planning by forming a few simple, high level questions, let’s consider something similar for managing money in tough times.

The big picture money questions in tough times are:

• Do we need money for an essential expenditure or a non-essential expenditure?
• Am I going to spend within the next 5 years or beyond the next 5 years?

I will explain the five year time-frame in the next blog, but with these simple questions we can create four buckets of money and form very straightforward action plans for each. The four buckets are…

• Essential, Now (less that 5 years)
• Non Essential, Now
• Essential Future(more than 5 years)
• Non-Essential Future

Next week… walking through simple money management strategies for each of these buckets.

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