Owning It and Moving Forward

September 2, 2014 (PLANSPONSOR.com) - Wouldn’t it be nice to know from what success will come, before it actually does?

To know what products will thrive and thus what stocks to buy or which solution will solve a given problem to appropriately focus our energy. Despite the best of information, however, we so seldom have this insight. Even those exceedingly talented futurists among us are actually quite challenged in this regard.

Let’s take publishing for instance. When a good book becomes popular, we all seem to intuitively understand why it did. Wouldn’t it then stand to reason that publishers should be able to easily identify the winners and losers before they became popular? Well perhaps not all of them, but at least the big winners—those destined to go viral?

Consider the following excerpts from letters sent to aspiring authors from successful publishers as they rejected their work:

  • Lord of the Flies – “An absurd and uninteresting fantasy which was rubbish and dull.”
  • Catch-22 – “I haven’t the foggiest idea about what the man is trying to say.”
  • Carrie – “We are not interested in science fiction which deals with negative utopias. They do not sell.”


Now consider those last four words…“They do not sell.”  Carrie went on to sell millions and Stephen King is one of the most celebrated authors of our time, but even more astonishing is that these are but a few in a very long list.

So, why did the publishers not recognize the brilliance of these works? With the benefit of hindsight, it’s easy to pass judgment on these critics since history has shown us their blunders.  But, perhaps the answer is as simple as their only having read the first chapter. Perhaps they simply didn’t know how the plot thickened as the story played out or how the book ended. Perhaps it was simply a rush to judgment.

There isn’t a day that goes by during which I don’t read something wildly negative about our current retirement system. I suspect you feel the same. Critics abound. Their targets are varied and many, starting with the average account balance in 401(k) plans of less than $70,000 and culminating with a $6.6 trillion retirement savings deficit. They lament the complexity of the system, its failure to cover the entirety of the American populace, and to address the variability of life expectancy. They glorify the golden age of defined benefit (DB) pensions, mercilessly contrasting it with the defined contribution (DC) model of our current era. And, while I understand moderation doesn’t grab headlines, let’s at least get the story right.

I have looked long and hard for this “golden age” of DB pensions and have yet to find it. Was there really one? Coverage by a DB plan was never ubiquitous in America; it just never happened that way. Most Americans never had access to a DB plan and many of those who did neither vested nor accrued a meaningful benefit at retirement. Now don’t get me wrong, those who did were indeed fortunate, since a paycheck for life is a blessing. But, let’s not rewrite history to suit the argument.

Regarding coverage, I think we all agree that ensuring Americans are covered by a retirement plan in the workplace is essential to retirement readiness. But, what the current conversation fails to acknowledge is that coverage is actually broader today than at any time in our history. More people are covered by a DC plan today than were ever covered by a DB plan during the “golden age.”

And, when judging the success of the current system, if we are looking only at average 401(k) balances we are making a grave error. When the median employee tenure is about five years and very few people ever consolidate their balances, doing so is a lot like determining your net worth by looking inside your wallet; it just isn’t accurate.

But, to not acknowledge that there are indeed shortcomings within our current system is also a colossal mistake and we need to own them in order to move forward.

A secure retirement should not depend upon investment acumen or retirement planning savvy. It should be available to anyone who works hard and saves diligently for it. We have to become more instructive, not only about how to invest, but also how much people should save and how they take income in retirement. We need to get more aggressive in our use of auto-features to help get behavior headed in the right direction, because behavioral finance does work. And, we need to get busy with solving the bigger issues of coverage, lifetime income, and a baseline of financial literacy in America.

I strongly believe we are in the first chapter of what will ultimately be a pretty good book. The story has not yet played out, the plot has yet to thicken, and a rush to judgment will only prove to be a mistake. Let’s read the rest of this book.


Stig Nybo, president, U.S. Retirement Strategy at Transamerica Retirement Solutions  

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. Any opinions of the author(s) do not necessarily reflect the stance of Asset International or its affiliates.