Not only does retirement preparation vary from person to person, many of us can't even describe what it actually looks like.
Successful retirement planning requires a multi-layered exploration of our wants, needs, financial fears, and risk tolerance, along with sensitivity to what we really mean as well as what we actually say. There is a close analogy to psychotherapy.
For this reason, it is not feasible for Wall Street firms to conduct their own periodic surveys of retirement readiness. Not surprisingly, these surveys often reach widely varying conclusions.
However, Wall Street keeps trying. Six such companies have already contacted me this year and published their latest surveys. Someone published a report on February 13 declaring that the US retirement crisis is worse than ever, with two-thirds of workers not saving enough for retirement – and nearly one in four not even saving enough to pay for their funeral.
Meanwhile, another survey – released two weeks ago – found that 70% of US workers are confident they have saved enough for a comfortable retirement.
The inherent weakness of these surveys is that they attempt to quantify what cannot be quantified. Take, for example, survey results that found two-thirds of workers are not saving enough for retirement. She arrived at this conclusion by measuring the size of respondents' retirement portfolios, then comparing them to the overall $1 amount that the surveyors claimed was necessary to retire comfortably.
But there's no one-size-fits-all when it comes to a retirement portfolio. Benjamin Graham, the father of fundamental analysis, made this point in his famous book The Intelligent Investor: “The best way to measure your investment success is not by whether you beat the market, but by whether you have your money invested in the market.” Create a financial plan and behavioral discipline that will get you where you want to go.
How many of us can answer the question “Where do you want to go” with more than a few bromides? This doesn't mean that having a large portfolio isn't important for retirement preparedness. But the relationship between money and happiness is surprisingly ambiguous. Take, for example, recent research by Wharton professor Matthew Killingsworth and Princeton professors Daniel Kahneman and Angus Deaton.
Researchers have found that more money brings more happiness largely only if you're a happy person to begin with. If you are an unhappy person, money helps you only to a limited extent. And even for the happiest people, the impact of more money is much smaller than you might think: “A four-fold difference in income…is less than a third the headache effect” on a person's feelings of happiness on a given day.
Financial advisors can play a valuable role in helping us resolve these thorny issues. There is no doubt that there are unscrupulous advisers who take advantage of vulnerable retirees and semi-retirees. The presence of such advisors only reinforces the importance of searching for an advisor carefully. Just don't let the sheer complexity of retirement planning deter you from looking.
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to audit them. It can be reached at mark@hulbertatings.com.
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