The government isn’t your financial savior
The most terrifying words in the English language are: I’m from the government and I’m here to help. – Ronald Reagan
Regular readers of my column will notice that I have used the aforementioned quote from former US president Ronald Reagan many times. I love the quote and in these times of c novel coronavirus, it’s just perfect to describe what is going on. Regardless of which side of the political divide you find yourself, it’s clear that the government is inept and has become virtually paralyzed trying to help its’ citizenry get back on sound financial footing.
Don’t just blame Prime Minister Benjamin Netanyahu, look around the world. The global economy is a mess and government’s continued meddling has added to the devastation. It’s important to note that while the heads of state get the blame, as the buck stops with them, those paid to carry out policy can’t get the job done either. Why we keep looking to our politicians to solve our problems is beyond me. Describing how government should be shunned as the solution to business woes, Ayn Rand said, “Government ‘help’ to business is just as disastrous as government persecution... the only way a government can be of service to national prosperity is by keeping its hands off.”
It’s time to take a long look in the mirror. What do you see? If you see more than your eyes and forehead, put on a mask for crying out loud. You can have all the COVID-19 social distancing regulations you want, but if the people don’t follow the rules, it becomes worthless.
Let’s face it, in many respects it’s our own fault that we are headed for another full scale closure. But seriously, when we look in the mirror we should be seeing the solution to our problems. In most cases we can solve our own problems.
I have been pounding the table for more than two decades about the importance for individuals to take seriously the need to save for retirement. That reliance on the government to take care of you is foolish and that you will not be able to have a secure retirement if this is your approach. Maybe now, the message will hit home.
When I speak to people about retirement planning, I am often met with “I don’t need to plan for retirement because the government will save me.” My blood pressure spikes when I hear this. I think it’s important for individuals to take care of their own retirement and not rely on anyone else to do it for them. I can’t tell you how many meetings I have with people who have worked 25 or 30 years and have a small pension and get a whopping 2,500 nis a month, approximately, from Bituach Leumi.
Taking care of your own retirement is even more important if you live in Israel. A while back I quoted Dr. Aviad Tor-Sinai and Prof. Avia Spivak at Ben-Gurion University of the Negev’s Pensions, Insurance and Financial Literacy Center research which showed that Israelis are in much worse shape financially for retirement than their European neighbors. “Income after retirement among Israeli pensioners stands at 65.9% of their before retirement income. The dramatic decline by age 67, just two years after retirement, includes income from all sources: labor, pension plans, social security, and capital income. When compared to developed European countries conducting similar surveys, based on data provided by SHARE, Israeli retirees suffer a greater decline in income than their European neighbors. Austrian pensioners, for example, enjoy 91.2% of their preretirement income; French pensioners retain 83.1% of their previous income; and Germans continue to earn 76.8% of their income.”
For those counting on Bituach Leumi, look out. With the government freely handing out money to every special interest group that protests, and increasing spending exponentially while incoming revenues crater, at some point you need to pay the piper. I am not sounding the alarm bell but it’s important to know that after decades of mismanagement and skyrocketing deficits, there is a real possibility that the Government will not be able to meet their long-term obligations.
Take control of your own pension. First of all it’s important to sit down and do a budget. By doing this you can get a clear picture of how much money is coming in versus how much money is going out for expenses. Too bad the finance minister doesn’t do this! Then create a disciplined approach to saving. Try saving at least 10-15% of your monthly income.
Since no one else is worrying about your future, make sure you take control of your finances, so that you will have a financially secure retirement.
The information contained in this article reflects the opinion of the author and not necessarily the opinion of Portfolio Resources Group, Inc. or its affiliates.
Aaron Katsman is the author of Retirement GPS: How to Navigate Your Way to A Secure Financial Future with Global Investing. www.gpsinvestor.com; aaron@ lighthousecapital.co.il.