Economist: ‘Retirement for most people is financial suicide’

Laurence Kotlikoff, the brash Boston University economics professor and Social Security expert, doesn't mince his words.
"We Americans are pretty sick financially," he writes in his new book, Money Magic: An Economist's Secrets to More Money, Less Risk, and a Better Life, before listing all the financial gaffes we Americans make in our lives.
"As a group, we under-save, under-insure, under-diversify, pay for poor investment advice, rely on dying early, retire too early, claim Social Security at the first opportunity, free up far too little tied-up equity, lend us money to invest in stocks, convince us that stocks are safe in the long term, live poor,” he writes.
Marriage, divorce, college and other lifestyle choices we make also irk him. But it's a lack of savings -- especially for retirement -- that's really getting under his skin.
"Most workers save on bubkes," he writes. “Half of today's working families risk a significant drop in living standards in retirement. That percentage would roughly halve if all workers retired two years later.”
That's why he offers his retirement advice in his book, which has a slightly tongue-in-cheek title. It's not an abracadabra.
"It's budgeting for life," he told Yahoo Money. "It's the economic approach to financial planning ... [it] doesn't ask what you want to spend, but here's what you can spend."
Here's what else he had to say in a conversation with Yahoo Money.
Kerry Hannon: Is Traditional Financial Advice on Retirement Wrong?
Laurence Kotlikoff: “The financial industry is taking people looking for advice on retirement planning into fantasy land. Advisors ask them how much they plan to spend in retirement? My answer is a billion dollars a day.
Then they ask her how much you save? 'Not as much. Okay, let's put you in these high-yield funds.” Your odds of not running out of money are more likely to succeed. And your probability of failure is slim - that really means the probability of starvation.
So where you have financial planners who basically put together a plan with little chance of starving. That doesn't sound like particularly good planning.
What are the biggest mistakes people make when it comes to their retirement?
A lot of people just don't plan it. You leave it to someone else. They assume that Uncle Sam and her employer will take care of them. Then they are surprised when they retire and realize that they may not have enough money.
Second, there are many people who are not on 401(k)s or are on 401(k) plans and are not participating enough. They don't even stake enough to get an employer match.
Using Employer Match is possibly the easiest money magic trick in the world. The average matching contribution to an employee's retirement plan is over 4% of their salary. Still, a quarter of workers eligible for this free money do not participate in their employer's plan. Let me state this matter of course:
If your employer offers you money for free, accept it.
In my opinion, the whole experiment with 401,000 retirement accounts in this country has failed.
The story goes on

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