Lift the hood of a 1960's era car and two things will immediately jump out: 1) there's an awful lot of room in there, perhaps twice as much versus what's needed for the engine; and 2) the engine itself is relatively simple with components easily recognizable to anyone with a base level of mechanical knowledge.
That same 1960's era car is also relatively easy for a shade tree mechanic to maintain. The biggest challenge faced by the owner is whether or not it will start. If success is achieved on that front there's little to worry about on the air conditioning, digital radio, and electronic locks and windows front – because none of those things exist.
Juxtapose that arrangement with what awaits you under the hood of just about any vehicle built in the last decade. The engine compartment not only doesn't have extra room, it appears 30% too small for the confusing array of hoses, belts, wires and components that were somehow crammed into the allotted space. If you're unfortunate enough to have a problem with any of vehicle's various electrical or mechanical systems you're essentially out of luck on the self-help front unless you received the specialized training needed and also happen to have the tools and the computer software required for the work. This is a challenge even for the pros, as evidenced by the fact that GM has recalled more cars this year than it sold last year.
Switching gears (pun intended), the financial landscape for the average American has definitely not taken a turn for the simple. There is no need here to belabor the point that many, perhaps most Americans are not saving at a rate sufficient to fund their retirement. It is, however, worth noting that a new study finds that people are more predisposed to save also demonstrate a greater level of care for their health. Success with our financial plan is, at least for some us, linked to our success in maintaining our overall health.
We are all inclined to say the right thing when it comes to our savings habits and our health. The problem is, to paraphrase Louis C.K., most people have strong beliefs that have nothing to do with how they actually live their lives. For the fortunate subset of our population that is perhaps genetically inclined to save and lead a healthy life style this is not an issue. For the rest of us, just saying the right thing isn't going cut it as the increasingly complex financial needs are also increasingly intertwined with issues impact our health.
For example, let's look at the decisions that an average American, dual-income family has to face in any given year:
- How much to contribute to their company sponsored retirement plans (and in the event that one of them doesn't have access to a plan, how much to save via an IRA or regular savings).
- The investments within the plans/accounts that make the most sense for their long-term goals.
- The best tax treatment for their contributions (Roth vs. regular pre-tax).
- How much to contribute to their flexible spending account to offset predicted out of pocket medical expenses.
- If one or both works for an employer that has gone to a high deductible health plan (HDHP): how much should be set aside in the corresponding health savings account (HSA)?
- If an HSA is funded, which of the available investments will you utilize?
- If college is in the future for one or both of the children, is a 529 plan needed?
- Should the 529 plan be of the pre-paid tuition variety or instead look to grow the contributions as a college savings plan? If the latter, investment decisions need to be made here as well.
All of these ongoing decisions have to be made in addition to the more mundane, but critical elements of running a household such as: paying bills, living within a budget, making sure that the right amount of property and life insurance is in place, and so on. Poor short term decisions on the health side of the equation (not funding an HSA or flexible savings plan account) can have long-term implications on the amount gathered for retirement. Not setting aside funds for the college education can ruin your retirement. Not saving enough for retirement can also lead to a myriad of problems, particularly with potential costs of health care during retirement.
There is a subset amongst our population that is equipped to handle the majority of these decisions without help. I work in the retirement industry and hopefully have a head start on that front, but freely admit that I am often lost when challenges come up regarding health insurance. I also know that there are some areas which are so specialized and technical, such as financial aid for our children's college education, that I am unlikely to reach the best solution on my own.
When it comes to vehicles you do have the option of choosing an aged model and skipping the complexity of today's cars. In terms of your finances and your physical health I believe we're all now stuck in a world where the challenges are both complex and interwoven. When in doubt, close the hood and ask for help.
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CAPTRUST Financial Advisors
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© 2012 CAPTRUST Financial Advisors
The opinions expressed in this report are subject to change without notice. This material has been prepared or is distributed solely for informational purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy. The information and statistics in this report are from sources believed to be reliable, but are not warranted by CAPTRUST Financial Advisors to be accurate or complete. Performance data depicts historical performance and is not meant to predict future results. CAPTRUST Financial Advisors, Member FINRA/SIPC.