The Fletcher School

Did you know that in the year 2020, Americans over the age of 65 will number almost 100 million? That only 5-6% of Americans actually maximize their contributions to their retirement plans? That social security was actually put in place to provide a basic guarantee to the economically disenfranchised, rather than serve as a lifeline in retirement? That the public sector will most certainly not provide us with the luxury of a secure retirement, so it is up to us as educated and engaged employees and financial planners to make sure our financial futures remain bright ones?

These were amongst the plethora of statistics and perspectives opined by Paul S. Henry, Director of Strategic Planning and Market Research at Manulife Financial in a presentation to the Fletcher community on March 4. A twenty-year veteran of the financial services industry, Mr. Henry was at Fletcher to talk about issues in global social security and how the private sector could play a critical role in bolstering financial security in retirement worldwide.

Mr. Henry pointed out that social security reform is a critical issue, because the current public apparatus to offer sustainable pay-as-you-go benefit programs (in which current workers finance pension benefits), cannot, by itself, handle the pressure being placed on retirement benefits by an increasing older population and the disinclination of companies to offer defined benefit programs in an era of increasing job mobility.

Citing relevant global examples, Mr. Henry mentioned that in China, increased labor mobility led to the loss of pension benefits, as the system was not built to handle benefits transfers. In Japan and the European Union, rising life expectancy has led to unfavorable climates for managing pension benefits due to a rapidly aging population.

“The Emperor (in Japan) will have to assume a full-time position sending out cards to those over the age of a hundred,” he quipped.

He stressed the pressing need for the evolution of retirement benefit programs from being a caretaker system to that of a self-managed system, putting the onus of saving in the hands of the individual. While the United States and Britain have certainly set the standard in this regard, there remains a lot of work to be done in terms of educating people about the true value of saving for the future.

“We’re part of an ‘I want it now society’,” he remarked. “The concept of living from paycheck-to paycheck is prevalent across age groups.”

Mr. Henry went on to add that instead of saving, people have recently chased higher returns, hoping to capitalize on the volatility of the capital markets; Such practices lay waste to the assumption that in the private financial planning system, people actually make sound investment decisions based on future needs and not current trends.

"To achieve financial goals for retirement you have to begin by setting one. Most people don't, or feel that they do not know how," he said. Add also that most people are concerned about managing finances, are confused about investment opportunities and generally lack confidence in financial decision-making, and we face an uphill struggle in trying to maximize savings in a society saddled with feverish consumerism.

Mr. Henry concluded his remarks by stating that the private sector faces a challenge in educating workers about saving for retirement, and that a company like Manulife, fresh off its recently announced merger with John Hancock, plays a critical role in assisting the individual investor plan a path to retirement security by educating workers about truly effective retirement planning.