Investors have learned few lessons

Submitted By Tim Iacono
For the weekend edition of the newspaper, the folks at the Wall Street Journal put together an interesting quiz called Have You Learned Your Lessons? based on a recent report that included surveys of those planning for or already in retirement.

It's now available online in the public area and it provides a valuable insight into how little has really changed over the last year despite all the talk of lessons having been learned. The quiz is also a fair test of your own knowledge on this subject, though I wouldn't get too hung up on your personal tally of correct/incorrect answers since it's really not important that 43 percent, not 53 percent, of households aged 65 to 74 carry mortgage debt.

The point is that it's way too high and, unless, somehow, policy makers can inflate another stock market bubble and another housing bubble, financial planning will be increasingly difficult for most individuals who aspire to a life of leisure in the years ahead.

Anyway, here are the questions and answers that, in my view, were most disconcerting:

While that may not be so bad when considering that some of these people have pensions, those ranks will continue to dwindle every year until only gubment workers have a guaranteed income for the rest of their lives.

Unfortunately, it gets much worse regarding how individuals handle their nest eggs.

While many save too little, those same individuals probably don't realize that the odds are not in their favor for making up for their savings shortfall by working longer.

This next one is just plain sad when you think about it, particularly when you consider the case of individuals who have followed the conventional investing "wisdom" regarding asset allocation (heavy on U.S. stocks) and have been in their prime earning years over the last ten years, a period when U.S. stocks have risen no higher than where they were in the late 1990s.

And, of course, many people continue to think that they can make up for not having saved enough by taking on more risk. I wonder how people would answer the question below today, after the events of the last year.

There are other categories - health, saving and spending, social security, looking ahead - but the answers above, found under the "nest egg" tab, were most troubling to me.

Perhaps others might find the final question under the "looking ahead" tab even more troubling, "What's the single best cure for a battered nest egg?"

The answer?

Working longer (see question #2 above).