Tuesday, July 04, 2006


Financial Independence Day




Americans will celebrate Independence Day on July 4 with patriotic tributes, picnics and parades. Wouldn't it be wonderful if some time was spent ruminating about financial self-sufficiency as well?

According to the national debt clock website, U.S. IOUs are growing by roughly two billion dollars each day. (Keep hitting the Refresh key for the full effect.)

Personal debt levels are staggering. In a report to Congress, the Federal Reserve cites credit card outstandings in 2004 at $644.8 billion. UK statistics are no less sobering with an estimated fifty-two percent rise in indebtedness over the last five years.

Eilene Zimmerman describes the adverse impact of debt load for Workforce Management, stating that "debt problems cause stress and anxiety that sap workers' productivity, cause health problems and increase the likelihood they will leave a job in search of better pay". Moreover, employees may tap into their 401k accounts prematurely just to stay even with bills.

What role do employers play? Besides plan design, educating employees about retirement choices and personal finance overall can boost morale and enhance a company's return on benefits spending. However, doing so puts companies between Scylla and Charybdis. In its survey about corporate-sponsored financial education programs, Ernst & Young reports that some employers worry about the liability of providing financial education while those that abstain do so for the exact same reason, fear of increased liability.

According to the U.S. Department of Labor "Some plans, such as most 401(k) or profit-sharing plans, can be set up to give participants control over the investments in their accounts. For participants to have control, they must be given the opportunity to choose from a broad range of investment alternatives" and "must be given sufficient information to make informed decisions about the options offered under the plan."

Whether an employer provides broad-based financial training or not, employees still bear the responsibility of paying their bills on time and arguably planning for their own future.

So enjoy the fireworks and picnic today. The debt diet follows.
posted by Susan Mangiero at 7/04/2006 01:10:00 AM