Month: October 2014

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6 Keys to a Comfortable and Happy Retirement

retirement1Gene Perret, the comedy writer for such popular television shows as “All in the Family,” “Three’s Company,” and “The Carol Burnett Show,” once said of retirement, “It’s nice to get out of the rat race, but you have to get along with less cheese.” Almost everyone looks forward to that time when they can sleep as late as they want, spend their days traveling or playing golf, and opining about the state of the civilization.
 
But the responsibility for a comfortable retirement rests almost completely on the shoulders of the individual worker. Government programs like Social Security and Medicare provide a minimum level of income and healthcare costs to recipients – but those benefits are intended to be supplemented with employer benefits and private savings.
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Having failed to save enough during their earning years or being victims of poor investment decisions, many seniors are discovering that the retirement they expected is beyond their reach. As a consequence, they are working longer, scaling back expenses, and forgoing some of their dreams. But fortunately, all is not lost, even for those whose retirement dreams may seem dashed.

The Keys to the Retirement You’ve Always Wanted

Despite the travel industry’s advertisements showing seniors walking through the sand on exotic, foreign beaches or dancing the night away on a Caribbean cruise, fewer than one in five workers are “very” confident that they can retire comfortably, according to the 2014 Retirement Confidence Survey. Only one in four current retirees are “very” confident that they will have enough money to live comfortably throughout their retirement years.
 
While the outlook for your retirement may be cloudy, there are steps you can take to improve your financial situation and the happiness of your retirement years.

1. Maximize Income Flow

Few people who retire continue to have the same level of income as when working. Nevertheless, there are options available to increase your income:
 
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To Ensure Compliance, Say What You Mean!

“I know that you believe you understand what you think I said, but I’m not sure you realize that what you heard is not what I meant.” This quote, often attributed to the late children’s book author Robert McCloskey, perfectly sums up the problem of communication. The possibility of misunderstanding, misinterpretation, and mis-identification exists any time two or more people attempt to transmit and receive information, often leading to humorous – and sometimes, tragic – consequences.
 
younggirloldwomanThe picture on the right – usually referred to as the young/old woman illusion – is an example of how miscommunication can happen. The speaker can refer to the “young woman” while the listener can only see the “old woman.”
 
A few classic examples of how people often say one thing, but mean something else:
Trip to the Grocery Store: A young wife asks her husband to run to the grocery store to pick up ingredients to bake a cake. Her husband, happily engaged in watching his favorite football team play, reluctantly agrees when she assures him it will be a quick trip, as he will be purchasing a minimal number of items. To ensure that nothing is omitted, she lists the six items she needs and hands the list to her husband before starting to preheat the oven. An hour later – the third quarter of the game almost over – the angry husband finally returns from the store, staggers into the kitchen with multiple full sacks, and returns to the car for a second unloading. As she opens the sacks, his chagrined wife discovers the following:
 
1 bottle of vegetable oil
2 bottles of vanilla extract
3 two-pound sacks of sugar
4 dozen eggs
5 pounds of butter
6 five-pound sacks of flour
 
In making her list, the wife failed to put periods after the numbers on her list, so the dutiful husband viewed the item number as the amount of units to be purchased. Fortunately, the honeymoon had not ended.
 
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Conscious Capitalism – A New Paradigm

capitalismThe idea that a growing economy benefits all classes has a long history of acceptance. It has been embedded in political rhetoric for the past half-century, regardless of party – in fact, John F. Kennedy is credited with the saying, “A rising tide lifts all boats.”
 
The theory – popularized as “trickle-down economics” – presumes that economic policies that help the wealthy eventually benefit everyone. It’s led to federal legislation reducing taxes on the wealthy and easing corporate regulation, as well as Supreme Court decisions increasing the legal rights of corporations, bringing them in near-parity with natural beings.
 
Despite expectations that the country as a whole would benefit from these measures, the results have been disappointing. Consequences have included a growing income disparity between the wealthiest members and the rest of society. It’s also led to an increase in national debt and significant corporate abuses of public trust, such as the manipulation of energy and securities markets. As a result, citizens and corporate leaders are rejecting the old paradigm and exploring a new model for capitalism.

Failures of Traditional Capitalism

The 1990s savings and loan failures, Enron’s manipulation of electricity prices in 2001, and the mortgage securities crisis in 2008 are major examples of the negative consequences of capitalism. In the view of many business and citizen leaders, corporate greed and uncontrolled capitalism have also had the following general negative effects.

1. Lack of Equality and Opportunity

The most public critic of the current capitalist system has been Pope Francis. In an apostolic exhortation issued November 26, 2013, he asserted that “today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.” The Pope goes on to say that the minority who do benefit “reject the right of states, charged with vigilance for the common good, to exercise any form of control. A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules.”
 
Businesses overtly resist the efforts made by governments – which have the responsibility of protecting the rights and interests of their citizens – to pass laws or regulate corporate activities. All this, even as the wealthy benefit the most from publicly owned assets and exorbitant government contracts.
 
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The Responsibilities & Duties of a Modern CFO

cfo lettersOver the past couple of decades, the role of the modern CFO has been, and continues to be, redefined. The advent of new technology allowing for enhanced data collection and analysis tools—as well as operating management’s demands for reliable real-time information—has extended the CFO’s responsibility to all aspects of the company.
 
International commerce and expanded regulatory oversight in culturally diverse customer and employee bases complicates decisions and increases risk. As a result, the CFO’s authority and responsibilities over traditional finance, accounting, and treasury functions has intensified and expanded to satisfy an exhaustive list of internal, external, and regulatory stakeholders, many of whom have conflicting interests.
 
Just as businesses have become more complex, diffused, and subject to greater risks—many of which are unidentified—the CFO function has evolved into a multi-focused position with unprecedented requirements for responsiveness and accuracy. Yesterday’s bean counters are as passé in a modern public corporation as Ford’s Model T on the highway.

Best Practices of the Modern CFO

In a 2013 report coauthored by the Association of Chartered Certified Financial Accountants (ACCA) and the Institute of Management Accountants (IMA), Jeff Thomson, president and CEO of IMA, detailed various factors that have changed the CFO function. In addition to traditional finance duties, modern CFOs are expected to work in collaboration with others throughout the organization, direct integration of key business processes, stimulate change and business transformation, and be trusted business advisors to CEOs and boards of directors.
 
The report identifies several priorities modern CFOs have that their predecessors did not. These are the consequence of increased regulations, globalization, industry and business transformations, aggressive stakeholders, and the adoption of complicated financial and operating reporting requirements. While the actual duties of a CFO vary according to industry, company dynamics, and historical precedents, an effective CFO in the 21st century must excel in each of the following practices.

1. Communications

Whether talking to the board of directors, delivering financial data to stock analysts, investment managers, and regulators, or detailing performance metrics to fellow officers and employees, the importance of clear, crisp, and relevant information delivered in an understandable format cannot be overstated. Knowing what to say, when to say it, and how to present it has become a critical component of a CFO’s responsibility.
 
As Robert Hoglund, CFO of Consolidated Edison, recognizes, “Communication is essential in every aspect of the business…ultimately I need to persuade people to my point of view.” While CEOs can expound upon such nebulous subjects as mission, vision, goals, and culture, CFOs are expected to bring real data to the table, to put the “meat on the bones” for gimlet-eyed regulators and anxious money managers.
 
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