Make sure you don't create your own fiscal cliff

Americans had good reason to be disgusted by the behavior of politicians arguing over the so-called fiscal cliff, dragging the situation to the nervous, critical last hours before reaching a half-hearted, half-effective conclusion.

The question is whether people recognize the same disgusting financial behaviors in themselves and work to avert their personal fiscal cliff.

For as bad as the behavior and action was in Washington, there was nothing on the table that would have had the average American facing poverty in retirement. Had the government not negotiated an extension, there's no 50-year-old who would have faced the future saying "I was planning to retire at age 65, but because they failed to fix the fiscal cliff problems, I now have to work to 70 or beyond."

By comparison, there are countless people who can say "Because I haven't addressed the problems in my retirement savings, I'm going to have to work longer or take a big cut in my standard of living."

Consider your personal fiscal landscape, where you decide the outcome. Save sufficiently and it's a "fiscal valley" - a gentle slope into retirement. If, however, the savings gap grows, then you are climbing uphill, and there will be a steep drop when retirement comes and income stops.

What's more, just as Congress had plenty of time to tackle the problem but failed to get it done until the deadline - "the political equivalent of a kid waiting until the last minute to do his homework," according to Russ Koesterich, chief investment strategist for BlackRock Inc. - individuals know that every day they're not addressing retirement is one day closer to trouble.

More important, while Congress can punt and still muddle through, individuals aren't necessarily so lucky. There's no bailout coming; you can't push the problem into the future without making the potential consequences worse.

A recent survey from Capital One ShareBuilder showed that 54 percent of Americans plan to retire by age 65; for the 36 percent of Americans whom the studied registered as not actively contributing to a retirement plan, that's a tall order.

Taking that a step further, the surprising disconnect was that just 23 percent of these pre-retirees worried they may never save enough to retire. Apparently, more than 10 percent of those who contribute nothing towards their retirement believe they will catch up.

For some, that might be possible. Dan Greenshields, president of Capital One ShareBuilder, noted that some Americans seem to be halting their retirement savings to pay for the college educations of their children - listed in the survey as the biggest impediment to retirement savings - meaning they could be intent on plowing money into a retirement plan harder than ever once the kids are through school.

But such stalled retirement savings diminishes the power of compounding that helps savers build a significant nest egg. Greenshields noted that delaying savings entirely to pay for college tuitions is a bit foolhardy.

"You can get loans to pay for college, but nobody is giving you a loan to pay for your retirement," he said. "You had better figure it out, because if you get to retirement age - or maybe are forced to retire early in this economy - and you don't have savings, you won't have many attractive options."

If Americans can learn anything from the fiscal cliff debacle, it's that no one will care for them better than they can. And nowadays, it has never been more important to prepare for a future that is dependent almost entirely on the ability to provide for oneself.

The problem is clearly visible. The solutions are all of the many options and courses that people have to secure their future. The question is whether Americans will take the actions, make the hard decisions and do the dirty work necessary to reach their financial goals.

In terms of what we have just seen in Washington, you can either take affirmative, decisive action, or you can kick the can down the road and hope things aren't markedly worse the next time you review the situation and have choices to make.

If you hated the actions of the politicians, don't repeat the mistake.

A December poll from the National Foundation for Credit Counseling asked people if their financial problems were self-inflicted or the result of events beyond their control. Nearly two-thirds of respondents took responsibility for their money woes.

"That's a good sign," Gail Cunningham, a NFCC vice president, said. "Once you own up to the problem, then you can start to fix it."

Thanks to the bungled handling of the fiscal cliff, we have all seen the problem on a grand scale for months now. We have seen what happens when hard decisions are not made and how ineffective temporary and partial solutions can be. We now know the fear that comes from having real financial concerns and not seeing them properly addressed, so that they linger and create ongoing stress.

If we learn anything from the fiscal cliff - from our disgust with how the people in charge of the situation handled things - it should be that we can't let this happen in our own lives. The sooner we take action, the easier it will be to believe that we can reach our financial goals - regardless of how badly things get mucked up in Washington.

Chuck Jaffe, senior columnist for MarketWatch, can be reached at cjaffe@marketwatch.com.

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