Retirement Planning and Advertising

I have always marveled at the ingenuity employed by companies looking for your retirement dollars. They have portrayed it as a nest egg, picturing people wheeling around giant replicas of what they have amassed to secure their future. Although between you and me, retirement planning is more about the nest you build than the contents of what you put in it. Yet the image definitely has a certain stickiness to it.



Now the Dutch banking giant ING Groep has entered into the fray with their latest advertisement picturing a wide variety of people carrying around dollar based numbers. This new guilt trip offers a speculative look at how much money you will need in retirement. The bank’s message is designed to prompt everyone who has yet to save a nickel for retirement to take action.

The idea that some “hypothetical” number will prod you into saving more is not anything new. The advertising world has been very active in formulating the right spin on the topic. But I wonder if the costs of such campaigns, which are passed on to you in the form of fees, produce better investors.

I have spent a great deal of time talking about the high costs of investing in your future. My current book, the inspiration for this blog and the soon-to-be-launched website that accompanies it, looks at the numerous ways each step forward is taxed. Not in the sense the federal government taxes you but by the very companies that seek to make you rich – but not before they themselves take a cut of the action.

With mutual fund advertising, the 12b-1 fees offer a relatively straightforward assessment of what you will be charged by the fund company. You can pick among funds that charge their shareholders for campaigns to attract new investors by choosing the companies that charge little to nothing.

But once those funds get tucked inside of corporate sponsored retirement plans, the fee structure becomes more opaque. You should always ask: “why does the mutual fund offered in my 401(k) still charge a 12b-1 fee?”



Each fraction of a percentage point levied against your retirement savings means that, to achieve a target like ING suggests, you will need to save more. But saving more is only part of the equation. As I mention in the book, it takes a great deal of financial coordination to get where you think you should be (which I take the time to break down, one by one).

There are numerous forces at work chipping away at the effort and the fees, which ING does not mention in the ad – and why would they, are just a part of it. Beware the dangling carrot. It offers you the opportunity to chase what may never be yours.