Retirement with a Plan

What if there was no more fine print?  The whole idea behind unnoticeably small font sizes is, by its very nature, designed to deceive.  The deception is smugly offered right in front of your eyes and yet, if we fall victim to too much risk, too many claims or too little understanding about what it is we are involving ourselves in, it is the fine print – that you didn’t read that is often the blame.

So what do we need it for?  At the heart of our current financial crisis is fine print, written so small and ignored so completely, even the authors of such microscopic script failed to realize what it said.  The old adage of “past results is no promise of future returns” was kicked to the wayside in favor of risk.  Describing that risk was relegated to miniscule paragraphs laden with potential consequences that contain incredibly pertinent information about the deal.  Who understood derivatives, credit-default swaps and other ingenious, “oh that computer is so smart” factoids?

Imagine for a moment what the world would be like if all of the information you need to invest was contained in three basic bullet points.  For instance: “this investment contains risk; this investment can cause you to lose money if the markets fail to perform historically or in the same way you hope and dream it would; and if you are planning on using this investment for your retirement, you might be shocked by the results of what can happen if you have not shored up the rest of your financial world”.

Steven Forbes still champions his postcard sized tax returns, a flat tax that spelled out, in clear language what you were being taxed on. Income would be income that you worked for.  Not mystery stock returns or investments or even some piece of artwork you found in your grandmother’s attic.  The interest you paid, the doctor bills you incurred, and number of kids you had would be no longer relevant. Just pay a tax on what you earn.  Make more than $250,000 and pay this percentage; make less and pay another.

You could buy a house in the same way.  There would be only three things you would need to know: “you will need twenty percent down; you will need a job with a provable net income that takes into account the rising cost of taxes and insurance, upkeep and other relatively easy-to-estimate occurrences over the course of the loan; and you will need to pay this loan back every month for the next thirty years”.  Would knowing this ahead of time give you pause?  Would we sell fewer homes to under qualified buyers and more to those who could afford it?  No reams of paper to sign.  No hidden increases.  You knew going in what the cost was and could make a sound financial judgment about whether or not it was affordable.

Could we do the same with a car? This car is worth more than the sticker price after you add interest in and take the depreciated cost off.  Would you still be willing to purchase an automobile that was worth much more than the price you were quoted?

What about a college loan? Can the cost of your education be described as potential earning power in your chosen profession and your ability to pay for it ten years down the road be considered worthwhile disclosure?

Spelled out in clear, easy to understand terms, financial contracts would become a simple agreement between lender and borrower, taxpayer and the government/civilization they supported.  This would lead to numerous job losses in the personal finance advice area while bringing the need for brokers or mortgage analysts or even bankers into question. Innumerable trees would be spared the fate of being turned into reams of endless, mind-boggling paper that we don’t read but which, because of the fine print, we can be held accountable for.

Fine print makes us stupid in ways we had not imagined.  This coffee is hot!  Direct TV in a recent ad using the Poltergeist movie as a backdrop even suggests that the commercial does not depict the average cable viewers experience as the television comes to life emitting bluish lights and disturbing winds.

As the line from Quadrophenia, the classic Who rock opera suggests: “You were under the impression, that when you were moving forward, you end up further onward, but things ain’t quite that simple.” Eliminating fine print would bring our impression of where we are into clearer view and by default, we would know what further onward meant.