Education in the United States is a topic that provokes a lot of concern these days. We seem to be falling behind other countries in many areas, especially the sciences and mathematics, and that truly could undercut our future prosperity as a nation. Yet little attention is paid to educating our citizens in personal financial planning. There never has been a comprehensive attempt to provide even basic education in this area — but all evidence suggests it is sorely needed. I have some suggestions that I hope will help.

I learned a great deal about personal finance when I was a teenager from my brother (now a retired judge) who created a course in personal finance at a local college in Massachusetts. I stole his idea. While I was working for a bank in New York City, I learned of the New School for Social Research, which offered hundreds of nondegree courses to the general public — but none in personal financial planning. I wrote a proposal to one of the deans, and he brought me on to teach a course in the subject. I taught the course for 18 years to young and old alike — to men and women, high school graduates and holders of PhDs, and several physicians. They all had one thing in common: no education in personal finance. Even today someone can obtain several advanced degrees and never learn even the basics of the subject.

Fortunately, many schools, colleges and government agencies are introducing new course programs, often in collaboration with financial services companies. However, taken as a whole, the American education system isn’t taking this challenge seriously. Only 13 states require students to take a personal finance course in order to graduate from high school. That leaves the lead teaching role to parents.

Statistics show that future retirees are not saving enough to ensure a prosperous retirement. We should get our children into the habit of saving early. One way to start is splitting allowances into two portions, one for spending and one for saving. If your child wants an expensive item, you can show him how to save more of his allowance for it.

Once your children start working, encourage them, to save a portion of their earnings. Encourage them to start investing at an early age, including in tax-advantaged retirement funds. One approach that I recommend, and use myself even now, is a monthly investment in no-load mutual funds. T. Rowe Price (TRowPrice.com) offers several well-managed no-load funds that allow people to invest as little as $50 a month. They are some of the few funds that offer good investment opportunities for such low monthly amounts.

When you make any financial decisions in your home, whether it is obtaining a new credit card, initiating or refinancing a mortgage, shopping for a new or used car, or purchasing insurance, why not explain and discuss the issues with your children as soon as they are old enough to understand? Once your children are in high school, they are old enough to have meaningful discussions about college costs and financing alternatives.

Indebtedness from college loans has risen to shocking levels. Do your children a favor: Before it comes time to apply for financial aid, make sure they understand debt and how too much of it can make life difficult.

The earlier this kind of education begins, the better. Vanguard has just rolled out a free basic financial education program to schools. This program is interactive, and allows students to experience the economic facets of adult life. They earn a salary for doing a classroom job, earn bonuses for outstanding performance, and must use some of their income to “rent” their desks. Details regarding this program are available at http://www.myclassroomeconomy.org. The program was developed by award-winning educator Rafe Esquith, and it is free of charge to teachers from K-12. If you have children in these grades, ask thier teachers to look into it.

Most experts who study the subject lament the fact that the American public just isn’t getting any savvier about personal finance. Some studies even reflect declining “financial literacy.” Is it any surprise that Bernie Madoff and other scammers have been successful, or that millions of Americans went in over their heads with mortgages they didn’t understand? Programs like the one introduced by Vanguard can help the next generation of savers and investors avoid these pitfalls. However, we have a long way to go.

Uninsured individuals do not have insurance coverage because no one had offered to sell them a policy, according to a new survey that explored life insurance buyers and non-buyers’ beliefs, motivations, influences, priorities and preferences.

Deloitte’s “The Voice of the Life Insurance Consumer” study found that 62 percent of non-buyers had not received an unsolicited offer to buy life insurance in the past year compared to 44 percent of buyers. Another 30 percent said their employer does not offer life insurance as a benefit while 46 percent of buyers compared to 66 percent of those currently uninsured said they had not looked for life insurance on their own initiative.

“Many life insurers are not dealing directly with prospects,” Deloitte Research Insurance Leader Sam Friedman told Insurance Networking News. “Instead, insurers distribute their products through agents and financial planners. Part of the challenge facing carriers is how to work more proactively with their agency force to provide the tools, marketing and advertising support to better educate consumers about everything life insurance can do for them and their families and create more demand for their products and services.”

Older respondents who were current buyers found unsolicited offers to be less influential. About 70 percent of current buyers 50 years old and older—compared to 12 percent of those 26 years old and under—said such offers were not at all influential compared. The same age-related trend was evident with the uninsured sample as well.

“Among a variety of other steps, insurers are getting more involved in social media to highlight to a younger generation especially the importance of financial protection,” American Council of Life Insurers Spokesperson Jack Dolan told Insurance Networking News.

The Deloitte study found that the Internet was a vital information source for both buyers and non-buyers. About 32 percent of current buyers and 27 percent of non-buyers did a general Web search about life insurance, while another 21 percent of buyers and 16 percent of non-buyers had surfed specific insurer websites. In addition, 8 percent of buyers and 10 percent of non-buyers had surfed insurance agency websites.

“The Web and social media in particular can play a huge role in helping insurers distribute information to demystify life policies, educate prospects about all the financial needs life insurance can fulfill beyond simple death benefits and create awareness about the product’s affordability,” said Rebecca Amoroso, vice chairman and U.S. insurance leader for Deloitte and the survey’s executive sponsor.

About 26 percent of respondents found the application and underwriting process too difficult, according to Deloitte.

“The process could be discouraging many prospects from going through the application process because invasive medical tests may be required, such as blood and urine tests,” Deloitte’s Friedman said. “In many instances, insurers can make the process easier and faster by using predictive analytics, eliminating the need for invasive tests for many prospects and speeding up the sale without compromising the integrity of the underwriting process.”

While life insurance is not the top financial priority for most, Deloitte notes that consumers desire life insurance coverage.

About 45 percent of non-buyer respondents included life insurance among their top five financial priorities and 21 percent ranked it in their top three. Life insurance ranked even more prominently among those who already have life insurance with 70 percent putting life insurance among their top five priorities and 34 percent included it in their top three.

“Life insurers can proactively market a positive message either individually or perhaps as part of an industry-wide ad campaign showing how a policy can support a family or business in so many different ways in the short- and long-term,” Friedman said.

Among the non-buyers, 37 percent of those who had life insurance in the past said the workplace was a big source of sales with 43 percent automatically securing a policy through their employer and 20 percent buying additional benefits through their group plan. Only 16 percent had bought coverage on their own through an agent compared to 13 percent through a carrier. And 5 percent bought through a group or association.

“Life insurers could work more closely with employers to promote automatic and voluntary life benefit options since many of those surveyed prefer to buy coverage through their places of work,” Deloitte’s Amoroso said.

We’ve all seen the studies – one seems to land on my desk once or twice a week. “Americans are living longer.” “Fewer have defined benefit pensions.” “The value of Social Security is shrinking.” “Boomers don’t have enough money to retire comfortably.” “A retirementcrisis is looming.”

Just a couple recent data points:

–Working American households may experience a potential income drop of 28 percent in retirement, and nearly four-in-ten (38 percent) retiree households won’t have sufficient income to cover their monthly expenses, according to a Fidelity Investments survey of more than 2,800 adults.

–Americans’ confidence that they’ll be able to retire comfortably is at historically low levels, due to worries about jobs and debt, according to the 2012 Retirement Confidence Surveyby the Employee Benefit Research Institute (EBRI). More than half (56 percent)
haven’t tried to calculate how much money they will need for retirement.

–Even among the affluent, 66 percent of women and 54 percent of men are worried that they won’t have sufficient assets to last through their lifetime, according to the most recent Merrill Lynch Affluent Insights Survey.

You may have clients who share these worries. Yet there are ways to change the retirement math, even for people close to retirement. This is true especially for those who may not be on track for retirement success but are “within striking distance,”as Steve Utkus of the Vanguard Center for Retirement Research put it in a recent blog post.

If you have clients who fit that description, consider the following ways to get them on track. These aren’t easy, magic-bullet solutions, but basic blocking-and-tackling ideas that can have very dramatic impact on retirement success.

1: Scrub the Expense Assumptions

Many financial services companies and planners adhere to the rule of thumb that retirees should plan to replace 80 percent of working income in retirement. Many baby boomers will fall short of that. For instance, The Urban Institute calculates that about 40 percent of late boomers (born between 1956 and 1965) won’t have enough income at age 70 to replace even 75 percent of what they earned between age 50 and 54.

Just as important, the 80 percent rule-of-thumb is no more than a rough estimate. For example, it doesn’t take into account unforeseen spending needs such as higher health care expenses or a long-term care insurance policy. At the same time, the rule doesn’t recognize that some expenses might shrink or disappear entirely, such as commuting or maintaining a business wardrobe.

It also sidesteps some key questions people should be asking themselves in tough economic times: What is the lifestyle I want? How much will I need to spend on basics? What can I afford to spend?

A recent EBRI analysis concluded that the median retired household spends about 80 percent of what working households spend. But that’s just the median – many spent more or less.

Just as important, EBRI found that overall spending in retirement falls with age — which means that a retiree won’t need a constant replacement rate of pre-retirement income.

A better approach is to create a careful zero-based budget for projected expenditures over time based on the client’s lifestyle expectations, and discuss alternatives that could reduce costs in key areas, such as housing (see retirement math suggestion No. 2, below).

2: Tap Home Equity

Real estate is a key asset for most older Americans – even in the wake of the housing crash. Eighty percent of Americans over age 65 are homeowners, according to the Joint Center
for Housing Studies at Harvard University. And Census Bureau data reveals that 65 percent own their homes free and clear. So, there’s plenty of home equity out there waiting to be tapped.

Downsizing is the best way to do it. Most homeowners will need to sell at a lower price than they would have expected a few years ago — but they’ll be able to buy at lower prices, too. What’s more, an improving economy should unleash a great deal of pent-up demand among young buyers who have been forced to hold off on home purchases over the next few years as employment and incomes rise.

Most downsizing moves occur close to home. In 2010, just 1.6 percent of retirees between age 55 and 65 moved across state lines, according to an analysis of U.S. Census Bureau data by The Urban Institute. Moving from an expensive inner-ring suburb to a less costly exurban location can help your client extract equity that can be saved, invested and drawn upon in retirement.

Reverse mortgages offer a second option – with caveats. I’m not a fan of adding debt in retirement, and traditional reverse loans carry heavy fees. But a relatively new lower-cost option introduced last year could make sense in some cases.

The Saver HECM (Home Equity Conversion Mortgage) is administered by the federal government, just like a standard reverse loan. But the amount that can be borrowed is smaller, and Saver HECMs can be used as a flexible line of credit. Saver HECMs also have far lower costs: an upfront premium of only 0.01 percent of the property’s value, or HUD’s loan limit, whichever is less, versus the standard loan’s 2 percent.

Some planning experts – including Harold Evensky of Evensky & Katz Wealth Management – see these loans as a useful way to help clients who may face a short-term cash shortfall to avoid unwanted portfolio sales; others have suggested using Saver HECMs as an alternative to early filing for Social Security. (See retirement math suggestion Number 3.)

3: Work Longer

It’s easier said than done in a tough economy, but working longer can have a nearly magical effect on retirement success. Working longer means fewer years relying on nest eggs to fund retirement, more years of contributions to retirement accounts and higher monthly Social Security income through delayed filing.

The Social Security numbers alone are dramatic. Benefits are calculated using a formula called the primary insurance amount, or PIA. Seniors who wait to start receiving Social Security until their full retirement age (currently 66) receive 100 of PIA; taking benefits at 62, the first year of eligibility, gets them only 75 percent of PIA. By waiting until age 70, they’ll receive 132 percent of the PIA – nearly double the monthly income for the rest of their lives. Those benefits are enhanced by an annual cost-of-living adjustment, which is added in for any years of delayed filing.

David Blanchett, a research consultant with Morningstar Investment Management, ran Monte Carlo simulations that show delaying retirement even one year improves the probability of successful retirement by 18 percent; waiting two years boosts the odds by 37 percent and a three-year delay improves the outlook by a whopping 55 percent (Success is defined as achieving the income goal for the target retirement period.).

4: Annuitize

Income annuities offer another path to mitigating longevity risk. The single premium income annuity (SPIA) offers a simple proposition: turn over a chunk of cash to an insurance company, which then sends your client a monthly check for life. The latest twist – and one that bears watching –is the longevity policy – essentially a deferred annuity that can be bought well ahead of retirement with payouts delayed to an advanced age.

It’s a very specific hedge against longevity risk; the downside, of course, is that clients might never see a dime of it if they don’t make it to advanced age. Nonetheless, longevity policies are far less expensive than SPIAs. For example, Metlife says that for$43,000, a 65-year-old man could purchase a longevity policy paying$2,000 monthly starting at age 85, compared with $398,000 for a policy generating the same payout immediately.

SPIA critics point out important downsides, including lack of flexibility and liquidity and inadequate diversification that comes from relying on a single insurance carrier. Moreover, current ultra-low interest rates makes all types of income annuities more expensive.

5: Boost Savings

At the risk of stating the obvious, encourage your clients– especially younger ones – to sock it away. Vanguard research shows that getting an early start in life on retirement saving, and the rate of contribution, have a far larger impact on retirement success than market returns or asset allocation. For example, Vanguard found that saving 9 percent starting at age 25 in a moderate allocation resulted in a higher median ending balance than saving 6 percent in a more aggressive allocation.

That’s an important consideration in light of the growth of auto-enrollment programs in workplace retirement plans, where most default contribution rates are set at 3 percent. As the saying goes– control what you can control, and the rest will take care of itself.

Mark Miller is a journalist and author who writes about trends in retirement and aging. Mark edits and publishesRetirementRevised.com, featured as one of the best retirement planning sites on the web in the May 2010 issue ofMoney Magazine. He is a columnist for Reuters and also contributes to Morningstar and theAARP Magazine. Mark is the author of The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work and Living (John Wiley & Sons, 2010).

FINRA is substantially underestimating the costs to set up a self-regulatory organization for investment advisors, according to a review by an outside consulting firm. In response, FINRA says the review should be viewed with “skepticism and amusement.”

The Boston Consulting Group review is the latest salvo from the Financial Planning Coalition – comprised of FPA, NAPFA, and CFP Board – in its efforts to have lawmakers authorize the SEC and not FINRA to collect user fees to pay for increased investment advisor examinations. The review also was sponsored by the Investment Adviser Association and TD Ameritrade Institutional.

Last year, the coalition released a study conducted by Boston Consulting Group estimating high costs if FINRA were to become the SRO: $200 million to $250 million in startup costs and $460 million to $510 million for ongoing operations. The coalition says these expenses could be passed on to advisors in annual fees to the tune of $51,700, or much more, per firm, depending on its size. By comparison, FINRA recently released a two-page document with much lower estimates: $12 to $15 million in startup costs versus $150 to $155 million in ongoing operating costs. The new review comes in response to these FINRA numbers.

“They have left out important accounting of costs,” Marilyn Mohrman-Gillis, the CFP Board’s managing director of public policy and communications, said as she was on her way to meetings on the matter with members of the U.S. House of Representatives Financial Services Committee. “It would seem to us that they are drawing on their existing oversight operation. This raises concerns that a FINRA SRO would be truly independent.”

House Financial Services Committee Chairman Spencer Bachus (R-AL) introduced legislation last month in the house that could clear the way for FINRA to become the self-regulatory organization for retail investment advisors. The bill is cosponsored by Rep. Carolyn McCarthy (D-NY). The Bachus-McCarthy bill would authorize one or more self-regulatory organizations (SROs) for investment advisers funded by membership fees.

FINRA released its cost estimates on April 25, the same day that the bipartisan bill was introduced. The authority also has retained powerful lobbyist Michael Oxley, of Sarbannes-Oxley fame, to rally support for it to take over SRO functions.

FINRA says the Boston Consulting Group’s new review is inventing numbers out of thin air. “[U]ntil the Boston Consulting Group has at least one conversation with the SEC and FINRA about what it takes to run a nationwide examination program, their numbers should be viewed with skepticism and amusement,” FINRA Spokeswoman Nancy Condon said in an email.

There’s a reason why BCG didn’t contact FINRA or the SEC, according to Skip Schweiss, managing director of Advisor Advocacy for TD Ameritrade Institutional. “My sense is that the Boston Consulting Group wanted to go about its analysis using less partisan numbers and inputs and I think this is why they didn’t consult with FINRA on this,” says The study says it relied on publicly available numbers in making its cost estimates.

Unlike other custodial firms, Schweiss says TD Ameritrade decided to enter the debate by helping to commission the Boston Consulting Group study in December, and subsequent review, in order to get some hard and objective data to inform all parties affected.

“We jumped in because this is an issue of direct impact to our 4,000 investment advisory firms around the country as to how they are regulated and they tell us that this is a very important issue to them,” Schweiss says. The specter of very high annual advisor fees would impose meaningful expenses on small firms, he added. “It’s just a heavy regulatory and expense burden on what we all know these advisory firms are which is small businesses.”

Chris Paulitz, the managing director of communications and media relations at the Financial Services Institute has said that FINRA is the only logical choice for an SRO, given that it’s highly unlikely in the current political environment that the SEC will be adequately funded to sufficiently regulate advisors. With a FINRA SRO, at least many more advisors will be regulated going forward, according to Paulitz.

“Instituting even basic RIA examinations will level the playing field for all advisors, protect consumers and help RIAs flourish as trust is gained in their business model,” Paulitz said today, although he did not address the question of the costs to advisors.

Specifically, the Boston Consulting Group review finds that:

•FINRA’s estimate omits the cost of SEC oversight ($90 to $100 million) and the cost of enforcement ($60 to $70 million), both of which are required by the legislation;

•FINRA’s estimate of $12 to $15 million in setup costs does not include staff costs incurred during the 12-month setup period, specifically the cost of examiners and support staff. FINRA only includes these expenses as part of its ongoing investment once the SRO is up and running. This omission accounts for $180 to $230 million of the difference between the BCG and FINRA estimates;

FINRA’s estimate of the ongoing annual cost of examining 14,500 IA firms once every four years assumes that FINRA’s IA examiners would be able to nearly double the productivity rate of SEC IA examiners, by performing five or more examinations per examiner per year. This compares to SEC IA examiner productivity of three, and FINRA broker-dealer examiner productivity of 2.8. This productivity assumption accounts for $150 to $170 million of the difference between the BCG and FINRA estimates; and

•FINRA’s estimate does not include overhead costs in its estimate of $150 to $155 million of ongoing annual investment. Overhead costs account for $135 to $140 million of the difference between the BCG and FINRA estimates.

A side by side comparison of the cost estimates can be found here.