The YOYO Economy: Forget FOMO and YOLO - What Really Matters Is "You're On Your Own"

The headlines are filled with stories of FOMO and YOLO investments. It’s as if many have abandoned the tried and true path to building wealth in search of some holy grail – which apparently takes the form of a meme stock, a digital coin, or a non-fungible token. But all of this noise is covering up a much larger narrative that I believe is the single most important thing shaping our futures. It’s the story about how you and I – and all of us – are now responsible for creating our own financial security and independence. Welcome to what I call the YOYO – You’re On Your Own – Economy.

Over the last few decades, the responsibility to plan for our futures has gradually shifted to rest more and more on our shoulders. As public policy changes and more companies shift the risk of funding a secure retirement to their workers, we all face this new responsibility together. Some may call it our greatest challenge. I call it our greatest opportunity to create access to the financial resources people need and to reimagine a more inclusive financial services industry.

The Shifting Landscape of Public Policy & Personal Finances

There have been public policy and legislative changes over the years that show an increasingly uncertain future especially when it comes to taxes. Here are a few examples:

• Social Security was established in 1935 as a non-taxable benefit. In 1983 that changed when Congress made up to 50% of benefits taxable. It changed again in 1993 when 85% of benefits were made taxable.
• In the late 70s, the 401(k) was born. In 2006, the Roth 401(k) was established. The rise of personal retirement accounts overshadowed the fall of pension plans.
• The Health Savings Account (HSA) was established in 2003 to give people greater control over their healthcare decisions. It also started to shift more of the costs to American households and away from companies.
• Washington state created the first publicly funded long-term care program in 2021. It established a mandatory tax of 0.58% on all compensation for workers. Other states may follow suit as they face aging populations, increasing healthcare costs and ballooning debt.
• The U.S. tax code has almost 10,000 sections and has been changed almost 4,000 times in only the last ten years. With so many changes, the plans we make today may have to be adjusted every few years.
• As the saying goes, history doesn’t always repeat itself but it sure does rhyme. Decades of public policy changes have taught me one thing, and it’s that change is the only constant. And each time it changes, it shifts more of the responsibility to all of us.

Where We Stand Today - The Current State of Affairs

It’s clear that public policy has changed over the years and continues to evolve today. So where has it led us? Before we start planning for our futures, let’s take a look at where things stand today. 

• We are living longer yet retiring earlier. Investment strategies that were designed for a 20 to 30 year retirement must now last longer. A married couple at the age of 50 has a 50% chance that one of them will live into their 90s. That’s a 10 to 20 year increase in how long their money has to last.
• Healthcare costs are rising. A couple that retires at 65 will need, on average, almost $300,000 to pay for healthcare costs alone. And this doesn’t include the costs of long-term care that are not covered by Medicare.
• The average 401(k) balance is only slightly above $100,000. If we translate that into income using a 4% withdrawal rate, we are talking about $4,000 per year of income.
• Government and corporate pension plans are woefully underfunded. On average, pension plans only have enough assets to cover 70% of their liabilities – the money they promised their employees.
• As for Social Security, the trust fund – the account that holds the money we pay into it – will run out of assets as early as 2035. From that point on, recipients would experience a greater than 20% reduction in income.

As we look to the future, households face such issues as the rising cost of a college education, aging infrastructure and the need for investment, environmental and sustainability issues, and everything from inflation to interest rates. There’s a lot to consider and to plan for.

Our Greatest Challenge Gives Rise to Our Greatest Opportunity

You might be thinking that this article would make a great script for an episode of Doomsday Preppers, but I like to look at the world as part realist – seeing what is – and part optimist – believing in what can be. The realist in me sees a government support system that is strained and that will lead to more responsibility being placed on us. The optimist in me sees this as an opportunity to recreate what financial advice should be so that we are in control of creating financial independence for our families.

Our challenge is to find a solution to problems that threaten the very financial health of a nation. Our opportunity is to create a new way forward that improves financial education and literacy programs, expands resources and capabilities, and increases access to unbiased, personalized financial advice that integrates into every facet of life. These items aren’t just essential to our financial health. They are essential to living well.   While I believe the current financial services industry is exclusionary in its design – wealth as a prerequisite, high costs, poor quality – my grandfather told me that it’s always better to stand for something than against something. Companies must stand for a better system. To reimagine what a financial services company could be if designed for the right person – you, the client. I believe it’s the start of a movement that will create a more inclusive financial services industry. One in which we all have access because we are deserving and worthy of it.

You’re on your own in this economy, but that doesn’t mean you have to go it alone. Your financial independence is no longer an option. It’s a fundamental right. After all, the best way to live life is with the freedom from worry and power of choice that comes with having a plan to create financial independence for you and your family for generations to come.