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Retiring the Dream of Retiring

July 5, 2013

Do you ever get tired of reading about what the Fed is doing? Because I sure am getting tired of writing about what they are doing. It just seems so sad that our financial markets hang on every word of the Fed and company when these are the very same individuals that never saw the last two economic implosions coming. So instead, I want to talk about how the American dream has been retired. I grew up in an era when being “financially independent” was a predominate objective in most working families. And the ultimate goal within that general objective was to be able to retire comfortably at some point when it was time to slow down. I remember the term “‘security in your old age”’ was part and parcel to the American dream. So have we retired the dream of retiring?

Back in my college days, an economics professor instructed our class to come prepared to debate what the various impacts of the “baby boomers” would be on our society and economy. Each student was supposed to have a unique point of view. In other words, I would not receive a passing grade by waiting for one of the brainy students to make some convincing or eloquent argument and be the first to say, “Ditto for me!”

Never being one to go first, I listened as student after student had well-presented thoughts about how this population bubble known as the baby boomers would affect living standards, the work force, consumption, the economy, inventions, technology, etc., etc.

Mostly the discussion was all quite promising, but I noticed the longer I waited, the fewer good ideas seemed to remain. This may have well been my very first “Dr. Doom moment,” now that I think back on it. Knowing I needed some grade for this assignment (which was honestly my only motivation at the moment), I mustered all the confidence I could in order to enlighten the class with a moment of brilliance. Okay, in truth I was petrified of public speaking, even though I was allowed to sit at my desk to make my point. Up to this point, any mildly negative aspect of the baby boomers on our society was more than offset by positive aspects from the same speaker. Most of the students were my age or older, and since I am near the end of this baby boomer generation, we were really talking about ourselves — so it made sense that you would not want to think negatively about your own future when the most exciting part of that future lay immediately before us.

For various reasons, I don’t remember an overwhelming amount of what happened in college —  particularly in the classroom — but this specific moment has remained perfectly clear in my mind over the years. Maybe it was the blank stares or the sorrowful looks I received after I made my presentation that made me remember it so clearly. But it is an irony that my career is approaching an end (I have a few good years left), and I find myself most consumed with trying to prevent what I predicted 34 years ago. I proceeded to tell my professor and fellow students that I did not think most of the baby boomers would be able/allowed to retire.

Upon reflection I think there might have been at least three things wrong with this hypothesis (at least in this setting). First, what a depressing thought. I mean, seriously, who wants to hear that the carpet is going to be pulled out from under our own generation on such an important dream/goal. The second problem was that we hadn’t even started our careers and I was suggesting that there would be no end to them. Third, and most importantly, I supported my theory by using many of the theories students who had preceded me used in their support. Yes, baby boomers would have a major impact on consumption, productivity advancements, technology and the economy as a whole. However, a society would need to prepare for that trend to reverse and unless they were able to practice discipline and restraint, we might find ourselves between a rock and a hard place.

I was concerned that it was more likely that the opposite would occur and that our working and consuming years might actually lull us into a complacency that would leave us ill-prepared for an economy that slowed as a result of our shift into an “unproductive” stage of our lives. As I looked around the class, I could tell this wasn’t going so well. I pointed out the tremendous shift that would happen to such a large portion of our population going from workers, wage earners, investors and consumers, to a population that would at best be consuming from our savings. I argued that would not work out well for the baby boomers later in life. No matter how many ways I explained it, they weren’t buying it.

Fast forward to today. Here is the statement I wish I could have presented to my class back in 1980:  “The amount of money saved for retirement by the average American is ‘appalling, terrifying.’” This comment comes from Susan Felton, a retirement planner quoted in the link below. The article also notes, “We have millions of Americans who have nothing saved for retirement,” says Diane Oakley, executive director of the NIRS. “We have 38 million working-age households who do not have any retirement assets.”

For people 10 years away from retirement, the median savings is $12,000. Think about that! Social Security and $12,000 for the rest of one’s life. OUCH! The main solution in this article and others like it has been to plan on working most, if not the rest, of your life. Where are my doubting classmates? I want to tell them ‘I told you so,’ but that might be rubbing salt in the wound, because many are probably the ones who the article below was written about.

Haven’t saved enough for retirement? What to do?

And  this link is an interesting story about how our Wall Street banks have the U.S. Treasury Department acting as their lobbyist with the European Union. Very interesting article —worth the read.

Does the Treasury Secretary Have to Be a Lobbyist for Wall Street in Europe?

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One Comment
  1. Wayne permalink
    July 9, 2013 11:24 am

    Hi Jon,

    I tend not to be a conspiracy theorist, but in the case of retirement I am starting to believe the media, central planners and general populace have embraced the idea of extended careers i.e.working beyond the age of 65. Working beyond the age of 65 is becoming the norm and not the exception. The idea of retiring is rapidly being replaced with the notion of staying in the work place longer. This new work ethic is becoming more and more accepted and encouraged.

    Clearly, most baby-boomers are not financially prepared for retirement. Article after article and study after study support this basic fact. Given that most baby-boomers lack the financial resources to retire, it makes sense that they will have to work longer out of necessity rather that desire. Consequently, the age of U.S.workers will increase. As more and more people over 65 continue to work, society will argue this is a “good thing”.

    This new embraced “good thing” will give our elected policy makers the cover they need to increase the Social Security full retirement age from 66 to 68 or 70. Weather this is an untended consequence of economic woes, or a planned conspiracy, the result will be the same: 1) people will have to work longer, and; 2) the cost of future SS benefits will be reduced. How this impacts the future economy is unclear at this time, But, I believe it will have a detrimental effect on young people looking to fill the job vacancies that here-to-for became available as older workers left the job market.

    I understand, we live in a new economic norm where good news is bad, bad news is good and corporate earning don’t matter. This seems to be part of the “new norm”. However, I believe keeping older workers in the job market longer will have a detrimental impact on the younger workers resulting in that demographic group having to postpone future purchases and decisions. Major purchases such as houses, cars, etc. and decisions such as marriage and children. With the limited job market, this group will also be impacted by the reduction of manufacturing jobs, high school drop out rates, over saturation of 4 year degrees (school loan debt), shift to a service economy and “lower or stagnant wages”.

    I could be wrong, but I think there is a clear trend emerging that suggests a demographic shift for older workers, working longer. This demographic shift is currently being supported by financial necessity, pop culture and political will. The net result, most people to work longer, fewer career opportunities available for younger workers, and more part-time/ temporary employment. Unless the economy starts to grow and expand significantly (4-6% real GDP- which I doubt) – I don’t see any other outcome for both older and younger workers alike.

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