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June 18, 2013 / paulio10

Retirement Investment Failure

There’s some amazing charts and graphs on this article from Business Insider titled The Stunning Fall of Generation X you might find interesting.

In the near future, everyone in our society is going to have to work out their own retirement plan for themselves, whether they are prepared to or not. They will have to consciously put money aside in investments of some kind to be ready for them when they are so old that they can no longer work.

Come on… A Retirement “Plan”?

Yes, think about it: when you’re old you’ll need a way to make money that does not require spending your time or having skills, like a normal job demands of you; because when you’re really old, you can’t perform the same activities you could when you were younger, yet you still need to eat food, live somewhere, wear clothes, and visit the doctor when you need to (probably more frequently than when you were young).

One of the worst things that happened in the United States of America to destroy people’s ability to retire was the creation of the retirement investment vehicles – IRA’s, 401K’s, and similar devices. You would think that putting “control in the people’s hands” would be the right thing to do. I thought it was good when it was invented, but now I see I was wrong.  It is not the right thing to do when 99% of the people with 401Ks and IRAs have no formal training or experience in investing, and no emotional preparedness for investing!

By giving people control over their own retirement investments, you remove their employer’s responsibility to provide a good retirement for them – something that past generations could depend on – but not any more. So many companies have eliminated their pension plans – more and more all the time – leaving employees with nothing but their own resources to cope with in the coming years.

I have an idea – why don’t we do the same thing in medicine?  Let’s make all the doctor’s tools and medicines available to the public – people can learn to treat themselves!  Don’t you want more control over your own medical procedures?  Isn’t your body important to you? Isn’t it true that if you want something done right, you have to do it yourself? Don’t let a “middleman doctor” get in the way of your health!  Save money – do it yourself.  Here’s your information pamphlet and a scalpel, go to it! There’s 3000 youtube videos of how to operate on yourself! You can order your EEG machine and CAT scan equipment on Amazon.com. Yeah, it’s kind of expensive. This is your body we’re talking about, don’t you think your own health is important for your future? It’s too important to entrust to someone else. You can be in charge of your own medical service yourself!  You could hire a medical consultant to help if you want, but you’ll have to pay for that too.  Other than that you have FULL CONTROL over your own health care now!  No hospitals needed!  If you feel like buying a book on medicine, or taking a class on it, go for it – learn all about it.  Maybe you’ll be good at it.  But more than likely, you will suck at it, and experience worse health than your parents did.  We could call it “401M” where the M stands for Medical.  Let’s not optimize anything by grouping customers or combining services to save money.

My Father’s Retirement

My father worked at universities for most of my life when I was growing up.  When he retired, he had money coming in from three sources:

  1. California state retirement system
  2. Arizona state retirement system
  3. Social Security

All three of them were about equal amounts of money each month.  He had more money coming in every month than he needed to live. Which was good, because it paid for his stay at a nice retirement home later in life, when his medical requirements were the highest ever in his life.  He had enough left over as spending money for a weekly visit to the grocery store, where he would buy things he didn’t need because the retirement home provided all his meals and other services for him each day. I would visit once a week and throw out the old food that had gone bad in the refrigerator. (Don’t make me tell the story of the bulging can of food in the pantry that hissed at me when I tossed it in the trash).

I make more – I should have as good a retirement, right?

Even though every job I have ever held brought in more money per year than my father ever did with any of his various jobs, I will not have his kind of retirement income.

Social security will be very small for me, certainly not enough to live on; probably not more than 1/10th what I need to live on when I retire – if I’m lucky.

I do have a very small state retirement, because I worked at Northern Arizona University for 6 years as my first job in the real world after college. I don’t have any pensions from any company I’ve ever worked for.  It wasn’t an option. I do have an IRA from one company I worked for, but after 11 years of faithful service, the income it generates would be about enough to pay 1/20th of my bills in retirement.

I am part of the beginning of generation X. I am 48 years old, and I am really seeing the writing on the wall, now. More and more inflation is coming to the United States of America, and many other countries too. I will not have a nice retirement unless I build one for myself.  And all the generations coming after me will probably have it worse than I will. And they’re younger than I am, so they don’t see it coming yet. They’re still too young to care.

Taking Action

Part of me asks – how do I cope with this?  I feel 85% sure that I have a good plan for my retirement, because I have been learning real estate investing on my own over the past 5 years, actually practicing it, losing money sometimes and making money sometimes which lets me discover what works and what doesn’t. I hope to make more than enough money to live when I’m 70, 80, 90 years old (if I live that long) – just like my father did.

Another part of me asks – how do I help those who are younger than me survive retirement?  That’s a much harder question.  I feel 10% sure I know what to say, what to do, to encourage them and train them.  But I don’t think they will listen. Because they’re at that age – when I was their age I didn’t give a shit about anything related to retirement.  I had more important things to do, right then and there.  And that was important to me, and nobody should try to push “retirement” thoughts on me back then. So who am I to try to push “retirement” thoughts on them now? I am both people, young and old. I can see both points of view. Since young me would not want that, old me is going to be wise about how to approach this.

Why would I try to treat someone else the way I never wanted to be treated when I was their age? It seems ridiculous.

Age Matters

Our society, in the past, cooperated with the way people think when they are 30 or 40 years old. Thoughts that do not plan too well for their retirement.  Back then, they would still have a nice retirement, automatically.  But now it’s different.  Now if you aren’t thinking about this stuff and creating a plan for the rest of your life by age 35, you’re probably screwed.  And that’s assuming you are working a good job consistently from age 35 on, thru retirement age of 65 or so.

What’s the best way to help those younger than me, with less experience than me in investing?

Maybe the best advice I can give is things that they can do now (or not do now) which their future-self will appreciate when they come to their senses.  Around age 45 or so.  “Thank goodness I did X when I was 20, and Y when I was 30… or I never would have a good future!”

But it’s not enough to simply relay information; that’s only a part of the learning.  The smaller part.  The larger part is the experience of using your own money, sometimes many thousands of dollars, risking it on investments, figuring out how to make it work, and dealing with the crippling emotions of having it sometimes fail. And getting back up and doing it again. And again. Until you get it right.

Some people give up after a big failure, and just say “I can’t do it” or “I never want to do it again,” and walk away. Go back to their “normal” life.  Not planning for retirement. That was OK 30 years ago. It’s not OK today.

So I tell you now: either choose to learn investing as a serious hobby for 10+ years of your life, if it interests you; practice it, get used to losing money, and be prepared to make a lot of money. Physically prepared, emotionally prepared, mentally prepared.  That alone is a whole science not yet accepted by society (maybe I can discuss that in another blog article). Play the Cashflow 101 board game at least 20 times until you really get it.  You don’t have to buy it – find a Cashflow group on Meetup.com near you to play it for free with some really nice people.

Or, if you don’t like the thought of learning how to invest – how your money can make more money without you having to do much more than guide it to do so, then you’re almost screwed – put as much money as you can into retirement investments: 401K’s and IRA’s, and hire a good management company to control those assets for you, learn to live within your means after setting aside that part of your income as if it never existed, and never withdraw from it until you retire. Those devices aren’t very good investment vehicles, it may not be enough for you to live on exclusively when you’re retired, but it will be better than the nothing you’ll have if you do nothing.

Growing Old

Believe it or not, your mind and your memory will start fading eventually, and it will continue over time.  Your body’s strength will start dropping, slowly, more and more.  Your emotional tolerance for bullshit and pop fads will dwindle to near zero.  You start getting old when you’re not psychologically ready for it, when you still feel young on the inside, but your physical body disagrees.  People will start treating you like you’re old, because you look old; and that will color your own view and attitude towards the world. And 10 years later, you’ll feel EVEN LESS ready for old age than you do now.  But they say this is all a normal part of life.

At least that’s my experience.

Your mileage may vary.

Harumph.

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One Comment

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  1. bookofmohs / Aug 27 2013 7:03 PM

    Good advice and a lot more thinking than most do about investing 🙂

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