Not only, as TCS Daily points out, is it time for “back to basics” on financial matters, but, so long as we’re puncturing all sorts of wishful thinking by suggesting that maybe saving is a good idea after all, let’s pop this little wet dream:
Which moron said that you could save 10% of your salary per year, and have enough to live on for the rest of your retired life?
I’d like to meet that guy and thank him… with a 2×4. That’s almost as bad as the dork who goes around on his radio show saying that you don’t have to save if you’ve invested in the same fund for years in a row, because your shares are diversified in time. As if anybody gives a crap what you paid for a share: when it comes time to dump it, you get what people are willing to pay, less brokers’ fees.
But, I digress. Let’s say 30 years of working. Hey, yeah, basic mathematics! You really think you can keep anything other than a “mournful pasta” lifestyle if you’re going to live an extra 15 past retirement (a reasonable bet nowadays), if you only have three years’ savings? Okay, that’s a bad number. What if you got a “career-quality job” at age 25 and were never unemployed?
How many fifty-somethings do you know with four and a half years’ savings in the bank? And what’s the average credit-card debt running at nowadays? 7-10k?
Of course, the Baby Boomers will simply assume that they’re entitled to suck off the rest of our salaries to cover for the fact that they never bothered to save. That’s how the Congress-critters managed to pass a NEW trillion-dollar-and-growing entitlement this administration. But that gets in trouble, too, because of demographic drops. It’s going to be:
- Social Security folds (or is effectively gutted) along with other entitlements
- The economy goes right into the toilet b/c the politicos buy votes by trying to spare their constituents the price of their decision-making
- Or the retirement age jumps dramatically.
Personally, I’m hoping for #3. Social Security was never, outside of Boomer pipe dreams, meant to fund twenty years of retirement. And I’m willing to put my generational mouth behind it, and have a ten year jump to 75, starting for workers under the age of 40. (Now, age-based discrimination is something else, but let’s hunt one species at a time)
Why am I picking on the Boomers? Because collectively, they’re the ones who have had decades to do what has to be done, and have instead generated the kinds of debt and lack-of-savings numbers you keep hearing about in the financial news. And in case you haven’t checked them lately, the numbers are grim.
If you don’t have several years’ worth of salaries either saved, or else invested in a way that can be made liquid in a crisis without losing double-digits’ worth of value… now would be the time to start doing some math and making some choices. It doesn’t have to be rocket science.
- I’m late finding a career. “God willin’ and the creek don’t rise,” I get thirty years to productively save.
- I’m planning on living to 100, because I at least one relative who’s done it and I figure medicine will make this reasonable.
- 30 years of working, to fund 35 years of retirement at current income.
- I must plan for the likelihood that politicians are going to force me to pay an ever-increasing percentage of my paycheck to fund previous generations’ retirement.
At this rate, my spouse and I must, at minimum, max out a 401k, and be prepared to live on one salary, saving the other one. Sure, compound interest rocks. Unfortunately, so do monetary inflation and occasional financial cycles… unless you want to bet your livelihood that you don’t have to cash out while an Enron is going on. Of course, if everything stays pretty, and your mortgage is long out of the picture, then there’s a good chance that you’ll be just fine, because your rising medical expenses will gradually replace the disappearing mortgage expenses.
There are lots of ways to quibble with that, many of which are much more optimistic. That’s okay. Please, feel free to chime in and slap this down. Because at least that’s quibbling and calculating… not dreaming.
We can survive driving used cars and hitting garage sales for the fun of the bargain-hunt. But the daydreaming has got to go.