We are on the verge of a substantial retirement crisis. The crisis is fiscal, familial and humanitarian in nature. Retirees who simply don’t have the money needed for comfortable survival will depend more heavily on government benefits and public assistance. This means additional pressure on the children of retirees who are unprepared and sometimes unwilling to step in and help. If we do not find better privatised solutions the government will increasingly raise taxes on the young to pay for the care of the elderly. The net effect of this cocktail of problems includes tension between the generations, economic instability and fear for America’s aging population.
What’s Behind It?
1. Inflation: The value of money earned and saved is less because of inflation reaching record highs. Consumables are 8% to 10% more than they were even a year ago. That means retirees who rely on social security or who draw from savings, and individuals who count on a fixed income, are losing a significant percentage of their resources.
2. Lack of Savings: It is common to hear that to ensure a comfortable retirement the average American should have $1 million in savings before leaving the work force. But most retirees have far less, with studies showing an average savings of under $200,00. The result is that a majority of retirees suffer from financial insecurity and believe that they will outlive their savings.
3. Underpopulation: Elon Musk is right. The world’s population is moving towards an inverted pyramid over the next three decades. That is bad news for retirees. For years we have been told that overpopulation is a global problem. That conclusion was based on two errors. The first was an emotional, rather than mathematical response to the earth’s population. The second error was defining overpopulation based on a subjective sense of the relationship between population and land mass. From an economic perspective, overpopulation is actually a function of the number of people to the food supply. The American problem is not food supply, but a diminishing base of workers who support the system and pay taxes to perpetuate the governmental support structure for the elderly.
4. Lack of Privatised Safety Nets: Historically, families understood it to be their duty to care for their elderly. Children and extended families banded together to ensure that ageing parents who could no longer provide for themselves had food, housing and medial care. Modern families are far more fragmented and less concerned about generational responsibilities. They largely view elder care as the duty of the state. But Uncle Sam has his own problems and over the long term can not sustain a nanny state sufficient to meet the needs of the growing elderly population and diminishing working class. According to the 2022 annual report of the Social Security Board of Trustees, disability and other Social Security benefits will be depleted by 2035. Also, keep in mind that present social security benefits are typically insufficient to cover the needs of financial security during retirement years.
How Do We Make The Process of Retirement Less Difficult?
As government support programs dry up, savings prove inadequate, children have no interest or ability to help their ageing parents, and inflation rates cause the value of money to diminish, the sense of crisis grows for individuals considering retirement. Yes, there are macro cultural, economy and political considerations that could improve the problems on the whole, but what should the average person do to improve his or her situation? Here are a few considerations:
1. Reject Fear: Take Action: Fear may be the single most destructive threat to retirees. Fear paralyzes. It spawns inactivity. It undermines personal health. Fear brings tomorrow’s problem into today. One way to overcome fear is through gratitude. Look for things in life for which you are grateful. That are going your way. The health which you still enjoy. The friends and family that are part of your life. From a position of gratitude, start looking for solutions. Be thoughtful regarding planning and execution.
If there is a shortfall, focus on solving the shortfall. Do I get a part-time job? Do I pick up a side hustle? If I am $500 short a month, where can I find another $500. There are opportunities all around us. Help to solve the problem by focusing on the solution, not the problem: Planning, execution, being thoughtful, solves tomorrow’s problem.
2. Choose Not to Live With Regrets: If you want to do something you’ll find a way. If you don’t want to do something, you’ll spend your time finding an excuse. The greatest regrets people have in life tend to be the things for which they were unwilling to take chances. Think about where you want to live and the things you could do with your life. If retirement for you means doing something exhilarating, figure out how to do it. If you’re short, solve that problem. What can you sell? How can you make a little more money? What can you trade? Instead of worrying about tomorrow use your energy for planning about tomorrow.
The retirement problem is a real one. Inflation is real. But that is only part of the story. You get to write your own story. The perspective you adopt, the intentional planning you initiate and the courageous choices you make today will have a greater impact on your long term security than the rate of inflation.
Life is like an hourglass. You can’t change what has already happened. You can’t control tomorrow. You CAN make wise choices today and maintain a positive outlook in the present. That means living in the most small part of the hourglass. So live there. Experience hope for tomorrow, keep a positive outlook and make plans that focus on solutions.