Tuesday, March 18, 2014

Titanic Moments

If you saw this going down and could do something to stop it, years earlier, would you?  Could you?

In this recent article on CNN, they bandy about some numbers that should make you shit in your pants. But sadly, most people fail to read the article or fail to read into it, what it is saying.   The numbers are talked about so obliquely that you'd think they were talking about paint drying, instead of a house burning down:
"Among workers without any retirement savings plan, nearly half said they were "not at all confident" they would have a big enough nest egg, compared to just 11% of those with a plan.

Saving through employer-sponsored plans can be a big help. Yet millions of Americans don't have access to workplace retirement benefits -- a problem that plays a major factor in the country's savings crisis, advocates say.

Meanwhile, out of all workers surveyed, many reported little or no retirement savings. More than half said they had less than $10,000 set aside, while 36% said they had less than $1,000 saved. In contrast, only 22% said they had $100,000 or more.

While EBRI surveyed workers of all ages, financial planners typically recommend that workers aim to eventually have at least 11 times their annual salary saved. So a worker retiring with a $65,000 income would need a nest egg of around $715,000.

"People recognize the need to save," but they aren't acting on that knowledge, said Greg Burrows, senior vice president of retirement and investor services at Principal Financial Group, one of the survey sponsors."
As I noted before, the "news" covers only events that happen suddenly - like a landslide or an earthquake.  Long-term trends are harder to cover.   Covering global warming is just hard to do - on a 22-minute newscast.  Covering a "Climategate" controversy is easy.

"So we are seeing a dramatic shift between a generation of pensioners and a generation of savers.  And no one seems to notice this seismic shift.   Today, you might think the situation in Crimea or a missing plane is what is "important" in the news.  But more important things (that happen slowly) are going on, and no one comments on them.   Well, except me. 
To me, this is like watching an iceberg slowly move South.   It is a noticeable event, but happens so slowly that many folks ignore it - that is until the Titanic strikes it in the middle of the night.   Only then is it "news" and by then, it is too late. 
And unfortunately, the Titanic event, which is slated to occur in the next decade, is the legions of retirees staggering toward retirement with nothing saved whatsoever.   We are heading off into the ocean of retirement, but only with enough lifeboats for less than half the passengers (and none of those are for the folks in steerage). 
But again, I digress."
"Iceberg! Dead Ahead!" - that's what I'm trying to say here.  That's what a lot of people are saying - but few people hear them, and the few that do, fail to listen.

It is like the housing bubble.  We all "saw it coming" but no one did anything about it.  In fact, it was "full steam ahead" and "Stay Calm and Continue Buying Mini-Mansions!" as far as the government or the real estate industry was concerned.
Getting ahead financially means spotting these Titanic moments before they happen.   Watching the nightly "nooze" and obsessing about Crimea or a lost plane is really a waste of your personal energy and time.   And in terms of finances, neither "event" will likely have as a profound effect on your world (or our world) as the newscasters would like you to believe.

Long-term trends and slowly evolving events are far more significant than the sudden impact of the "news".   Someone winning the Billion-dollar lottery is "news" today.  But what is not remarked upon, at all, is how we went from a country that didn't gamble, to one with a plethora of State Lotteries and gambling casinos, over a period of about 30 years.  Who won the lottery isn't really unimportant (unless it was you).  How our country has gradually changed from one extreme to another, over a period of decades, really is - and has a more profound effect on your life.

Read the cited article above carefully and then think about what it means for the future.  The baby-boomer generation (yea, I know, a horrific moniker) is slated to retire - a large generation with a large number of people.  And a lot of them will have nothing saved for retirement.

Now, play the futurist.  How will this play out?   There will be a lot of elderly people trying to live on Social Security and foodstamps and other government assistance.   Many older people who didn't save anything (or have any opportunity to do so) will try to continue to work, well into retirement.

On the other hand, a lot of middle-class people, who took advantage of all those juicy tax deductions, will have a ton of money socked away, and be comfortable in retirement.  If you complain about the "haves and have-nots" in our society and "income disparity" - how do you think this is going to trend?  Better or worse?

Myself, I see a lot of people struggling to get by in retirement, and you will see more and more people look to retire overseas (where costs are low) or perhaps in an over-55 park model community or some other lower-cost alternative.   You might see more oldsters move in with their kids.

And you might see the elderly homeless as well - people who are really broke, not just crazy or on drugs.

Like I said, this hasn't happened yet so it isn't news.  And it will happen so gradually that no one in the media will notice it as news.   We'll all just wake up one day in 2030 and realize that there are a lot of poor elderly in our country, and "Gee, I wondered how that happened?"