Monday, June 8, 2015

I Don't Want To Talk About It (Living in Denial)

Denial can be a powerful force.

A reader writes:
Flipping through the channels (I know, but at least I don't have cable), I heard the last part of a program on Consuelo Mack's "Wealthtrack" show on PBS, and it so startled me that I went online and watched the entire show (the good part is less than 20 minutes).    I usually ignore Consuelo Mack because I don't have a large amount of disposable income or need a financial planner, but this show repeated everything you've been saying about the 401K generation.  The show was a rebroadcast of a show originally broadcast on January 23, 2015.  Charles Ellis, a business professor at Harvard and Yale, has co-authored a book called "Falling Short:  The Coming Retirement Crisis."  He said that a crisis is coming and no one is concerned because no one in the business community or in government is talking about it, but it's real and it's going to be a huge problem.  He said he didn't write the book to make money, but to try to arouse some concern and get people in government to start talking about the problem.  He said that in Australia that by law you and your employer have to put 14% of your income in a retirement account, and that there are only about five low-cost index funds that you have to invest in, so you won't be confused or lose a lot in fees, and he believes that the U.S. should do something similar.  It's scary.  This is the info:

"Falling Short: The Coming Retirement Crisis and What To Do About It"
Charles D. Ellis, Alicia H. Munnell and Andrew D. Eschtruth
WEALTHTRACK Episode #1131; Originally Broadcast on January 23, 2015
So it's not just me.   Bad things are going to happen to an entire generation of retirees, and nobody wants to talk about it.   Why is this?

It is human nature.  We live in denial.  We'd rather sweep problems under the rug than address them.  We don't like conversation that makes us uncomfortable.   We don't like to talk about Politics or Religion - two topics these days that should desperately be talked about.   So instead, what we learn about Politics is what we hear on the television, usually in attack ads.  What we hear about religion comes thundering down from the pulpit.   Neither are good unbiased sources of information.

Similarly, I have seen people squirm in their seats and try to change the topic when I mention finances, credit card debt, car leasing nightmares, and the coming retirement debacle.   Change the channel please, I'd rather have happy talk.   Maybe Pawn Stars is on, right?

People would rather gossip about other people, or talk about scandals or funny videos on YouTube.   They don't want to confront the problems in their lives.   After all, they might actually solve them, right?  And then where would they be?   Having to worry about dying is what.

It is human nature to try to forget unpleasant things.   If we don't, we go crazy.   Soldiers returning from war try to put the horrific images out of their mind.   We don't want to be depressed.

But this aspect of human nature is also dangerous.  By suppressing thoughts that are unpleasant, we fail to address problems in our lives.  We drive our car off a cliff, convinced by "happy talk" that we are taking a wise shortcut to the bottom of the mountain.

The powers that be, of course, have no vested interest in talking about this problem.   Telling people that they are going to die broke and poor doesn't sell newspapers.   Telling them about other people in misery, of course, sells newspapers.   So long as they can tsk-tsk about the foibles of others it is a compelling story.

And the banks and investment houses, they want you to invest, of course, but they have little financial benefit in trying to tell people who are 60 and have nothing saved that they are utterly screwed.   No one likes bad news, and they tend to kill the messenger.

The government is silent because there is no constituency for this message.  Would would sound the alarm?  The IRS?  Social Security Administration?  Again, no one wants to be the bearer of bad tidings, as they would be then blamed for the message.

And I've learned from experience that people in denial are very hostile to folks who try to tell them basic honest truths.  Denial is a very powerful mechanism, as anyone who has dealt with addicted friends or family members can attest to.  In another posting, I mentioned two lawyer friends of mine who decided to become crack heads in law school:
As I mentioned before, I had a friend whose husband, while in law school, decided that a little crack wouldn't hurt.  Before long, he wanted to spend the mortgage payment on crack.  She demurred on the grounds that the mortgage would then be unpaid.  "Yea, but we'd have a lot of crack!" was his reply.
That's a pretty powerful denial mechanism at work there.

So when you talk to people about retirement, they get fidgety and nervous.   You can tell that at age 55 they are still struggling with credit card debts (but will regale you about the "bonus cashback miles" they got) and they have once again refinanced their house to pay off debts.   They have under-saved and over-spent and don't want to talk about it because talking about it means thinking about it and that is scary.  So they shut down and change the subject.

Or, they use mantras to drown out reality.   And you've heard them before:
"I'll just work until I'm 70!  I like working!  People who retire early are lazy!"

"Everyone has a mortgage, right?  I'll never own my home free-and-clear!"

"Everyone has debts, right?"

"You'll always have a car payment in life, that's just how it works!"

And today's new one, for the Millennial generation:

"Student Loans are unavoidable.  It's like a mortgage on life!"

(By the way, a friend of mine is sending their kid off to college.  Years ago, she and her ex-husband contributed a lump sum to a State tuition program that today will pay for all four years of his college.   She and her husband have agreed to split the cost of room and board.   As a result, their child can graduate with do debt whatsoever, if he chooses to.   It can be done, for average middle-class people!)

These mantras are comfort-food for the brain.   And the folks who say them, say them to each other, as if to say, "Well, it's not so bad here as a galley slave!"

So, don't expect to hear much about the retirement debacle.   And when the baby boomers and their younger siblings start to retire in droves, and the ugly truth becomes unavoidable?   Well, we'll all just externalize the issue and blame the big banks or the "Wall Street Fat Cats" for "taking all our money away!"

Oh, wait, we're already doing that.

Who took the money away?