Wednesday, January 19, 2022

Life In The Rowboat - For Retirees

In one of my first postings, I suggested that your economic life was like living in a leaky rowboat.  How has retirement changed that analogy?

In one of my earliest postings, I mused that your economic life is like living in a leaky rowboat.  You can patch the holes in the bottom, or bail, or a combination of the two.  If you do neither, you sink.  Patching holes is cutting spending.  Ideally, if your boat is "tight" it will never sink, unless an economic storm occurs - and they do occur fairly regularly.   If your boat leaks like hell, well, you can bail like hell (earn money by working) but the moment you stop bailing, you are sunk.  And if a storm occurs, well, your bailing was just keeping up with the leaks as it was.

I posited that if you can plug as many holes as possible (and you can't plug them all - we have to eat, have a place to live, wear clothes, and whatnot) you won't have to bail as hard and maybe get a chance to row your boat in some direction toward your goal.  And if you have a partner, one can bail while the other is plugging holes, and you can both row toward shore.

Sadly, in many marriages, it becomes a race to the bottom, where both spouses intentionally poke holes in the bottom of the boat out of spite, and neither bail much. And if they ever get around to rowing, they row in opposite directions, so their boat spins in circles.

Maybe it is a tortured analogy, but I think it is apt - and I see people sinking their own rowboats all day long and wondering why it happened.

When you are working, you can afford more holes - or so you think - as you are bailing pretty regularly.  But what happens when you retire?  Well, for starters, you have a lot more time to plug those holes in the boat. As a result, many seniors become very thrifty - they have a limited income and can't afford to poke holes in their own boat.  So you see old people going after senior discounts and whatnot - early bird specialssenior coffee, and other gimmies that they hand out to old people.  For some, this is their only means of staying afloat.

If you played your cards right, you've plugged some major holes in your boat by the time you reach retirement age.  Hopefully you've retired your mortgage, paid off your credit cards and student loan debt.  And since you don't commute to work anymore, your car can last a good long time.  We barely put 5,000 miles a year on the hamster - it is almost obscene (6 years old and 27,000 miles!).  You start worrying less about having the "in" clothes or having the latest and greatest electronic gadget or service.  You don't feel the compelling need anymore to shell out hundreds of dollars to see your favorite band, particularly now that your hearing is shot (thanks to going to all those concerts as a youth!).  The rowboat gets pretty tight.

And since you are not working all day long, you stop doing silly things like sending out for food because you're "too beat to cook" which is another way of saying, "hey, I'm making good money, why not punch another small hole in the boat?"  And when you are young and healthy and have lots of energy, you can get away with this, for a while.  But as the credit card debt creeps up and the bilge fills with water, you might be able to kid yourself you're still afloat, even if you are sinking.

As a retiree, your energy peters out - bailing is out of the question.  You have to hope you have enough money set aside, or some source of income, including social security, to run that bilge pump for at least a couple of decades.  It is interesting how the rowboat analogy becomes even more apt as you retire.

Sadly, many will enter retirement with a bilge full of water, a broken bilge pump, and many, many holes in the bottom.  Retirement at age 55 or thereabouts seems to be a new norm.  Companies want young, energetic people who have modern technical skills - not obsolete old people who need to nap every afternoon.   And so many people claim they will "just work until they are 70!" which is a bad plan to begin with (working when you are old and infirm isn't a lot of fun) and is based on the flawed idea that they'll let you work.   At age 61, I am virtually unemployable at this point - even in an era of labor shortage.  Even the most basic sort of retail business would want nothing to do with me.  What's worse, I'd give the younger workers bad ideas about unionizing and asking for raises.  No, they don't want that.

So the idea of "just bailing more" is out of the picture for me.  It illustrates why retiring debt is so important for the 401(k) generation.  I have friends who have government pensions - and mortgages, and car payments, and credit card debt.  I guess they can "afford" it but could afford so much more if they were debt-free.  And like saving money, retiring debt doesn't require heroic efforts, just paying down a little bit every month, over time, and not rolling over debts and constantly refinancing.

I am not sure how inflation factors into my rowboat analogy, or of the analogy falls apart at that point.  I guess inflation would be like transom rot - slowly causing more leakage into your boat, such that your carefully laid plans on spending and income no longer work out.  Given enough time, I could torture the analogy to death.