Market Overview

Exploring The "Retirement Bubble"


David Merkel had a great post up that he titled The Retirement Bubble. The post was thought provoking as were the comments on the Seeking Alpha version of the post. David covers a lot of ground and if I am reading him correctly, he and I draw some similar conclusions about the idea of traditional retirement and the viability of various programs that are in place that the country is relying on to be there.

The post did not do much in the way of exploring alternatives in an opportunistic sort of way as I try to focus on. I am not sure if David has touched on this in other posts or not. He covered the fact that for many people the solution will involve working longer, living on less (two that I mention often) or defaulting (I usually don't cover this ground).

Some of the comments were along the lines of how I like to come at this as a problems in search of an unique (for you) solution. There was one commenter in particular who mentioned having made $30,000 last year on a side business. He said it took time to get to that level and at one point talked about this as being his hobby. Long time readers will recall that I have been writing about figuring out how to monetize a hobby for many years--I just mentioned this last week.

Another comment called for a small scale exodus from the US as more people who came here for their advanced education will return home instead of staying and that a relatively large number of newly retired Americans will move to somewhere like Panama or Costa Rica for the lower cost of living. As a side note does anyone have information about how many people that leave the country at 60 or 65 come back for healthcare reasons in their 80s? Obviously someone who stays healthy and just expires at 94 probably wouldn't need to come back but someone needing care starting in their early 80s, for example, who was living abroad would have to at least consider returning. In that light is coming back feasible?

There were others about income inequality, the potential resourcefulness of Americans (reading between the lines, if the government would get out of the way), an acknowledgement that not everyone can keep working until some age they think of as being old and the no fault of their own argument. There were also comments along the line of age warfare (similar to class warfare).

In terms of viability of social security and medicare, as a guy in my mid-40s I expect nothing. Maybe it won't go bust but if there is a means testing then I would anticipate being left out. There was a comment on David's post that really took issue with this idea because we have all put in, so we should all be able to take out. Ok, but I simply believe that the reality, versus what should be, is that many will not be getting these checks. I will gladly take the $3000 (the amount that my annual statement says would be our combined benefit) as in today's dollars that more than covers our expenses but needing that $3000 in order for my financial plan to work would be a bad place to be.

Instead of no fault of their own (I hate this saying) let's call it wrong place wrong time. There is no question that getting a nest egg to compound during a lost decade or two is very difficult, most will not be successful. Whether a stretch like this comes along and when it comes along is a function of luck and otherwise based on factors you cannot control. Ok, what can we control? We can live less of a lifestyle than we can afford which would allow us to save more money. As an oversimplification, if we have 40 years to accumulate savings (and we invest most of the savings) we can expect the stock market to "work" most of the time but if it doesn't or doesn't at a personally crucial time we have to be ready to adapt as we are entitled to nothing.

Obviously I am big on working longer if possible both for financial reasons and health reasons (staying active in this way might keep you healthier longer). The one commenter who said he made $30,000 with a hobby is a great example. For someone who lives a modest lifestyle $2500 (assumes the revenue is actually that linear) could relieve a huge portion of the burden off of the portfolio. Depending on the hobby it could still be doable even with some sort of impairment that is a function of old age.

Many of these issues can be mitigated or partially mitigated with certain lifestyle choices. At 50 years old there is no way to know that you will be healthy and strong at 75 but a serious commitment to exercising and a few simple diet choices (no soda) can vastly improve your odds. The benefits here are clear. In addition to feeling good later into life there would be more options available for someone who wants to work or needs to work.

Where we live there are all sorts of seasonal jobs with various parks, forests and so on that require being on your feet. This type of work will obviously be much easier for a 70 year old who physically is more like 55. This is not like standing in a retail store for 40 hours a week all year but a more of a physical challenge for six or eight weeks which I think are two different things. A month or two of full time pay would relieve some of the burden off of the portfolio as well.

As far as income inequality; yes it exists and it appears as though it is as bad as it has ever been based on various ways of looking at it. Unless you can figure out how to monetize speaking out against this issue then I am not sure what good it does to preoccupy yourself with it, and again I concede this is a problem.

The age warfare is interesting. In the comments where was blame placed upon the boomers and an expectation that they should get out of the way of the younger generations. We can see that the boomers are not getting out of the way and there is some impact because of this on other segments of the population but in reality both groups will have to adapt. To the extent boomers are staying longer perhaps this is how they are adapting. I'm not sure how younger people are adapting (not a shot, I don't know).

Adapting, being flexible and planning ahead of time with contingencies will be cornerstones to success and this is what I try to convey in related posts. The extent to which the country's balance sheet has deteriorated is beyond our control but the state of our own balance sheets doesn't have to be (I realize there will be those who disagree with me on this point). I continue to believe there is an endless number of solutions but finding them will take work.

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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