Unless you’re 70, you don’t know what it feels like to be 70

Americans are pretty good at kicking cans down the road.

Collectively, Congress is putting off our debt problems by arguing over spending cuts and balanced budgets that will take years or even decades to materialize.

And individually, many Americans are kicking their own cans down the road by adopting a retirement ‘strategy’ of either working into their 70s or, in some cases, planning to not retire at all.

This is one of the results published in the 12th Annual Transamerica Retirement Survey.  More specifically:

• 39% of workers plan to work past age 70 or do not plan to retire
• 54% of workers plan to continue working when they retire
• 40% now expect to work longer and retire at an older age since the recession

Now it’s one thing if (like me) these folks love their jobs and want to prolong the satisfaction as long as possible.

But the survey suggested otherwise:

• Workers estimate their retirement savings needs at $600,000 (median), but in comparison, fewer than one-third (30%) have currently saved more than $100,000 in all household retirement accounts.
• Most workers, regardless of age or household income, agree that they could work until age 65 and still not have enough money saved to meet their retirement needs.
• Of those who plan on working past the traditional retirement age of 65, the most commonly cited reasons are of need versus choice.
• Many workers (31 percent) anticipate that they will need to provide financial support to family members.

I can’t help but wonder how much thought the respondents gave to their answers, or if they even realized the implications of the questions.

Undoubtedly many, perhaps even most, suffered a significant devaluation of their retirement nest eggs during the 2008/2009 market decline.

Perhaps to a rough approximation (especially for those who have an aversion to detailed mathematical models) they concluded that it will take, say, 5 years to get their portfolios back to pre-2008 levels, and maybe throw in another 5 years to factor in notional “corrections” for inflation, reduced pension benefits, reduced social security, or what have you…  Under such an approach their targeted retirement age changes from 65 to 75.  …Oh well, C’est la vie.

My guess is that the younger one is, the more tendency there is to think like this, and to discount how one will actually feel at age 75.  After all, there are a lot of years between now and then…

I’m now a little past the halfway point as a pentagenarian and I can certainly feel myself slowing down a little each year (although, truthfully, I’ve been saying this for at least the past 20 years).  The 2-week business trip to Europe doesn’t have the same allure it had when I was in my twenties.  I’m no longer interested in major DIY projects around the house (like tiling the kitchen floor, rebuilding the deck, and crawling around the attic installing ceiling light fixtures).

Ernest Hemingway‘s situation was much more dramatic and tragic:

“At the age of 61 he had a bad combination of physical and mental ailments caused by a lifetime of neglect and fast living. Mentally he had lost his memory during electroshock treatment at the Mayo clinic. Physically he suffered from rapid weight loss, skin disease, alcoholism, failing eyesight, diabetes, hepatitis, high blood pressure and impotence. Basically his body had broken down, he could no longer write and he was severely depressed, and rather than endure a lingering and ugly death he decided, ironically, that the courageous thing to do was to shoot himself.”

So what’s a can-kicker to do??

Every financial adviser knows that there are fundamentally only four approaches that can be taken to alter one’s retirement finances:

1. Work longer (delay retirement)
2. Save more prior to retirement
3. Spend less during retirement
4. Improve investment results

Surprisingly the survey placed little emphasis on improving investment results.  Three out of four workers kept their investment allocations unchanged from the prior year, with “a significant number of workers being less confident about their understanding of principals of asset allocation.”

In a society where self-reliance, ingenuity, entrepreneurialism, and independence are so highly valued it is astonishing to me that there is such an apathetic and even fatalistic view towards controlling investment results.

And yet, more than any of the other three approaches, altering investment results can have a significant and immediate impact on the retirement calculus.  I further submit that it is the easiest of the four to control and to forecast.

I think the survey is a reflection of how, sadly, many Americans have been systematically conditioned into believing that investing is too complex and risky for them to manage.

It is the ‘unlearning’ of this conditioning for my clients and readers that I am most passionate about achieving…

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