The Retirement Bubble

Once again, recent reports cause me to focus on the financial and economic environment we live in today. Three disturbing situations and no clear way out. We can begin with the US side of “the Pond”.

Allan Sloan, a senior editor at Fortune magazine, tells us, “Don’t look now. But even as the bank bailout is winding down, another huge bailout is starting, this time for the Social Security system. A report from the Congressional Budget Office shows that for the first time in 25 years, Social Security is taking in less in taxes than it is spending on benefits. Instead of helping to finance the rest of the government, as it has done for decades, our nation’s biggest social program needs help from the Treasury to keep benefit checks from bouncing — in other words, a taxpayer bailout.” The full article shares the statistics on which he bases this report and they are supportive…of his argument, not us.

And another topic that gets some attention, but far less than it deserves, is the gross under-funding of pension plans in the US. Mike (Mish) Shedlock discusses one tiny piece of this unfolding disaster in (where else?) California, as the city of San Diego faces a collapse of its pension program. Now that is a really tiny piece of a very big picture, but it gives us a taste. And San Diego is not alone. There are plenty of states, cities, and corporations in trouble, as is the federal government’s pension plan for its employees.

Across the Pond, Europe is facing a real disaster, as many of you have probably heard. Charmingly referred to as the PIIGS (Portugal, Ireland, Italy, Greece, Spain), we find their economies unraveling and threatening to take the Euro with them. Cute though “PIIGS” may be, it is also misleading, as Peter Zeihan of Stratfor (Strategic Forecasting) explains in simple terms in this video.

A major league financial crisis In Europe has consequences for all of us and we do not want to go there, but by this time next week or next month, we may be there. I do not see an easy way out for Europe, any more than I do for the US and, I fear, it will be worse in Europe.

Folks, the old 20th century system is broken. We have created a giant mountain of debt that is now crumbling, with occasional landslides that drive the point home. The mountain is still huge and growing in some areas. But the crumbling and the landslides are continuing and are likely to continue for a long period, measured in years, not months. That is the grim reality. Unfortunately, we have no really dynamic leadership, anywhere in the world, willing to level with the people and face up to this honestly. In the past, major crises have seen the rise of leaders who, whether they were loved or hated, provided the leadership that people needed when all was confusion and fear (Roosevelt, Churchill, and others come to mind). I do not see that leader today. I single out no one person to criticize, the problem is global.

When I wrote Next, the Retirement bubble last June (seems like a couple years ago), the situation was grave, but it just keeps getting worse. And as far as I can see, there is plenty of pain left to come.

But the single most important thing to know is that this is one horrible time for a traditional retirement! For all the reasons I have already discussed here (earlier retirements, much longer retirements, insufficient savings, etc.), this would be true under the best of economic circumstances for many people. Under our current economic circumstances, it is nothing less than a disaster for everyone. Yes, everyone. We are so inter-linked these days that there is no cave deep enough in the mountain for any of us to hide. If that sounds extreme, let’s talk in a year or two.

I could easily say that it is scary to watch this mountain of debt crumble underneath so many people, but that would be misleading. You see, we are all living on that mountain. None of us will go unhurt, but those who refuse to accept the reality that surrounds them are in danger of being buried beyond rescue.
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When I see something new and different on the topic of retirement elsewhere, I like to comment on it while it is still fresh. Thus I will step back from the direction mentioned in the last post to talk about another approach to the Retirement Bubble. This is a column titled, “The Geezers’ Crusade”, written by an op-ed columnist at the New York Times, David Brooks.

Ignoring for the moment the use of “geezer”, what especially grabbed my attention was Mr. Brooks’ blunt comments on those of us in the “50+” category:

Far from serving the young, the old are now taking from them. First, they are taking money. According to Julia Isaacs of the Brookings Institution, the federal government now spends $7 on the elderly for each $1 it spends on children.

In the private sphere, in other words, seniors provide wonderful gifts to their grandchildren, loving attention that will linger in young minds, providing support for decades to come. In the public sphere, they take it away.

He finishes by calling for a “spontaneous social movement”, mentioning both the movement that brought Barack Obama into the White house and the more recent Tea Party movement.

Spontaneous social movements can make the unthinkable thinkable, and they can do it quickly. It now seems clear that the only way the U.S. is going to avoid an economic crisis is if the oldsters take it upon themselves to arise and force change. The young lack the political power. Only the old can lead a generativity revolution — millions of people demanding changes in health care spending and the retirement age to make life better for their grandchildren.

The elderly. They are our future.

You can read his entire column at the New York Times.

THe first section above expresses some simple ideas in the sort of blunt language I used in my article at Barron’s, Next, the Retirement Bubble. It is rare to see this type of frank approach and I appreciate it. Some folks go so far in trying to be “polite” that they just do not get their point across. David Brooks gets his point across and I thank him for that. We need to hear it.

I am of the belief that if you are going to point out a problem, you should have something in the way of a solution to offer as well. In my case, the sharply negative language at the beginning of my Barron’s article led to my recommendation for a Life Sabbatical as a positive response.

Mr. Brooks has his positive proposal as well, but I must politely suggest that it is unlikely to be of much help. He calls on us to initiate a “nonselfish” social movement to demand that more money be spent on the youngest generations rather than on us. Sounds good, but not likely to occur.

First off, don’t imply that we are “selfish” and uncaring for the fate of younger generations. We are simply trying to deal with our own situation, resulting from an out-dated approach to retirement not because of any selfishness, but simply because that is the route our parents and grandparents took. We have been doing or planning to do what we were taught we were “supposed” to do when we were the younger generation. Give us a chance to come to grips with the radical changes facing all of us, not just us “geezers”.

Second, please keep in mind that simply calling for more money to be spent in support of the young does not do anything to remove the burden you now suggest we are. It only ignores it and, quite frankly, where the heck do you expect to find the money to support the goals of our “nonselfish social movement”, as well as help us deal with our needs?

Third, there are very few “nonselfish” social movements and the successful ones usually have a leader. Most have a clear benefit to those in the movement. Mahatma Ghandi’s movement in India was “selfish” in that its success was meant to directly benefit the members of the movement. I do know of one social movement in the US that I would call “nonselfish” and that was the Civil Rights movement which was powered in great part by white people on behalf of brown and black people who were to directly benefit. But such a movement requires a truly inspiring leader who can galvanize our support and the attention of the media. That leader was the Rev. Martin Luther King. Without leadership of that quality, we will not be able to rise above our own needs to focus on those of others “nonselfishly” (sorry for all the quotation marks, but “nonselfish” is not a word in my dictionary, I would have used unselfish and been done with it). I see no Rev. King of the geezers on the horizon.

Fourth, the approach we need to take is one that deals with the burdens felt by all generations, not just shifting attention from one generation to another. How can we who are older help the younger generations and ourselves at the same time? That is the question.

The solution is not to spend more money on the younger generations while spending more money on the older generations. I believe the solution lies in the older generation doing a better (and happier) job of earning its own income and meeting as much of its own needs as possible to free up resources to help those coming up behind us. That is the core of the Life Sabbatical approach.

I figure the probability of David Brooks reading this blog post are about one in 10,000, probably less, but if he were to do so and we were to discuss it, I would emphasize my appreciation for his having faced the problem straight-forwardly. It’s the solution that needs work.
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None of us likes to feel vulnerable, that is, susceptible to physical, financial, or emotional injury. I wrote earlier about the 3 S’s (structure, stability, and security). When we feel vulnerable, our security and often our stability are threatened and we hate that. I certainly do. To be vulnerable is a negative and feeling vulnerable is associated closely with that most powerful and dangerous of emotions, fear. If we don’t like feeling vulnerable, we really, really don’t like being afraid.

When folks felt vulnerable following the collapse of the stock market bubble of the late 90’s, it was possible that people would have gambled less on quick profits and focused more on long-term planning, but the allure of the real estate bubble was too great. Many people got swept up in that bubble, particularly at its later stages, because everyone else was doing it. As long as they were just part of the crowd, they felt less vulnerable when, as we now know, they were actually just making themselves vulnerable again. The failure of the real estate market in the last couple years has really hurt folks who were still carrying the scars of the stock bubble collapse.

Under these circumstances, two collapsed bubbles of huge size in less than a decade, it does not surprise me to hear that many people are now pulling back from anything they see as risky and becoming much more conservative in their planning. It is a natural tendency to swing to the reverse as a reaction to pain. You can see it in many articles, such as this one at MarketWatch that discusses the trend to “down-sizing” homes and amenities when retirees buy real estate.

In general, this is all for the good. However, unfortunately, many people are likely to over-react.

I now hear this far more often than a couple years ago, for obvious reasons. Some people have simply “frozen” and do not want to do anything differently for fear that they are making themselves vulnerable again. As the old saying goes, they have tossed in the towel. Anything new that sounds “radical” is immediately rejected as dangerous.

I think that can be just fine when it comes to financial matters. Too many folks just rushed in to buy without considering the consequences if it turned out to be a mistake. Taking some time out to consider consequences is an excellent thing to do, if you have been stung by a collapsing market, especially if you have been stung twice.

But when it comes to future planning, a little “controlled vulnerability” can be useful. That is one consequence of following the Life Sabbatical model. Whether you are unemployed and doing this as a full-time activity or employed, but doing it in your spare time to open up new options, a Life Sabbatical approach will leave you just a little vulnerable. You will look at a variety of different activities that might be worth your time and effort for serious implantation, so you are always a little vulnerable to disappointment. But since your goal is to study, learn, and experience an activity before adopting it as a goal, you can drop it if things don’t work out and move on to something else.

Think of it as “following your nose”. If something “smells good” (i.e., it is an activity that interests you on the basis of what you know now), then you can look into it, visit others doing it, talk to people who do it for a living, and so forth. If it continues to smells good, you can take a course at a local center in your community, if you have one, or on the Internet, if you don’t.

As long as it smells good, keep moving forward. Whether you are taking small steps or big steps is not half as important as taking a step forward. It is not a question of how fast you are moving, but whether you are moving at all.

If that activity should “smell bad” at some point, then you can stop and reconsider it. Is it just one bad experience? Is it an obstacle with a way around it? Did you approach it with the wrong attitude? These are questions you will have to answer, I cannot, but if you decide it stinks, just drop it and move along. You still have your nose. There are other scents to follow.

Sometimes we get too wrapped up in deciding on a new course, feeling we have to know what we’re going to do before we have done it, observed it in detail, and discussed it with others who do it regularly. Sometimes we feel we cannot invest our time and effort in anything unless we have pre-determined that it is “worthwhile”. The problem is simple. Without having put that time and effort in, we cannot know if it is worthwhile or not. Any decision we reach in advance is likely to be way off-course.

Follow your nose. That is today’s generalization. I will try to provide you with a couple specific examples drawn from real life in the posts to come. In the meantime, get that nose out there!
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There are changes underway in American society. I suspect the same can be said in Canada and much of Europe, although the changes may take on a different emphasis there. There are also going to be some small changes here at the blog and site, but more on that later.

It so happens that the latest statistics available to me are from the US, so I will focus on those. In the last post, I mentioned the Pulte survey indicating that 41% of Americans turning 50 years of age in 2010 do not expect to ever be financially able to retire. I suspect that is way too pessimistic, but it means they are reconsidering their future planning and not assuming the best results, a sensible approach these days. Of the 59% who still expect to retire, their average predicted age of retirement has risen four years from 63 to 67. Again, whatever the future may hold for them, this is a rational approach today.

Bits and pieces of other trends are showing up. As MarketWatch reports, “New-home buyers responded to the tough times in 2009 by opting for smaller houses, driving down the average size of a house built in the U.S. for the first time in 27 years. Data released Wednesday by the National Association of Home Builders found the average size of a new home that was completed in 2009 fell to 2,480 square feet from 2,520 square feet in 2008. The last time the average completed-home size fell by a statistically significant amount was 1982.”

Okay, that’s less than a 2% reduction, but it is a reduction and that is the news. I am not going to be the least surprised if 2010 brings an additional reduction and probably a larger one.

One of the potential obstacles to folks breaking from their failed future strategy to create a new one is the belief that everything will soon “return to normal”. I suspect there were many who felt that way in late 2007 when “sub-prime” entered the vocabulary and probably through 2008. But things did not get better in 2009 and attitudes are changing. Just a few days ago, the Gallup Poll asked a national sample how long they thought it take for the US economy to recover. Here are the results:

The mean (average) was four and a half years (some in the “5 or more” category expect it to take far more than five years) and that puts recovery into 2014.

The accuracy of these guesses is of no consequence. Obviously, they are not all right. The key is that people are beginning to approach the future differently than they were five years ago. They are starting to think longer-term and that is critical if they are to deal successfully and happily with the extended future that lies before them. We are starting to break the habits of our parents and grandparents and beginning to create our own habits, more fitting to this century and our place in it.

This is not unexpected, we all come to grips with reality eventually, but it is good to see it underway. Of course, politicians on both sides of the aisle are going to act as if they have the solutions to our problems that will turn things around in a year or two and guarantee happiness for everyone. Thankfully, many of us choose not to be so short-sighted in planning our futures.

Are these trends or shifts sufficient to get us through the Retirement Bubble? No. It is an important beginning, but only a beginning. Now that we are accepting that the world has changed for the worse and we cannot avoid it, we are vulnerable to slipping into a negative, frustrated, even bitter mindset. That is fertile ground for future social conflict that we really need to avoid. No, we need to create a positive approach, not just to rationalize our actions, but to give us the emotional “kick” we need to get into a different mindset. That is what the Life Sabbatical is about and that brings me to the blog and the site.

Most successful bloggers follow simple rules: write short posts and post frequently, at least daily. Now that Twitter has taken off, hourly or less seems to rule. Well, I am not going to waste my time on that. I don’t need the ego boost. I have written for Barron’s and the Christian Science Monitor, I have been interviewed on CNBC and Reuters television, quoted by the Associated Press, BBC, the New York Times, and a host of others, written for several publications both in print and on-line, the list is a long one. My ego is just fine, thank you, it does not need boosting. When I write, I want to have something of substance to say and it is not likely to be said in 150 words or less, and certainly not in Twitter’s style. But that is not a good way to draw blog traffic! So be it.

Likewise, I do not blog every day or even five days a week. I have stuck to a Monday-Wednesday-Friday schedule. But this is also a “forced” approach that is not always appropriate.

So, from here on, I will blog once, twice, three or more times a week, but on no particular schedule. When I have something to say, I will say it. Those of you who subscribe either to the RSS feed or the email alerts will know when I have written.

My longer-term goal over the next couple months is to reorganize the site to reflect much more of what I have written here. Among other things, I want to put together a summary of my thoughts and recommendations in a form that can be downloaded. That will take the most time, but I want to be able to offer something more complete so visitors do not have to wade through the more than 100 posts already here to find what they want!

Yes, it is a good time for change!
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The silly “retirement planning” nonsense continues with no end in sight. Over at MarketWatch, their home page makes a big deal about this, ” Special Report: Retirement Outlook – You’ll need to save more for your retirement than you think. Marshall Loeb offers a simple retirement-savings formula right for today.” When you go to Mr. Loeb’s simple formula, you will find something more simplistic than simple. Here is his formula for retirement planning success:

“If you’re 40 or younger, you should be saving or investing at least 5% of your pretax pay every year. If you’re between 40 and 45, you should step up your saving by at least 10% a year. After age 45, put away 10% a year. Do you think you can’t scrape up any savings at all? Consider this: When you get your next raise, bank it and continue to live off your old income. Also, arrange with your bank or employer to have a fixed amount deducted from every paycheck and deposited in a savings account or a stock mutual fund of your choice.”

Good grief, this is utterly irrelevant to a huge group of the population and of little use to many others. At the very least, it falls short of being “a simple retirement-savings formula right for today“. Mr. Loeb, one out of every six (actually 17.3%) in the work force are unemployed and still looking, unemployed and have given up looking, or our part-timers who need full-time employment. Many others are struggling with lowered income, the threat of future job loss, mortgage payments beyond reason, and a host of other problems. We are indeed in the midst of a financial crisis, although you would never guess that reading Mr. Loeb’s advice.

People who can actually put aside 5-10% of pre-tax income are very likely a minority group and, quite frankly, if I’m 45 and get 50K a year and somehow put 5K of that aside, after taxes, will I be ready to finance a 30-year or 40-year retirement at 65? I don’t think so.

Let us take a moment to consider another version of reality. As Reuters reports, according to a survey commissioned by homebuilder Pulte Homes, of those who turn 50 this year, 41% say they will never be financially capable of retiring and 23% have not even started to save. Yes sir, Mr. Loeb, a quarter of those hitting 50 this year have not even started to save.

But there is good news too! As Reuters adds, “Still, the study reveals deep financial concerns on the part of potential Del Webb buyers who are turning 50 in 2010. Even those who do plan to retire say they will do so later, at a median age of 67 compared with 63 for the older survey respondents.”

There you go! Finally, some real retirement planning that makes sense. Put retirement off for a few years and earn additional income. Or do what 41% are doing. Just put retirement out of your mind for now. Those folks can go back into a planning mode later if circumstances allow, but for now, they are dealing with life as it is, not as they wish it was.

Give that some thought, Marshall. Both are simple solutions “right for today”.

I try to offer something more positive and constructive in the Life Sabbatical, but I would take the advice of 64% of those turning 50 this year over that of Marshall Loeb any day of the week.
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As Chaya Cooperberg of Toronto’s Globe and Mail mentioned today in her column, “Chatting with a financial planner recently, I learned that increasing life spans mean we all need to adjust our retirement savings goals. People should plan for retirement income to last until at least age 95, she told me. Even for those not leaving the workforce early, that’s still 30 years of living expenses to finance. No wonder many Canadians don’t expect to be able to afford their dream retirement.”

Her last comment is a reaction to the release of the results of a major poll of Canadians, retired and planning to retire, contracted by the Royal Bank of Canada (RBC) and conducted by the professional survey firm of Ipsos Reid late last year. I will summarize some of the results below, but the full press release can be read here.

I am delighted that Chaya’s financial planner friend told her that clients had to plan to live “until at least age 95″. I think this is an under-estimate of a decade, possibly more, but it is a huge improvement over the 85 age still used by some planners. That is the closest thing I would call “good news” to report tonight. The poll itself offers no real surprises to us, but is still scary. Here are a few excerpts from their press release and my brief comments:

“Nearly all Canadians (90 per cent) feel they will have enough income to cover their necessities in retirement but only one-in-four Canadians (25 per cent) feel they will have enough money to fulfill their retirement dreams.” Let’s ignore that many of these people may be under-estimating their age at death and thus their needs. The idea that 65% of Canadians (90%-25%) seem to think they will cover their “needs” but not their “dreams” is disturbing. Why? Because they have no margin of safety. If they leave the work world and go unemployed for years, then discover they cannot meet their needs, they are in serious trouble. At least the 25% have a fighting chance, if they have under-estimated their requirements, to fall back from “dreams” to “needs”. But the 65% are more likely to fall from “needs” to “desperation”.

What would I say to these folks if I was a future planner? As for the 10% who don’t think they even have enough to meet their needs, I would work with them to create a strategy to find employment. Nothing else makes much sense. For the 65%, I would help them focus on a Life Sabbatical or some similar positive approach that gave them some of the benefits of retirement while we developed a positive approach to income-earning that would bring them supplemental income and keep them “in the game” of the work world, but with greater satisfaction. But I doubt RBC is going to do anything like this. They will just continue earning fees to handle whatever “portfolios” these folks have. And if they run out of money in the future, I would not be shocked to hear the bank express their regret, wish their former clients well, and send them on their way. Next customer, please.

“The poll found that most retired Canadians (75 per cent) didn’t know how much they spent in their first year of retirement, virtually unchanged from 2008 (76 per cent).” Good grief. If you don’t know what you are spending right now, how much confidence can you have in your future planning?

I’ll be frank though, it is not the statistics that bother me so much as they statements made by bank representatives. Let’s take a look at a couple.

“How much money you’ll need in retirement depends on how you’ll be spending your time, with many Canadians underestimating the amount they will need,” said Lee Anne Davies, head, Retirement Strategies, RBC Royal Bank. “Financial planning is more than just number crunching and your retirement is not a single phase of your life, but a series of stages.” Okay, not too bad, what’s next?

“A personalized financial plan can look at options to make your nest egg last and help ensure your retirement needs and dreams are met…Whether retired or not, your life will be somewhat unpredictable at times and you need to be ready when life throws you a curve ball. This is where having a plan can provide peace of mind – you’ll know you’ve considered the unexpected and you’ve taken the steps to save for your retirement, said Davies.”

Good god, that just sucks. How many glittering generalities can you stuff into three sentences? They feed us this pap and they expect us to be impressed.

This is what I would like to say to any RBC or any major “retirement planning” outfit that fed me that pap. “You spend plenty of money on market research (and this poll is just market research), so I am sure you must spend a lot on evaluation of past efforts. I need some sound statistical evidence demonstrating that your planning advice of the last ten years successfully protected your clients from the current financial crisis. You hire outside professionals like Ipsos Reid to do your polls. I expect you to hire outside professionals to prepare a statistically-valid study of the outcome of your actual planning advice to real clients over the last decade. Prove to me that you have already demonstrated that, “you’ll know you’ve considered the unexpected and you’ve taken the steps to save for your retirement” is not empty talk, but solid results you can point to with pride.

I would think you already would have done this and proudly announced it. Funny though, I haven’t seen that press release.

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Too much is too big. Our multi-level hamburgers and super-sized fries and drinks are too big. Our new television screens are too big. Our pants are too big. Our bodies are too big. I don’t know about other nations, but our homes in the US are too big (1950’s – 1100 square feet/102 square meters; 1970 – 1400 sf/130 sm; 2004 – 2330 sf/216 sm; 2006 – 2469 sf/229 sm), despite a drop in household size (from 3.67 members in 1940 to 2.62 by 2002). I am sure most of us could add a lot to that little list. How do you know these are “too big”? You know when your wallet is too small and you have to go into debt to get something too big. The result? Our household debt is too big. Our government debt is too big and growing. We are in big trouble, too big to solve in a month or a year, or with a stimulus bill or a bail-out.

Now there are many of us who have discovered that our “retirement plans” are too big.

Some will criticize that quick list as silly. They will focus on the trees and miss the forest. Others will understand my point has nothing to do with the size of anybody’s television screen. I will assume you are part of the second group and just move along.

Most of my readers are old enough to remember the 1980’s as an adult. I remember in the late 80’s, probably 1987 or 1988, reading in the Washington Post that the big banks had taken the unexpected step of lowering the minimum down-payment for a mortgage from 20% to 10%. 10%! Astonishing! We had a real estate bubble going at the time and I remember thinking, these guys are going to do whatever they can to keep this bubble expanding. It helped….for a year or so, then the bubble popped.

How ironic. If that “astonishing” 10% down-payment that was front-page news in the 80’s had been the rule over the last decade, we would be living in a very different world today, and not just in the US. Our mortgages would not have been “too big”. Too late now.

There is nothing wrong with “big”. But there is something very wrong when we fail to see the difference between “big” and “too big”, until immediately after a disaster. It is immediate because we really knew all along that it was too big, but we just hoped we could cash out before the truth escaped the darkness of our sub-conscious and slipped into the light of our conscious minds. Some of us got lucky. Many did not.

Okay, I could do what some bloggers do and spend the next six posts talking about things that are “too big” in our North American and European societies. It would make for some fun writing and probably fun reading, but to what end? Instead, what do we do about this situation?

Years ago, people got fired. Then we felt bad, so we created the word, layoff. Then government came up with a euphemism for firing people. They called it a “reduction in force”. Sounds nicer than firing, unless you are the one being reduced. Business tried “down-sizing” when layoff got a bad name, then came up with a more positive term, “right-sizing”. Again, that was just great, unless you were the one being right-sized.

Like “collateral damage” replacing “civilian deaths” in war, these sanitized terms often made me wince. Right-sizing was especially annoying, as if the person being canned was somehow “wrong”. I don’t know, it just was not a very appealing term. Today, “rightsize” (no hyphen) is a word.

But there is a good reason to right-size (forgive me, I am going to go on using the hyphen; I am an old-fashioned guy) that does not have to mean causing other people pain, although it may involve some pain.

We need to right-size our lives and our future plans. Yes, I know that sounds a little corny, but we need a positive way of looking at this transition we have to go through. If our old plan has failed, we need to get it right this time. As I said a couple posts ago, “Do not consider this a failure. Consider it liberation from failure.”

A few years ago, I lived in a house in the country that was at least three times larger than I needed. It was a beautiful home with a big yard and I was always pleased to show it to guests, but a third of the space was rarely ever used, another third was used very infrequently, and the yard went ignored almost all the time. I informally tracked my movements one day and realized just how little space I actually used. That was the space I needed. A little extra was nice, but more than that was useless to me in practical terms and just space that had to be cleaned, warmed, cooled, and otherwise maintained at some cost to me. When I moved into a much smaller apartment in the city, I actually felt a great relief. I “fit” my home and it fit me.

I now live in as small an apartment in Panama and have no desire to move into a bigger home. Who am I trying to impress? And why? Yes, I have quite a few things in storage back in the US, but I now wonder how much of it I really want to bring down to Panama. When I visited my storage last year, I was surprised at how much was there that I had completely forgotten about. I can imagine handing out most of it to family and friends. If I can’t even remember a piece of furniture, can I honestly say I need it? And if I don’t need it, why hang onto it when someone else can use it?

For me, this is right-sizing. For you, it may be something else. But the only way I really came to grips with my problem of “too big” was to seriously look at what I had and what I really used. I do not need what I do not use. It is too big for me.

That is hardly a profound insight. What is profound is how long it took me to understand it and act on it.

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A “time warp” in science fiction is a literary device typically used to mean a way of moving forward or backward in time. About as close as most of us ever get to a time warp is to relive a past experience or fantasize a future experience entirely in our heads. I have no problem with time warps as a literary device or as fantasy, but “warp” also means “distortion” and time distortion is often something that does bother me when it affects our future planning.

There are many little time warps we experience in our minds that are basically innocent. A parent looks at a newborn child and “sees” him or her twenty years later as a bright, attractive young adult about to set off on their own. A woman looks at the man she will soon marry and “sees” him in decades to come as a good provider, a good father for her children, and a comfortable mate in their “golden years”. A young man walks into an office for the first time to take a new position and “sees” himself as a manager in three years and a vice-president in ten, or whatever fits his fantasy. Obviously, you change the genders in the last two examples, but the point remains the same. And we do this hundreds of times during our lives, “seeing” ourselves in times to come in a new car, a new home, college, summer camp, a vacation spot, and more.

In all these instances, most of us are seeing positive results in the future. And most of us understand that there are hundreds or thousands of steps we have to pass through before we truly see, for example, the babies in the crib become the successful young adults off on their own. The time warp that lets us “see” results well before they happen is restrained by a realization that, as the old saying goes, “Rome wasn’t built in a day.”

When we lose the restraint, the time warp can be a life distortion.

Yes, I am old enough to remember when young couples might spend several years saving money before having their first child, than spend several years saving enough for a down-payment on a house. I remember when Americans had “Christmas accounts” at their savings bank where they put in ten dollars every paycheck so they would have extra money at Christmas for gifts (by the way, I was delighted to find that they still do this in Panama). I remember when a young professional expected to rise slowly up the ladder to a management position, perhaps taking a decade or two or more to get to his or her goal. We did not call this “delayed gratification” in those days. We called it “life”.

Were people then smarter than people today? No. They had lived through 15 years of crap called the Great Depression and World War Two. Any ideas of rapidly attaining a long-term goal in a short-term period were pretty much destroyed by simple circumstances. So what might have been frustrating and irritating to their parents during the “Roaring 20’s” became normal and good. After all, they saw the 20’s collapse into the 30’s. They knew something gained too quickly and too easily could disappear just as quickly and easily.

We may be training another generation to understand that right now as a result of our own distorted time warp. I hope so as it would be nice to think someone is going to benefit from all this!

But our older generation needs to catch on to this too. We are not dead and we look like we are going to be around a lot longer than our parents or grandparents would have expected. We can be 75 and still need to plan our future.

We know we have a problem and we have known it for a long time. For something like 30 years, I have heard people say over and over again that there is too much short-term thinking and too little long-term planning. Companies, governments, and households have all been criticized for expecting instant gratification or promising to deliver it when we all know life does not work that way.

During the most recent real estate bubble, we began to resemble Gollum, that ordinary hobbit in Lord of the Rings who transformed himself into a strange, sad creature wasting his life seeking what he could not have. Gollum had his moments of supreme joy when he thought he had the ring in hand, and he had his periods of depression when he realized it had escaped him again. Sounds a little like some homeowners I have known over the last few years.

We have to break this habit of expecting to reach ambitious goals quickly. We may protest that we are not seeking instant gratification, but it would probably strike a lot of our parents and grandparents that way if they were able to see how we plan today. It is not a question of blame. We have lived through very different experiences than that earlier Depression/War generation. They had their short-comings too and we did a lot to change their world for the better. It is a question of recognizing we have a bad habit and doing something about it.

I can write these words and agree with myself while writing. I suspect the majority you can agree, if you do, just as quickly. But I know that I have to actually work to make this happen in my future planning. Recognition of the general problem is only the first step toward dealing with it myself.

One technique I use is to go ahead and set my ambitious goal, but I assign it to the “future”, without a specific year in mind. Then I plan for the next three to five years. I do not expect to reach that goal in three to five years. If I do, great, but I definitely do not expect it, so I definitely do not plan for it. I just focus on what I can do over those years to move me closer to that goal.

I know that events will occur that cannot be predicted or planned for now, but which will have impact on my planning. Okay, I’m only planning for three to five years and I am not expecting to reach my goal, so I can adjust more easily. It’s a “head thing”. I don’t care, just so long as it works and it has worked.

I started this when I was 40, nearly 25 years ago. At first, I thought in terms of “five year plans”, but that sounded too much like the Soviets and I knew where that took them. Unexpectedly, I discovered that once I got into this habit, I no longer worried about when I would reach my goal, only that I was making real progress.

I have changed my goal more than once to fit changed circumstances, but I have always felt I was moving forward. I have learned that this is enough to keep me positive, and that has made life a lot easier when circumstances have gone negative. It has given me the flexibility to roll with the punches, a very handy benefit in tough times like these and, I trust, will be the same in tough times to come.

There’s no magic in this. I am just warping time for my own benefit, instead of letting it warp me.
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The last post concerned the 3 S’s: structure, stability, and security. Today, I want to discuss the current global crisis that marks the end of an old, familiar, but collapsing structure.

Regular readers will surely have noticed that I do not waste my time by joining the mob of shouters and screamers who are too busy trying to tell us who is responsible for the royal mess we are in. I do not concern myself with that old question, “Who shot John?” John is dead. I am more concerned with “Who’s next?”

Let me begin with a few blunt comments. The 20th century is history. The Cold War is history. The Soviet Union is history. The “Free World” was defined by its opposition to the Soviet Union. It is now history too. Therefore, America’s role as “leader of the Free World” is history. Karl Marx is long dead and so is Joe Stalin. Chairman Mao is dead. The “Third World” was a catch-all category for new, impoverished nations and it is history too. Some of those former Third World nations are in much better political, economic, and social shape than Europe and the US. I live in one of them, Panama. Finally, one idea that has been beaten to death before our very eyes is the idea that Americans and Europeans are more “sophisticated”, intelligent, and rational in handling their finances than the rest of the world. If anyone has missed that somehow, just open your eyes, your ears and your mind. The beating continues and probably will for some time to come.

The old “structure” has collapsed in its many forms. I feel that the last few years have been the proverbial “wake-up call” for people all over the world, including those in other nations who have now accepted that North Americans and Europeans are not good role models and do not always merit their attention or, perhaps over time, even their respect. As an American who has partnered with other Americans and Europeans for four decades in global work, the collapse of the old structure is too obvious to ignore. Like everyone else, we struggle to deal with it too, but at least we have given up any idea that our history represents our future.

What is the new structure to take its place? Well, that is up to 6.7 billion people in nearly 200 nations to decide. This is going to take some time, although the process is gathering steam, now that critical parts of the old structure are collapsing. Check back with me in a few years and perhaps I can do a decent job of describing the new structure, but it is too early now. All I feel comfortable saying today is that it will not be the old structure modified, it will be a brand new structure and very different than the old.

What does this mean to us, those who are attempting to plan our futures?

With the old structure gone, instability and insecurity are the logical results, as discussed in the last post. Since we humans hate instability and insecurity, we typically try to first convince ourselves that the old structure will return and, once that has failed, to do nothing but be depressed and let events take their course. That is not “future planning”. That is surrender and will leave you totally vulnerable to even more disaster.

There comes a point when you have to turn away from the agony of the old structure’s collapse which you cannot stop and focus on the one structure that offers you any hope of control – the structure of your life. Go ahead and be “self-centered”. That does not mean that you need to be selfish. You can still give serious attention to the needs of others, but you must give serious attention to yourself or you will be of little or no use to anyone.

If you have had a plan from past years that is now toast due to the crisis, get rid of it. Trash it. Delete it. Do whatever you need to do to put it out of your mind. Start fresh. Just wrap all that depression, anger, wishful thinking and whatever else is making you cling to that old plan, put them in a box, and toss it off the highest cliff you can find. Put it out of your mind and if it pops up, kick it out again.

This is not going to work, though, if you have nothing to replace it with. If it is the only plan you have and you lose it, then you really are lost at sea. You do not need a detailed plan to replace it. That is a serious stumbling block for many people. All you need is a plan to begin again. A Life Sabbatical is one approach. But in any case, do not consider this a failure. Consider it liberation from failure. It is only a long-term failure if you get stuck in it. It is an analogy as old as the hills. If you get knocked down, get back up. Don’t just sit there crying.

You would tell a kid to do this. Why should you be any less helpful to yourself?
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In my own experience and that of others I have worked with over the decades, I have found that there are three things we like to have. And if any one or more of them are missing, we prefer it be by our choice, not someone else’s, and we will work to restore them, perhaps in a new form, but one we find acceptable. It so happens that each starts with an “s” in English. They are structure, stability, and security. Let me define them very briefly.

Structure may be provided by your parents, your school, your government, but whatever structure is important to you, you feel comfortable that it will be there tomorrow morning, next week, next month, next year and beyond. Structure is made up many tiny parts that fit together. Structure is knowing you have to be in History class at 3 pm on Wednesday. Structure is knowing who is going to be beside you when you wake up in the morning. Structure is knowing that your boss likes reports in a specific format and you know that format well. Structure is knowing that you live in a democracy and the secret police are not going to kick in the door and make you “disappear”. Structure is knowing that you are not welcome somewhere, so it is best to avoid it. During the Cold War for most of us, structure was knowing both our nation’s allies and its enemies, at least most of the time.

Stability is all about your environment, including the people you love or like the most and hate or dislike the most, and all the many you meet briefly or simply ignore. Stability is feeling confident that the structure is secure. Stability is safely assuming that no one on the bus has a gun and wants to kill you. Stability is safely assuming that when the traffic light turns red, the cars will stop a second or two later. Stability is knowing that your children will have what they need to get ahead in life. Stability is knowing that when a partner says, “I love you”, he or she means it. Stability is knowing that you have planned well for the future and can look forward to it with enthusiasm.

Security is all about you. Security is more than feeling safe. Security is knowing that sometimes a piece of the structure collapses, but knowing that it will be replaced with something else, maybe better, and there will be a place for you in it. Security is knowing that sometimes your environment can be unstable for awhile, but that stability will return, maybe even greater stability, and that it will be one that you can adjust to with a little effort. Security is walking out the door every morning, whether happy or not, knowing who you are, where you are going, and how you are going to get there, whether on the road to work, in your career, in your marriage, in your retirement.

The three S’s are not exactly the same for everyone. The structure that makes your life easy may be an obstacle to someone else. Your idea of stability may be someone else’s instability. What makes you feel secure may make someone else feel suffocated. But outside your immediate circle of co-workers, friends, and family, “someone else” will have to take care of themselves. You focus on each S as it affects your little corner of the world. When it works out well, there is a good life to be lived.

Well, here we are in 2010. Whoops. The “structure” so many of us counted on for so many years is dangerously shaking for some of us and has already collapsed for many others. Read a magazine, surf the Internet, turn on the television news and it is not at all clear what the “new” structure is going to be, only that the old one is falling apart. You can look for a leader with an outline of the new structure, but those who claim leadership offer no new structure, just a temporary “fix” here and there. Their sense of structure and stability has collapsed too. We may understand why they don’t have the answer, but they keep pretending they do. That can get old really, really fast. Is it any wonder that our sense of personal security is not what it used to be either? I don’t think so.

We all regularly use terms like “collapse” or “crash” at times like this. If we talk about “bubbles”, we are talking about the “pop” of that bubble. All of this is in our heads. Structures do not just collapse. They can weaken for long periods of time, but the day comes when the stress is so great that the structure just cannot stand any longer and then we experience a “collapse”. The collapse is in our perception of reality, not the reality itself.

But when all is said and done, who cares? We still have to deal with the collapse of the old structure.

If any of the above seems to apply to your situation, here is a suggestion. The Life Sabbatical is not just a way of dealing with future planning when you are older. It is also very useful if you feel the structure, stability, and security you need to live happily is disappearing. It can be a way of “stepping to one side” while the old structure’s collapse is finally acknowledged and a new one gets under construction. And when that new structure’s outline becomes clearer, the work you have done during your Life Sabbatical can help you adjust and find your own place in the new structure.

One thing is certain. It beats allowing yourself to be buried under the collapse.
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