The Retirement Bubble

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.

———————

Did you enjoy this post? If so, click here to subscribe to updates to The Retirement Bubble by e-mail. If you prefer an RSS feed, click on the RSS symbol on the upper-right of this page. If you would like to share this with a friend, just click on “share this post” below.