The Retirement Bubble

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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