The Retirement Bubble

Last December, I wrote in an essay, Staying Off Our Backs, that focus was important, however, “that focus can become something we have a different term for in English – tunnel vision. That means the focus has become so intense that we may miss other factors that are important, or notice them only when it is too late to do anything about them, or if we see them, to give them too little serious attention.”

I have said here that I do not enjoy raising negative possibilities, but wish to emphasize the positive, and I have every intention of continuing to do that. But ignoring the negative does nothing to help when talking about future scenarios. Discussing why something or someone in the past was wrong or did the wrong thing is of little use to future planning, beyond the simple reminder not to repeat past mistakes. There is more than enough of that kind of negativity going on already. Discussing the negative factors existing right now, today, and having a bearing on our futures is more acceptable, but still has to be dealt with carefully to avoid unnecessary conflict among people of different viewpoints.

However, thinking about potential negative factors or events in the future can be very useful. For example, I talk about the likelihood that we will live to a far older age than most of us think likely right now, thus greatly extending and expanding our financial requirements. I also talk about the likelihood that depression can be our worst enemy in the future, if we find ourselves without resources and no practical way to gain them due to our decision to step out of the work world completely. I talk about the possibility that government funds either will simply not be available when we need them or that the taxpayers may decide that other groups, the young for example, deserve priority. These are all negative possibilities and mentioning them is not meant to depress us, but to help us break free of that “tunnel vision” and take into account factors we might not otherwise consider or give little attention.

I seriously doubt there are any Americans (and most others as well) who are not aware that their nation is facing huge government deficits and a rapidly rising total government debt burden. How all this debt is to be paid for is a serious question that leads to a wide range of responses, but everyone can agree on the basic fact that the debt is huge, growing rapidly, and will take a very long time to pay off without destroying the value of the US dollar. The graph below, taken from Wikipedia’s entry on the US budget, helps provide us with some perspective on the issue.

The US is not alone. Just as many people are probably aware that Greece is currently going through a national trauma of the first order as it struggles to deal with a government financial situation that is worse than that in the US and most other nations. It is difficult to see any relatively easy or painless remedy to the Greek tragedy being played out before us today.

But Greece is not alone either. There are a number of other European nations facing severe financial challenges. One of those is Ireland. They are one of the worst-hit economies in Europe, but they have not provided the melodrama we see in Greece with angry demonstrations, riots, and whatever else some Greeks can come up with to make their anger known (with kudos to the majority of the Greek people who polls clearly show accept the financial reality and support efforts to deal with it constructively, despite the pain). Today, the Greek parliament passed an austerity budget that will be very unpleasant, but, if implemented, can make a big difference. The question is, of course, will the Greek people accept it and survive it without tearing their nation apart? I sincerely hope so, but that is to be seen.

Ireland, on the other hand, already has its austerity budget in place and under implementation. It is a very tough budget and it means drastic cuts in services that the Irish people have taken for granted for a long time. So this gives us, whether as Americans or citizens of another nation facing difficult choices, an opportunity to see what results from a genuine austerity budget.

The folks at BusinessInsider.com have prepared a very simple and straight-forward series of “slides” to describe what the Irish austerity budget looks like and how a similar American austerity budget might look like, should the day come when Americans decide they have to do something to cut spending as dramatically as they are now currently raising spending.

Their presentation has nothing directly to do with retirement, although it is briefly mentioned. Indeed, the Irish cuts that directly affect retirees seem quite modest compared to some of the others, but the it is the total impact that we have to understand, as well as how the rest of the Irish may feel in the year to come on the subject, are retirees taking their fair share of the cuts? When you have children with needs, that can be a serious question. But the important thing is to set aside tunnel vision and open your mind. We all talk about “cutting spending” to deal with budget deficits, although we may greatly disagree as to what to cut and how much to cut. Ireland is a nation that has not simply argued about it, but done it. Let’s look at the results.

So here they are. Wherever you live, take a moment to consider this lesson from across The Pond. When planning your future, whatever those plans may be, if they depend in large part on government support, all the more reason to consider it very seriously.

I will be back on the weekend with another story of someone who faced a challenge of his own making, with relevance to the requirements of a Life Sabbatical, and how it worked for him.
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