The Retirement Bubble

When a major trend begins to turn, it does not turn overnight. It is a progression. Today, I share an example of that progression.

A few years back, I began reading articles that pointed out that Americans (and others) were not saving enough for retirement. The answer from retirement planners was to save more. I remember one article where it was recommended that would-be retirees save at least 40% of their after-tax income for retirement. Ridiculous. The great majority of Americans could not possibly save that much. That was not advice, it was just silly. But it was the only way to “make the numbers work”.

When that obviously did not make sense, we moved to the next level. No change in retirement plans in general, but a change in “products” offered to would-be retirees. Not so long ago (although it seems like ages ago), that product was tech stocks. Ooops. That didn’t work. Then the product was real estate. That seemed so much safer than stocks and it appealed to many in the public who saw real estate as having stable long-term value. Ooops. That didn’t work.

Now distress is growing, even panic in some cases. Time to find another “safe” product. Remember, retirement planners are earning income for their own retirement while helping others to save for theirs. As with the real estate industry as I mentioned in my Barron’s article, retirement planners did not want to “rain on your parade”. There was no money for them in telling people to delay retirement or to find alternative ways of earning income following retirement.

We are still at this stage in most cases. Words like “annuity” are now commonly used and, once again, are being sold as “safe”. Others take a different route to meet the emotional needs of their clients and recommended oil, gold, or another commodity. Above all, they support the illusion that a long-term retirement can be funded by simply purchasing their products and nothing more, certainly not earning income. We were definitely already into that stage when I wrote my Barron’s article.

We are now seeing a different approach. It is one that has been there for awhile, but not so much in the “mainstream” media. It is at least partially in accord with my approach at Barron’s. It reflects the first half of my article, but continues to ignore the second half, or an alternative of the author’s own creation. That approach could be called the “tough love” approach. One of those articles was published recently by Atlantic magazine, written by Megan McArdle, their business and economics editor. It was also republished at another site where I first saw it yesterday. You can catch the drift of her commentary from the title, The End of Retirement as We Know It.

She does two things in this relatively brief commentary. First, she demolishes the argument of another person that the retirement benefits enjoyed by public service employees should be extended to all private sector people as well. That is easier than “falling off a log”. It can take a little effort to fall off a log. It takes no effort to see that the money for such a scheme is not there and won’t be there for a very, very long time, if ever.

Secondly, she rains on the retirement parade. Consider it a ‘Spring shower”. As she puts it,

It was nice that a combination of rising life expectancy and broader pension coverage allowed a large segment of American workers to take what amounted to a multi-decade vacation. (Though this was never quite as widespread as people now “remember”). But this was never going to be sustainable.

and

We can warehouse people in spartan old folks homes (or treat them like kids and move them into the spare bedroom), in which case they can enjoy a lengthy retirement. Or they can retire for less time, and live more lavishly. But there is no conceivable system that is going to allow the vast majority of the population to spend a full third of their adult life in retirement, at anything like the same standard of living they had when they were working.

Yes, that is raining on the retirement parade. You can expect more of this from the mainstream press in the future, probably the near future. There will come a time when even “retirement planners” are going to have to come to grips with this, and that time is probably closer than they would like to think.

What is lacking from Ms. McArdle’s commentary? A practical solution that has any appeal to it. Moving into your kid’s spare bedroom is not one of those, especially for those like me who have no “kid” with a spare bedroom to begin with. No, the closest is, “Or they can retire for less time, and live more lavishly.”

What? She is saying “delay retirement” without actually saying it. And the goal is to “live more lavishly”? Good grief. That’s why her article is a “Spring shower”, not a real rain.

Recent surveys have indicated that many people are already pushing back their retirement. Most indicate they are pushing it back about two years. Good. That gets them in the right spirit and, if two years is not enough, then it will be easier to add another year or two or more later. In any case, once “retirement planners” are comfortable that much of their clientele are moving in this direction, even if reluctantly, you can expect to hear “delay retirement” more clearly stated. At least their products won’t have to change much, if at all, to fit that advice, but it won’t be seen as raining on a client’s parade. Remember, retirement planners (like most folks in business) are not leading their clients, they are following their clients.

I do not mean to insult Ms. McArdle. I wrote her a brief note and thanked her for bringing this reality to the attention of a wider public, without mentioning any deficiencies in her article, and I meant that. This is a step in the right direction, if belated. But at least she is less belated than most commentators in at least recognizing that traditional retirement is a “bubble” that is likely, all but certain, to pop.

There are two practical ways to deal successfully with The Retirement Bubble. The first is to keep working at your current job, if that is possible and if you currently have a job.

The second is to create a transition period between traditional employment and traditional retirement. That is what the Life Sabbatical is all about. Call it what you like and modify it to your heart’s content, or even create something new that works for you, but it is the other alternative.

Those of you who read this blog and accept its basic message are ahead of the game. You’re out in front. But that is for now. If you want to stay out in front, you have to move beyond acceptance to implementation.

One of those two alternatives is your “bottom line”.
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If you would like to read Megan McArdle’s full article, you can find it here.
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I am going to break the basic rule of “serious blogging” today and go way off-topic. I am so very, very proud of my new home, Panama. One of its strong points is that it is a “business nation”, not a “tourist nation”. That has meant that we have passed through the last three years of the global financial crisis without a single negative quarter of GDP growth. At its lowest, our GDP grew at a rate faster than our population. At its highest, we rivaled China. However, one of its weak points is that we have not had the sort of PR folks who could put together a good video presentation as is common in Mexico and the Caribbean.

Well, that has finally changed. A group made up of Latinos and Gringos now provides that service and the links below are two of their brief “demo” films.

In the first and most dramatic video, you will see snatches of lake scenes. In the second, about half the video is devoted to them. They were taken at my lake, Lake Bayano. The lake was created to power a hydroelectric plant which is completely unnoticeable to residents, unless they are standing on it. But best of all, they caught Bayano at the moment during the dry season when the lake’s water level falls. The land around the lake islands that is typically underwater “rises”. Even before the land is above water, when the sunlight can reach it, it breaks out in plant life. It’s a magical moment and they caught it.

Don’t worry. I will be back to normal in the next post!
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As business people know, every market is made up of segments and each segment is different. It is the same with retirees and those planning retirement. I don’t have a survey to point to, but I do have plenty of experience. Based on that experience, I can generalize six segments. Of course, every individual and every couple is a distinct “segment”, so this is necessarily a crude division, but I want to pass it along.

Desperate – These folks are in serious trouble right now. They can’t meet their bills and they are genuinely desperate as they search for some alternative. They cannot afford to even think about a Life Sabbatical. Unfortunately, there is nothing I can do for them, but I can and do sympathize hugely. I have seen good times and bad times. Bad times suck. I would not have wanted people to judge me during the bad times and I return the favor. Regardless of what led to their situation, they deserve my respect.

Depressed – They can pay their bills and they have food on the table, but they are depressed, very depressed. Their depression may root from the housing collapse or another market failure, but it affects every aspect of their lives and they even have trouble smiling. They can be very quiet, then very explosive. They can tell me who is responsible for causing their problems, in their minds. They can tell me who they think is responsible for solving their problems. Unfortunately, the latter list rarely, if ever, includes them. I have not been that depressed, so I cannot fully identify with their depression and they are not the easiest people to sympathize with, but they get my sympathy anyhow. I may not respect their attitude, but I respect them as people in trouble. I just cannot help them much. They see a Life Sabbatical as a hopeless waste of time. It is a lot easier just to stay depressed and angry.

Delayed Gratification – These are primarily people who had planned to retire, but are delaying retirement for financial reasons. Most of them are pretty positive about it. They have come to terms with their change of fortune and are lucky to still have jobs. They may have to delay retirement longer than they think now, but they are likely to be able to deal with it when the time comes. They find a Life Sabbatical interesting and feasible, either modifying it to fit their current circumstances or beginning some basic research in anticipation of beginning a full sabbatical in a few years. The Life Sabbatical is a potentially valuable “half-way house” on the road to retirement.

Retired and Emotional – These folks have done it. They are retired. They have sufficient funds to meet their needs now. They are disturbed by what is going on and their anxiety levels are far higher than they had hoped for when they retired. They do not deny that the future could be more difficult, but they tend to avoid talking about it. They want to be positive. After all, retirement was all about the “golden years” and they are determined to live it that way, no matter how hard it may be to avoid what is happening around them. They frequently believe that the current crisis is some sort of extended “correction” and that life will return to “normal” in a year or two. In other words, they do not need to adapt to changing circumstances. They expect the circumstances to adapt to their needs. They may be right. They may be wrong. If the former, than they have this burden of sub-conscious anxiety to carry. If they are wrong, they are in trouble, but they will probably not come to grips with it until it’s too late to adapt easily. Some may be actively involved in market speculation, although they call it “investment”. They can become attached to a particular gamble and put much of their money behind it, thus becoming dependent on its success. Failure can quickly throw them into the “Depressed” segment. They may read about the Life Sabbatical with mild interest, but are unlikely to make much progress toward implementing it at this point.

Retired and Analytical – These folks have retired also and are not in financial trouble right now, but can see that potential. They not only are anxious about what is going on and what the future may hold, they are confronting it. They don’t avoid it. They can meet their needs today, but they recognize they could be backing themselves into a corner by giving up all earned income. They find the Life Sabbatical to be a very interesting alternative. Many will adopt it or a modification of it, but if nothing else, it gets them thinking and often acting.

Not Retired and Analytical – As you might imagine, they share a great deal with the folks immediately above. They see the dangers and it worries them. But they are not yet retired and have earned income, so they may take a little different approach to the Life Sabbatical since they are still working full-time, but they see its potential value quickly. They often begin looking around for something that would make a good focus for a Life Sabbatical. They may even decide that their next stage of life will be a Life Sabbatical, then traditional retirement much later, and focus their work and savings now with that in mind.

Does everyone fit neatly into one of the segments? Of course not. Life is too messy for that. But it does sum up my general observations. In addition, over the course of a month or a year, individuals may shift from one segment to another. Your life is a process. You change over time, just like me and everyone else.

The value in mentioning these segments rests entirely in your mind. Take a moment to consider which segment you might best fit in. Is that where you want to be? Do you feel drawn toward a negative segment? Whatever, just consider them in the context of your life.

One of the greatest gifts of the human brain is its ability to “step outside” of itself and look at what it is thinking and doing critically. It is a wonderful gift, but like all gifts, the value lies in what you do with it.
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It can be really boring, but I do take a look at retirement articles once in awhile if they seem interesting. One that I enjoyed was published in Toronto’s Globe and Mail. Although the Canadian system differs from that of the US and many European nations, the points made are applicable to just about everyone. As is my habit, I will give you a link to the entire article later on.

The article is titled “Why baby boomers’ retirement is different from their parents’” and is divided into two sections. The first is “Why The Boomers’ Retirement Is Different”. This is, by far, the better of the two. It bluntly points out major differences between today and our parents’ day. One statement jumped out at me.

Boomers’ parents were Depression-era babies who practiced frugality and continued to pinch pennies throughout retirement. In stark contrast, boomers want their retirement to include travel, vacation homes, new cars, dining out, etc. This is fine, but it is expensive. Boomers need to plan for a much more expensive retirement than their parents ever would have expected.”

That is so very, very true for so many people these days. Forty-some years ago when my parents, who had a very comfortable middle-class lifestyle (upper middle-class in my rural community, to be truthful), considered retirement, they discussed buying a little “camper” and traveling around the US. We visited their friends in Tucson, Arizona when I was looking for a university. Their friends lived in a trailer park! It was lovely. They had a good-sized trailer (the size of many urban apartments) set on a small plot with carefully tended grass, a couple orange trees, a flower garden, and, of course, the standard concrete “patio” with a barbecue. The park had a large social center and swimming pool for residents and the whole place was very pleasant to visit. I was ready to move right in!

Today, there may be trailer parks like that, I certainly hope so, but such a living arrangement would not satisfy many would-be retirees (and campers definitely would not). It would be just too small and too simple for their taste. Forty years ago, people expected to die in their 70’s. Sure, some lived longer, but they were a relatively small minority. If you were still alive at 80, you were fortunate if you had your health. My Uncle Charlie had the audacity to be alive for his 100th birthday! People were just stunned when they heard. I didn’t know anyone who had a relative who had come close to 100, much less made it.

Today, people are healthier and can expect to live longer. And that is only going to be more and more the case as medical science, especially genetics and stem cell research, continue to increase the pace of change. Retirees now expect to not only live longer, but to live “better” in material terms. It is that simple. But it is now that complex. As this article and common sense suggest, we cannot and will not and most certainly should not expect to relive our parents’ retirement, but far more comfortably.

In any event, the article’s points made in this section are worth reading. I especially appreciate that the author expresses them in simple, frank terms, as he did above.

It is the second section titled “What boomers want (And how to get it)” that leaves me unimpressed. It is a list of some general statements that are okay, but really provide no real direction to a reader. Above all, they are all focused on the same thing 99% of these articles focus on – making more money by “investing” (often speculating, but that is not a pretty word). The article appears to be associated with Investopedia.com. That’s a website devoted to investment (again mostly speculation, but still not a pretty word, so it doesn’t get used). You can join me in guessing if Investopedia is happier when you spend your money on investments and speculations or in choosing something useless (to them) like delaying retirement or seeking a new source of earned income as in the Life Sabbatical.

I guess we are making some kind of progress. Bit by bit, the self-proclaimed “retirement planners” are learning to be more blunt in describing the dangers ahead. They have to. Too much of the public has already figured this out or is well on their way to figuring it out. So it’s safe now to admit it in public, if you’re a “planner”. But you still have to bring in the money and you are not going to do that by encouraging self-support through earning income, even part-time income doing something a person really wants to do. No sir, you gotta get these guys to send you (or your advertisers) their money and that is all there is to it! Otherwise, there go the retirement planner’s retirement dreams out the window!

Yes, there are exceptions. A few hardy planners even recommend this blog to their clients. Now that is a bold thing to do and I admire them. If I need a planner, that’s the sort of planner I will look for. But if we held a convention of such planners, we could hold it in my apartment’s living room.

Such is life. Half-way there is at least a beginning. But it is the easy half.
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If you’re interested in reading the full article, you can find it here.
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Prior to moving to Panama and starting a new business, I spent most of my professional life working in “developing nations”. In 1995, I took all my passports and counted 36 nations where I had worked. I wouldn’t bother doing that again, assuming I could find all those passports plus the new ones, but I surely have passed the 40 mark and am probably closer to 50 in Asia, Africa, the Middle East, and Latin America, both south and central. The total is immaterial to me now, but the experience gained was one lesson after another.

Combined with my background as an American and my visits to Canada and Europe, I experienced a wide variety of cultural practices and outlooks. But after a decade or so, it’s impossible to say when, I finally realized that the differences separating humans in one society from others was less important than the similarities. Rather obviously, human behavior is human behavior everywhere, despite the many different ways in which it is expressed. Obvious though that may be, there is nothing quite like experiencing it first-hand.

I visited many of these nations more than once, some on several occasions. It is very difficult to generalize about so many societies, but given that my purpose was to advise them on one or another aspect of their economic development, I was interested in trying to guess which ones would see progress and which would not. Since I did this for more than four decades and revisited many of the nations, I had a chance to see how things unfolded. After all, the last four decades or so have certainly seen a lot of change globally, so although I worked in some of the poorest nations, some change could be expected and a lot of change was certainly needed.

In looking back, there are only two critical elements that seemed to me to separate those that grew economically and socially, and those that stagnated or even fell back.

The first was the attitude of their people toward themselves in terms of time. There were many occasions when I had a chance to speak informally with local folks, both the wealthy and the poor. Sometimes it was over a dinner table, sometimes in a living room, often in a car driving from Point A to Point B, and various other venues. I would ask them how they felt about their nation and its status.

In one set of nations, people chose to speak of the past. Some nations had glorious histories from prior decades, often prior centuries. They would speak with great pride of what had been, but was no more. Sometimes they were angry that other people didn’t appreciate what they had accomplished in the past. Sometimes they were angry because some other nation had “stolen” their status from them through war or economic competition. Sometimes they were angry about all of the above. But the emphasis was always the same. They talked of the past. As for the present, they were unhappy. As for the future, they were at best uncertain, but often depressed and fearful. It was in these countries where people asked about job possibilities in the US. The younger ones would talk about emigration.

In another set of nations, they spoke of the future. They usually had something they were proud of in their past, but it was only mentioned briefly and in passing. They were much more likely to talk about the present and with it, the future. They saw opportunities all around them. The younger ones may have been educated in North America or Europe, but they were excited by what they could accomplish at home. Their overseas experience was almost always a positive one, but it was something to be applied to their home nation. Emigration to the US never came up.

As you might imagine, given the events of the last four decades, the first group was predominant in the early decades and by a huge margin. But in later decades, the balance began to shift. That brings me to the second critical factor, one that will come as no surprise. It related to resources, a nice way of saying money. Nations with rapidly expanding economies clearly offered more hope than nations whose economies could barely keep up with their population growth.

But oddly enough, the relative wealth of the nation was not always an important factor. It was their sense of forward movement in their lives. If that was present, then the future was the emphasis. If not, the reverse was true. A relatively poor nation like Ghana could have people with far more positive attitudes about the future than a comparatively wealthy nation like the Philippines.

In retrospect, I cannot tell you exactly what made the difference. If not money, what? But I came to a point when I felt happiest when working with a people who emphasized the positive aspects of their future rather than with a people who emphasized the positive aspects of their past, regardless of whether or not I felt their future looked bright. It was not so much the “system” under which they operated or even its relative success, but a question of attitude among the people themselves.

How does this relate to individuals of “retirement age”? Actually, it is not a matter of age, but it seems more common among older people. As I have mentioned in the past, I have been studying the aging process since my parents entered their 60’s more than 40 years ago. As their friends and associates were of a similar age, I had plenty of examples. Since then, I have worked more and more with older people, particularly retirees and those planning retirement. I often sit with them informally and ask them about their situation (I do not mention the past or the future).

One group focuses on their past. They reminisce. They can regale me with stories, some of them fascinating but always in the past, for an hour or two or more! Enjoyable though some of them are, it is all about what has happened, not what will happen. Another group can go on for quite a while (if not as long, they tend to be less verbose) on their current plans and what they plan for their futures. It’s all about what will happen, with a little emphasis on what has happened. I will leave it to you to guess which group I find to be the happiest as years go by and feel the most “alive”.

I feel saddest when I talk to someone who is clearly intellectually and physically healthy, but who has little or nothing specific to say about his or her future, although they can spend hours talking about their pasts. I wish them well, of course, but I wonder how they will do (and be) in a few years. Are they going to be among those folks whom you meet a year or two or three or four later and have nothing new to say about themselves, just the same old stories? Are they going to become boring old people, even before they hit 70? That’s harsh, I know, but if you spend enough time with traditional retirees, you know what I mean.

So here’s my question for the day, one to ask yourself as I ask myself from time to time. Do your best years lay behind you or do they lie ahead of you?

Whichever is your answer, you’re probably right.
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As those who read the comments posted after my last commentary will see, the matter of “trust” is important. Questions were raised. Can I trust a company that sells me an annuity to meet its obligations years, even decades, from now? Can I trust the government to meet what I assume are its obligations to me years or decades from now? Those are easy questions to answer. No.

Why? The first reason is always a good one. No one can predict the future. When you go ten, twenty, thirty years out into the future when planning, the odds that you will be reasonably accurate in your predictions become horrendous. Indeed, an unexpected event of great significance a year from now, or less, can change all future probabilities dramatically.

A second and equally good reason is that traditional retirees or those planning traditional retirement are just one group among many who “trust” institutions to meet their needs in the future. Parents trust that the school system will provide their kids with the education they will need in a competitive world. Commuters trust that the government will maintain and improve the roads, bridges, and other aspects of the transportation infrastructure to assure they will get to and from work without major problems. All citizens trust that government will protect them against potential disasters, be they man-made terrorist attacks or natural disasters.

The list is endless and much of the trust is placed in the public sector…government…as it has the responsibility for dealing with the most important national and global issues. Retirees cannot expect that their “trust” is more important than others who will compete for the funds available.

The private sector also depends on government. A failure at the governmental level can put a company out of business and your annuity with it. But the private sector has its own problems that cannot be placed in the government’s lap. Some years ago, when my mother was in her 80’s, she still got around fairly well. Just prior to one of my visits, she had been to her bank of many years. A bank officer had tried to sell her an investment product produced by the bank. He pointed out that she paid nothing to move her money from savings into this product, but would receive a higher interest rate. She was impressed, it was cost-free and offered a better return than her savings account. Thankfully she waited to talk to me first. What the bank officer had failed to mention, buried in a multi-page contract, was the “back-load”. Whenever she sold, the bank would take 10% of the proceeds. Cost-free? Better return?

I was furious with the bank. I trusted their officers to be honest on financial matters. I also trusted them to be sufficiently sensitive that they would not manipulate an older woman with limited resources. So much for trusting bank officers.

The loss of trust in formerly trusted institutions can be very slow at first. We do not enjoy having to be suspicious of everyone we deal with. We want (we need) to be able to trust some institutions or our life gets complicated and anxiety-ridden. Often, too often, we have to wait until we get hurt by misplaced trust before we accept that it is no longer justified.

Sure, we may have our suspicions. I may have sat and talked with friends about the questionable practices of some banks, but not lost my trust that my mother would be treated honestly by her bank. The incident above led me to lose trust immediately. My suspicions, carried in the back of my mind, suddenly were confirmed and my perception of reality “caught up” with reality very quickly. My mother and I were lucky. The perception caught up before the damage had been done. Not everyone was so lucky, I’m sure.

You may have your suspicions as well. It is best to confront them now and begin to think of how to protect yourself if your trust is misplaced or your assumptions are out of synch with the reality of the future.

The planet is going through a massive shift. This is something I have studied for years. Segments of that shift have been the basis for nearly all of my writing at Barron’s, the Christian Science Monitor, Minyanville and so forth. The change in the global reality outstrips the perceptions of many people, although current financial crises are helping speed it up. We can no longer trust that our “systems”, whether in the US, Canada, Britain, Germany or elsewhere, that have been successful in the past will continue to work well in the future. The reality has already changed and continues to change.

The perception of that change is underway, bit by bit. We think we have already seen a great deal of change, but I assure you that more is to come. We can see it in bits and pieces. At Business Insider, Vincent Fernando describes one change, one of many. We can argue with his prescription (more college-educated people) as alternatives to a traditional four-year college education are conceivable, but his basic point remains valid. The rest of the world is catching up with us and, if we are not careful, will pass us whether we live in North America or Europe.

Change is normal, but it can be especially damaging to retirees who have not earned income for years, failed to maintain marketable skills or learned new ones, and who “suddenly” are confronted by a reality that has been there for a long time. As I often say, we are not in denial, we are in avoidance. We know that change is underway, but we prefer to avoid the implications. We want to believe we can enjoy the retirement of our parents, in the manner of our parents. As Marshall McLuhan put it years ago, “We look at the future through a rearview mirror.”

That is not a good way to drive our cars or our lives.
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One of the blog’s readers was kind enough to make a comment on the last post. Mr. Cosgrove raised a good point and I did my best to explain why I had said what I did. Since many readers may rarely read comments on past essays, I thought I would include both his comments and my response here where they are more likely to be read, along with a few brief additional remarks on my part at the end.

Mr. Cosgrove’s comments:

At the risk of sounding Rodney King-ish “can’t we all get along?”, I think you’ve short-changed the need for developing a greater appreciation for interdependence.

So maybe the challenge is to learn to be flexible enough to forge a sense of self-confident independence while at the same time acknowledging our inherent and necessary interdependence. We’ll see.

My response:

Jim, thanks so much for your observation. I can certainly understand and agree with it in principle and in practice. I believe strongly in the concept of public service by ordinary citizens. I consider each individual’s contribution to his or her community to be not only important, but a confirmation of the reality of inter-dependence. I’ve lived my entire life with that in mind.

I run into too many people, especially those who are retiring with no expectation of ever earning income again, who have lost trust in inter-dependence and are now standing, confused and unsure what to do next. To expect that trust and successful inter-dependence to simply reappear in the near future is a very risky assumption and they know it. Like it or not, they will have to be rugged individualists more often than they like. It’s no fun and it’s a lot of work, but it is an approach that can help them get through this intact and, ultimately, that must be their bottom line.

I take this matter of trust extremely seriously. If you have read my Barron’s article, you can hear my sense of outrage that our “public servants” had completely failed to warn us of the dangers we faced with the real estate bubble, much less protect us, despite the evidence that was out there and well-known to the leadership that clearly indicated we were headed for trouble. Along with them, the people we depend on in the banking sector had failed us as well. And who would pay for their failure? Who else? We paid for it and will be paying for it for a long time to come.

Now I see it happening again with traditional retirement. Every indication is that our government is going to have serious problems meeting our financial requirements in coming years (a recent summary of the Congressional Budget Office’s study of the debt situation makes it clear in very non-partisan, very under-stated terms), and that definitely includes the rapidly increasing numbers of retired people as the Baby Boom ages. The debt we are piling up and the interest payments on that debt threaten to crowd out spending on everything else in coming years when increasing numbers of traditional retirees will depend on government payments. This is not a partisan rant, as the CBO summary attests. No party stands blameless.

Okay, so they know what’s happening. Can we depend on them to warn us to rethink traditional retirement. to find ways to make it more appealing to continue to earn than to depend on money that could easily be insufficient to meet our needs?

And what about the retirement planning “industry”? Can we depend on them to do the same? Is there any other group in the private sector that we can expect to be more knowledgeable of the situation and in a better position to help?

This was a problem with the stock market bubble and the real estate bubble, and now we face it again with the retirement bubble. It was and is a problem of trust. Mr. Cosgrove is absolutely right. We need to acknowledge “our inherent and necessary interdependence”.

But the “we” includes those who have failed us twice before.
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In the summer of 1893, a young professor from the University Wisconsin, Frederick Jackson Turner, introduced the concept of rugged “individualism” to a group of historians. He used it in reference to the settling of the American West. Those early settlers were on their own more often than not. They really had little choice but to be individualists until “society” became a reality in their part of the country. As for being rugged, you don’t have to read much of their history before you realized that being rugged was an essential quality if you were going to survive, much less prosper.

Rugged individualism is a term that pops up from time to time in discussions of social, economic, and political issues. As such, it has become a “catch phrase” for many people, used lightly without much serious consideration. Others boast of being rugged individualists who do not appear to be either rugged or individualistic. It is also a term that has faded from the vocabulary of many Americans. They never use it, or perhaps once in a decade.

You and I are not settlers in the Old West. We are not joining a wagon train any time soon. We don’t have to worry about Indians scalping us. But we do share something in common with those folks. Like them, we are entering our own special wilderness…the future. Unlike the settlers of the west, we are being forced into this wilderness. But like the settlers of the American West, we cannot count on the government or society (whatever that is) to protect us. Some of us will anyhow, but they are likely to be very disappointed. Our wilderness has its own predators and dangers. If we cannot expect others to protect us and support us, than we will have to do it ourselves. This is the real test of our generation. Are we rugged enough, tough enough, to endure the pain and build our own future, or are we going to crack? Good question. The only answer that counts is the one we make with our lives. There is no quick and easy response.

There was a time when being called a rugged individualist was a compliment. There was a time when it was an insult directed at those accused of being selfish. But above all, it was a choice. We are likely to be forced (some of us are already being forced) to confront this wilderness. Worse yet, as I have discussed before, there is no real leadership out there that speaks to our needs, just politicians looking toward the next election. Many of us may feel very much alone, but the truth is that we are not alone. Nonetheless, it sure feels like it some days! There are tens of millions of people, each with his or her own outlook and challenges, but all of us facing that wilderness. It was no different in the Old West. And in this world, it is no longer a question facing just Americans, it is global.

I suspect if we had been in the Old West, we would have met quite a few folks who would have been happy not to have to be so rugged, so individualistic, all the time. But you do what you have to do to survive. Circumstances made them rugged individualists. If that didn’t happen, they turned east again or they sat down and quit.

We live in a very inter-connected world. We have a responsibility to our nations and to people generally to help get everyone through this future wilderness as successfully as possible. Like it or not, we are inter-dependent. But at the same time, in the day-to-day struggle of life, we need that old Western spirit.

Circumstances are making us rugged individualists too. But we cannot “turn east”. We cannot “go back” to the past. We can sit down and quit, but that’s a pretty miserable way to live. We have time. We always have time, if we use it. So now is a good time to toughen up and get on with it.

No news articles today. Just a thought that crossed my mind and this is the best place to share it.
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Never place a period where God has placed a comma. – Gracie Allen (1895–1964), 20th century American comedian. When I was a kid, Gracie was one half of the Burns and Allen show, one of the best comedy series of the 1950’s. She played the role of a zany and somewhat ditzy wife, but she was a really intelligent woman. She and her husband, George Burns, went through a roller coaster in their joint career. They were a popular vaudeville act, then had a popular radio series, and finally a popular television series with occasional movie appearances scattered here and there. Each time they had to shift media, it was a struggle. Television was not radio and radio was not vaudeville. They recreated themselves time after time and never lost their humor and their willingness to start all over again. As he told us many times, Gracie was the rock on which George Burns built his life. She never mistook a comma for a period. Neither should we.

Do we ever have dark moments when we think that God, life, society, our boss or someone has placed a period to our futures? Probably. I know I have had that feeling sometimes. I have mistaken commas for periods. Never did me any good. The only way I got on with my life was to grow a little tail on that period, call it a comma, and get on with it. It’s easy to talk about, but it’s not an easy thing to do when you need to do it. All the more reason to let Gracie remind us of what we need to remember today and tomorrow, both with her words and her accomplishments.

“Minyan CC” is the Internet nickname for a member at Minyanville.com, a website for the financial and business crowd. I don’t know him and he isn’t famous (as far as I know), but I read one of his comments months ago and wrote it down. Here it is.

A couple of hundred years ago, Benjamin Franklin shared with the world the secret of his success. ‘Never leave that till tomorrow which you can do today.’ This is the man who discovered electricity. You’d think more people would listen to what he had to say. I don’t know why we put things off, but if I had to guess, I’d have to say it has a lot to do with fear. Fear of failure, fear of rejection, sometimes the fear is just of making a decision, because what if you’re wrong? What if you make a mistake you can’t undo? Still, sometimes we have to make our own mistakes, learn our own lessons, sweep today’s possibility under tomorrow’s rug until we can’t anymore. Until we finally understand for ourselves what Benjamin Franklin really meant. That knowing is better than wondering, that waking is better than sleeping, and even the biggest failure, even the worst mistake, beats the hell out of never trying.

If you have visited one of the big websites with a hundred or 200 or 300 comments following an article, you have seen some very silly, even stupid, things said. So few ever really offer anything worth reading that I almost always ignore them now. I’m glad I didn’t ignore this one. Whoever you are, wherever you are, thanks Minyan CC. You have proven that “comments” can be inspiring and helpful, not just critical whining.

This has been a busy weekend. I spent yesterday in Chepo, a small city of Panama. It happens to be the “capital” (like a “county seat” up north) of the district in which I own land and where I hope to build one day. I always try to attend fiestas in Chepo and yesterday was a special Folkloric Festival. I spent some time earlier today putting together a simply little video of folk dancers who performed for us. I have a second one I am putting together now and it’s a little fussier to create. We Chepanos are simple rural folks, but putting these videos together is not quite so simple!

In any case, in the middle of all this, I thought it would be a good time to let others share a few of their thoughts with us. Gracie and CC have done that quite well. Since I started with Gracie Allen, perhaps it would be most appropriate to end with a thought from her husband, George Burns.

Age to me means nothing. I can’t get old; I’m working. I was old when I was twenty-one and out of work. As long as you’re working, you stay young.

“I was old when I was twenty-one”, George says. I’ve been old many times in my life, very old on a couple occasions. That’s good. It means I can enjoy being young now. So can you.
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I would like to share two excerpts from the writings of well-respected financial and investment commentators, Louis-Vincent Gave of GaveKal and Jeremy Grantham of GMO. I will follow them with a few very brief comments. Although these gentlemen may reach conclusions that you and I may or may not agree with, their statistics and opinions are widely-followed and carefully prepared. They are very successful investors and economists. They are not sensationalists out to get you to buy their book for $49.95.

The first is an excerpt from “The Western World’s Two Distinct Problems” in John Mauldin’s “Outside the Box” of July 19 written by Mr. Gave. Note: his first “problem” is associated with the real estate and other asset bubbles and our failure to deal with them properly. It is his second “problem” that interests me. The bold type is my emphasis.

The second problem is that, for structural reasons, a growing number of OECD countries are confronting a very challenging budgetary situation. As we reviewed in our latest Quarterly, the credit crunch, bank bailouts and recession only account for 9% of the increase in long-term public debt burdens in major advanced economies. The remaining 91% of the long-term fiscal pressure is due to the growth of public spending on pensions, health and long-term care. In other words, the credit crunch and recession did not create the present pressures on public borrowing and spending. They merely brought forward an age-related fiscal crisis that would have become inevitable once a majority of the baby boomers retired around 2020.

…Western economies could fall into the trap of what Jacques Rueff called ’subsidizing expenditures that give no returns with money that does not exist’, a path which invariably leads to inflation. Even more worryingly, such a path could conceivably lead to growing suspicion of the fiat monetary system, which, as Anatole reviews in Capitalism 4.0, has been the bedrock of the post Breton-Woods economic miracle.

Notice the proportion of the “problem” assigned to age-related expenditures. I assumed they would be half or more, but 91% really brought the point home. This is very closely followed by his remark about “subsidizing expenditures that give no returns with money that does not exist”. Folks, he is talking about spending on the old instead of spending on the young. I like to think that many of us also can “give returns” to society, but obviously that is hard to argue if we are doing nothing productive.

The second is an excerpt from a commentary titled, “Aging Populations, Pensions, and Health Costs” by Mr. Grantham in the GMO Quarterly Letter of July 2010

A Time-out on Pension Logic

Both steps are completely the reverse of what is needed. What a testimonial to the shortsightedness of both today’s and yesterday’s politicians. And to be fair, let it be said that long before Obama was a gleam in the eye, no conversations at all were heard on the prudent preparation that this aging population problem desperately required. Congress has played the part of the carefree, unprepared grasshopper perfectly.

You may wonder why I bother sharing information like this so frequently. Over the years, I have found that it can be very difficult for people to do something dramatic to change their lives unless they really feel that there is justification for it. I am no different than anyone else in this regard. Part of the problem for some potential and recent retirees today is the thought that maybe starting something like a Life Sabbatical is an “over-reaction” to a situation that might turn around soon and make it unnecessary. Commentaries like those above and others that I have shared and will share help bring home to us the need to think and act differently than we had planned a few years ago.

In addition, most of us have “significant others”, friends and family. When we start talking about a major life change, we are likely to hear some skepticism or worse. Being able to show the support of outside expertise may help get us more serious attention from the skeptics.

Finally, warnings of coming problems are often only shared among a small minority who read the work of men like Gave and Grantham. Many of us never hear the warnings until it is too late. It is similar to what I discussed in my essay, What do Bob Shiller and Al Gore have in Uncommon?. By offering the opinions of others, I try to spread their words to a wider audience that needs to hear them.
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