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The Actual Reality of Old Age; A rebuttal to “The New Reality of Old Age” From The Washington Post

The Actual Reality of Old Age; A rebuttal to “The New Reality of Old Age” From The Washington Post September 29th 2017

A frequent article I see under various titles is the woeful state of the American retiree. If you didn’t have a chance to read the latest from the Washington Post, it can be seen here.

A client passed this article along and as I read it, I became disconcerted. I know, it is not very Stoic of me, but pieces so horrendously slanted they border on propaganda tend to have that impact.

I began to jot down my thoughts on the misconceptions being perpetrated and it quickly became too much content for an e-mail reply so I decided to turn it into a blog post in a sort of letter to the editor rebuttal to the article. Do people still do that?

Anyway, here are the top misconceptions I saw the article taking advantage of.

1. The New Reality for Retirees Is a Horror Show of Pain and Suffering Until They Die

Life is 90% how you look at it.

The article centers around a couple in their early 70s who are helping to run a campground in Bar Harbor Maine during the summer and spending the winters near their children in Texas. He is a maintenance man. She is a desk clerk. The article paints this situation out to be a Steven King scale horror show.

Let’s contrast the picture being painted with real life. I had relatives who literally never left “the plains” of Ohio working in coal mines their entire lives (which for most lasted into their early 50s). In comparison spending the summers in Bar Harbor Maine, where tourists flock to vacation, and the winters in Texas sounds like “the good life.”

The article coined a phrase I heard for the first time called “workamping.” This actually sounds pretty sweet to me. In fact, there are similar trends in the US right now to quote the article where people “shed costly lifestyles, purchase (or build) RVs and travel the nation picking up seasonal jobs.” You may know these trends as minimalism and the Tiny House Movement - shout out to John and Zack Love that show.

Another aspect that is commonly reported as a corollary to overall happiness is companionship. These folks are lucky enough to still have each other after 55 years of marriage! Few couples can say that as a result of a 50% divorce rate or having been widowed.

So the take away here is your life is 90% how you look at it. A positive attitude is another predictor of happiness. Let’s make the choice to train our brain to look at the bright side of every situation. In this one, there were quite a few.

2. People are Living Longer More Expensive Lives So They Will Have to Work Longer

To this I say, “duh.” The key is people are living longer! Depending on who you believe, the average person that has achieved age 65 in the US is expected to live into their middle 80s.

The article says, “record numbers of Americans older than 65 are working — now nearly 1 in 5.”

Nearly 1 in 5 turns out to be 18.6%. Hardly an epidemic! Actually, this is surprisingly low when you take into account all of the media reporting about people having no savings. The quick math of the flip side says that 81.4% of people over 65 do not work despite the expectation to live another 20 years!

The question becomes what do the 81% of people who don’t work after the age of 65 do for all of that time? From my firsthand experience it seems to be argue with their spouse (if they are still married), make some attempt at travel whether they like to or not and figure out how to kill time. In short, they struggle without a sense of purpose.

The most satisfied people have a reason to get up in the morning. They know somebody is counting on them. Without a purpose, quality of life suffers horribly. Gainful employment provides that sense of purpose for most people regardless of age. If a person is healthy, there is no reason to stop working at 65.

Let’s sum this one up as “65 is the new 45” work is good because it provides a reason to get up in the morning other than arguing with your spouse. Let’s move on.

3. Millions Are Entering Their Golden Years With Alarmingly Fragile Finances DueTo Fundamental Changes In The U.S. Retirement System Having Shifted Responsibility For Saving From The Employer To The Worker.

It is absolutely true that saving for retirement has been shifted from the employer to the individual. But is this a bad thing?

Story time; Once upon a time, my grandfather worked for 20 years in a shop in Detroit that provided a pension. Then the shop went bankrupt and he lost his job and that pension. Oh no, what did he do? Well with his quiet genius and unrelenting work ethic, he managed to save and invest enough money to allow Grandma to stay in the nicest facilities money could buy during her near decade’s battle with Alzheimer’s and still have enough money left over when she died to pass on to each of their three girls. Some of the money that my mom inherited paid for my education and is a large reason I am where I am today.

The principle this story illustrates (as you will see is a recurring theme) is to rely on yourself. Do what it takes to make sure you and yours are taken care of. Don’t wait for someone else to do it. If something isn’t working you must change, adjust or fix it with your own ingenuity. That is the American way.

By the way, I do have clients who live almost exclusively off of their Social Security and surprisingly well in doing so traveling to France and spending winters in oceanfront condos. The amount of benefit received in retirement becomes a matter of what was paid into the system while working combined with the Social Security withdrawal strategy. That being said, when Social Security was established, people were lucky to live long enough to even collect it. It was never meant to fund 100% of a retirement lifestyle for 30 years.

4. “People With Little Financial Knowledge Often Find 401(K)S Confusing” and ”I Don’t Know What I Am Doing, So I Am Furious With The System.

Just because something necessary for your future well-being is “confusing” doesn’t mean you can ignore it. The medical system in this country is incredibly complicated, but people still find their way to the doctor when they need help.

“I don’t know what I am doing so I am furious with the system” makes no sense to a rational person. I don’t know how the electrical grid works, but that doesn’t result in me getting angry about it or not turning on the lights.

I have said for a long time the lack of financial education at any level of American Education system (K – college) is a Government conspiracy designed to make sure that consumerism remains the engine of growth for the US economy at the expense of the American public. This can only transpire if an unthinking public thoughtlessly plays along continuing to spend to “keep up with the Joneses” at the expense of saving for their future.

Perhaps a tenet of stoic philosophy is best applied here. Specifically, focus on the things you can control (did I mention self-reliance would be a recurring theme?).

What you can certainly control is how much you spend now and how much you put away for the future.

5. The Laws Governing Financial Advice Are Geared to Drain Main Street’s Pockets into Those of Wall Street Fat Cats

“Brokerages and insurance companies that manage retirement accounts earned roughly $33 billion in fees last year, according to the Center for Retirement Research at Boston College.” From experience I would bet that the bulk of those fees went to insurance companies, but that is beside the point.

Yes it is true that the laws governing financial advice are still heavily slanted in a way that allows supposed professionals to take advantage of the working public. Regulation to prevent the public from being defrauded is one of the few places I would agree it is OK to expect help from the Government. They make the laws of the land. Sadly it appears President Trump will delay, water down or stop the Department of Labor’s Fiduciary legislation that was supposed to protect Americans from the crooked Wall Street vultures. Some would say it is because such legislation would hurt his Wall Street buddies who get rich off the current rules.

Fees at many small employer retirement plans border on the ridiculous, but the specific instance the article mentioned where the subject’s 401K went from $40,000 to $2,000 in 2008 should be investigated. While fees are large and risk is born by the individual holding the 401K, if she didn’t take money out of that 401k, a legitimate fraud took place and somebody needs to be punished for it.

The good news is that there are advisors out there who already operate as Fiduciaries for their clients. The best of these Fiduciary Advisors operate on a Fee-Only basis which means the only fee they are paid comes directly from their clients. Their number one priority in doing this is to eliminate conflicts of interest between them and their clients.

The bad news is that we don’t have the big marketing budgets of the giant rip-off firms, so consumers need expend a little effort to find us. The lucky few who do are then often surprised by what it costs for financial advice because those costs have previously been buried in the products they were sold and or they are not accustomed to paying for professional advice. They are therefore hesitant to defer the fees to pay us from their consumer lifestyle preferring to pay maids to clean their oversized houses rather than build solid foundations for their future.

Yes the deck is stacked against you when it comes to financial advice. However with a little effort expended to find the right Financial Advisor and then being willing to pay fees equivalent to the value he or she will create, you can level the playing field and win the game.

6. I Don’t Have Money. Other People Do. They Must Have Been Born Into It.

Not everybody who has money was born into it. The “born into money story” is a fallacy people like to tell themselves to make it seem like financial success was never in their control.

The truth is I have seen more downsides of those born into money than upsides specifically sentencing children to lifestyles riddled with drug and alcohol addictions and depriving them of the motivation to find their life’s purpose through work.

Remember this, “every system is perfectly designed to get the results that it gets.” The quote’s origin is disputed, but it appears consistent with quality guru W. Edward Deming’s philosophies. Applied to this situation, this means that if you ended up with little saved in retirement, your system sucked!

Having a good system requires two things focus and repetition. We become good at what we choose to focus on. The most prominent reason that the minority of people end up in a better financial position is they make financial success a priority and in doing so set aside time to work on it, learn about it and practice it. They probably also understand the value a professional can add and they don’t hesitate to pay the price for it.

They also don’t settle for being average. And when things aren’t working they make the required changes to get on track be it cut back on spending or change jobs to maximize opportunity to earn income with their skills.

One of the benefits of capitalism is that it is (for the most part) a meritocracy. The people who put forth the most effort typically end up with the most financial assets. This affords them the flexibility to do what they want. The tradeoff is the people enjoying extravagant things in their retirement years likely had to sacrifice time and energy and incur significant stress in order to accumulate the means to do so. In other words, they traded their most valuable resource (time) and energy in the past in order to be able to spend their time in a way they deemed valuable in the future. It is an insult to their efforts to automatically think they were just born into money and didn’t work for it.

7. The Rich Help the Rich

Rich people have networks. This is true.

However taking the most recent natural disasters of Hurricane Irma and Harvey as an example, I’d say we all help each other when there is a true need.

Yes, the rich get richer. That is the way the system works – assets earn income. It is a fundamental of capitalism, but abundant opportunity remains.

8. Nobody is Looking Out for The Retirees

Young, old, tall, short, male, female, black, white; just about any way someone can classify themselves they feel like nobody is looking out for them. I find it to be particularly the opposite in the case of retirees.

Among the Holy Grail of entitlements that are never to be touched are Social Security and Medicare. These two benefits are primarily enjoyed by the retirement set. The reason for this is simple. Retired people have a disproportionate say in things because they make up the majority of the voting public (probably because 81% of them have so much free time).

We were talking about this the other day and it is frightening how much say those in the twilight of their lives have over we, who are not, and will have to live with the ramifications long after they are gone. It should really be the opposite, but the majority of young people don’t see voting as a priority.

A quote from the article says, “Helping building a nest egg is not on their agenda.” What? Helping build your nest egg is not in the Government’s job description. It is 100% up to you. Again, it is the American way to look out for you first. That’s why the capitalist system works. It’s built on an inherent human tendency. America being called the land of opportunity is a direct result of this system. And oh by the way it still is the land with the most opportunity. Maybe rather than sending death threats to NFL players who don’t stand for the national anthem, folks should get out there and take advantage of what that symbol (our flag) represents in the way of opportunity.

What we as a country must do is work diligently to put EVERYONE on the same level playing field and then let each person live with what they create. I will admit we have a lot of work to do in this area.

Bonus: Electing Trump To Look Out for The Little and Forgotten People

Wow. File this one under “never underestimate the gullibility of people.”

What do you think Donald Trump knows about being middle class in America?

He knows how to get some brilliant marketing people to make the middle class and self-identifying “forgotten” believe that he does. That’s all he knows. The strategy worked. Move on.

9. Inflation is Running Rampant for The Retirement Set Making the Cost of Living Unbearable

A. The Cost of Healthcare and Prescription Drugs are up almost 200% since 2000.

Inflation in the medical system, for everyone, is ridiculous and healthcare reform should be the top item on the President and congressional agenda. I thought it was. It has somehow been overtaken by the more serious concern of commenting on transgender military service and whether or not NFL players are standing for the National Anthem.

Again, a fundamental tenet of stoicism is to control what we can control. I heard a statistic today that said the average American takes 6 prescription medications each day. For older people that number may be as high as 13. This is completely illogical to anybody with an understanding of the human body.

The body came with a program that will repair itself so long as functions are not prohibited from doing so. Relying on 6 pills a day to treat various symptoms (as opposed to causes) certainly qualifies as -prohibition.

Similarly drinking multiple soft drinks per day and eating most of your food out of a cardboard box or through a drive through window also qualifies as a prohibition to health.

Rather than taking $3,000 of medication per year as a fact of life, maybe look into taking a proactive approach to improving your health so that you will not need all of that medication. This will not only improve your financial situation but your entire quality of life.

B. Heating Oil Prices are Up 130% Since 2000

About 6 million of the 115 million households in the United States use heating oil as their main space heating fuel according to the U.S. Energy Information Administration as of February 2017.

The majority of these households are in the Northeast US where it is common for retirees to relocate or spend the cold months in warmer climates.

So while the statistic sounds oppressive, it is probably not having as much impact on retirees as it appears.

C. Real Estate Taxes Are Up 147%

I have no idea if this is true. The only people I know who have lived in the same house for 17 years is my parents and they only have records going back about 10 years. In those 10 years the increase in taxes has been negligible. However, again, this is beside the point.

Payment of property taxes would imply home ownership. Property tax increases typically correspond with increases in value of the underlying property. This means in order for property taxes to increase 150%, property values should have increased in kind. For retirees this opens up several options to take equity out of their home for their lifestyle including downsizing, refinancing and even a reverse mortgage if warranted.

The bottom line on inflation is retirees typically fare it quite well because they have more flexibility to substitute things and make changes when prices rise. As the article shows the majority don’t have a job to anchor them in place, so they can move to Florida if the cost of heating their home is becomes onerous. Likewise if they are not working they don’t incur the costs associated with having to go to work each day such as gasoline, fancy clothing and lunches away from the house.

10. The Formula For Success In America

Finally, the formula for success in the United State of America is rather straightforward. Here it is:

1) Apply yourself in school. Every child in this country is provided a K-12 public education. Do you know how many countries that puts us ahead of?

2) Do everything humanly possible to complete either a 2 year vocational program or a traditional four year college degree after graduating from high school. Money can be borrowed without a credit history directly from the Government for this purpose. Again, do you know how rare this is in the world?

3) When you are done with college, get a job that you enjoy doing using that training, pay back your student loans, live within your means and with integrity and don’t ever stop learning and improving your skills.

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