Of Safety Nets

A false sense of security is the only kind there is

—Michael Meade

We were moving our stuff into the condo for our annual stay at the beach when the owner of the unit next door ambles over. “We’ve just retired,” he says, “We’re set for life.” This would have been an unseemly bit of braggadocio in any circumstance, but I’d hardly met the guy. He tells me he and his wife were teachers. They looked to be fiftyish, and apparently had opted for early retirement.

Well, it was the summer of ’99. The NASDASQ was elevating in parabolic fashion. You could tell where the optimism came from. No doubt, they were certain that Microsoft, Dell Computer, Cisco Systems, Netscape and a host of other dot coms in their TIA-CREFF accounts would keep them in shrimp ‘n grits well into their dotage. No idea how it’s actually played out for them. We go back every  year and they’re not around.

Expectations ran high at the start of the millennium, but that was then. Even though the market has yet to head down into the serious part of the bear phase, social mood is out in front with growing apprehension about the future. There is ample reason. Almost every aspect of the economy is sucking wind. Krugman wrote:

“…what ails the U.S. economy right now isn’t lack of productive capacity, but lack of demand. The housing bust, the overhang of household debt and ill-timed cuts in public spending have created a situation in which nobody wants to spend; and because your spending is my income and my spending is your income, this leads to a depressed economy over all…”

This is the real deal and it’s not going away anytime soon. Long before things improve, the markets will join in and head down until they overreach on the downside in proportion to the upside mania of the recent past. Retirement accounts will wither, further reducing demand and increasing joblessness. Paint any picture we want of the next ten years, we won’t be able to make it as bleak as it’s gonna be.

The standard reaction to big trouble is denial. But that won’t do. It’s a sure recipe for ending up as roadkill. Laurence Gonzales (Deep Survival, Who Lives, Who dies and Why), tells us that the first rule followed by good survivors is Look, See and Believe.

We can all make a plan. First thing is to “accept the brutal facts of our current reality, but never doubt that we will prevail “( Stockdale). If we’ve got the above firmly in our minds, we’ve got the first, most important tool for surviving: we’re not bullshitting ourselves. Armed with a realistic appraisal of the outlook, we can not only survive, we have an excellent chance of thriving.

The reality is that many people entering retirement age are going to come up short in their retirement accounts. A high percentage of pension funds are underfunded, and a weak stock market will worsen the situation. Major insurance companies have recently been called out for overstating their balance sheets. MetLife was mentioned. They administer my pension. So we have to think about getting redundancy into our income streams. The time to start the plan is now.



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