July 16th, 2008

boomer woes

There's been a lot of loose talk over the last decade-ish about how social security is going to go bankrupt. Adjustments have been made (increasing the payroll tax, removing limits on the payroll tax, increasing the age at which benefits can be collected, stepping the age connected to amount of benefits available, etc.) and social security as a program is actually in really great shape and has been for a while. If _you_ worry about solvency issues 30 years in the future, well, lucky you. I've been sitting around trying to figure out how you predict gas prices, or town population, etc. in 10/20/30 years time. Think about what you would have predicted gas prices in 2008 to be in, say, 1978, 1988, 1998, etc. Kinda tricky, hunh?

Most corporations got rid of defined benefit plans, replacing them with defined contribution plans (good pensions becoming 401(k), with matching _if you're lucky_ and you have the foresight and financial wherewithal to take advantage of the matching) for very similar reasons: if we don't, we're going to go broke.

So if the _government_ couldn't afford to pay for the retirement of the boomers, and their _employers_ couldn't afford to pay for the retirement of the boomers, why the heck would anyone expect the _boomers_ to pay for their retirement. Now, having been born after the tag end of the boomer generation by any definition, and suffering the consequences of their wrenching demographic effect my whole life, my sympathy is qualified. Also, I know a bunch of boomers, and this is not a crowd I would characterize as overly financially savvy in general, and they certainly aren't cautious and careful as a group. Of course they couldn't be; their spending has been expected to keep the whole game afloat for their entire lifespan. Like, since before they were born, practically.

So this comes as no surprise:


I have a variety of friends over the age of 55, some of whom have no debt, run their cars into the ground and generally behave in a financially cautious manner. Some of the slightly younger in the batch refi'd repeatedly during the boom, moved from place to place, buying and selling houses and incurring expenses associated with those moves. The ones who haven't been retired for a while already -- that is, the ones who are still pretty close to 60 on either side, rather than 70 on either side -- have suffered from erratic employment in the last decadeish. And they aren't any of them computer folk, and their industries vary widely, as do their regions. I've been discussing bankruptcy as an option with one of them for a few months now, but he seems uninterested. He doesn't want to commit (admit?) to the idea of penury for the rest of his life. And he's got pretty serious health problems, too.

We really need to move past the idea that we need to somehow maintain the solvency of social security or replace it with some private alternative. And here's why, from that article:

Astre sounds quite reasonable here: “One of the trends we are seeing is when people retire, instead of downsizing, they actually upsize in housing,” said Patrick Astre, author of “This Is Not Your Parents’ Retirement". You should be mortgage- and debt-free by retirement,” Astre said. “You can’t retire when you owe a bunch of money."

But then he goes on to add:

"I’d make a case that you should be thinking about retirement when you get your first job.”

Maybe you should, but the world does not now, never has and never will run on should. That's why we have a different verb for the way it isn't, but we'd like it to be, as compared to the way it is. The way the world _is_, when you get your first job, you are thinking about moving out of your current place (whether with roommates or parents or whatever) into a place of your own (or with different roomies, spouse, offspring, etc.), acquiring your own family (and paying the bills associated with that), maybe paying off school debt, and trying to have some small amount of fun when you can. The worst aspect of having children when you are older, judging primarily by what I see around me, is that a lot of the big bills get all piled on top of each other. About the time you're worrying about paying for your parents' medical bills (this, I do not have to worry about -- a rare benefit of being completely shunned by my parents) you're also worrying about your kids orthodonture and college tuition and making the payments on the bigger house you had to buy for the kids. What slides? Your own retirement.

Just for reference purposes, my crazy parents (who preceded the boomer generation by about the same amount I came after it) put their money in two places: paying off the _one_ house they bought, the year before I was born and never moved from (altho they did add on), and socking away as much money as possible in a variety of retirement vehicles. They did put braces on us, but they did not have to pay for their parents medical bills (mom's dad abandoned her and then died the year I was born, her mother was a Canadian citizen -- there's an early lesson in the value of socialized health care -- and my dad and his family is all so allergic to doctors they won't go see 'em. They died at home). They did not save for our college (and in any event, it was not so expensive back then). My sister-who-went-to-college got merit-only full ride through her masters. (My parents would not agree to fill out the FASF; wouldn't let anyone see their tax returns. Remember, I _said_ they were crazy.) My next sister got a cosmetology degree on the cheap at a local tech college. I got full ride partway through and by then my parents' had a religious reason not to pay for college (altho they did fork over for a quarter or two to get me out at the end) (Jehovah's Witnesses Disapprove of College Education. Just so you know). When my father was unemployed, they scared the crap out of us that we were going to lose the house to stop us for begging for things (like, you know, school stuff, clothes -- that kind of thing; we had to buy our own clothes with our babysitting money and I should tell you about the allowance/chore system they set up). Meanwhile, as soon as my dad was back at work as an electrician, he didn't give up his second job doing handyman work because it was nice to sock away the extra cash in Microsoft stock (this would be in the 1980s and early 1990s when he was trying to bully first my sister and then me to work for them; neither of us would have anything to do with a company that treated women that badly). And to drop some of the cash on $1000 suits. He was in the _trades_. The suits were for _church_. He wouldn't spend $20 on a dress for one of us.

_That's_ how you get to retirement solvent and independent. By screwing the living hell out of your parents and your children, and generally being a completely unlikeable, despicable, jackass. I think this is something we should think through several times before encouraging as a general solution.

what to teach the next generation about money?

This is a long-standing question of mine. I certainly see the benefits of financial independence. Boy howdy, it's nice.

But I have a lot of reservations about how my parents got there, and even about how I got here. Some hedge fund operative who socked away an obscene amount of money during this last go round who has the sense to not spend it all in one place should not gain a lot of respect for having fully financed their future commitments ahead of time -- and depending on the details, they ought to be feeling at least a smidge guilty about some of it. Some should be feeling very guilty. It's one thing to play the hand you're dealt. It's wholly another to design the venue so you see everyone's cards before they do. And define the rules of play. And control security so you can bounce them when they object.

My current thinking is teach frugality with a conscience: don't be such a cheap pick-an-insulting-noun that you screw other people reflexively. Have a good time within limits. Pick a profession that will support the lifestyle you're going to live whether you can fund it or not. Think about how you use debt/credit. If you see an economist making some sort of case for something, run away. If you are trapped, kick the shit out of the economist until they shut up. They do not have your best interests at heart. And if your heart is set on hoarding up a pile of whatever, recognize you probably will be screwing some very good people who don't have the "sense" you do, so at least don't mock them after their money has been transferred to your pockets.

But it's a puzzle. As the original daytime Phil used to ask, anyone got any wisdom to share?