American Madness

Intelligent Criticism in the Service of a Better Nation

Retirement is a foolish goal

Posted by Josh Friedlander | 2 Comments

Ron Lieber was kind enough to respond to my letter (which I rewrote into this piece) with these questions:

Thanks Josh — but what do you propose as an alternative?
T-bills forever and always? Will that provide a secure retirement for most folks?
Or do you believe that the mass of NYTimes readers can figure out the right times to get out and in?

My response:

Of course NYTimes readers can’t win the market game; no one can. It’s an impossible problem, but that’s because retirement for all Americans is an impossible fantasy. The idea that older people should give up all labor and enjoy complete liesure is historically a very recent concept and, very likely, an unhealthy aspiration. It’s at least plausible in collectivized schemes, but certainly not when the working population declines considerably against the nonworking population, as is now set to take place over the next thirty years in the U.S.

The reason we have a user-funded retirement system, which unfairly requires all Americans to have to consider questions of market timing, is that collectivization on the corporate level failed. I believe it has to fail on the state and local government level, as well. The states, presuming a higher rate of return than was statistically prudent, have not saved enough to support their obligations and are increasingly tossing money into alternative investments to try to improve their chances, despite all evidence that not every pension in the U.S. can beat the market (i.e., every pension system can not exceed average market returns, except in Lake Wobegon).

This problem will be exacerbated as boomers retire and states continue competing for their cash. I fear for what will happen to high-tax states like New York when all the teachers and firemen take their pensions and move to states with no income taxes (Florida, Nevada), causing a tax base death spiral here and boosting real estate and sales tax revenues in the swamps and deserts.

The corporations began getting out of the pension business long ago and the states will either follow or push to socialize the system federally. This leaves the poor unpensioned worker with an overpriced tax-deferred plan provided by his company (in the case of variable annuity plans, the costs are criminal) or with the usual brokerage options. In either case, he is expected to be something of a financial wizard and ascetic (I really loathe advice from personal finance gurus like Suzy Orman in the vein of “Make your own lunch every day,” which is basically a clarion call to sit at your desk all day and never enjoy your life).

The only certain advice anyone can give the poor retiree is to stay in stocks for the long run, but even Jeremy Siegel acknowledges that one’s time horizon is vital. I was at a party tonight with a mixture of age groups, and the 60-somethings were not happy campers. They know they are screwed.

My bottom line is this: the stock market can be a magical place, but for most people it’s a form of gambling, and not a dependable way to secure an independent income. Of course, your article was short and didn’t delve into asset allocation theories, so I’m not saying I’m against holding a mixture of stocks/bonds, but I think, again, understanding asset diversification is quite a lot to ask of all citizens. One doesn’t need to like the idea of socialized retirement to see its benefits as opposed to this system. Investing in a stock market to secure retirement is kind of nutty when you consider that listed companies are merely a subset of all U.S. corporations and that there are high costs involved in being a listed company, so that it’s entirely possible that a theoretical basket of revenues from non-listed companies would offer better returns. Too bad there’s no way to get the revenue from all companies, listed and unlisted. Except there is…they all pay taxes to the U.S. government. So maybe the government should use corporate taxes to support retirement? Just a thought.

However, I’ll stick with the idea that we shouldn’t even be concerned with this, and that spending our working lives saving and gambling with an inordinate amount of our wealth simply to achieve a life of liesure seems awfully foolish, hard to accomplish, fraught with peril, and lacking in perspective. It speaks very poorly of our culture that we’re so obsessed with giving up work, instead of focusing our efforts on finding work we love.


2 Responses to “Retirement is a foolish goal”

  1. Joel Friedlander
    October 12th, 2008 @

    Just what is so fabulous about retiring? You get to go to a place like Florida, get up late every morning, go to the golf course and play 9-18 holes and then go to the club and play cards. After that you can go to the gym and work out, followed by a trip for an early bird dinner someplace so you can save money on the meal. Follow that with some television in the evening and you have a recipe for terminal boredom and the death of the spirit. That’s what I think anyway.

    I’ve got a second cousin, Julie Gantman, who has been practicing law for quite a long time. In 1980 he had a retirement dinner at the law firm he helped to found and the next week opened another law firm on lower Broadway. Last year, when he was 97 years old, my friend Richie Jaegers saw Julie walking up the steps of Supreme Court, New York County carrying legal files under his arms. The last time I spoke to the guy his mind was working like a Swiss watch. Now, is that, for certain, because of the work he does? Who knows? But he keeps physically and mentally active and he lives better for it.

    Many of our retirees spend their lives going from one doctor to another to get new tests and new prescriptions. That is all that is left of their lives, except for playing golf when it isn’t too hot in Florida, or too cold elsewhere. That is no life as far as I’m concerned. I had a grandfather on the other side of my family who never stopped going to work and lived to 99&1/2 years of age. He never stopped moving as long as he was alive. He was healthy because he worked and he worked because he was healthy. He never once considered stopping what he was doing.

    Aside from the physical benefits of work and the stress that it presents to the body and the brain, there is the emotional fulfillment of doing something that you love which hopefully helps other people. Now, I know that there are many people who absolutely hate doing the work that they do, and they can certainly retire, but let me suggest that they might consider doing something else of a gainful nature after they retire from their first kind of employment.

    You have to keep working or you dry up and rot. I don’t care how many examples you can give me of people who just love retirement, there are just as many people who find work rewarding. And if you have so much money that you don’t have to work, then work for free and help other people.

    The sooner we get past the idea that its a good life to loaf around until death claims us, the better off we will be as individuals and as a society.

  2. Eric Hazard
    October 12th, 2008 @

    I often thought that retirees would make the world’s best teachers. They have the knowledge and they are far enough away from the kids to be considered their buddy. Since they would not be relying on teaching from the text, but sharing their knowledge, the kids would be more interested and have more to gain.

    The baby boomers are rewriting what is thought of as the traditional retirement. They are quiting their first line careers to start lives pursuing hobbies, interesting career that are not lucrative or philanthropy. To Joel’s point, they are not wanting to just sit around waiting to die. They just want to live more on their terms than someone else’s.

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