I don’t plan to retire. I’m boring enough as it is and would go whacky if I didn’t stay productive. For a majority of Americans, retirement is a goal and who can argue with the vision of kicking back and slowing down after years of raising children and commuting to jobs that in some cases we hated, but had to in order to take care of our families. As we live longer, the issue is how do we pay for our own increasing medical needs while keeping a roof over our heads.
Most Americans hope to have savings and investments necessary for financing our retirement. Where savings and investments fall short, most of us expect that our social security annuities will fill in the gap. A significant number of Americans rely almost exclusively on social security which makes concerns about the social security trust fund being unable to payout full benefits even more disconcerting as this The New York Times editorial argues.
The editorial asks what’s next for social security. The real question should be what’s next for how we approach retirement planning. Our social policy surrounding retirement has centered on owning a home; socking away money into some investment fund; or relying on a pension, fully funded by an employer. Unfortunately we’ve seen Americans abuse their home equities; listened to the Obama administration bash Wall Street and put a distaste for investing in our mouths; and watched as private and public entities struggle with fully funding the pensions Americans believe they have a right to.
We’ve also seen Americans’ wealth shrink in the aftermath of the so called Great Recession and have seen the wealth gap increase between white and black Americans, particularly because unlike their white counterparts, blacks have over-indexed their asset accumulation in houses.
The model isn’t working. Although white wealth is estimated around $110,000 and black wealth at just under $5,000 what it tells me is that financial death will merely be slower for whites. The income generated off of $110,000 is meager at these rates of interest and for blacks, social security is all they have.
For those of us not yet close to retirement, I believe the answer requires a slightly more outside the box approach. The ravages of the Great Recession occurred because we were under capitalized; we did not have accumulated enough assets that generated actual income, income that would help sustain us as we looked for work post a layoff. What the social security scenario should be teaching us is that we need to not only sock away some cash (which over the long term at these rates loses buying power), but to accumulate, build and create intellectual and other property that can actually increase in value over time. This is the type of buffer we need to surround ourselves with.
You won’t hear progressives touting asset or capital accumulation. First, it is a long term solution and our congressmen have a two year election cycle to work with. Second, it’s not the type of approach that keeps you within their constituency. Taking actual control of your economic and financial destiny means not being a lifetime “customer” to a program. Individual economic freedom is not the type of social policy politicians are interested in promoting.
This approach is not easy and thinking about it can make your head spin, but when you envision your later years it’s best to suffer the pains of creating that buffer now than suffering from the onslaught later.