I want to continue on the topic of retirement today. What are we really up against with this? Anyone ready to take a long hard look and admit that the future with or without the eventual economic collapse is not going to be the future we have all dreamed of? Well, let me rephrase that, it won’t look like most of us have believed… a few doomers out there are probably happy to have their dreams come true; economic chaos seems to be a really good time in some folks estimation. However, I like most of you have been working hard to get to the place where I can start “livin’ the dream”! Most of us will still have the opportunity to live the dream but that dream will require some revisions to fit into our new reality!

   Last time I told you all about a few of my older relatives and the way they are living their retirements. I neglected to mention one specific relative that is actually living out a dream retirement. It wasn’t that I didn’t want to admit that the dream retirement did still exist but I really didn’t think of them because their situation is so different from the rest of the family. This relative is very much living the dream on many levels but we’ll see today that this retirement is quite fragile. I do not want to scare this person since they do read my work here from time to time and will easily recognize themselves! It is my most sincere hope that they continue to enjoy the fruits of the many years of hard work that were required to get them to this point. They deserve to live out all of their golden years in style and I hope they do!

   With this in mind, let me describe this particular retirement… The couple I’m referring to consisted of two working adults. One worked for a county government in a midlevel position that allowed for above average to high earnings. The other was self-employed and received a modest salary but also enjoyed many tax deductions thus compounding their combined retirement savings abilities. They paid off a home in a very inflated real estate bubble area and then sold the home near the top of the market. This sale allowed them to build their dream retirement home and retire there in there sixties.

   Shortly after retirement began one spouse past away, while still in their sixties. The surviving spouse (the previously self-employed one) was eligible to continue receiving the others state government pension. They are now living on that pension along with social security, life insurance and those unusually large retirement savings plans. Home is paid for as well as the vehicles! Assets are available to sell if they choose or they can sit on them.

   Not a bad place to be right? More than enough retirement funds to live pretty much as you choose and enjoy the next 20 years, maybe more! Well, lets look at this a little deeper, shall we? After years of saving pennies and living a lot more frugal life then others in their income bracket might have, they reach retirement. Within the first five years one spouse is gone, fallen suddenly to a rare illness – literally here today and gone tomorrow (not really that quickly but pretty close). Great, the survivor gets to walk along that babbling brook alone, that was the dream right? Live out your later years as the survivor, without your spouse? Not quite but life happens and must also go on!

   The way the retirement systems usually work is that if you are going to receive a pension when you stop working, it will often continue until you die! Sounds good except when you have a surviving spouse to think of. It is usually possible with a state level pension to opt for an alternative pension payout. If you set up your pension from the beginning to accept less monthly income while you are living, your surviving spouse can continue to receive your pension payments should you pass away first. While this is a smart route to providing for your spouse, many don’t take it because they need the higher monthly payment when they finally retire…

   Let’s see, that’s right they had/have substantial savings; let me remind you all that they had the ability to save at this level because they had paid off their home. This savings while sizable wouldn’t last long if that was all they had. They chose to locate their retirement home in a desirable area. This decision requires high expenses and upkeep to maintain the home. That’s alright since it is paid off but the monthly drain is already wearing on the retiree. Social security payments come in monthly as well and are seen as extra, not really needed at this point but they come none the less! The last item was life insurance, this was an unforeseen windfall of course and I’m confident that most folks do not continue to pay into a life insurance plan once they reach retirement. Company paid life insurance plans would also stop when employment was discontinued. This insurance money, while welcome and potentially needed eventually, only comes at a much larger trade off of having your spouse lost prematurely!

   Ok, so we have an out of the ordinary retiree and other then the loss of their spouse they are able to live the dream. Now, let’s look at the ways this retirement is vulnerable in the reality we are all living now and will continue to live in the foreseeable future…

    Where does the money come from that is supporting this lifestyle I’ve just described? Anyone, anyone? That’s right largely from the government! The pension is actually from the State ofCalifornia; while any dependence on the government is sketchy to say the least,Californiais probably worse off than most. Highly indebted and admittedly close to bankruptcy, this pension is subject to forced renegotiation and or discontinuance in the future. We have begun to see the states discussing the cut back of their pension payments… Can they do this? My answer is, “does it matter what they can or can’t do”? They are beginning to and will do whatever they choose, with the people only left to deal with the consequences.

   Social security, surely this is more secure then aCaliforniastate pension, right? Can you hear me laughing from wherever you’re reading this?? Social security is beyond broke, they are in debt to the public for more than they bring in each year, so they go further in the hole each and every year with no hope of a turn around. Yes, I will cash any and every social security check I am offered but I don’t think that counting on this federal boondoggle is a very smart decision, do you? While my relative has earned the right to accept these monthly payments and I’m glad they are getting to benefit from the system they participated in, I wouldn’t count on this as a retirement strategy for the long term. We’ve seen what government dependence has gotten folks in other countries, especially during chaotic periods in history like what we appear to be entering.

   Private retirement accounts and savings… These are great and we should all be putting away whatever we can for the future. Over the course of this discussion I will show you that there are ways to save these dollars that are far more likely to pay a dividend then others but I think we can all agree that saving is always a good idea.

   How we go about this retirement savings plan is very important! How can it be done safely and still pay a significant dividend? This is the question that each individual needs to ask themselves. If we save money in such a way that involves our employer then we need to realize we could be at risk of mismanagement or even worse deliberate fraud or theft. Much the same peril goes for anything like an IRA that is subject to the whims of government. We all know for certain that our countries leaders will only do what is in their own best interest! Something that might be helpful or safer for us is not at the top of their list of concerns! Sorry to have to be the one to point this out but their actions speak for themselves, we only need to look to history to see that in this chess game we are all nothing more then the pawns!

   However we choose to accomplish our saving plan I suggest we keep at least a sizable portion of it under our direct control. We’ll then only have ourselves to blame if something goes wrong… How this is done is up for debate but each of us has an obligation to ourselves and our families to take a degree of control, our future is only as secure as we choose it to be! Even then the best laid plans are subject to the hard rules of life and whatever Mr. Murphy might have coming our way!

   Most of you reading this are not as fortunate as my relative and will have far fewer options when retirement time comes around. I include myself in this particular equation too so don’t think I’m being unfair in my estimation of my fellow preppers… We have a system that does not favor us to begin with and economic forces that are working directly against us and our savings plans, whatever they might be!

   As we continue to dig into this topic we’ll discover that we do have in our power the ability to wrestle control of our financial destinies from the forces that want the status quo! We’ll be making decisions today that will have a direct reflection on how we get to spend our retirement years. Each of us will choose which path we want to be on and then live with whatever comes at the end… Society has promised all of us the dream and I’m here to tell you it’s a dream few are going to realize! We have before us a series of choices that will give each of us the ability to grasp the life we really value or at least to a much greater degree. The sooner we make these difficult choices the longer we have to lay the groundwork for our own success!

   I’ll be back soon to discuss these ideas further and hope to help you all see that there’s a better way!  A way to stack the financial deck and give ourselves the edge we all need to win at this game and enjoy a retirement that few other will!

Prepper

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  A week or so ago I brought up the reality of what retirement might look like for the majority of us… remember? Older workers doing jobs that they would have either wanted to leave behind or certainly should have had the choice to! Nope, the prospect of getting an old age work reduction is currently on the decline and the opportunity to see this trend turn back around in our collective futures is doubtful. If necessity is the mother of all invention then it’s got to be our acknowledgement of our own reality that helps us find out what our necessities really are! With this in mind, let’s go further in our discovery of where we are now so we can get a solid footing on what we can do about it.

   As a side note… some of you have been with preppernation.com since the beginning and know me better than some of our newer readers do. Let me give my more recent readers a brief description of who I am so that it’ll be easier to see from what perspective I’m drawing some of my conclusions. I think that a lot of these conclusions are going to challenge what we’ve all been choosing to believe for a long, long time!

   I’m a 40 year old, self employed man. I started my regular working career when I was 13, at least that’s when I got my first legitimate job with scheduled work hours. In addition to a “regular” job, I would also mow lawns, babysit and deliver newspapers… Not necessarily all of these side jobs at the same time but I was a busy and ambitious young man. My father would probably give a more colorful picture of my past, it would also be true but we’ll leave those past experiences out for now… Shortly after high school graduation I got a “good county job” like most people only hope to get, I spent 11 years there. The county was a great employer and I had a good salary and benefits… I left the “security” of the county to go out on my own and have been self employed ever sense. On one occasion I’ve needed to go back to an employed status but 90% of the last 10 years I’ve been completely self employed. I’ve seen both sides of the employment fence and spend a great deal of my time working with people of all ages. I’ve had good years financially as well as a few not so good. It’s with all of these experiences that I’ve come to the conclusions that I’ll be sharing…

   Throughout the discovery process we’ll need to go through on this topic, I’ll be asking you all to do some homework of your own. I can do the majority of the research and bring it back to you here but you’ll have to see if my analysis is indeed correct. I assure you that my conclusions are accurate but it won’t be until you see these facts in your own life and the lives of those around you that you’ll be able to come to the same conclusions that I have for yourselves!

   We all have more in common, than the ways we’re different, at least in what the future holds for each of us. No matter what age we are now we can all look forward 20, 30 or even 40 years to see what those that have gone before us have to say about our own futures. Just look at your parents or grandparents and see what they deal with financially. Are they thriving or trying to just make ends meet? If you don’t have a relationship with your older relatives then stop by a retirement home and see for yourself what that’s all about! When you do you’ll find people from every walk of life, these are the lucky ones. They have sufficient retirement resources to keep themselves fed and a roof over their heads.

   Don’t misunderstand, that retirement home might very well be an option for you but I doubt it! I can think of lots of worse places to spend my later years, however at present this wouldn’t even be an option for me and Mrs. Prepper. Why not? These places are at least $3-5,000 per month, that’s why! Just a little quick math shows us that optimistically the expenses of a less expensive place will exceed 100K for just a 3 year stay… Maybe, if I squirreled away that magic 1 million in retirement funds I could run out the clock someplace like that? Remember this is an OPTIMISIC example, not the typical or taking into account the additional care that often comes with older folks!

   Since I’m already 40 years old and wanting to work less then I am now, where’s that cool million going to come from? If I saved $5,000 per month for the next 10 years, I could be over half way there… This is NOT encouraging or reasonable! I know for a FACT that most of you reading this don’t even make $5,000 per month before taxes… I know this because I’ve done the research! The average American makes around $40,000 per year… I hear the scoffers but I don’t want to argue about this, if you are one of the higher income earners, that’s great – be thankful! I deal with financial paperwork for a living and ask LOTS of questions! Most folks look like they make a lot more money then they actually do! Let’s agree for the time being that a traditional retirement takes A LOT of money and I’m here to say few of us will have that money!

   Now lets look at those older relatives again, how and where are they living? I’ll start with my own relatives – I have 2 living grandparents left and they are both living in retirement homes… I also have some older Aunts and Uncles that are living on small pensions to social security and sometimes combinations of both. Some live in their owned homes, while others are living with their children and still others are renting apartments. Everyone eats regularly and has a roof over their heads, we are a blessed family. What I don’t see in my family is anyone living the dream that we’re all promised in one fashion or the other during our working years. They’re all either broke or living wisely and watchfully on a fixed income.   

   I know what you’re thinking, what do we have to worry about? These folks are all doing ok and we’ll all be fine too, right! Wrong, all of these older relatives in my family – actually in every family, are from a time inAmericathat is fading fast. The time I’m referring to is the time where a guy can just put in the required number of years with a company and when they hit the right age, walk away with a pension check for the rest of his life.

   First, not every company even offers a pension plan anymore. Second, more and more employers are going to something like a 401K plan. This type of setup is fine and might even be a viable option for a successful retirement as long as everyone does their part, which is far from guaranteed and given a sufficient number of years… Third, budget cuts have hit nearly every level of corporate America, employee benefit plans are an easy target for the chopping block. Even 10 years ago when I was still employed with the county and compelled to participate in a trade union, compensation ground was lost across the board every time a new contract had to be negotiated. Workers always seemed to vote for keeping the pay rates higher and losing ground in the area of benefits. Let’s face it, the status qou can not be maintained, cuts will be made and the benefits will continue to erode! Fourth, every level of government has continued with their irresponsible spending and they are now faced with the very real threat of bankruptcy. When, not if that happens, many government checks will fail to be printed. What could be worse then that would be if the Federal Government chooses to continue inflating the currency as their last ditch effort to keep those checks flowing… Unfortunately, as we are already starting to see, the purchasing power of those inflated dollars continues to decrease.

   Next time we’ll take a further look into the areas that our current retirement system is vulnerable and how this will certainly have an impact on all of our future retirement plans!

To be continued…

Prepper