The Problem With Retirement Planning: What If You Die Early?

by: John Lohr


Not everyone has a 401(k). My (probably unpopular) solution for how we can give them some financial advice.

Do it now or sacrifice for later? There is no "right" answer. It is a personal-choice decision.

"If you got it, save some; if you don't got it, don't save it." Will Rogers should have said this, but I don't think he did.

Gil Weinreich, senior editor here at Seeking Alpha, writes the best articles. The other day he pointed out a survey by some not-much-thinking tank that said 49% of Americans think they will have to make financial sacrifices in retirement. 46% think they will be fine. Retirement is a socio-economic, and even political conundrum. Here's my take on saving for retirement

1. Toss the survey. That 49% who think they will have to make financial sacrifices in retirement have no idea how much money they will need in retirement. Neither do the 46% who are confident they are OK. ING used to have an ad, "What's your number?" The fact is, there is no number, unless you can tell me what tomorrow will bring.

2. "Helpers" who tell us we will need 75% of our current income to "maintain" our lifestyle are full of my horse's pasture droppings. Others who still use the 4% withdrawal rate for your IRA are visionless. Lives change: downsizing, kids gone, the skis put in the attic. As we age we have to downsize our lives, and financial sacrifices happen to be a byproduct of that. Of course we will make financial sacrifices in retirement. 99% hang up the skis and tennis rackets in favor of fishing poles, and we're not going to start that photography shop to franchise it and make a million. We open it because we love photography.

3. Financial professionals have methodologies to try to help determine how much you will need tomorrow. They are all flawed. The only two methodologies that would help would be a crystal ball or a TARDIS. No one, repeat no one, knows. So what is wrong with sitting back and living for today and take what comes in the future?

4. Do we know how many people (especially from my parents' depression generation) sacrificed today to have something for their old age, and didn't live long enough to use it? Whatever one may think, everyone will underestimate the number. My parents never owned a home, always had old cars and wore relatives' hand me downs, as did we kids. But every summer they begged, borrowed (or stole) enough to take a two week vacation to the shore. Two glorious weeks out of a doldrum existence. My father died at his desk at 60; my mother died a few years later with all but $1,000 of his small insurance check saved in the bank for her "old age." There are more stories like this than you can possibly imagine.

One of the commenters on Gil's article told the same story. He watched his father dying on the sofa at a too young age and couldn't help but wonder what his thoughts were, and wonder if he thought "Should I have invested a bit less in the markets, and a lot more in the Memory Bank?" The writer said, "I'll never know, but sure wish he had."

5. There absolutely is a financial retirement crisis. One commenter said everyone he knows fully funds their 401(k) and sees no crisis. How myopic. He either has his rose-colored glasses on backward or is blind. But, I contend, delayed entitlement is not the answer. If you work for the highway department, and your wife is a ranch hand and you hope your daughter gets a track scholarship so she can go to college, and a fishing boat with a new motor, or a palomino barrels horse or newer truck gives you pleasure right now, I say do it now, because you do not know what tomorrow will bring.

6. Everyone does NOT have a 401(k).

The problem we have, those of us who can afford to fund a 401(k), is are not the norm. The 5 bedroom house in Garden City and cottage in Amagansett is not the norm. The highway worker and ranch hand are. Nobody in the financial industry wants to help them because they wouldn't generate much money for advisors. They don't watch Jim Cramer or Suzy Whatshername because it's not relevant to them. Can we help them to save to retirement? No. Period.

7. Let the folks with the nice homes on Long Island live in the vanities of the moment. It's their money, after all. The nuclear train wreck might come tomorrow from North Korea, we might get in a SEPA train wreck on our way to Philadelphia on Monday, or that coal train might crush my pickup on Tuesday at that seldom-used track in Chugwater. You never know.

8. Time is not money. Money can not buy more time. So do we trash retirement planning, try not to save, go to Vegas and put it all on 23 Red? Some will. Some will scrimp and save and miss memory bank moments. It's about balance. Retirement planning, investing and saving are personal choice decisions. There will be excesses on both sides. Neither will be right and neither will be wrong. And, if you make it as far as I have so far, don't look in the rear view mirror. You're here, after all.

9. Advisors have a challenge. How can we provide free investment advice to my highway worker and ranch hand. There are more of them than there are of us, and they need as much help. If I had ONE advisor in each state willing to give FREE investment advice to those in their state who need it most, and have the least, I could retire myself. Any takers?

10.. We (us'n, government, business, professionals, highway workers and ranch hands) can't fix the retirement crisis. It's been there at least since someone added the 401 to K, and DB meant Cooper.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.