The article in the WSJ on September 6, 2017 caught my attention, Where the American Dream Is Slipping.
The concept of retirement has so many facets to it, but clearly economics is a driving force in the decision of timing and on the expected quality of life in retirement. Not surprisingly, the answer to the question, "The economy is working well for me and my family" was split along political party lines - with nearly 64% of Republicans saying yes, while just 45% of Democrats answering the same. In 2014 the answers were reversed, with 42% of Democrats saying yes, while only 35% of Republicans answering in the affirmative.
So who is correct? Was the economy that much better for Democrats in 2014 than Republicans? Or vice versa today? Or is perception the bigger issue? We have discussed in the past how party affiliation does impact investment return - not because of the investment performance, but entirely due to investor behavior. People are more optimistic when their candidate is in office so they invest more.
What is most surprising to me was that the percentage of Americans who say they will retire after 70 or older is now 28% - up from 18% just 18 years ago. I have many clients working past 70, but only because they are still having fun - or derive satisfaction from maintaining their relevance. Or maybe it is their spouse wants them out of the house!
Another shocking statistic - the number of people who report living paycheck to paycheck is now 78%, up from 75% just a year ago. Seventy one percent of all workers say they are in debt - up from 68% a year ago. And 18% of all workers have reduced their 401(k) contributions and nearly 40% don't participate in their company retirement plan or a personal IRA. Financial Wellness: Majority of U.S. Workers are Living Paycheck to Paycheck
With all of this data as foundation - let's turn our attention to those impacted in Texas, Louisiana, and soon to be Florida. When people are living beyond their means, have little saved for a very rainy day, and are deep in debt - what do they do now? Their lives have been shattered and their personal economic situation is now totally hopeless. Add to that, many of those were relying on the equity in their homes to bail them out. Now even that is gone.
Focusing on all of this can be quite depressing. We should open our hearts and our pocketbooks to assist the neediest of those in despair.
But now back to you - and your family. Here are some questions and advice to consider:
What if the unthinkable earthquake event in California became reality?
How much are you relying on your home and other California real estate holdings for your retirement? Is there a backup plan? Should you diversify? We shake our heads in amazement that so few in Texas had flood insurance. Do you have earthquake insurance? Do you know anyone who does?
What is your savings rate?
Have you lowered it to fund your todays instead of your tomorrows? Lowering your spending to increase your savings is often the only way to secure a comfortable retirement. Consistency is your pathway to financial freedom.
What are you teaching your children?
I have seen way too many parents reluctant to inquire about how their adult children are saving for retirement. The millennials are notoriously poor savers. Do they have a budget? Are they increasing their 401(k) deferrals? Do you know? Most adult children I know appreciate their parents getting involved. Who else can they trust more than you? I am often asked to guide young adults as they start saving and investing. I am always happy to do that.
You can't start too young - to save or to teach.
Teaching children when they are young to save is one of the greatest habits you can instill. The worst gift to pass along is to enable them and pay for everything. What you may think is a head start in life might in fact be a handicap.
The American Dream is very much within your grasp. It doesn't depend on your political affiliation, and it shouldn't depend on where you live. And it certainly shouldn't depend on your needing to work past age 70! It is totally up to you and how you behave. Sticking to a well thought out plan will be your anchor in the storms that we know will come.