Financial Freedom In Your Retirement Life

Strategic Solutions

Next year will be the retirement year for Uncle John.   He’s been toiling in one Flint GM factory or another for 35-plus years, and he’s about done with it.   Work— tinkering with cars, boats, and home remodeling tasks— can still give him a charge, but crawling out of bed every weekday morning at 5 to slap together torque converters wears on him.   He’d rather spend time hunting and fishing, and also with his grand-kids.

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An option for retirment - GOLF

John is pretty young for retirement.   He’s in excellent shape— SAY NO TO Alcohol and Cigarettes and he’s able to carry his 150lb outboard trolling motor down a flight of stairs into his basement every winter’s eve for storage.   He’s paid into the Social Security pensions system since he was a teenager, when payroll taxes were 6%.   Most of that money went straight to retirees drawing direct benefits at the time.   Today, payroll taxes are 12.4%, a partial reflection of a trust fund set up in 1983, so John’s kids and grand-kids, and nephews, wouldn’t have to worry about their Social Security later on.   Just like John isn’t one to worry.

“You get old in your head,” John says. “Age is different. That comes whether you think about it or not.”

John’s got a lot left in his tank, and his retirement should be a good one. He’ll draw from his GM pension upon retirement, then from an IRA when he’s 59.5 to compliment his GM pension.   Finally, at either 62 or 65, John will add Social Security as his third stream of income. As it happens, some company pension systems (like GM’s and Ford’s), and the Medicare system, are deeper into crisis than Social Security, though our government won’t speak on this.

So, maybe tackling Social Security’s existential issues first is a way of trying to fix the obviously fixable before grappling with some real monsters. It’s going to be challenging enough to keep a constant stipend stream flowing to a growing gaggle of seniors; God knows how much it’s going to cost to keep them all medicated properly. Thus no one knows how to fix Medicare right now without doubling taxes— and killing our economy. Like our leaders, I’ll leave that hornet’s nest for future treatment.

Folks like Uncle John symbolize why Social Security is facing a long-term solvency crisis. Baby Boomers, some seventy million of them, are healthier than their parents, and certainly healthier than their grandparents (being weaned off Spam, succotash, and filter-less Lucky Strikes surely helped). They could spend up to a third of their time on Earth collecting social security benefits. In Uncle John’s case, his retirement could last as long as his 35 years in the shop.

Unfortunately Boomers have not produced enough GenX’ers and PlayStation Babies. Boomers certainly lived up to their part of Social Security’s social contract by paying for the retirement of their forefathers. Yet while working hard to build a hyper-tech society, Boomers tended to keep their families small. Aside from the grief this demographic wedge causes a pay-as-you-go pension system, the reproduction drop makes a lot of sense. We don’t need hordes of large families to mind the farm. Children today are expected to move from birth through high school graduation without getting whacked by the measles or polio. Furthermore, the costs associated with raising children to where they’ll compete successfully in modern society have skyrocketed.

An 8th grade education and a strong back won’t cut it anymore. Reactionary conservatives look at the demographic crunch and point to issues of selfishness– the popularity of the Pill, and the fact that maybe disco dancing till 4 in the morning was more fun than wiping up baby vomit. In fact there are too many factors to list for the population decline of Western Society. Trying to weigh each one properly is futile. What we know for sure is that, in 1960, there were 5 workers for every retiree. Today it’s ~3.4 to 1. In 2030, given generous immigration quotas, the ratio will be ~2.2 workers per one retiree.

By assuming those generous immigrant inflows, it’s important to remember that new Americans typically make less than the 7 th generation WASP, and thus contribute less in payroll taxes…so we can’t go there for the panacea. I should add that manufacturing a homegrown population explosion to increase the worker-to-retiree ratio is off the table. Mom earth doesn’t need to be made angrier, and anyone who suggests otherwise needs to be dragged off in manacles to the nearest inpatient rehab facility.

So, more old people, drawing benefits and living longer, against fewer working people, equals financial rupture for a pay-as-you-go trust system. No serious person can dispute this, not to dismiss the metric tons of seriousness people milling about, but monolithic cultures are boring, and all I seek is a solid consensus.

Financial Freedom In Your Retirement Life
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