Investing in Your Retirement Income

How is investing in your retirement income like keeping yourself in food? Well, how do you keep yourself in food now?

Feed-Me #3: I eat at my parents’ until they invite (force) me out to work and live on my own. Okay. Partying, social media, Starbucks platinum level may have to back off in place of serious work, rent and utilities, and eating out—but giving up international cuisine is asking too much. After all, you only live once, right? And this is how it will go until I drop or marry into money, the latter of which is not likely to happen when I pass the retirement age of 70+. By then inflation is likely to have out-paced wages by 100%. Hello, cat food.

I had no pension plan, except Social Security, and years of small government conservative shrank that and Medicare to something less than the poverty level and free clinic visits. No one explained to me that not everyone wins the lottery or winds up in the top 2% of wealth.

Feed-Me #2: I make a plan before moving out to own a house by 35, so save for a down payment while working hard and long—a day job plus a part time. I buy smart and healthy at the co-op and learn the best buys in wine and craft beers. I take a cooking class or two and master some pretty good dishes that impress my friends and partner. Our children don’t appreciate the food, but demand much in clothes, sports activities and tech-toys. Our kids go off to very good schools, which we hope will earn them high paying jobs.

By the time we settle in to paying off the house and college loans, we realize that there has never been a time to contribute the advised 20% of income to an IRA. We will be working past retirement age if we can, but those last 5 years of life, which cost half or more of our total life medical costs may have to be covered by the kids. I may be watching a modest life drain away into a long, sad decline. It all balances out.

Feed-Me #1: I live at home, paying costs to my parents until I have a steady career job. I plan on buying a home as soon as I can arrange it. I live as cheaply as I can manage, valuing people over things, parks over concert halls, Mr. Coffee over Starbucks. I use public transportation, which alone saves enough for a down payment on a house in about five or six years. I buy smart and healthy at the Cub. I have learned what foods have real value and are affordable. As soon as I can, I get a garden plot to supplement the expensive stuff I can grow. Once I get a house, I plant an apple tree in the yard and a big garden in the back. These investments, along with running and biking, help keep me fit as well, and will reduce my medical costs even into very old age. Live starts early and ends late after all.

I was fortunate enough to have a public pension plan which with Social Security took about 15% of my salary, and that was matched by my employer. I have paid off my house, and the kids’ public college loans are handled. Since I also saved in 430(b) and 457 plans almost from day one, I will have enough income for the next 20-25 years to equal about 80% of my final working salary. That means travel, visiting the kids, and even reinvesting against expensive final years.

Just as I planted seeds in my garden, I planted financial seeds in my retirement plans, and because I started early and waited, as I did with the apple tree, I can actually wind up with more than I absolutely need. Just as I understand the growing season, I see the value of treating life as a whole process. I could have just lived on the harvest collected by others; then I would have been feeding the others as well, and that would be expensive and would have no end. I could have joined the harvesting, cutting the wheat I could later eat, and that would have reduced the cost, but because of waiting until late in the process, it would have offered too little a return, and even that return could be threatened by a bad crop. Worse, next season, when I wasn’t working, I would earn no return at all.

Even starting early, planning and exercising some prudence, while it could earn proportional wealth compared to those early years, — even that case offers no guarantee. Climate change, mining operations, social disorder, any number of things can spoil the crops or even poison the land. Social Security and Medicare can still be gutted, pension plans can be subverted, or the world economy can collapse.

There are no guarantees; there are risks. The trick is to minimize the risks, and that is best done by pooling our efforts. Going it on your own, no matter how good you are, leaves you the most vulnerable. There is safety in numbers. It doesn’t matter how confident you are in your abilities, the thing that will get you is beyond your control or anyone else’s. Life is a challenge; rise to it; don’t try to play it. Your public employee pension plan is your best hedge against tragedy. It’s your right. Support it.

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