1. Crazed Spending
It is very simple: To be capable of retiring, one must have enough money to retire. Accumulating the requisite assets to fund an agreeable separation from the workforce takes decades of diligent saving and investing. According to a brilliant New York Times article by Teresa Ghilarducci, we’ll need to sock away at least 20 times our ending salary before calling it quits. Most will never get near that number, because they are presently having too much fun squandering their hard-earned dollars on lattes, weekends in Vegas, craft beers, dining out, and incessant technology upgrades, happily making purveyors of distractions rich rather than themselves.
2. Unrealistic Expectations
The classic, no-frills retirement enjoyed by generations past, is but a quaint notion to today’s modernists. Downsizing to a Sunbelt condo, embracing the kitschy charm of early bird dining, and playing golf on-heaven forbid-a public course, is considered obscene. The current crop of retirement hopefuls expect to greatly expand their standard of living once they punch out for the last time, with assorted palatial homes, exotic travel, classic automobile collecting, and exclusive country club memberships graciously filling their days. The reality is legions of near retirees have next to nothing saved, making passage to a luxurious world without earned income highly improbable.
3. Conditions Different
Sure, they had to endure years of abject poverty and a rather inconvenient world war, but the Depression-era set were really taken care of on the back end. The G.I. Bill, a spectacular post-war economy, and a penchant for thrift and self-reliance allowed the Greatest Generation to retire with ease. America’s economy is terrible now, and has been for quite some time. Real wages haven’t increased for the middle and working classes in over 25 years; the same cannot be said for the price of goods and services. To cover this never ending shortfall, households have incurred crushing debt loads, which pose a huge barrier to financial independence.
4. Persistent Low Yields
Corporate, individual, and bureaucratic malfeasance bred the perniciously low interest rates that have been the bane of principled savers since 2008. As I write this, the venerable, practically risk-free 10-year Treasury Note, long-cherished for keeping hard-won fortunes out of harm’s way, is yielding a paltry 2.70%. For those lucky enough to rack up a sizable nest egg of, say, $2 million, they’ll receive a measly $54,000 annually (pre-tax). Adding insult to serious injury, the widespread prosperity promised by these manipulated, chronically depressed rates, never materialized.
5. Blind Faith
The financial services industry has done a splendid job convincing folks that all they have to do to retire rich is to continuously feed their 401(k) and IRA accounts for 40 years. Sounds great. The bad news is few have the aptitude to successfully manage money over decades, making the current retirement system irresponsible to individuals, and by extension, society. Capital markets are not our benevolent business partner; rather, they’re capricious mechanisms indifferent to our retirement plight and viciously prone to disappoint when we are most vulnerable. Remember that.