To quote Archie and Edith, “Mister, we could use a man like Herbert Hoover again.”
Actually, I have no idea if that’s true. I’m guessing it’s not. Some say that he was one of the worst presidents. Others say he was simply one of the unluckiest.
But we’re not here to reflect on the tenure of the first president born west of the Mississippi. (There’s some presidential trivia you can use to impress your friends at dinner parties). We’re here to talk about the good ol’ days.
I’ll admit that I’m as guilty as anyone of sometimes thinking we’d be better off with the way things used to be, financially speaking. Every month when I look through our household budget, I can only shake my head at the amount of money that gets spent on things that weren’t household expenses when I was a kid (either because they didn’t exist, or because it just wasn’t something that people spent money on). For example:
- Gym membership
- Cell phones
- Sponsored kids in Kenya (I’m sure Kenyans existed when I was a kid, but to my knowledge, they didn’t have programs to make it easy to send money to them)
That list alone represents $664 every month to pay for things that weren’t around in the good ol’ days.
I hear a lot of wistfulness for the good ol’ days among my clients too. But their complaints tend to revolve more around the current investing environment and general retirement planning landscape.
For example, the disappearance of pensions is a sore spot for many. People love to cite the fact that their mom is 92 and never saved much for retirement, but she’s in fine shape financially because she’s still living off Dad’s pension.
Another complaint is interest rates. Most people like that 3.25% interest rate on their mortgage, but that satisfaction seems to be offset by the paltry 0.95% they’re earning with their money market.
And then there’s inflation. “We paid less for our first house than we did for the car we just bought!” Apparently the car dealerships print that out on a little card and give it to every car buyer over the age of 65 right before they drive off the lot, because I hear that one all the time.
So let’s rewind a couple of generations and talk about retirement in the good ol’ days. It usually looked something like this…
It’s 1975. Grandad retires at age 65 after a 42-year career at the textile mill, where they give him a gold watch and a pension. Combining that pension with Social Security for him and Grandma, they have a monthly income of $1,850, which sounds like the poverty line, but is actually equivalent to $8,250 in today’s money. They haven’t had any debt since the first year of the Eisenhower administration, and that $1,850 is more than they can spend every month.
Grandad never saved a ton of money, but he does have $45,000 in a CD that’s paying him 10.25% interest. So there’s another $4600/year (or nearly $21,000 in today’s dollars), which they also don’t need.
And by the way, life expectancy is 72 years, so the chances of living long enough to end up in a nursing home are slim.
If I’m their financial advisor, my job is easy.
“Keep spending money on the same stuff you’ve always spent money on, splurge a little bit because you can, and leave an inheritance to the kids. Now, here’s a little parting gift for you, it’s a brand new craze called the ‘mood ring.’ Hold on to it because it will probably be a worth a lot someday.”
Those were the days.
Now compare that to the current environment…
- Life expectancies continue to increase, so the chances of a nursing home stay for any given individual are higher than ever.
- Our rapidly increasing national debt means that we’ll almost certainly be seeing an increase in both tax rates and inflation down the road.
- CDs and money markets are paying basically nothing.
- Markets are more volatile than they’ve ever been.
- Pensions are quickly becoming extinct.
- Robin Williams and Princess Di are dead, but O.J. Simpson and Keith Richards are somehow still alive.
It’s a crazy, unexplainable world out there, and if retirement is on the horizon for you, you have a long list of challenging issues to address. Just because Grandad was able to do it all without professional help doesn’t mean you should try to do the same.
Get some help and you’ll be more likely to end up with what Archie would call “a happy frame of mood.”