If you are of a certain age you know the rock band Red Hot Chili Peppers and you might even know their hit from 1991 Sock It Away in which the extol the virtues of saving money for retirement. They have always been ahead of their time. To whit the second verse and remember this was 1991;Greedy little people in a sea of distress
Keep your more to receive your less
Unimpressed by material excess
Love is free love
Me say hell yes
Well those words become even more prophetic as this week we have learned that social security will start burning money in 2017 and go bust in 2037. Medicare will be insolvent in 2017. These timetables have been moved up because of the current recession.
Oh boy.
Obvious, even if politically impossible, solutions include raising taxes, delaying benefits, reducing benefits and although tough to see now, if the economy begins to grow again it will buy the country a little time. For a little controversy maybe we could allow anyone into the country who is not a felon, get them on a payroll somewhere and then collect their payroll taxes to fund our retirements.
My thoughts about this have been the same since before I started the blog. I do not expect either program to be there when I am of age and so do not factor it into my planning. In this context I often write about working longer, spending less and otherwise being self-sufficient and resourceful in crafting your own solution.
If your interest in investing and personal finance is such that you seek out content from sites like this one you probably are reasonably positioned to figure something out for yourself. Unfortunately we know that many people live paycheck to paycheck, are the folks who have the average $8000 in credit card debt and only $36,000 in their 401ks. That combo might be OK for a 30 year old but not someone who is 50.
Something is going to have to give, I obviously don't know what will give, maybe everything, and the consequence of this will either be as bad as some people fear or it won't--again don't know.
I tend to make a priority out of personally avoiding potential consequences like this. For me, the solution is living below your means. If you can be so lucky as to need very little money to cover your nut then things like job loss doesn't have to be a disaster. I don't think I could function very well knowing I needed a huge income to cover the bills. If you make $10,000 or $20,000 a month that is a fine income but those incomes may not be readily available if you needed to replace it.
No doubt I am peculiar with this stuff but I just don't want the aggravation. One thing is certain, everyone needs to figure this stuff on their own at some point in their life. To paraphrase my wife's former boss/our friend Bill you can figure it out now or you can figure it out later but if you can figure it out now you'll be much happier.
36 comments:
I must disagree with your TOTALLY ignoring SS and Medicare from your calculations.
This reminds me of the client I had who was a fine concert violinist when he was younger and it was truly his passion. However, he got married and wanted to have a family and he wasn't making such great coin. Also being intelligent, he got his degree and became a CPA and went on with life.
I got to know him when I handled his father's estate (trust officer by trade). He knew his dad had money but completely discounted ever getting anything. Well, he inherited a 7 figure amount.
What did we learn?
Families should discuss finances.
You should never COMPLETELY count on an inheritance / social security, etc. but to COMPLETELY ignore it is folly. Dreams can die this way.
Just my two cents.
DE
Ignoring social security could be the wrong thing to do but I don't follow your point as to why.
I'm with you on the shock of a huge inheritance but don't see how a $2000 stipend (in today's dollars) ties in to your argument.
I'm always confused that the 2 obvious things aren't usually considered by politicians: cutting/stopping benefits for the wealthy retired and removing the cap on payroll taxes.
SD. If you means test SS, then it becomes welfare. Obama, most Dems, and their non-income tax paying electorate would like that very much; but the tax payers who fund it would revolt. Similar thoughts on eliminating the cap, though I have no doubt it will be raised. I realize the gov't has problems, but having paid into SS for 40 years, I expect to reap a benefit.
raising the cap; someone in Boston or NYC or LA or SF making $200K is not really high income. that person ponying up another $14k per year would be rough, very rough.
You say something has to give but don't know what. How about a discussion of Uncle Sam acting like "billy bigshot" all over the world. How about a discussion of the "military industrial complex". Manned fighters that cost a quarter of a billion dollars a piece. Ridiculous!!
How about a discussion about middle east expenses. With 2% of our population Jewish, don't you think we spend a great deal of time and money on something that far removed from us?
Please don't start the discussion about "fight 'em there, so we don't have to fight 'em here. Remember, we choose our enemies.
You know, we have options here with regard to retirement. We can sockitaway and avoid the mess of social security all together. This assumes that SD doesn't consider me 'rich' and have it all confiscated :P
[semi-off-topic-rant]
However, when these goons take over healthcare and mismanage it, we're screwed. Most government systems eventually ration and then they outlaw private options.
Tell me "it'll never happen" as we keep rolling down this path.
[/semi-off-topic-rant]
I totally ignore SS and Medicare. I consider it highly improbable that I'll see any of it. Same for inheritance. The previous inheritance comment was a rare exception. It was just as likely that dear old dad could've told him about the 7 figures and it could've been horribly mismanaged into much less than that. Meanwhile, this guy is counting on it.
To me, that's a horrible risk to take.
Ouch, this seems negative, but it's not my intention ... just in disagreement with a lot that's been said today. That, and I stopped sniffing glue this week :)
"I can make a Pterodactyl"
Weren't we just talking about the reliability of financial news? Oh well, Yahoo mostly just repeats what they get from elsewhere and stenographic news has become so commonplace as to be entirely unremarkable but the source of the original article, the NY Times, better start improving its editorial checking if it doesn't want to wind up as fish-wrapper along with all the rest.
The original article at http://tinyurl.com/o5uzbo posts what appear to be a set of reasonably accurate charts based on Treasury Dept and Health and Human Services data at the top of the article but the article's author apparently doesn't understand what "solvent" -- the state of having at least as many assets as liabilities -- means and states that "...the [Obama] administration said, the Medicare fund that pays hospital bills for older Americans is expected to run out of money in 2017, two years sooner than projected last year. The Social Security trust fund will be exhausted in 2037, four years earlier than predicted, it said."
Of course "it" -- meaning the Treasury Dept, Health and Human Services and the Obama Administration -- probably said no such thing because the data say no such thing and "insolvent" doesn't mean "exhausted" IAC. The issue is that solvency in the accounting sense will probably become an issue because, under current assumptions (death rates, payout rates, economic productivity, revenues, cost of living, etc), the administratively entirely separate SS and Medicare trusts are projected to be bringing in less than each of them are currently projected to pay out by 2034 and 2017 respectively.
I don't have time to look up the numbers but IIRC, in the case of Social Security, that boils down to a projection of about 98 cents incoming for every dollar being paid out by 2034 so some combination of increased debt and/or taxes and/or decreased benefit payouts will presumably need to occur some time before that if projections pan out; i.e., it's not going away unless it's intentionally skragged.
The situation with the Medicare trust is far more serious and the escalation of medical costs in the United States so out of the control that any projection is difficult but, regardless, it seems clear this trust fund requires very focused attention over the next few years (free from useless and senseless conflation with the SS trust one would hope). Despite the enherently statistical nature of these issues most discussions seem to avoid hard numbers but there are real numbers and structural distinctions and those who want to actually understand the facts of the case may wish to start with the actuarial publications of the SS Administration at http://tinyurl.com/ofjmlb.
I still wind up agreeing with what I take to be Roger's main point however: Trusting the government to take care of you probably has less potential for harm than assuming you will be effectively abandoned.
In my case I assume that: (a) politicians of all stripes can't resist combining the SS trust with the general budget to hide the fact that they overspend (the SS trust currently has a huge surplus) and eventually may be unable to repay and/or, (b) if the Democrats stay in power, I'll eventually be classified as "rich" and receive fewer benefits, or, (c) if conservatives/libertarians get back into power, they'll destroy the program entirely unless the conservatives can figure out a way to throw libertarians under the bus and sell a reverse means-test giving more to the rich but I won't meet the definition of rich in that case.
Guess I better get busy and make some more money; maybe stick some more of it off-shore while I'm at it.
In the meantime got the Red Hot Chili Peppers "Under the Bridge" in the slot and a nice little pharmaceutical company in my sights. No time for huffing. Ciao.
Roger,
This brief interview/article with Barry ritholtz reminded me of your perception...
http://finance.yahoo.com/tech-ticker/article/247615/Rally-%22Guilty-Until-Proven-Innocent%22-But-Not-for-Sucker's-Barry-Ritholtz-Says?tickers=%5EDJI,%5EGSPC,SPY,DIA,C,GM,SCHW?sec=topStories&pos=9&asset=&ccode=
anon 7:09. Obviously you think we should not be spending money on the military and supporting one of our few middle east allies. I disagree, but the dollars spent are these budget items is not that significant in the scheme of things. Where the US really spends the vast majority of its budget is on programs like SS.
RW, no politician is ever going to kill social security. That's political suicide no matter the party. With the entire population paying into it, everyone has an active interest so it won't just get pushed aside.
RW, thanks for an excellent post.
I believe it was ex-Labor Scty Robert Reich who responded to the report by saying it was all projected from the absurdly overpriced medical costs we pay in the US; if we had a health care system as cost-effective as those in Europe & Canada (for example), there would be NO PROBLEM.
Obviously this is a top priority for the administration. Single-payer (like Canada) would be most efficient, but that's not on the table for now, so we will get some monstrous cost-control package.
In any case the value to society of a healthy populace, through all social classes (not just the bare majority now who have affordable insurance), is at least worth putting some effort toward.
Getting distracted again, meant to say in the above comment that "[T]rusting the government to take care of you probably has more potential for harm than assuming you will be effectively abandoned."
Bill B, there are a lot of ways to kill SS and pretend to have clean hands; e.g., what do you think the state of the trust fund would be now if the 'privatization' plans had gone through?
Anon 8:23, the US does not spend a penny for SS or Medicare from its budget: They are separately funded and administered trusts. The delusion SS and Medicare are a large budget component is the result of politicians discovering they can effectively ignore the general budget and hide the fact they have been overspending for the past several decades if they refer to a "unified budget" that combines the budgets of the US government which is heavily in debt with the SS budget which currently has a large surplus. This is aided and abetted by conservative and libertarian organizations who like to refer to "entitlements" as a unified budgetary entity for their own purposes.
AAlan: If the level of obstruction (and horse manure) does not rise too high I could see the US moving towards something along the lines of Switzerland: More expensive, yes, but everyone is covered and many Americans simply would not accept the more heavily controlled continental models even if they understood them better IMO.
Indirectly criticizing conservative and libertarian constituents after reading Roger's post today is preposterous.
Conservative and libertarians, while disagreeing on some issues, are joined at the hip regarding limited government as expressed by The Founders - and not agreeing to become another Switzerland, which would have been still accepting Nazi loot and bidding on gas chamber contracts if the war was won by the Axis. And, just like old Europe and Japan, they depend upon U.S. military and diplomatic prowess to prop up their world outreach.
Franklin Roosevelt would be shocked as to how the social security program as originally implemented has morphed into a myriad of entitlements and other assumed largess due to almost solely to liberal, Denocratic Party pandering.
We are approaching the day when the Greatest Fool will find that extracting exhorbitant taxes from the U.S economic machine will be much more difficult than getting a Dailey elected in Chicago.
We do not want to be, as a country, another California.
Roger can you explain why everyone things this must go on..."The American consumer recognizes they have to save and trade down," says Howard Davidowitz, a retail industry consultant. "It's a permanent condition. Trade down is here forever."
Once credit loosens up again why won't everyday Joe start charging everything to his credit card again?
anon 12:34,
we know that the great depression dramatically altered behavior of the people who endured it.
The current decade is somewhere on the road between expansion and the great depression (I don't think it is anywhere near as bad as that). Is it bad enough now to permanently alter anyone's behavior? If so, how many people and what sort of modification? Same questions apply to financial institutions. How easy will credit be three years from now? The same as 2006 or tighter credit than that? If tighter how much tighter?
So many interesting threads to comment on...
1. Shocked, shocked I say, to find out that in fact, there is no social security trust fund. There is nothing in the mythical lock box but "iou's". This "running out in 2017" is just more accounting shenanigans involving assumptions on expenditures and on revenues, same as it ever was.
2. Re: #1, so what? What possible difference is made in the current environment where "QE" (quantitative easing) is nothing more than a few pen strokes?
3. The monster in the closet is health care. These boomers (I stand just behind them in line) will not "go gently into that good night". Think about it: if something like 85%* of lifetime health care costs are expended during the last 6 months of one's life, won't the sound of the boom soon to come be deafening? Caring for the living (SS costs) pales to a fly's testicles compared to the elephant's ass of "caring for the dying".
4. Please why don't all the libertarians and "originalists" all get together and move to some (remote) island where they can happily grow their own food, and use Hammurabi's code and read Thoreau to each other, and leave the rest of us alone. I live in NYC, the world's greatest experiment in humanity, and all this "individualism" from the libertarian wannabee's is as much bullshit now as it was back in "Walden Pond" days. We're all terminally dependent on one another and if we don't get on with finding acceptable compromises and growing the f*ck up, it'll eventually end in a bad imitation of mad max's world. The difference between the top 5% (in terms of intelligence/talents/determination) and the bottom 5% becomes completely meaningless by adjusting the parameters of context (physical, environmental, biological) ever so slightly. (Example: raise the average global temperature 3 degrees in a short period of time, and we all drown; increase the proportion of nitrogen to oxygen in the air by 5%, we all suffocate. Our similarities, and common dependencies FAR outweigh the "merit" based arguments for false distinctions.)
5. All that said, I get that some things are worth arguing / fighting about. I just think the SS trust fund ain't one of em.
Whew. That was a rant!
R in NY
Hi Roger,
I was curious if you will be attending the Big Picture Conference? It appears there will be some heavy hitters there in Taleb, Mauldin, Ritholtz, Kass, Ratigan, etc...
It is my understanding that there will be access to a video afterward for a fee?
http://secure.pnmi.com/bigpicture/
i have a scheduling conflict
@RW
In my case I assume that: (a) politicians of all stripes can't resist combining the SS trust with the general budget to hide the fact that they overspend (the SS trust currently has a huge surplus) and eventually may be unable to repay and/or, (b) if the Democrats stay in power, I'll eventually be classified as "rich" and receive fewer benefits, or, (c) if conservatives/libertarians get back into power, they'll destroy the program entirely unless the conservatives can figure out a way to throw libertarians under the bus and sell a reverse means-test giving more to the rich but I won't meet the definition of rich in that case.
Anon 8:23, the US does not spend a penny for SS or Medicare from its budget: They are separately funded and administered trusts. The delusion SS and Medicare are a large budget component is the result of politicians discovering they can effectively ignore the general budget and hide the fact they have been overspending for the past several decades if they refer to a "unified budget" that combines the budgets of the US government which is heavily in debt with the SS budget which currently has a large surplus. This is aided and abetted by conservative and libertarian organizations who like to refer to "entitlements" as a unified budgetary entity for their own purposes.RW, not sure I'm following you here. There is "accounting" and then there is economic reality, right?
If we change the accounting, that doesn't change the underlying economic reality.
Social Security/Medicare are liabilities of the U.S. government. All liabilities of the U.S. government are still liabilities of the U.S. government whether we want to pretend they are in the right shirt pocket or the left shirt pocket, or the pants pocket or wherever.
Let's take this down to the individual level. Let's say I set up a gasoline trust fund to fund all my future gasoline purchases, and I put aside 50% of my income for that purpose, but meanwhile I rack up a ton of debt for the rest of my living expenses. Isn't the "delusion" that I have a gasoline trust fund surplus. Eventually, I have to pay ALL my obligations/liabilities out of my income.
I just don't see the logic of pretending a "surplus" exists in a single budgetary item of one entity (the U.S. federal government is a single entity, right?) while ignoring the massive debt to pay everything else.
Here is David Merkel's take which I think is as usual spot-on right:
http://alephblog.com/2009/05/14/so-whats-a-year-worth/
"Many focus on when the trust funds will run out — now 2017 for Medicare, and 2037 for Social Security. Consider this, the trust funds are invested in nonmarketable US Treasury Notes. That’s safe, right? Safe, yes, as safe as the US government. They will pay with the dollars that they print via their stepchild, the Fed.
This is my advice to all who read me. Given that these social insurance programs invest only in US government debt, on an accounting basis, it makes sense to unify their balance sheets with that of the US government. Once we unify the balance sheets, it is easy to realize that the negative consequences will come when expenses exceed revenues, not when the funds go to zero. When expenses exceed revenues, the US government will either need to tax or borrow more in order to make ends meet. The US Government bonds held are a convenient accounting fiction to show that the taxes paid have been spent for other purposes. There are no “Trust Funds,” only nonmarketable bit of US debt, that will get repaid through higher taxes, or further borrowings. China and OPEC, ready to fund US retirements in style?
@ R in NY
4. Please why don't all the libertarians and "originalists" all get together and move to some (remote) island where they can happily grow their own food, and use Hammurabi's code and read Thoreau to each other, and leave the rest of us alone. I live in NYC, the world's greatest experiment in humanity, and all this "individualism" from the libertarian wannabee's is as much bullshit now as it was back in "Walden Pond" days. We're all terminally dependent on one another and if we don't get on with finding acceptable compromises and growing the f*ck up, it'll eventually end in a bad imitation of mad max's world. The difference between the top 5% (in terms of intelligence/talents/determination) and the bottom 5% becomes completely meaningless by adjusting the parameters of context (physical, environmental, biological) ever so slightly. (Example: raise the average global temperature 3 degrees in a short period of time, and we all drown; increase the proportion of nitrogen to oxygen in the air by 5%, we all suffocate. Our similarities, and common dependencies FAR outweigh the "merit" based arguments for false distinctions.)Wow, I think I just got hit over the head with a sledgehammer.
This is really profound. I am serious. I never really thought of it from that perspective. I lean libertarian, but you are absolutely right that "merit" really is just a function of the external environment, the rules of the game, and what the game rewards.
This reminds me of a statement I think I recall Buffett made which is that his capital allocation skills woudn't have been worth diddly if he had been born in Malaysia or something to that effect. His "merit" only exists in the framework of the existance of the U.S. capitalist/stock market system. In the jungles somewhere, he probably would have starved unless there was "redistribution" from the physically strong/good hunters.
Interestingly, the older I get the more I find myself migrating away from libertarian/laissez faire dogma. To what eventually I do not know?
Because I know the even greater fiction is the socialist one where we all live off "redistributing" from someone else, and all the workers and producers disappear (the Galt I'll leave it how I found it).
I must admit I've read many things the past few months on economics, and social, cultural, and demographic trends that leave me very pessimistic about the future.
Okay, I want to get in on this.
My 2 cents as a retiree aged 60's.
I'm a D.Merkel follower on finance.
Having tended 2 parents through prolonged end-of-life deaths, I'm of the sort that does want to go gently into that good night, unlike "R in NY at 1:52" opines for my cohort. I'm guessing there's a group of us (don't know size) who view this catastrophe called a US health care system a farce that threatens succeeding generations. Why are we so scared of rationing? Why do we not accept a cap on health expenditures post 65 age? I find it preferable to 10-15% annual increases in med. insurance premiums being foisted on my younger siblings. (Currently $12K annually under BCBS for one who is self-employed in Florida.) It's insanity to not approach this problem with some rationality.
(As info, I'm a long-term supporter of hospice projects & right to a natural death.)
Thanks for the opportunity to give my opinion.
Retired in NC
Mike C, a full answer would be too long for a blog entry to say nothing of a comment so, here’s as short a version as I can offer and still, I hope, make some sense.
Analogizing from individuals or even corporations to a government may sound like common sense but can only mislead; e.g., individuals do not have the power to tax, issue currency, create and enforce laws, regulate, and so forth. If it suits a government to segregate funds it may do so in a manner no other entity other than itself can alter and in the case of the SS trust that is pretty much what happened: The funds that were actually in the trust account were replaced with special bonds.
So is it all just one set of liabilities? Well sure, thank goodness, because if any one of the bonds in question is not honored then no obligation of the government is any good including its currency and that will pretty much be that for everyone in the country even if they have plenty of beef jerky, shotgun shells and Krugerands on hand.
So why maintain these accounting fictions? Well first of all, your money in the bank or the distinction between your money and someone else’s or the banks money is all part of that same fiction. With the exception of some cash on hand, it’s all book entries in a machine, bits and bytes, and I really don’t think anyone here wants to risk invalidating that or the government’s ability to regulate it and enforce the relevant contracts.
IOW there is nothing wrong with David Merkel’s analysis but it misses the central point. It’s not just a matter of assigning accountability it’s a matter of judging a democratically elected government’s ability to rule effectively and justly. Allowing the SS fund surplus to mask the heavy debt of the federal government through the fiction of a “unified budget” would not be altered if Merkel’s recommendation were followed, it would become enshrined in law and the US government would have successfully evaded the political consequences of thirty years of chronic deficit spending and inadequate revenue collection; money managers who merge an underperforming fund with a better performing fund to mask the underperforming fund’s history understand this concept quite well (as I am sure Merkel would too if he thought it through).
But there is worse: Identifying “entitlements” (SS et al) and their unreformed nature as the core problem allows the blame for nearly three decades of feckless government rule to be shifted to old people and the sick. Only an accounting fiction and a legal distinction reveal that for the terrible fraud it truly is.
But enough, a semi-tall Scotch awaits, and I made some money today. Prosit!
Tom Drake: "I don't really care if this is a bear rally or a new bull market, but.....I don't see sentiment as I measure it being sharp or high enough to be the high of a bear market rally. Bear market rallies are crazy, and this isn't, although lots of perennial bears think so. 2cs says there's still lots of room unlike the bear market rallies of 2001 and 2002 and 2008.
.Does that make any sense to anyone else?
Now it's scary after three days. In a bear market rally pullback sentiment would be screamingly bullish today. But the 2cs is 144,,, it should be 74 for a high.
I'm not saying we won't have a hellish pullback at some point but I don't see it here in the numbers."
If someone told you when it was 100 degrees or more in Phoenix that fur winter coat sales exploded higher - you'd laugh. You'd say it made no sense. It's "tea leaves!". But if this was the pattern, and many people followed it, and you were a fur coat merchandiser you'd be stocking up ahead of >90 degree days. And the more times it worked, the more people who would follow it. That's basically how I look at technical analysis - a lot of these things make little sense from the perspective of - why is the 20 day or 200 day or 50 day moving average important? Why is not the 47 day moving average important?
Anon 6:35- technical blah is all noise
Technical Analysis...blah. Wake up anon. TA records what the market thinks of an issue. If the fundos look great but the stock stops making higher highs, maybe the insiders are dumping or a law suit or judgment is pending and the charts start showing it what's not on a financial statement.
Roger, I'm just guessing here but I think you probably don't have any kids or if you do you are not encountering any problems. Sometimes in life, unlike cards, you get dealt a hand that you can't fold. Expenses can run high and you can't get away from them. You probably shouldn't take the chance...you wouldn't want to upset your apple cart.
PS. My property taxes are still going up....again this year....but not my income.
I plan on moving back to Norway and laugh at you capitalists!
We in Norway are so socialist that we SAVED and INVESTED our oil wealth rather the SPENDING it all invading Arabs.
Now we have taken a little more risk and invested in cheap stocks.
When will you capitalists ever learn about fiscal responsibilty, government, democracy, and freedom.
We in Norway Socialist land are very free, we work less then any people on earth, free health care, free education, free all kinds of stuff and we still have trillions in the banks - zero debt.
Good like paying off all your Republican war spending all you great capitalists.
Is it true, many of the so called "socialist" countries are much more fiscally responsible then America anyday.
It is mostly culture, "isms" like capitalism and socialism are bogus labels for politicians.
Northern Europeans are much more fiscally conservative then latinos and Mexicans which cannot even fix thier toliets so they do not smell.
As America because more latino, it also loses its white european culture and one day I predict the toilets will start breaking as well.
"When expenses exceed revenues"
Sounds like my mortgage, as long as my house price goes up I'm good!
Its the America way, don't you watch Trump?
It is all about how much cash flow you have NOW to spend on jets, women, and cigars.
Hi Roger, I never got a chance to respond - I was the first poster of the day.
You Poo-pooed getting $2,000 per month plus getting your health care paid for for the rest of your life. I like to look at $2,000 per month through the eyes of it takes $600,000 in savings to produce $24,000 in a year at a 4% withdrawal rate. On top of that, the medicare part of the equation is even more valuable than the SS annuity.
Thus, I stand by my statement that TOTALLY ignoring the possible receipt of these funds is as irresponsible as TOTALLY relying on them or TOTALLY relying on an inheritance. You must factor these things into any equation.
Also, remember that when SS "runs out of money" that means that there will only be enough money to pay 76% of benefits.
My two cents.
DE
i didn't poo-poo 2000 per month, i don't see you point about not expecting the 2000 per month.
Perhaps he couldn't have done anything about it as his dad lived a frugal life but he had an inkling that he may inherit something but talk on the subject within the family was taboo.
By not factoring in a VERY likely SOMETHING, a person may live too much for tomorrow at the expense of today. In his case, his dream of being a concert violinist was set aside for the higher pay of being a CPA. The chagrin on his face and the discussion we had on the subject when I talked to him about the estate will stay with me always.
PS - I live well below my means and have no debt, not even a mortgage on my house and I'm in my 40's so I am not a live for today, the hell with tomorrow type. I just try to be realistic in projections for myself and for my clients.
Is this DE?
At some point this becomes a psychology issue too. Before people start to worry about saving, spending, investing and all that I think they need to figure themselves out first.
While not easy to do for everyone I think that is a big step.
As I write about this from the perspective of jsut being some guy not a CFP (portfolio manager is diff than planner) this is how I view this stuff.
Yes, DE here.
I understand what you're saying and yes, I come from this as a guy "in the trenches" with the distraught at my desk.
It's absolutely psychological but we are emotional beings as you have always stated and our decisions about investing and how much saving for today versus living your life in the present is intertwined.
I deal with absolute spendthrifts (not my favorite clients) and I deal with "depression era" clients who squeeze a penny so tight that Lincoln screams. Neither position is healthy, there must be a balance!
I'm off my soapbox now. :)
DE
DE
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