What The Heck Am I Preparing For? (Part 4: Retirement)

Ok, so retirement is not really a disaster in and of itself…unless you are not prepared for it.

Social (in)Security

Most folks in the good old US of A don’t plan for retirement. After all, that’s what Social Security is for. They have been paying into it for all these years and expect it to be available. Unfortunately, that probably will not be the case. You see Social Security has pretty much always been a bit of a scam. Initially the plan would have supported those who paid into it, like a retirement savings plan. However, that didn’t help all those folks who had already retired so it was changed almost immediately so that those working today are paying for those who have already retired. That sort of a pyramid scheme worked great as long as the average life expectancy didn’t increase (it did) and each generation of workers was as large or larger than the previous one (not the case).

As a result, the trust fund that was supposed to provide benefits for those with disabilities is already exhausted although some shenanigans by our elected leaders have made promised funding until around 2023. Basically, this program is being funded out of general Federal revenues and is one of the drivers of the Federal deficit.

Overall, according to the Social Security Fund Trustee’s Report, Social Security will continue to take in more money than it spends until around 2019. At that point in time, the deficit will have to be paid out of the trust fund itself; essentially the program will begin eating itself.  It will take a bout 17 years to deplete the trust fund assets completely. I will be lucky to collect for about five years on what I have “contributed” over my entire working life. The Federal government is obligated by law to make up the difference but with spending and deficit levels like they are how likely is that to happen?

By the way, the push from both parties to naturalize illegal aliens resident in this country likely has nothing to do with anything other than a quick way to increase the number of people paying in to Social Security and postpone hard choices that will cost sitting politicians the next election.

So, if we can’t count on so called Social Security can we count on? Well, nothing is completely safe so it is best to hedge your bets a bit…

1 – Pay Stuff Off

One of the keys to the plan we have put together is to make sure the big items in our life are paid off before we retire. House, cars, etc all paid off before that time comes. But it doesn’t stop there. We’re planning to revamp the major systems in the house and buy new cars before that time as well. Now, one of the biggest questions we are struggling with is whether to stay in our current house which has been our home for longer than anywhere else ever or not. The taxes in this area are skyrocketing and despite that the city, like most big cities in America, is on a slippery slide into bankruptcy. Logic says we should sell an buy some acreage out a ways, off the beaten path a bit. But this is home…

2 – Investment-based Retirement Plans

We were poor when we first met and we stayed poor for a big chunk of the time we have been together; feed a family of five (later six) on less than $40 a week poor. We are no longer poor but we couldn’t start putting anything aside for retirement for a long time. This means we’re playing catch up so investment-based retirement plans, especially employer supported 401Ks that offer matching funds are super critical. We just can build the funds we need without such plans. Unfortunately, this means the performance of the investments is critical and we all know the stock market is (at best) a risk.

Another risk of such plans comes from the Social (in)Security shortfall. Like many other nations have already done, there is a real risk that private retirement plans could be “nationalized.” Call it nationalization, seizure or outright theft there is a risk that this money could disappear when it is needed most.

3 – Precious Metals 

To help balance the risks of Investment-based plans some of our retirement funds are channeled into physical assets like precious metals. Besides being a hedge against inflation and the loss of value that comes with fiat currencies it is a good way to store value in a way that is somewhat off the radar. We are also looking into investing in land as well and anyone who reads this blog knows I have been investing in lead, brass and copper for a while.

4 – Cash

While it is a losing proposition to have cash in the bank (where it also at risk of being seized by a cash starved government), having funds readily available for emergencies is also and important safety net for financial disasters. It is also another way to save for retirement.

So, that’s our strategy. What are we missing? Any other suggestions?

God bless.



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