Friday, February 15, 2013
Are We Acting or Reacting?
One week ago I wrote about Social Security, that it was not an entitlement with a guarantee attached. Despite this lack of guarantee, many people have become overly dependent on Social Security for retirement. Although seniors resent the idea of an entitlement because it implies accepting charity from a system they actually paid into, the prospect of losing any benefits causes panic. I concluded that at least part of this over-dependency was related to behavioral failings.
The problem begins as a consequence of poor discipline. In some cases living from paycheck to paycheck cannot be avoided. But in others, overspending on wants after the needs are met, an unwillingness to delay gratification, leads to minimal retirement savings. When they are ready to retire, their primary investment is a house, which is not easy to cash in. Social Security is a supplement, not able to replace a paycheck, so their lifestyle must be drastically curtailed.
How often, though, do they get to within a few years of retirement before they become aware that a problem exists? A lack of perspective has insulated them from the realities of the future. Perspective instills a sense of gratitude, appreciation for what we have rather than longing for more. It encourages moderation and provides the motivation for the discipline of frugality necessary to save for the long term.
Lack of perspective also warps expectations. Not so long ago, less than 100 years, retirement was a rarity, enjoyed by only a few. Most people worked until they died, or if they were incapable of work, they were taken care of by their families. When Social Security was passed, the life expectancy was less than 65. Now life expectancy is near 80, and we want to believe the AARP when they tell us that retirement is a right along with affordable healthcare, not something we must earn by saving for it. Considering the overall cost, this is not realistic.
For lack of discipline and perspective Americans have lost the ability to provide for themselves in old age. Expectations are skewed. In this and in many other areas we are reacting, without a plan or focus. When it looks like Social Security is in danger, we have no Plan B.
Years ago this would not have been such a problem. Changes were slower, allowing more time to adjust. The telephone, invented in the 1880′s, took over 40 years to become widespread in America. The first televisions, in the 1920′s, took nearly 30 years to replace radios as the primary source of home entertainment. Today we have gone from e-mails and instant messages to texting on our cellphones in only a few years. The pace of change continues to accelerate. If lack of perspective keeps us living for today and only reacting as crises appear, the danger of serious problems will only increase. This applies not only to retirement, but to many other issues, both personal and societal.