Cowering in a luxury bunker is a lousy retirement plan.
In 1978, Jimmy Carter’s IRS created the 401(k) retirement program. Prior to this, most Americans had two ways to enjoy a dignified retirement: Social Security, and employer-provided defined-benefits pensions, which guaranteed you a proportion of your final salary every month from your retirement until your death.
The 401(k) was a third way to plan for retirement: you could gamble in the stock-market, and hope that you weren’t the sucker at the table. At first, this was a great deal: between the tax-breaks for 401(k) bets and generous employer-matching funds, many workers and unions were convinced to trade their sure-thing defined-benefits pensions for market-based alternatives.
We know how that turned out. The vast majority of American workers have almost nothing saved for their retirements. There’s a reason for that: wages have stagnated since the Carter era, leaving workers with little-to-no excess cash to invest in their 401(k)s.
Even if you’re lucky enough to have saved something, that’s no guarantee. Most of us are woefully unqualified to make bets on the stock market. Even if your bets pay off, the deregulation of markets has produced wild, calamitous crashes that offer a stark choice to savers: eviction and hunger, or cashing in retirement savings and paying ruinous penalties.
Most American households have less than $400 in savings.
Meanwhile, Social Security benefits have also stagnated. Unless something changes, millions of younger boomers, Gen-Xers and millennials will find themselves pushed out of the labor market, into decades of “retirement” characterized by predatory Medicare drug-plans, sky-high rents and routine evictions, immortal student debt, no savings, and sub-starvation Social Security benefits.
But maybe that’s not you. Maybe you were lucky enough to have excess income, maybe you were lucky enough to put that excess into sound investments, maybe you were lucky enough to dodge crises that would have forced you to cash out early.
You’re still screwed. Remember J. Paul Getty’s maxim: “If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” A corollary: when one person lacks retirement savings, that’s their problem; when most people lack retirement savings, that’s everyone’s problem.
The people who don’t share your good fortune — tens of millions of them — will not reach retirement age and then politely dig themselves some holes, crawl inside them, and pull the dirt down on top of them. Their children — who will be entering their own (notional) prime earning years just as their parents enter the unnecessariat — will not sit idly by and watch their parents starve, nor will they meekly accept the foreclosure of their life’s chances as they are doomed to care for their elders and their own kids at the very moment that they are trying to forge their own way.
Your retirement savings will not buy you a life of comfort. Rather, at best they will buy you a front seat to the cozy catastrophe — Brian Aldiss’s term for a kind of English postwar science fiction tale in which respectable middle-class people barricade themselves inside walled farms while gangs of proles roam the countryside (think of John Wyndham’s Day of the Triffids or Nevil Shute’s On the Beach).
Life in an armed compound, surrounded by your starving and desperate neighbors banging on the gates, is no happy retirement — not for anyone with a smidgen of empathy, anyway. The only worse fate is being on other side of the wall, clawing at the fence.
Retirement is a social problem, not an individual one. It is one of those parts of our world where our destines are inextricably bound together, like, say, public health. And as with public health, the attempt at converting a social, collective issue into an individual, market-based one has been an abject failure.
There’s a classic con game that goes like this. You get a mysterious phone call from a stranger who gives you a tip on an upcoming professional sporting event. Sure enough, the tipster was right! The day after their prediction comes true, they call you with another one — and that one comes true, too! Time and again — four times, five times — the predictions pay off. Finally, the tipster calls you and says, “Now you see that I have an inside line on upcoming matches. I have one more tip for you, but it’ll cost you. Remortgage your house, borrow from your friends, and transfer me $100,000” — or whatever they think you can lay hands on — “and I’ll call you back with one final prediction.”
Here’s how that scam works: the con artist makes a lot of calls. 32 on the first prediction, say, and splits his predictions among his marks, telling half of them that one team will win, and giving the reverse prediction to the other half. Then he does it again, calling back the 16 marks who got the correct prediction, and once again, he splits his predictions in two. Then he calls back the lucky eight. Then the lucky four. Then the lucky two. Sixty-two phone calls nets the scammer $100,000 or more.
If you’re on the receiving end of this scam — if you’re the final mark who gets a correct prediction and a big payoff — it can seem like you have just been privy to a remarkable series of shrewd, skilled predictions. But from the outside, it’s easy to see that you just got lucky.
There are reasonably reliable ways to save for retirement: put your money in low-fee index funds and don’t touch it. But having the money to save, avoiding emergency redemptions? That’s pure luck. The members of your community who enter retirement with nothing but medical and student debt aren’t unskilled or unworthy — they’re unlucky.
They’re not going to gracefully concede to their misfortune. They — like you — will demand something more. If they don’t get it, they will make those demands more forcefully.
I am lucky. I have a retirement savings account. Hypothetically, I could see retirement with that fund intact. But I don’t kid myself that this means I’ll have a fine retirement. I have this savings because the only thing worse than retiring with savings amidst a no-savings retirement crisis is retiring without savings. In other words, I have retirement savings for the same reason I have health insurance: it’s terrible, but its absence is worse.
When covid struck, Texas lieutenant governor Dan Patrick told Tucker Carlson that elderly people should simply accept the risk of gasping death so that their children and grandchildren could continue to shop and attend sports-matches (ladies and gentlemen, I give you “The party of life”). He didn’t get any takers — not among elderly people, nor among the younger people who love them.
They understood that we have a shared destiny. They understood that the cozy catastrophy is not very cozy. They understood that surviving the Titanic in a half-empty lifeboat filled with your fellow first-class passengers surrounded by steerage passengers begging for their lives as they tired and drowned is not a happy ending.