Saturday, January 28, 2012

Live long and prosper

Here's my Saturday morning epiphany: even though the negative effects of illness can be multigenerational, but so too can the positive effects be......if we do the work. It is possible, even in the face of this, to live long and prosper.

Here's what I've just realized, or perhaps, re-realized: failure to prepare in one generation almost ensures an inability to prepare in the next. The end result of this failure to prepare, is what is referred to in some churches, as a multi-generational curse in which succeeding generations continue to feel the ill-effects of bad choices made years before.

I see the possibilities of this developing in my own family. Mummy's illness and her unwillingness to take a strong stand to prepare for retirement has, for the moment, wiped out any chance I might have to properly fund my own future. Note I say "for the moment". I have a plan you see. Fortunately for me, I'm still relatively young and could potentially have another 30 years of work to catch up, but it will be a steep hill and I will have to marshal every ounce of self-control every day going forward. There will be no pennies for fripperies and foolishness, but so it is. I could also strike it rich or marry a millionaire. Or I could strike it rich AND marry a millionaire. Anything is possible.

My understanding of the long term financial effects to the caregiver, is why I will continue to drill this point frequently: talk with your parents, your old aunts and uncles, about long term care needs. The reality is that either we are strong enough, and mean spirited enough, when the crisis hits to say, "Well, I told them. They didn't listen. Let them fend for themselves" or we find ourselves stepping in to plug the inevitable holes. Once you step in, this thing is like quicksand. You can't just step back out. Once you're in, you're in. For good. For the long haul, however long that might be and wherever that might lead you. So I say again, have those conversations, make some plans, create streams of income because if there is one truth I have learned, it is this: you can't out save your retirement needs. You have to out earn them by creating a never ending flow of new income.

I really believe that the model currently being touted, that suggests that it's possible to save enough for retirement is just straight up wrong. I know it's wrong because my mother followed most of the rules: she saved and she invested. She also did better than most in that she never spent what she'd saved, certainly not at the recommended 4% per annum rate. She simply never spent. It all just sat there and yet, when diagnosed with a chronic illness in the 20th year of her retirement, it immediately became clear to me that all that she had was still not going to be enough for the battle ahead.*

I do not offer any of this to alarm but rather as a warning and an opportunity for you to take action. For her, a solid retirement plan should have included a stream of (growing) income to help cover the shortfalls consequent upon a (shrinking) pension. Simply put, when the cost of bread rises, and the pension does not, the income stream covers the gap. When the cost of staples and necessities, indeed every blessed thing, rises and the pension does not, the income stream covers the gap. And so it goes, until one day, you find that it's the income stream that's doing all the work. The pension can perhaps fill your gas tank or repair a leaking faucet, while everything else is covered by your current income.

When we neglect to think about these things, when those who have experience refuse to share their experience of these things, others suffer needlessly. Please, don't suffer needlessly, cuz I'm out here, sharing. Don't put your family on a path to a multi-generational financial crisis. There really is no need. Creating a successful plan is more doable than you might think and taking small steps today eliminates the need for giant leaps tomorrow.

I must be part Vulcan, because I really do believe that we can "live long and prosper", even in the midst of this.

There's a long road ahead. How do you plan to navigate it? As pretty as this one looks, we really have no way of knowing what's around the next bend or just beyond the farthest point that we can see. So I ask again, what's your plan?

* Current models for retirees recommend a 4% per annum draw down on retirement funds based on a presumption of  about 25 - 30 years post retirement living. The trouble with that is that if you're perfectly healthy (as Mummy was) for the first 20 years of your retirement, by the time illness comes, you've all but exhausted your resources. What recourse have you then, but to turn to your children (who may by then have their own retirements to fund, children to educate, and mortgages to pay) for support?

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