Friday, June 24, 2011
The Sheer Awful Cussedness of Things
A statistic in the newspaper the other day called to mind a long-held fantasy of mine. More on the statistic later, but first, the fantasy.
It’s that whenever Congress takes up legislation that would affect the economic fortunes of most Americans, the congress members would be forced to watch the first 15 minutes of Pixar’s Up! and write a 100-word essay on what it shows about how real people live and save money.
(If you haven’t seen it, a young couple, upon marrying, begin to set aside money for a dream trip to South America. Every time they get a bit ahead, something happens: a tree falls on the house, the car crashes, and they have to raid the vacation fund. Finally, in their old age, the wife dies, and they still haven’t taken the trip.)
And if it’s that tough to save up for one crummy vacation, how can people be expected to save for retirement? The answer is, they can’t. Retirement planning is essentially a luxury for the 20-25 percent of Americans who make the most money. The other three quarters — unless they’re pathologically stingy or exceptionally lucky — will find that long-range financial planning is generally thwarted by exigent circumstances.
Even those who are fortunate enough to be in the top quarter can find themselves frustrated in their planning. Any number of things outside their control could break their bank. For instance:
• An extended period of unemployment can put anyone in a hole that will be tough to get out of.
• A long illness that puts someone out of work can have the same effect.
• If the above long illness results in significant medical costs uncovered by insurance, it can not only wipe out savings, but lead to bankruptcy as well.
• A child could develop a substance abuse problem or get in trouble with the law or both, requiring whacking fees for rehab or legal expenses.
• A divorce, which happens to around half of all people, can wreak as much havoc on a family’s finances as a serious illness or a long stretch of unemployment.
• An aging parent could require an extended period of care or treatment not covered by Medicare at the end of life.
• A family business that has been a prosperous concern for decades can be wiped out overnight by a combination of circumstances — for example, a severe recession and a flood.
That’s the sheer awful cussedness of things, or, if you prefer, that’s life. Whichever you prefer, it goes a long way toward explaining the statistic referred to earlier, which is:
Thirty-four percent of all working Americans say they have saved less than $100 for their retirement. You read that right; there are no missing commas or zeroes.
And I am guessing (the article didn’t say) that a similar percentage has saved no more than a modest nest egg, which is basically a contingency fund rather than an annuity.
If this is the reality, the importance of Social Security and Medicare in their present form becomes quickly apparent. There has to be something that’s there for people, no matter how long they live and how wisely they save and invest. Both programs need constant and vigorous refinement for efficiency and affordability, but the basic structure shouldn’t be messed with.
Of course the reason my fantasy is a fantasy is that some elected officials will never grasp that point. I don’t understand their thinking and can’t read their minds, but I have to wonder: Hasn’t anything bad and unexpected ever happened to them, their families or their friends? Or do they really believe that cutting taxes by a few hundred dollars a year will give people enough money to weather life’s storms? That’s an even bigger fantasy than mine.