In all of life’s endeavors, there is no substitute for a positive attitude, but I readily admit that I would have written an entirely different article on this subject two short years ago. As we enter 2009, a new man is occupying the oval office, and he has a lot on his plate, as do the rest of us. A few days ago, Donald Trump annnounced on Larry King Live that, in his humble opinion, the United States is in the midst of a depression. It’s hard to argue with his logic, and the truth is that those of us who work for a living need to get our heads out of the sand. On the topic of retirement planning, there is more to think about than ever before, especially when “worthwhile” investments are scarce and millions of jobs are in jeopardy. Essentially, there is no time like the present to explore other options, and one shouldn’t place all of his eggs in the basket that a growing array of foxes has been robbing over the years. I am by no means ruling out risky investments that may yield a nice profit, but it does pay to have a safety net.
A good place to start is with our once trusty 401K. As a federal employee, I am more knowledgable in regard to our Thrift Savings Plan (TSP). Like most other retirement accounts, there are several investments with a wide variety of risks and possible returns. The Life Cycle Fund encompasses a bit of all of these, but its successes and failures roughly mirror those of the S&P 500. When the DOW peaked at over 14,000 and the S&P reached 1500, the wisest among us saw through the smokescreen and re-invested in the sure-fire G fund, which is made up of government bonds and guarantees an annual profit of roughly 4% throughout. Those in the private sector have very similar choices, and the vast majority (like myself) succombed to greed, rather than heeding the early warning signs. Where does that leave the American worker who is looking for an answer? The experts on Wall Street don’t have much of one, nor do the economists, and I’m not going to pretend to either. However, it does seem that the possibilities are limited.
A new employee investing in these volatile times may or may not be buying stock at wholesale prices. Any upturn in the economy could reap valuable rewards, all without (much of) the risk that the rest of us have already taken. However, the majoruty of the herd has already lost tens, if not hundreds, of thousands of dollars, myself included. What do we do? One possibility is to invest what’s left in a safer venue, but that would be an acceptance of the losses with no opportunity to recuperate them. On the other hand, we could simply stay the course and hope for an economic recovery, and our own purchases of “cheap” stock could (and that’s the keyword) lead us back to the promised land. It’s a huge risk, but, honestly, the second option is the only one that makes any sense, particulary for those who have any dreams left about retiring early.
Yes, it does seem that 401K plans, etc., have a very hazy future. Fortunately, there are other means of investing money that are relatively safe outside of the main retirement account. I remember writing an article not all that long ago in which I scoffed at the purchase of U.S. Savings Bonds. I actually came very close to cancelling my payroll savings plan and going in a different direction. During the boom less than a year back, it appeared foolish to invest $50 a pay period in something that takes eighteen years to mature, but the first indications that we’re in a mess brought that old, nagging question back to the forefront: what if the market fails and doesn’t recover by the time I’m ready to retire? Over the course of a typical career, a worker can accumulate $70,000 + by purchasing bonds, and in troubled times, funds once set aside for leisure or a new car can be the difference between a secure retirement and poverty. At any rate, it’s something to fall back on.
A grandiose retirement is well and good, but it certainly doesn’t make sense to forego the present while saving for the future. The 2% (sometimes more, sometimes less) interest earned on a savings account isn’t much, but like savings bonds, it is a positive during times when nearly everything else is negative. Along with savings, a checking account is also a good source for ready cash. Think about it: all of the doomsayers, even the president himself, say that millions of jobs could be lost before the economy begins to take a turn for the better. One of the keys to retirement is maintaining one’s assets while getting to Point B, and every one of us could be on the chopping block somewhere along the way. Thus, having enough money put aside to pay the bills and mortgage while looking for another job is a must. In other words, losing a home after making payments on it for ten or fifteen years could make retirement virtually unreachable, all for the want of a few thousand dollars in the here-and-now.
Finally, I would recommend planning as if social security may not exist too far into the future. Among us laymen, nobody has a really good idea how wars and bailouts are being funded, but we all have a VERY good guess. Social security, to many, is a fairly large check that is counted upon for much of our retirements. The best way to offset the possible loss of one big check is to set aside money each month for safe investments that will bring in several smaller ones. Some possibilities may be municipal bonds, investing in utilities, or CDs. An appointment with any respectable investment broker will open up further options. For example, my parents did well by investing in the Tennessee Valley Authority. To the best of my knowledge, the TVA is no longer a possibility, but there are similar organizations that still utilize money from private individuals. A little research could go a long way.
I would like to look back on this someday and chuckle at my paranoia. I do believe that the citizens of the United States can rise above this current dilemma, just as our parents and grandparents survived the Great Depression. Our economy has hit numerous peaks and vallies over the years, and chances are relatively good that this is more of the same. However, like the depression of the twenties and thirties, there doesn’t seem to be an immediate answer, and in the meantime millions of us will have to retire. The catch is that most of us have really big plans for when the day finally arrives, and all of the details were mapped out pretty well. While we have little choice but to stay the course in regard to lost investments, there is no time like the present to prepare for the looming pitfalls. It may take some scrimping and saving, and perhaps even missing out on a vacation or two along the way, but in the end, the wise investor will muddle through the bad times and live his golden years to the fullest. If one believes hard enough, good things will usually happen.