American Optimism Blocking Our Hopes for a Secure Retirement

Americans are incurable optimists.  Despite setbacks or failures, we carry on.  If one business goes bankrupt, we start another one. If one job doesn’t work out, we tweak our résumé and plow forth in search of the next. If ever there were a signature song to express our credo, it would be this Depression-era lyric, “Pick yourself up, dust yourself off and start all over again.” But the current state of the stock market is going to require us to find a cure for incurable optimism if we want a financially secure retirement.

Recently, Wells Fargo Bank completed a study that seems to bear out this sunny ethos. In their “Investor and Retirement Optimism Index” they found that non-retiree (or, more precisely, pre-retiree) investor confidence shot up by ten points over a three-month period.

Given our current economy, this result is bemusing.  Either these respondents are exceptionally valiant or they’re not watching the news.  But on further examination we get a more acute insight into what’s really happening in the current economy and who’s being hit hardest, or at least first.  That’s because the survey also reports during the same time period confidence among those who’ve already retired has plummeted twenty-three points.

“Our portfolio isn’t what it was when we first retired,” reports Michael Sokol, a retired seventy-year-old teacher from Worcester, Massachusetts. “We have been drawing it down, and the performance isn’t what we hoped for. It’s a big concern.”

Clearly, the big concern of retirees polled for this study is they have less time to maneuver and to correct existing investments that are going south.  By necessity, an investor aged seventy or seventy-five is more concerned with shorter term gains in his portfolio, and with minimizing losses.

The lesson? While optimism can be a good thing, you’ll be better off being a bit less optimistic with a bigger nest egg.

Even more troubling are the results of another recent survey conducted by the Transamerican Center for Retirement Studies.  Researchers found baby boomers’ expectations of their retirement are entirely unrealistic and out of line with their current financial resources.  In other words, those who are about to retire have far less than they think they’ll need.

“Current retirees are expecting a long retirement: 28 years is the median response. Almost half (41 percent) plan to be retired for three decades.

Here’s the reality check: All these results just don’t add up. The savings amounts reported aren’t even close to being sufficient to finance 30-year-long retirements.”

Even more troubling, if both studies are even close to being accurate, baby boomers are in for an ugly reality check once they retire.  Chalk up their blindness to the fact they’re the ultimate optimists – we’re the generation that thought we could have it all.  If something was broken, we’d fix it tomorrow. But now tomorrow is bumping up against the endpoint of employment.

Unfortunately, that “tomorrow is another day” thought pattern dovetails almost uncannily with the murky thinking of the compulsive stock market investor.  “My portfolio just got whacked by growth stocks; let me move over to value stocks.”  “I’ve just been clobbered by energy…maybe what my portfolio needs is a heavy dose of tech stocks.”  There’s a reason gambling can become addictive—luck is always just around the next corner.  But no one ever talks about which neighborhood that corner’s in.  Right now Wall St. is one of the more dangerous neighborhoods in America.

With the disastrous performance of the stock market, the smart money is again looking hard at tangible assets – and the lowest-cost buy-in is still precious metals, particularly gold. For whatever reasons (and the theories run from here to China) the price is still lower than the real costs of production, though every time the stock market tanks it bumps up just a bit – reminding us of the connection between unreliable stocks and reliable gold.  Especially for those of us closing in on retirement, the prospect of preserving the buying power of our savings without risking our nest egg’s being decimated by the market is an increasingly compelling proposition.  Instead of being battered back and forth between optimism and confidence-crushing market drops, you’ll feel the calm of an investor who’s endowed his portfolio with long-term secure value.