Underfunded Retirement: A Lonely Road with no Destination

Retired folks are frequently hidden from us.  Not because they don’t frequent the same movie theaters, stores and gas stations we do. Frequently it’s because they’ve strategically timed their shopping and other commercial activities.  They’ve restricted their restaurant meals to early-bird specials, and their movie attendance to senior discount days.

Sometimes they hide, though, because they’re depressed or feeling unentitled.  As poor people used to say about their families during the Great Depression, “We were too poor to paint, and too proud to whitewash.”

But an increasing number of financially strapped retirees are simply packing up and hitting the road.  We fail to see them because they’re no longer living down the street from us.

They’re living, instead, in trailer parks or on the move. One such person is seventy-nine-year-old Dolores Westfall. Profiled dramatically and candidly in a January 29 Los Angeles Times article, Westfall lost her home during the 2008 Recession and, facing no good alternatives, has opted for a life on the move.

Working harder than many half her age, she’s forced  to supplement the meager twelve hundred dollars in Social Security and one hundred-ninety dollar pension she gets per month by working one seasonal job after another.

Much of the story depicts Westfall agonizing between competing priorities for her too-finite cash:  food versus a traffic ticket or plumbing versus roof repairs for her RV.  Meanwhile, much of her diet on the road consists of brown rice and milk.  When she wants to indulge in just a small luxury, a tour of homes designed by Frank Lloyd Wright, Westfall, a former executive secretary and museum curator, had to balance the needs of her soul and her dignity against the need to visit a dentist.  It’s a heartbreaking final chapter for a woman who worked all her life but simply couldn’t withstand the economic headwinds she had no hand in creating.

While it’s easy to second-guess others while we’re still earning, how many of us can say for 100% certain that we’ll have, when we choose to retire or are forced into it by health issues or job loss, every cent we’ll need to support ourselves, our homes and the increasing load of health costs?  Do you even know how much you’ll need for a retirement that may last thirty years?

What’s more, even if you look at your 401(k) and IRA balances and feel comfortable today that you can sustain a retirement free from hardship, what happens if the market crashes tomorrow? Or when you’ve been out of the workforce for ten years or more?

The very circumstances that created Westfall’s predicament:  inadequate financial planning, a catastrophic drop in U.S. housing prices, and the bottoming-out of the stock market during the same period, are ones that millions of Americans are still struggling to recover from; obstacles that could potentially recur at any time.

LA Times reporter John Glionna, who covers the story, points out that “Of the 4.7 million home foreclosures from 2007 to 2011, one-third, or 1.5 million, involved people ages 50 and older.”

While we console ourselves with reports of an improving economy, consider this: Almost one third of U.S. heads of households who are fifty-five and older have no pension or retirement savings and, like Westfall, have a median annual income of around nineteen thousand dollars. That’s $1584 a month, period.

So along with compassion, what we need to emerge with is the resolve to think hard about the security of our savings, and how vulnerable they are to forces outside our control.  Our market-based and dollar-denominated assets are vulnerable to an increasingly volatile market.  The future buying power of your cash is vulnerable to erosion by inflation.  We need to start looking hard at tangible assets that maintain value in the face of brutally destructive forces.  Simply put, as we age we need to hold assets that keeps their value while stock and housing values are potentially bottoming out.

Globally, when the value of these assets fall, disappointed investors flock to gold as a safe haven and drive its price back up.  The strengthening of gold’s price in the beginning of this year provides a testament to the yellow metal’s unmatched hedging properties.

As the shock market downturns at the beginning of the year aren’t recovering as expected, oil prices continue to drive volatility and mass layoffs, and China’s dysfunctional economy takes its toll here, gold has indeed started inching up.  When baby boomers who can spot retirement on the horizon start assessing the resilience of their savings against the forced aligned against them, the floodgates are going to open; as fifty-plus investors look to roll over at least part of their portfolios into safe haven assets.

That way, if you do hit the road once you retire your trip will be an adventure rather than a road to nowhere.