Going for Broke: One Advisor’s Retirement Advice

“Do you think you could save enough in a year to take two weeks off?” the man asks. “Please raise your hands.”

Nearly everyone in the room raises a hand.

“OK. Now, how many of you think you could save enough in a year to take six months off?”

The room is still. Not a hand is raised.

That startling difference is how Dallas benefits attorney Brooks Hamilton turns people’s attention to the problem of retirement saving. Today, there is an expectation that people will work about twice as long as their retirement lasts. A few decades ago, that ratio was more like 20 to 1.

In other words, whereas once we expected to work for 45 years and be retired for two or three years, now people are talking about working for 40 years and being retired for 20 years.

The difference in required savings is enormous.

To solve the problem, we have mustered an army of financial planners, brokers and financial product salesmen. We have also enlisted thousands of financial service firms to help people plan their future. Not a week goes by without a survey showing that most of us are spending too much and investing too little. Worse, when we do invest, we do it in all the wrong places.

As a consequence, we all are doomed to a diet of cat food.

The most common theme in my reader mail is a single question: “Will we have enough to retire at age [fill in the blank]?”

The answer to that question can come from software, calculation and planning.

But maybe we should look for a different kind of answer.

It could also come from a radical change in how we look at our lives and how we live them. That’s what financial advisor Stephen M. Pollan believes. And I’ll bet you, right now, that he is about to get an enthusiastic hearing from thousands of people who are frustrated with their lives as they are and as they expect they will be in the future.

Pollan’s ideas about our future can be reduced to eight words and four steps. First discussed in articles for Worth magazine, the ideas are now a book (“Die Broke,” Harper Business, $25). Here are those eight words and four steps:

* Quit today. In the prevailing view, we work hard, build our careers and save to retire--going over an employment cliff at age 65, when we magically become a card-carrying retired person. Pollan takes another tack. Noting that companies have abandoned loyalty to employees and that we are increasingly free agents, he suggests that we “quit today” in our minds and view our work differently. If we enjoy what we do, fine, but Pollan suggests that we can become trapped by seeing ourselves on only one particular career path.

To break the pattern and stay open to all possibilities, consider seeing employment as simply a job, an activity whose primary purpose is to produce income.

“The work reward that matters is what you’re paid. Remember: Everything other than money can come from the rest of your life. Your job is the only part of your life that can give you money, so you need to maximize that,” he writes. Basically, he is suggesting that we expect too much from work.

* Pay cash. The second step is to avoid debt by paying cash for everything but cars and houses. Limiting credit means you opt out of maximum consumption. With an estimated 1.5 million households heading for personal bankruptcy in a year of great prosperity and anti-consumption groups and newsletters sprouting up all around the country, this book is another bit of evidence that we are heading for a public reaction against debt, borrowing and saturation-bombing with credit card offers.

* Don’t retire. Instead of working toward that gold watch, Pollan suggests that retirement is nearly impossible and highly overrated. His alternative: Get flexible about work and prepare to do something useful as long as you can. This will eliminate worry about Social Security and reduce how much we depend on 401(k) accounts or corporate pensions.

* Die broke. Rather than bestow blessings on your children in death, enjoy giving and sharing while you are alive. That can mean help with a down payment for a home, cash for a computer or more education, travel, or help with educating grandchildren.

Pollan points out that the entire notion of both retirement and inheritance is relatively new. There is no evidence to support the idea that either is a great advance for civilization.

The prospect of an inheritance, he says, often freezes initiative, and large inheritances tend to remove people from the work force altogether. Worse, expectations of an inheritance can twist or sour a parent-child relationship.

If you’re unhappy with conventional thinking about how we live and plan our lives, this book will speak to you.

*

Scott Burns writes for the Dallas Morning News. He can be reached at [email protected], or at his Web page at https://www.scottburns.com