December 2, 2010

Receding Retirement and Proceeding Unemployment

The Trap of the Silly Dream & the Rainbow Chase

Many years ago, I got invited to a friend’s house for dinner and a stay over. It was a cute one, at the side of a nice big lake. The next day I said, “Nice House there!” And my friend, who was just past 60 at the time, said, “So you think it is worth working another 10 years to pay this all off!?”

The story of ‘Progress’ in the last several decades has been of work, more work, concentrated work, BE as if you are AT WORK virtually all the time. You are at a restaurant with your family in the evening, and your Blackberry keeps beeping new emails from work that you are expected to respond to immediately if the email is important -- which means that you have to, at a minimum, read an email as it arrives.

Possibly both the spouses work, and at least one works like this.

And the retirement age has kept sliding further out. Even as things in the market are more affordable than ever before on even one paycheck, yet people work to insanity, often two in the family, sometime more than one job. What are we working so much for? Not many are fired with the ambition of becoming CEOs, or be anybody high and mighty. And we are willing to retire (at least stop working fulltime or purely for bread) later and later in life. Why is this? Has the work become more enjoyable and engaging? I doubt that!

The lion’s share of the monthly expenses in a household today is the payment towards the home. The cultural meme that modern society has ingrained and strengthened is that owning a home gives some sort of security no other form of “Saving” can provide, and that it is a surely-profitable decision to buy a house, as its value will rise - If not rise each year, at least over every 10 year block, and will yield a return higher than CDs, stockmarket, whatever else. This has unfolded as a self-fulfilling prophecy upto a point: people have progressively leveraged themselves on loan to the limit of their (income – other living expenses) and have been buying at ever increasing prices, then chasing the dream of paying it off.

With this rainbow chase, people get off the workforce much slower than before. Further, the Public Leadership has absorbed the idea that longer lifespan should imply that people work until later in life, and Fulltime all these years. This enables the social security benefits, Medicare, 401K withdrawals etc to be started later, and provides some relief to Government finances.

Yet this late work leaves fewer opportunities for the young people to start their career, earnings and savings. Progress and production-pricing efficiency of goods over the years should yield the possibilities for EARLY retirement rather than LATE retirement, perhaps people can move from fulltime work to part time in their midlife, and then fully retire earlier than they do today. To fully absorb more young people that are fit to work into Full Employment, the need as well as the possibility of the time is to facilitate early retirement, and an even earlier transition into part time work. It should be possible for one to tap into one’s 401K account much earlier than is currently allowed without penalties. The Medicare benefits can continue to kick at the same age as now, and the healthcare pricing hijack needs to be arrested and reversed.

However, the one bottleneck is the cultural overhang of homeownership as the fulcrum of existence and work. Although it cannot be reversed by Public Policy or Governmental fiat, there is no point in Public Policy favoring or strengthening this counterproductive (or should we say, counter-retirement and counter-employment!) cultural artifact. The hope is that people begin to see buying a home as no different than buying a BMW. i.e. If you are Rich, Proudly Buy it and enjoy-consume it, ELSE rent/lease it, Else just use a Toyota or Ford (rent a modest Apartment or Condo). Aspirations around smaller workweeks, early retirements (partial or complete) hang on this cultural change.

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