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The end is near…again
8/1/2012 2:00:00 PM
By: Snider Advisors
My family has more than its fair share of peculiar personalities. We're from west Texas, so maybe countless hours spent in the sweltering sun chasing horn frogs and playing in caliche pits brings out a few additional cases of the crazies. Needless to say, I've learned to never be surprised by the things I hear at family get-togethers. However, as an investment advisor, I nearly came unglued when I recently found myself engaged in a heated family debate about which is the better idea - preparing for retirement or doomsday.
I couldn't believe that anyone, much less people I'm related to, would even consider getting ready for doomsday instead of retirement. I wondered if other people felt the same way, so naturally, I turned to Google. My search led me to National Geographic's recent Doomsday Preppers Survey . The survey, which included 1,007 nationally representative Americans age 18 and over found that a whopping 41% believe preparing for a catastrophe is a smarter than investing for retirement.
I found the results of the survey astounding, but after thinking about it for a while, it started to make sense to me. Preparing for Doomsday is probably more exciting, less intimidating, and definitely easier than readying for retirement.
Unlike most investment vehicles, doomsday products are easy to understand. With a quick internet search of "doomsday shopping list," you can find list after list of survival necessities. Most include pretty straightforward items like batteries, water, and freeze dried food. While you may not know the intricate details of exactly how a battery works, you probably have a general understanding. Certainly, you know the end result; you put batteries in a flashlight and voilà - you have light.
On the other hand, investment vehicles are not as clear. Sure you get a prospectus when you buy a mutual fund, but who has the patience to wade through pages and pages of minutia? Moreover, unlike batteries, the end result of investing in the stock market is never totally predictable.
Quite frankly, retirement isn't sexy. Retirement planning essentially comes down to figuring out how you will pay for mundane things like groceries, utilities, prescriptions, etc. That's why you'll never see a movie where after a lifetime of diligently saving and investing, the action hero du jour spends his days relaxing peacefully on the golf course. Yet there are numerous movies where we see our leading man heroically surviving in a post-apocalyptic world. These movies are not merely entertaining. They also create a picture of the world after a catastrophic event, which gives us a starting place to imagine what the future could look like. However, envisioning your life after you retire can be challenging.
Retirement involves a lot of moving pieces, many of which are still unknown. Today's retiree may not have a clear or realistic example of retirement. Previous generations lived in a world of guaranteed pensions. Everything changed in 1974 when Congress passed ERISA and shifted the burden of funding retirement from employer to employee. Add that to current longevity statistics and the recent whipsawing of the stock market, and it's enough to make anyone feel uncertain about what the future holds.
Retirement doesn't have a defined time period, whereas doomsday has an exact date; this time it's December 21, 2012. (See previously predicted doomsdays in the infographic .) Not all doomsday preppers believe the Mayans had it right, but most believe a catastrophic event isn't too far away. After the catastrophe, there will be no need to keep up with the Joneses, because the Joneses probably didn't buy generator. Everyone will be in survival mode and maintaining your existing standard of living will be impossible. In this situation, there will be no reason to worry about how your portfolio is invested.
With retirement, you may know when it will start, but because you don't have an expiration date stamped on your forehead, there's no way to know how long it will last. Common thinking is that your lifestyle will change and your cash flow needs will decrease after you retire, but this line of thought is off base. Who you are, as well as the things you need and want, will not immediately change just because you no longer go to work every day. In reality, most people do not experience a significant change in their expenses in retirement, especially within the first few years.
Here's the bottom line - although I've admitted that I may have a slight genetic propensity for peculiarity, I can absolutely and sanely assure you that while Doomsday may or may not ever happen, retirement will. Focusing on doomsday instead of retirement may be incredibly tempting and in some weird way, it may even make you feel better, but it is not going to change the fact that at some point, you will no longer want (or be able) to work. Your best bet is to take the necessary steps to prepare for retirement.
The intent of this article is to help expand your financial education. Although the information included may be relevant to your particular situation, it is not meant to be personalized advice. When it comes to investing, insurance and financial planning, it is important to speak to a professional and get advice that is tailored to your unique, individual situation. All investments involve risk including possible loss of principal. Investment objectives, risks and other information are contained in the Snider Investment Method Owner's Manual; read and consider them carefully before investing. More information can be found on our website or by calling 1-888-6SNIDER. Past performance is not indicative of future results.