SITTING IN A COFFEE shop, I struck up conversation with a middle-aged woman. We were talking about winning the lottery and then, as if one thought naturally followed the other, we got onto the topic of retirement. She mentioned how difficult it was for her and her husband to pay the mortgage and the monthly bills.
“After saving for retirement?” I interjected.
“We can’t save for retirement,” she responded. “Our plan is to get our mortgage paid off, sell the house when we retire and invest the proceeds.”
A smart strategy? According to data from Freddie Mac and elsewhere, the price of existing homes has increased at just above the inflation rate—and that’s before maintenance costs and other expenses. By contrast, the 90-year inflation-adjusted total return for the S&P 500 is around 7% a year.
This couple seemed to be treading water. I was thinking to myself, “Where are you going to live once you sell your house? If you’ve never invested in the financial markets your entire life, is retirement really the time to start?”
Then the coffee shop was empty and I was left with two millennial baristas, who became the next victims of my inquiries. I started by asking, “Were those tattoos expensive?” I know the answer—hundreds of dollars and up—from previous investigation. But when I see tattooed young people, spending money on what—in my opinion—just messes up their bodies, I can’t help myself. My occasional follow-up question is, “Have you thought about how that might look when you’re 65?”
But not today. Today, I was thinking about HumbleDollar stuff, so I say, “Have you guys”—actually they’re young women ages 21 and 25—”thought about saving for retirement?”
One takes the muffin from her mouth, and the other stops her pour over, and they stare at me. “No,” is the coordinated response.
“I’m still in college,” 21 says.
“I have no money and six years of student loans,” adds 25.
I’m thinking to myself, “Be nice, don’t ask 25 why she is a barista and not in a job that might allow her to chip away at those loans.” But as luck would have it, she gives me an opening. She says she has both a bachelor’s and master’s degree, hence the six years of loans.
“Are you going to eventually work in your degree field?” I tread lightly.
Are you ready for this?
“I can’t,” 25 replies. “It requires a PhD.”
As my thoughts spin trying to comprehend what I just heard, I return to my first victim. “Did you have any kind of financial education programs when you were in high school?” I ask 21.
“We did.”
“Okay, do you know the difference between a stock and bond?”
She giggles and says, “No.”
“Ever heard of compound interest?”
A moment of pondering and a head shake.
Are we at the point where we throw up our collective hands in frustration? With this lack of knowledge, is it possible for all Americans to have a retirement that’s reasonably free from financial stress?
Before you draw a conclusion about that, here’s another point of view—from a commentator on one of my blogs. It would appear that, where there’s a will, there may indeed be a way.
The comment: “I have never earned over $60,000 in one year in my entire life. But I have been smart with the money I did earn. I was able to amass a nice nest egg that enabled me to retire early at age 55. And now after 11 years in comfortable retirement, my nest egg has increased.”
No planning, questionable planning, serious planning. Take your pick—and get your reward.
Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include Get the Point, Poor Judgment and How to Blow It. Follow Dick on Twitter @QuinnsComments.
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They can easily move elsewhere. Where I live a 4-bedroom house by the sea costs 15 grand, and I spend 300 bucks a months on a family of 4. OK I’m a cheapskate, but say 500 a months will be more than enough for them two.
Wow- While I do agree with the message you are trying to convey here, Dick – all the same, It must be exhausting to be the smartest guy in the local coffee shop…The sanctimonious tone of your blog post is sadly overwhelming the important message. Constructive feedback that is offered for the good of the cause.
Richard – Keep writing because you provide valid insights and valuable points of view, even though not everyone is always going to agree with you. One of the best charities is Habitat for Humanity, not only because they help people into homes of their own, but also they teach the volunteers the bones of a house in general, that lenders expect to be repaid, and that if you grab a 2×4 without gloves on and get a nasty splinter it’s not the “fault” of the lumber company. If I had our two fine sons to raise over again I would definitely insist on working with them on a Habitat build as soon as they were 16. They’d get some valuable insights, it would be a great bonding experience, and it would look good on a college application. Again, thank you for your writing. – Dave
It seems we can blame Jonathan for interrupting an innocent trip to the coffee shop due to the need of another good post! Reminds me of the Twain attribute of golf being a good walk spoiled. 🙂 I have another take on those conversations – each of those people now have something new to think about that could divert their walk toward a financial cliff. The easiest thing to do is say nothing.
Another thing that comes to mind is how valuable it would be if the Dept. of Education asked someone like Jonathan to put together a high school class or curriculum that required finishing with a passing grade in order to graduate.
Agree! I used to tell my kid ‘fail to plan, plan to fail’ which annoyed her. Now she thanks me.
to quote Helaine Olen, “financial literacy advocates take the political and economic problem of increasing income inequality and make it personal. That’s both morally wrong and financially ineffective.”
http://blogs.reuters.com/great-debate/2014/03/25/self-help-is-no-help-for-inequality/
Blaming the victims isn’t going to help them.. the problem is the system we built that loads students with unassailable mountains of debt, and an employment system we built, that requires Phds for jobs which once could be done with a couple of years of school. Did you know that physical therapists need Phds now ? A vet spends the same time in school as a doctor. Both of these jobs pay about $90 000. Now service that $300 000 in debt, from that salary, and see how much is left over for savings.
This is not the economy we grew up with. It’s far more hostile.
Even if what you’re saying is true, it’s hardly useful. Giving private people financial help is much more productive than writing a letter to your senator about systems of oppression.
Actually the MD earns far more. How vets stay in business is a mystery. And yes, I have to laugh at how much training a PT needs. I must be missing something.
Quinn is 100% correct.
If he’d asked these two brain trust barista’s who won on the Voice last night, if they’d gone to the last moronic superhero movie, or what their level is in the latest phone diddle game, they could tell him in a heartbeat.
Compound Interest? Bonds? Stocks? Duhhhhhhh……
Which is fine with me. Just don’t “means test” ME based on my lifetime of savings, learning to invest, and living below my means. And I did all this BEFORE everyone was carrying the equivalent of a computer hooked to the internet, where they could learn something if they were so inclined, at ANY time. It’s all out there, 24/7.
I don’t want to support these future slugs.
One more thing….waste your money NOW on tattoos,….right now there is no government program that pays for them, although I did do some investigating because almost ALL the young people I see at the grocery store paying with food stamp cards seem to have them.
Am I supposed to feel sorry for these college graduates “burdened with debt”? Who the hell asked them to borrow so much money? They’ve basically free-loaded their way through four or more years of unproductive sloth. They should have developed a payback plan before they borrowed the first dollar. This bunch is beyond dumb” as Johnny Carson would say.
I went back a re-read this one today. I agree with all of your points.
My biggest observation is that behavior drives so many elements of our lives. I majored in economics, and they kept telling me it was a social science. As it turns out, it really was a social science.
I think one of the huge disconnects with these youths is the knowledge gained from experience. Many young folks have little to no experience. I don’t understand it. I got a paycheck at age 12 for working on the farm for two weeks. My social security records show wages back to age 15. I’ve always worked. And the harder I work, the luckier I get.
Well done, Richard. I read this after clicking on a link from your Money Wasters blog. The thing is, our schools, our culture and even our parents misdirect us in ways that can make it hard to plan constructively. Financial education? That apparently doesn’t even happen properly in MBA programs much less high school or undergraduate college. Trust Wells Fargo after their max misdeeds? Why not, all banks are bad anyway, and what the heck are credit unions? “You need to go to college and get a degree to get a good job”? Wow.
As Doug K points out, “the system” is to blame in many ways, but on the other hand, talking about blame without posing solutions, which is what Helaine Olen does in the column he refers to, is short sighted. I am proud to be a financial literacy advocate who also does not like “the system”–so, for instance, I no longer use a bank, voting with my money by using a credit union instead. And how is being financially uneducated a plus? The more we know, the better our decision-making is. I don’t want either to make the baristas out to be victims or parasites – they have the potential to be so much more, whether they know it or not.
Jim why do you find a credit union better than a bank? Thanks
I’m in my 40s. I’ve despised tattoos since they exploded in the early ‘90s. One’s rejection of this bovine phenomenon isn’t a matter of age, but of taste. Those with no taste and no class embrace this stinking herd phenomenon. (Note: having money doesn’t mean one has taste and class; e.g., Princess Stephanie has vandalized herself with at least one tattoo.)
If my children were ever to reveal to me that they’d vandalized themselves with a tattoo, I’d thereby know that I failed as a parent. I’d then disown them.
The best critique of the absurd tattoo phenomenon of the last 30 years comes from the great Theodore Dalrymple (pen name of British psychiatrist Dr. Anthony Daniels). The essay is called Exposing Shallowness. It appeared in The New Criterion around 2000. It may be behind a pay wall now; however, it’s been posted elsewhere since then. Don’t miss it. Those conformed to today’s rot will, of course, hate this devastating essay. No matter.