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Thanks, Younger Self

Catherine Horiuchi  |  April 15, 2020

SAVING FOR the future entails a pinch in the present. Every so often, it makes sense to reconsider how much we save—and whether it’s time to take a break from saving. As a recent early retiree, I was pondering this, even before the latest stock market disruption.

Unfortunately, none of us has a reliable crystal ball that tells us when to buy low or sell high. We also don’t have complete knowledge of our future self. Maybe future me will receive a windfall or die young, so I can get by with saving less. Or maybe I’ll develop a chronic condition and need more savings. We don’t know how lucky we will be on the way from youth to retirement—those years when we have the greatest opportunity to save.

Savings aren’t “safe.” Risk is inevitable. Cash in an FDIC-protected bank account is guaranteed to keep its face value, but it’s also pretty much guaranteed to decline in real value each year due to inflation. Meanwhile, buying bad stock or bond market investments does little more than transfer your wealth to someone else. Recessions, market corrections and normal fluctuations can be difficult to stomach. And then we have occasional extraordinary events, like the economic and political disruptions caused by the coronavirus.

Faced with all this uncertainty, I don’t try to divine the future. Instead, in setting aside a portion of my money for future me, I’m simply seeking to maintain purchasing power for a comfortable old age. With moderate luck and ongoing financial education, I might be able to eke out a percentage point or three above inflation, opening the road to a more prosperous retirement.

I recently reviewed the Series EE and I savings bonds that I’ve purchased over the years. These ultra-conservative investments are rarely recommended. They’ve never been more than a fraction of my investments. The earliest bonds I own were bought through a payroll savings plan at work. I discovered some were no longer earning interest and I cashed them in at the bank. I will redeem the rest over time as they reach final maturity.

I still recall the pinch in my long-ago budget. But as I say goodbye to steady paid employment, I’m grateful for the early savings habit I adopted. Those small sums, stashed in savings bonds, will periodically make nice additions to my everyday life. My remaining bonds, purchased occasionally over the past 30 years, earn interest rates ranging from 2.18% to 5.96%. That’s less return, over the long run, than I would have earned on a total stock market index fund, but those bonds are a sure thing that look good now as part of my balanced portfolio.

I plan to buy more savings bonds, as well as make periodic purchases of a total stock market index fund. It won’t be as much as I contributed while working. Maybe each month I’ll save a sum equal to a week’s worth of groceries. Still, I’ll find it easier to sleep in my early retirement years knowing I continue to save a bit. And down the road, when I sell those investments, I’ll appreciate getting back that grocery money, which will make my uncertain future a little more comfortable.

Catherine Horiuchi recently retired from the University of San Francisco’s School of Management, where she was an associate professor teaching graduate courses in public policy, public finance and government technology. Her previous articles include Muddling Through, When It Rains and The Aftermath.

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