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231 comments on Financial Forecast for 2009, Considering Resource Limitations

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WNC Observer on January 6, 2009 - 4:08pm Permalink | Subthread | Parent | Comments top

I am assuming that at some point in the next decade, the US government will realize that it cannot possibly make good on Social Security as presently configured. What I expect to see happen is that everyone will just get a minimum amount each month, regardless of prior earnings and contributions. This minimum will be pretty low, and become ever-lower in terms of real purchasing power. Someday it might go away completely.

I also expect that the federal or state governments will increasingly rely on institutionalized programs to deliver food and shelter to those who are unable to live on whatever money they have. The feeling will be that living on one's own in one's own home is a luxury, not a right, and if one doesn't have enough money to afford it, then it is not an increasingly impoverished society's obligation to provide it.

Thus, for those of us approaching retirement, I suggest the following:

1) You MUST liquidate all debts, and own your home free and clear. Don't even THINK of retiring unless and until you are at this point.

2) Try to set yourself up to raise as much of your own food as possible, make your home as energy efficient as possible, and invest in renewable energy if possible. You want to minimize your dependence upon and vulnerability to food and energy supplies.

3) Be prepared to do SOMETHING to bring in some money (or bartered goods) for as long as possible. This might be something different than you are doing now. Forget about "retirement" from all work; at best you might be able to shift to a different and less physically demanding type of work.

4) Reconfiguring one's home so that one can take in a renter is a good idea. Not only will this bring in enough money to help cover property taxes, there are also advantages in having more hands around the house as one gets older.

5) As far as your finances are concerned, don't put all your eggs in one basket, and live below your means. You need multiple retirement income assets, and need to assume that some will lose value or might go away entirely. You need to live on less than what your retirement assets could provide initially, because you might have less in the future.

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bruce from chicago on January 6, 2009 - 4:56pm Permalink | Subthread | Parent | Comments top

You MUST liquidate all debts, and own your home free and clear.

Are you referring to all debts, or just the secured ones? Credit cards, not being secured, don't provide a creditor much remedy to get their money back. Not being an expert in Cred Rem, (never took the course in law school, not my interest then, wish I had now) it appears it would be difficult to go after real property to satisfy a credit card debt. I'm guessing a lot of this debt will go up in smoke.

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Gail the Actuary on January 6, 2009 - 5:18pm Permalink | Subthread | Parent | Comments top

I personally have followed this, but I am not as certain that liquidating all debts is necessarily helpful. If the US government has huge debts, it will work as hard as it can at inflating those away (pay them back, but in dollars that aren't worth much). Also, if we go to a new monetary system (similar to rationing coupons), who owes what in the old monetary system may not make all that much difference.

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WNC Observer on January 6, 2009 - 5:34pm Permalink | Subthread | Parent | Comments top

I come at this from a different direction. I assume that as one enters what we presently know as "retirement age", one's ability to adjust to changing circumstances becomes increasingly constrained. For example, it is fine to say that one simply will not retire and just keep working. Unforunately, your body just might not cooperate with that plan, and employers might not be very keen on it either. Thus, I am suggesting that one forgo the temptation to game the system, and just try to minimize one's vulnerabilities.

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bruce from chicago on January 6, 2009 - 6:41pm Permalink | Subthread | Parent | Comments top

Thus, I am suggesting that one forgo the temptation to game the system, and just try to minimize one's vulnerabilities.

That probably is the smart choice, and the one I'm taking. However in a situation in which one has to make the choice between paying off unsecured debt, especially if it was made for an emergency such as unforeseen medical bills, versus paying day to day bills or keeping some cash stashed in a secure place to give one some flexibility, I'd go for the latter, and consider bankruptcy as an option. What good is being debt free if the credit market has collapsed and you have no cash or assets to help you through?

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aangel on January 7, 2009 - 12:18am Permalink | Subthread | Parent | Comments top

The ideal would be to pay off the credit cards AND have cash, but if the former is isn't possible in a reasonable time frame I'd rather have cash on hand, too. Thus I'm "hoarding" cash right now and will get back to paying down the credit cards once I've reached a certain level of cash.

The cash hoarding would go quicker except that I'm also making other preparations i.e. building my personal library, stocking the disaster kit (which got up there in $$'s once I was done), etc.

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jewishfarmer on January 7, 2009 - 10:34am Permalink | Subthread | Parent | Comments top

WNC, realistically, I think that the longer term future of baby boomers is something like what happened in Russia - they now will need to rely on their children or other family members, or on non-family relationships that trade long-term support for home and land. I don't think that most older people will be physically or economically able to go it alone - Orlov observed that this was particularly tough on the grandparents who had been able to help their children and now depended on them. Elder work is often likely to be child care so that the adult children can bring in income - I expect to see a lot of older folks lose jobs and never be able to find them again. Cottage industries are good too.

I agree strongly about paying off the house - because boomers have a disproportionate portion of wealth, and frankly, there's a good chance their kids and grandkids are going to be living in it with them. The family home and its capacity to produce food and cottage industry will probably matter a lot more than it has.

But if I had to add a number to that list, it would be "begin to get along with your family." Right now with one exception, our parents are all comparatively more affluent than we are - but they rely on invested funds, not on earned income, and I have long term concerns about what they will live on. I'm not a totally atypical case - my husband and I between us, in our mid-thirties have 7 parents - divorce and remarriage on both sides. For my husband's four parents, he is an only child. Our personal nightmare ;-) is the arrival of previously divorced exes, all in crisis.

Sharon

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ccpo on January 8, 2009 - 12:52am Permalink | Subthread | Parent | Comments top

Should we see a collapse of biblical proportions, on the order of something between the Dark Ages (though a bit of a misnomer) and the Stone Age, I wonder if the practice of discarding the infirm and unproductive might begin to arise? Seems euthanasia and suicide might become more accepted options for the formerly-affluent current generations unable to cope well with the reduced standard of living.

Caveat: unlike many, I see the only things preventing everyone being well-fed are ignorance of farming methods, politics and Big Money. It is, in my opinion, absurdly easy to feed all 6.7 persons currently alive. However, people (in the sense of the entirety of humanity, are selfish and stupid, so...) Thatis to say, I am not advocating the above measures in any way, shape, or form.

Cheers

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Consumer on January 8, 2009 - 1:00am Permalink | Subthread | Parent | Comments top

I agree. I consider myself a techno-cornucopian, and a political doomer.

We could solve these problems, but we won't.

That's really the most frustrating part of all of this. It doesn't have to be this way, but it will.

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pragma on January 8, 2009 - 1:35am Permalink | Subthread | Parent | Comments top

You and I might disagree on the level of mitigation possible but more and more I think it's moot.

Politics are barrier 1
Disaster capitalists are barrier 2
Foreign bad actors are barrier 3

Mix this all in with a healthy dose of denial, BAU and a credit crisis and I think we're toast.

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231 comments on Financial Forecast for 2009, Considering Resource Limitations

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