Learning From the Mistakes of “Do It Yourself” Retirees

In a disturbing trend, a growing number of retired Americans are finding out first-hand that Social Security isn’t enough. They’re moving in with their children, becoming “silver squatters” simply to survive. Here’s how to make sure you don’t join them…

From Peter Reagan for Birch Gold Group

Key takeaways

• Many Americans are struggling to save enough for retirement
• Inflation and rising costs of living are major obstacles
• The shift from pensions to 401(k)s adds pressure on individuals
• Poor planning is leading to financial dependence retirees’ children
• Physical precious metals can help protect and preserve your savings

Americans today are facing an uncertain retirement future. You’ve probably heard different figures thrown around, exactly how much you should’ve already saved and how fast your retirement savings should grow. Even knowing those figures, though, doesn’t help at all if you don’t act on them.

The ultimate goal is to give yourself a secure retirement, one in which you can afford the lifestyle you want.

A back-up goal is to accept a trade-off in your standard of living – saving less today while knowing that means less to spend in your golden years.

All too often, especially recently, Americans who didn’t adequately prepare for retirement are finding themselves in real trouble…

They aren’t necessarily bad people – they most often did their best. The truth is, saving for retirement is a challenge and planning for retirement is even harder.

And to make sure you don’t end up in a similar bind, you have to understand the real situation we’re in right now.

The reality of the situation

The fact of the matter is that many (most?) Americans simply don’t know how to set up a secure retirement for themselves. Fun fact: Many years ago, when I got my first real job that included a 401(k), I selected two investment options from the company’s list. The basis for my decision? One fund had the word “growth” in its name, and the other included the word “money.” That’s it. I paid zero attention to performance or expense ratios or investment strategy.

Decades later, I know better. But here’s the thing: Most people don’t. Most people know almost nothing about the finance business or the business of finance – let alone the pitfalls of investment planning.

Most people also simply don’t have the time or the inclination to become well-informed about these topics, even though they’re incredibly important for our financial futures. And we’re all responsible for our own financial futures!

And it’s a scary future that we’re facing…

Deanna Ritchie, describes today’s retirement reality this way:

As a result of near-term financial needs and economic pressures, Gen Xers are having difficulty saving for the future.

What’s going on? Why are they struggling? According to polling data:

• Inflation: 67%
• Higher daily living expenses: 58%
• Rising healthcare costs: 51%
• Greater non-mortgage debt: 26%

…in other words, everything is more expensive.

(By the way, the difference between “inflation” and “higher daily living expenses” isn’t exactly clear to me – here’s the Corebridge Financial poll itself, if you want to try and figure it out.)

And that’s just today. There’s not a thing in there about the future.

When you’re financially stressed right now, it’s challenging to turn your attention from your immediate problems to the future.

At the same time, ignoring the future sets you up for disappointment.

Not just your own disappointment, either…

Meet the “silver squatters”

So what happens to those least able to plan for the future? Ritchie tells us:

It is estimated that 25% of 55-year-olds expect their children to provide them with financial assistance… this trend, silver squatters live with their families and rely on them financially and for housing.

That is shocking.

Think about that: one in every four Americans nearing retirement age expect to have to live with their family.

Simply because they didn’t adequately plan for their own financial futures.

Of course, some people want to live with their children. That’s fine! And that’s a conversation they need to have with their children before retiring.

Used to be, we sent our kids off to college and if everything worked out, they set up their own homes. If things didn’t work out, we told them, “You’ll always have a place to live here.” We helped build them a security net in the hope that they’d never need it.

Now, imagine the opposite.

Your children sitting down with you and holding your hand and saying, “Look, not everybody gets retirement right the first time. We’ll always have a place for you to stay. And, sure, you can look after the grandkids, or do the dishes, or something else to help out so you don’t feel useless.”

I can’t think of anything more humbling than asking my own children for financial help.

The drawbacks of such an arrangement aren’t only in my imagination:

As an example, having elderly parents live with their adult children can strain their relationships and limit their independence. In addition, adult children may need to contribute to the parents’ living expenses or modify their housing arrangements to accommodate them.

Alternatively, elderly parents may experience feelings of dependence and loss of privacy when living with their children. In addition, maintaining social connections and participating in activities they value can be challenging.

Yes, obviously this isn’t a good idea. It’s a last resort.

Being in this situation fundamentally robs you of the independence and control that you’ve enjoyed your entire adult life.

Furthermore, when you’re financially dependent on your family, you’re creating a series of very difficult choices for them. Instead of paying for your grandchildren’s education, say, they’re helping you with medical bills. Instead of saving for their own retirements, they’re contributing to your comfort. What if one of the grandkids hits a rough patch and needs to move back home?

Can you imagine, however temporarily, sharing a room with your own grandchild?

Obviously, this is a generational challenge! So-called “silver squatters” could easily contribute to the next generation of basement-dwelling retirees who simply weren’t able to set aside enough to ensure their own financial independence in retirement…

The one thing most of us aspire to in retirement is not to be a burden, not to neighbors, not to friends and especially not to the next generation.

Just how concerned should we be?

Now, you may be asking if I’m making a mountain out of a molehill.

Listen: I’m concerned with accurately reporting reality.

What you choose to do afterward? That’s entirely up to you.

After all, it’s easy to find people working in the financial services industry who’ll say the opposite. They’ll promise your golden years will be one endless autumn afternoon. “Never worry about money ever again,” and “You’ll shave nine strokes off your golf game!” in a world where everyone’s kind and we all have pet unicorns.

I’m writing this column today in the hopes you’ll read it, take it seriously and will never be forced into a “silver squatter” situation.

Back to Ritchie’s column, which does help us understand how concerned we should be:

There’s more to the silver squatter phenomenon than poor planning. Other factors are inflation and pension declines.

It has also become increasingly difficult for retirees to afford their homes due to rising housing costs. Often, people are forced to sell their properties and move to cheaper alternatives, leading to multi-generational living arrangements. [emphasis added]

So, in addition to age-related healthcare costs and inflation’s corrosive effect on our purchasing power, many could no longer be able to afford to live in their own homes.

That is brutal.

But it’s also a perfectly foreseeable consequence of nearly two decades of near-zero interest rates… Cheap credit and easy money makes prices go up.

When prices of assets go up, we call it a bull market.

When prices of everything else go up, we call it inflation.

They’re the same thing. Different sides of the same coin.

The only way to get ahead – and to stay ahead – is to own enough assets that you’re winning faster than you’re losing.

Unless you were born into generational wealth, that means:

1. Living beneath your means so you can save
2. Successfully investing your savings for long-term growth
3. Preserving your savings from loss

It’s simple, but it’s not easy.

The first generation of “do-it-yourself” retirees

One last quote from Ritchie’s column that helps explain why so many Americans are struggling with retirement finances:

…after largely shifting from pensions to 401(k)s in the 1980s, this is the first generation to come of age with 401(k)s as their primary retirement vehicle. A 401(k) puts the burden on its participants to figure out how much money to save, how to invest it, and how to withdraw it in retirement. In other words, this is a do-it-yourself method…

It’s no wonder people are struggling – just like I was, when I thought picking “growth” and “money” meant I’d be able to retire one day.

The good news is, you don’t need to master finance to have an independent, financially secure retirement. You do, however, need a plan.

Within that plan, you’ll want to consider how much you’ll need for future expenses.

How much (if any) your Social Security payment will cover.

You’ll also want to ensure your savings are protected from the destructive effects of inflation.

There’s one type of assets with a long track record of inflation protection and wealth preservation. History’s safe haven investment of choice: Physical precious metals.

Physical gold and silver can’t be devalued by a central banker. They can’t go bankrupt. There’s no counterparty risk, because (almost uniquely among financial assets), they aren’t an IOU. There’s no 250-page prospectus to read.

So consider whether you’d rather become a “silver stacker” rather than a “silver squatter.” If you want to learn more about why precious metals are a crucial consideration for your retirement savings, Birch Gold can help. That’s what we’re here for!