Sunday, July 20, 2008

A Sure Thing

By some accounts, I just spent the past week in “retirement”—driving around sightseeing, reading some good books, and yes—even sitting on a beach.

And I have to tell you—if that was retirement, I don’t know how I’m going to afford it.

Now, I realize that isn’t the stuff of most “real” retirements, though it is frequently the stuff of retirement planning brochures. My week was a family vacation, and it was spent doing the things that families do on vacations. And it served as a stark reminder that, whereas sitting on a beach doesn’t cost much, making arrangements to stay—and eat—in proximity to the aforementioned beach is a whole other financial consideration.

Having said that, there were plenty of older folks sunning themselves out there—and most had the equipment and tan lines that suggested they got to do this kind of thing more often than yours truly (in fact, an entire busload descended on our hotel at 6 a.m. one morning, making the kind and volume of noise generally associated with drunk teenagers).

Still, I couldn’t help thinking this week about the thousands of retired salaried workers at General Motors who got word that their health-care coverage was about to change (see “GM Puts the Brakes on Health Care VEBA”). Don’t get me wrong—as disruptive as the change will likely be for those GM retirees, they’re still better off than the vast majority of retirees. Oh, sure, they’ll have to arrange for their own health-care insurance, but they’ll get a $300 boost in their monthly pension to help deal with that at a time when many workers don’t have the benefit of employer-sponsored retiree health insurance, much less a program as generous at GM’s. And they’ll get access to “counseling” to help them adjust to the change. Indeed, when all is said and done, those retirees may very well find the elimination of the common stock dividend (another cost-saving measure by the automaker) a bigger disruption to their financial plans.

Disruptive Influences

“Disruptions” are the bane of a fixed income, of course. Just when you think you have it all balanced out, you have to spend (a lot) more for gasoline, pay a higher real estate tax bill, scrape up some money for a new prescription drug, deal with the financial consequences of an unexpected medical emergency. That this happens at the same time that your investment portfolio is taking a sustained “hit,” and that you are told the house you are living in is worth a lot less than it was (on paper, anyway) a year ago, all contributes to the sense of economic pessimism that garners so much press (and presidential candidate) attention in this election season. Things cost more than they did, and those on fixed incomes (and that includes a growing number of current workers who perhaps haven’t gotten a pay increase in a while) have to make adjustments—sometimes painful adjustments.

It’s been said that the only sure things are death and taxes—but the lesson for those of us still drawing a paycheck, IMHO, is the importance of preparing for that third “sure” thing: uncertainty.

- Nevin E. Adams, JD

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