Should I Buy My Medicine or Keep the Heat On?

This article was published in the Escape Artist Weekly Newsletter on September 26, 2018. If you would like to subscribe to the newsletter, please click here.

What a tough question to have to ask oneself. But alas, there are some who already have to ask this question each winter and many more who face the prospect in the very near future. Check out a recent article in The Week magazine, my favorite weekly rag, by the way. They summarize the fact that circumstances are dire right now and getting worse as more and more people begin to face the reality that they didn’t save enough for retirement.   

Should I Buy My Medicine or Keep the Heat On?

Let me highlight and expand on a point in the article. The gap in what is saved and what will be needed is, right now, $28 trillion. By 2050, it will be $137 trillion. That’s $137,000,000,000,000 or $391,000 for each person alive in America today.   

But it’s worse than that. Because not everyone will be on a fixed income by 2050. It’s a much smaller number, so the math for them is worse. The nation’s 65-and-older population is projected to reach 83.7 million in the year 2050.

What this really means is that the $137 trillion dollars get divided by only 83.7 million folks. The shortfall per person 65 or older then, those who need the money lost in the shortfall, is $1.6 million per person. Where is that going to come from?   

Do these numbers stagger you? They should. When old people start dying because they freeze to death or don’t have money, the government is going to step in. They’ll have to. Old people vote.   

Wow, that’s harsh. Yes, of course, but how about the reality of the situation? The last time I wrote something like this I received a few “love letters” telling me that I was heartless to say such things. Really? All I did was point out that the emperor has no clothes. He’s naked. Here’s more proof.   

Should I Buy My Medicine or Keep the Heat On?Or how about these stats:

Should I Buy My Medicine or Keep the Heat On?

Should I Buy My Medicine or Keep the Heat On?Less than half have even tried to figure out how to save for retirement. Maybe they are so depressed about the trainwreck they see coming for them that intuitively they know they don’t stand a chance. It’s a harsh reality staring them in the face.   

So, where are we? What are we to do? How in the world do you make up $1.6 million per person in 30 years? You don’t. Each individual would have to save $54,000 per year, every year, for 30 years. But if we see the second chart above, two-thirds of U.S. workers make less than $45,000 per year. You can’t save more than you make.   

So, the belt will be tightened. And tightened. And tightened some more. Sacrifice and more sacrifice will be necessary under the status quo. If nothing changes, nothing changes.   

A recent article by Mark Skousen posted on his website was about boomers not having enough money for retirement. I love his last line:   

“The key to avoid running out of money is to live within one’s means, make it easy to save money regularly and invest those savings in good long-term investments.”

It’s a great sentiment. But it’s really difficult to save $54,000 per year if you only make $45,000 a year. Look at the very few places in the U.S. where people actually have any money left at the end of the year.  

Should I Buy My Medicine or Keep the Heat On?

Should I Buy My Medicine or Keep the Heat On?I guess if you live in Gilbert, AZ, you could start saving a decent amount, but what about the rest of the country? People are spending more than they make. They are not saving. They are going to enter retirement with not nearly enough money.   

So, let’s assume the worst here. You didn’t or can’t save enough to last your retirement year. What then? I guess it’s Social Security, right? Check out the stats I pulled on Social Security income:   

The average Social Security benefit currently being paid out to a retired worker is about $1,372 per month, or $16,464 per year. (Dec 4, 2017)

What kind of quality of life can you have in the U.S. on $1,360 per month? Probably an OK one, for now. Tight, but OK. But what about over the next 30 years? How much is inflation going to eat up?  

But wait, there’s a COLA right? I don’t believe it. Do you? Because the rate of inflation depends on how you measure it. Check out the measurement of inflation using the 1980 metric and methods:

Should I Buy My Medicine or Keep the Heat On?Many believe that to keep inflation “low” the government keeps changing the measuring stick. If that’s true, then today’s $1,300 Social Security payment is shrinking by a lot. What’s a retiree to do? The best answer? Think outside the box.

Do you know this puzzle? Get a pen and some paper and copy the nine dots arranged in a square below. To solve the problem, you need to join all nine dots by drawing no more than four straight lines. The straight lines must be continuous – i.e. you must not lift your pen from the paper once you start drawing

Should I Buy My Medicine or Keep the Heat On?If you know the solution, great. If you don’t, grab some paper and have some fun for a while. If you give up, the answer is at the end of this article.   

Just like the puzzle above, the only way to solve the fixed income and the hidden inflation problem is to think outside the box. People on a fixed income need to think of 3rd-way alternatives. A great life overseas is one of the outside-the-box solutions.  

Incredibly, moving overseas can save more than half what most folks spend monthly in the U.S. In some locations, the cost of living can be a third of the U.S., while quality of life can be higher.   

But wait, how can you have a lower cost of living and a higher quality of life? That doesn’t make sense. Neither does a one-sided piece of paper. Don’t believe me? Start at one place and trace the side all the way around.

Should I Buy My Medicine or Keep the Heat On?Paradoxes and puzzles are fun mind games, if you have the luxury of time and money. But necessity makes them stressors in real life. One’s golden years should be relaxing and fun. Not a time to worry about not having enough money for both heat and medicine and having to choose between them.

Retirees deserve excellent 3rd ways to resolve the issues critically important to them. Living overseas is a powerful alternative and one that most folks don’t imagine is possible or desirable.   Consumer Resource Guide

I continue to be saddened by the articles and somewhat alarmist views that boomers are going to have to work longer and harder to make up for shortfalls in savings, pensions, and Social Security benefits. While this is true for people who chose to stay in the U.S., there are alternatives if one simply expands the field of view a bit.    

Belize, an English-speaking country in Central America is a great place where expats now find that they can have a great life on a fixed income under $2,000 per month. Ecuador is a place people can live on $1,300 per month nicely. Panama has excellent healthcare, including a Johns Hopkins facility for people whose number-one concern is healthcare. For folks with more income, or perhaps a pension to supplement Social Security, vineyard estates in Argentina can be a phenomenal lifestyle at 10% of the same lifestyle cost in California.      

You see, the costs are relative, and if you’ve lived in California and have a home you can sell for a good price, then moving to a vineyard community in Argentina could be the Napa Valley retirement experience you’ve always dreamed up. But instead of millions, it’s thousands to acquire. And having a maid, enjoying fine wine, and eating all organic and free-range foods will fit the fixed-income budget.   

Chances are that if you are reading this, you already get it. But many of your friends and family don’t yet. Do them a favor and pass this article along by email and twitter. Post it on Facebook or Linkedin. Make sure that they get a copy of the Consumer Resource Guide with helpful tips, tools, and some additional articles about life overseas. You’ll be doing them a huge favor. One they didn’t know they needed, but one that could open their eyes to better alternatives if they haven’t saved enough for retirement and face the probability of having to ask some very tough questions about medicine and heat down the line.

p.s.    Scroll down for the answer to the puzzle.

Teak-Panama

Should I Buy My Medicine or Keep the Heat On?

This article was published in the Escape Artist Weekly Newsletter on September 26, 2018. If you would like to subscribe to the newsletter, please click here.