December 10, 2011

A Middle Class Lifestyle & Retirement: Does That Still Work?

There has been a lot written recently about the decline, if not outright disappearance, of the middle class in many countries around the world. The original premise was that hard work and perseverance would result in a comfortable lifestyle and a satisfying retirement. That vision included decent retirement funds, health care coverage at an affordable cost, a home, a car or two in the garage, and enough money to send kids to college. It assumed that each generation's standard of living will be better than the one before.

In reality, that picture began to go out of focus at least 10 years ago. The stock market crash of the late 1990's damaged the hopes and dreams of many. It exposed the true risks of betting that the stock market would always go up and making money was simple. Just as things seemed to getting back on track, the world came crashing down again in 2008. Folks who had pinned their dreams on the value in the homes found themselves upside down, or worse. Again, stock performance tanked taking the retirement plans with them. The average middle class person has seen a steady erosion of their financial situation. Some are referring to the past ten years as "the lost decade."  Even while the top few percent of our society are richer and more isolated from reality than ever before, the middle class, and even more so the poor and disadvantaged, have watched the dream turn into a nightmare with few promises of a fix anytime soon. The big squeeze is getting worse.

Some will argue that we are reaping what we sowed. Flipping houses, taking out loans we couldn't repay, running up credit card bills of more than our annual income, betting that stocks would only go one way....we were acting like children let loose in a candy store, assuming that "they" would be sure we were OK.

Others will say that the system has been tilted in such a way that the rich and powerful have stacked all the cards in their favor. The financial meltdown was caused by their greed and their manipulations. The "main street" middle class person has no chance to get back on top.

I believe that both those views have some validity. Each side must share part of the blame for the mess we are in. Our government has shown, at least to this point, it either has no idea how the fix things, or is so dysfunctional it can't.

I will also state that a satisfying retirement is still within reach of the many of us. Am I being foolish or hiding my head in the sand? I don't think so. The research I do before writing certain posts and the tremendous feedback left by readers have increased my sensitivity to the realities that way too many of our fellow citizens face. If nothing else, the past 18 months of writing this blog has given me a much clearer picture of ways to find a solution to many problems.

What I have learned in this journey is that we are in the midst of a massive and probably permanent redefinition of some of what we were brought up to believe. The concepts of employment stability and generally benevolent employers, of having protections and safeguards in place against unethical behavior that would prevent large scale damage, and of having affordable health care available to most are no longer givens. In fact, they aren't reality at this moment.

So what does my vision of a middle class retirement look like? Since there is no universal agreement on what constitutes middle class, I suggest we not get hung up on that phrase. Your satisfying retirement is determined more by how you act, react, and what you accomplish than by a textbook term or a particular income.

Having the proper retirement mindset means you are flexible. You may stop working completely at the "normal" age of 65 or you may keep working into your 70's or beyond. You may take on the challenge of starting a new business or company. You may become a consultant to your old industry. You may work part time at a local retail establishment.

You may never work another day in your life, but spend countless hours volunteering to make someone else's life just a bit brighter and less burdensome. You may take care of your grandkids all day so mom and dad can go to work. You may find yourself on a mission trip for a year to Africa. You may be the primary caregiver to your mom or dad.

Whatever shape your retirement takes, it will look very little like what retirement used to be. Relaxing and doing lots of nothing all day while slowly declining in mental and physical ability holds absolutely no appeal. You will do everything in your power to avoid that path.

At the same time, it probably won't look like you thought it would. That isn't necessarily bad, just different. A middle class retirement may still mean travel, an RV, a vacation home...or it may not include any of those things. If you like a life of travel then you will make sacrifices in some other area of your retirement to make that happen. If you are more of a homebody you will devise a budget that supports you in that decision: maybe lots of flowers in the garden, books and music on every flat surface, and an inviting place to live. It may be a 300 square foot rented apartment or a 3,000 square foot house. It shouldn't matter. It is where you feel safe and comfortable and "home." You will not let your possessions define you.

Your retirement will accept that you must take on additional responsibility for your future happiness, health, and well-being. You will not expect others to do all the heavy lifting. You will eat right, exercise, eliminate stress, see a doctor when needed, but fight aging and decline with every power you have. You will keep your mind active by constantly taking on new challenges and responsibilities.

A middle class retirement means you are in control of much of the quality of your retired life. Will there be times when you have to pinch pennies, clip coupons, bypass a wanted (or even needed) item? Probably. But, you realize that you have the greatest gift of all: more control over your time and how you spend this irreplaceable asset.

People will continue to aspire to retire (I like rhymes!), but in a way that will be unique to each of us. I can be satisfied with a lot less than I thought I'd need or want just 5 years ago. At the same time there are parts of my life I need and will fight to maintain: being close to family, volunteering to help just-released convicts, building my spiritual life, and feeling safe and comfortable inside my home. And that sounds very middle class to me.

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  1. Bob,

    Thank you for your realistic look at what retirement is looking like for many people. My concern is for women is particular. Many women I know do not have a retirement fund, including me. They are making ends meet now without a plan for the future. I'm heartened by some of the points you emphasize, especially focusing on the quality and positive aspects of life despite the financial pinch. I just can't imagine how many of these women are going to manage financially.

  2. Wow! Bob, excellent post. Finally, someone has good sense to look at reality and put it down on paper (or a blog). I wish you could wrap it up and put it in a bottle.


  3. Sandra,

    Your point about the extra concern among women is very valid. As we know many men are unprepared for the costs they will face. The unfortunate reality is women are in even worse shape. If married, too many times their retirement plan is "my husband." They have no independent fund, or little input into how their spouse is handling their shared future.

    You have given me an idea for a future post on the special steps women should take to prepare for their financial future. Since women tend to live longer than men, this is an important subject.

  4. Morrison,

    Thanks for the high praise. As you are very well aware, it is pretty much up to us to make the cards we are dealt into a winning hand.

  5. Another excellent and informative post reminding us that a "the buck stops here" attitude of responsibility doesn't start in Washington. It starts with each one of us.

  6. Galen,

    Maybe it is a generational thing, but having to talk about personal responsibility is disturbing. It wasn't too many years ago such a subject would be a given, not worthy of even bringing up.

  7. This was your best column yet. Thanks for the good words.

  8. Chuck,

    Thank you. Sometimes words and thought simply flow. This was one of those times, I guess.

  9. Wonderful Post.
    You could not have said it better!
    I, too, worry more and more about women. With the rise of elder divorce, more women are going to slip through the cracks. I look forward to your input on women who have primarily been caretakers during their lives.

  10. Janette,

    Thanks. I'll start digging into some background information and work on the idea. Coming from a man I may get some of the female perspective wrong, but I'll give it a shot.

  11. Excellent post. My favorite phrase "Whatever shape your retirement takes, it will look very little like what retirement used to be. Relaxing and doing lots of nothing all day while slowly declining in mental and physical ability holds absolutely no appeal. You will do everything in your power to avoid that path."

    Amen to that! I suggested on a blog elsewhere that perhaps "retirement" has become an antiquated term that needs to be, well, retired.

    To reference the point made at the beginning of your blog - although we live in a neighborhood replete with well compensated professionals, no one seems to understand how we could possibly be retiring so far ahead of the curve (I am 49, my spouse will be retiring in the spring at age 56).

    The truth is that we are the quiet millionaires next door that Thomas Stanley and William Danko wrote about. We do not shop at Nordstroms, we do not own an American Express card, we do not live in a fancy home, and we do not drive flashy cars. Oh, and also, we did not refinance our home multiple times in order to take out equity and buy things we couldn't afford and shouldn't have bought.

    What we did do was to live under our means for 30+ years. Which makes for a pretty boring "How I Made It" story, but is the truth.

    It's like the question you get asked whenever you lose weight - how did you do it? What people really want to hear is that you took a fancy pill or tried a fancy diet so that they can feel better about their own choices not to take care of their bodies. No one wants to hear that you simply exerted self discipline and cut back on your calories. Or exerted self discipline and cut back on your spending.

  12. Tamara,

    Your story is not much different from mine. Live beneath your means, save 20% or more of your income every year, don't clutter your life with stuff, and a satisfying retirement is quite possible.

    Self discipline plays a large part in a winning formula. Congrats to you and hubby for figuring that out.


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