Saving for retirement as an act of wild optimism

Photo: Mark Makela for The New York Times. "Virginia C. McGuire, her partner, Matthew, and their son, Leo, 9, play the board game Pandemic in their Philadelphia home."

When is setting aside money with which to retire at a happy old age a potentially recklessly optimistic decision? When you have cancer.

Librarian, freelance writer, and mom Virginia C. McGuire writes in the New York Times how during the worst of it, her anxiety was sometimes "all about money," and she worried about what would happen if and when her cancer returned. "Nobody pays freelancers for sick time."

"Sometimes I find it easier to fret about money than to worry about big things like cancer," she writes. "It seemed crazy to keep saving for retirement when my chances of living that long were so uncertain."



  1. Hell, we should all treat retirement this way. I, for one, have no optimism for the sound management of my retirement accounts, and I have TIAA and Vanguard. 

    1. I’ve had cancer, and think the odds of my being diagnosed with another cancer before my husband retires are excellent.  Therefore, I think of our retirement account as his account to support him in his old age… and he works for TIAA. 

      Yesterday he was listening in on a company-wide conference call.  They’re rethinking their “guaranteed” 3% as something more variable in the future, say 1% – 3%.  Too many customers living too long in the future; they’re not sure they can meet their promises.

  2. Hate to say this, but at the present time saving for retirement under any circumstances is an act of wild optimism. Zero job security, negligible safety net, and a political consensus determined to destroy Social Security makes retirement planning bleak..

      1. I’ll ask the same question for anyone that freaks out about Cyprus.

        Who actually keeps more then 100k in their bank accounts?

        1. I feel that the precedent of governments seizing privately held assets directly from banks is a bit troubling even if I don’t have 100k in a bank account.  100k was arbitrary, as was targeting only bank accounts.  Governments can seize property, stocks, bonds, and anything else they want.  We are supposed to have confidence that they aren’t going to.

          1. (1) Feel is feel, reality is different.  This is already becoming a text book case on what not to do in a bail out.  The results are a deep recession, what was not desired in first place.  Whoever thought this idea up is amateur.

            (2) Deposit Insurance, Investor Protection Fund, other insurance protection schemes, etc,.

            (3) As mentioned in (1) *IF* this is the way bailouts are handed, then no company would want to work in your country.  Thus leading to even more deeping recession.

            (4) I’ll agree your fear that there is no real protection for the public if the government decides to seize.  That is why I ask why keep more then 100k in a bank account?  That’s just stupid.  Having your entire nesteggs in a banking account is risky, as demostrated in Cyprus.  Better to have a balance portfolio.

          2. I agree that the results in Cyprus are going to be disastrous and we’re already starting to see that.  But that was easy to predict.  Given that it is easy to predict, why did Cyprus do it?  Maybe disastrous consequences aren’t enough of a deterrent.

            I also don’t think that insurance is any protection.  If it’s the government taking the money then obviously they aren’t going to pay out insurance on it.  If it’s a private company then they are just going to fold (unless they keep billions on hand to prepare for this).Almost no one has more than 100k in a bank account.  The reason there were so many such accounts in Cyprus is that it’s a tax haven, allegedly especially for organized crime from Russia.  But they raided those accounts simply because that’s where they could get the money from.  In Canada, where there would be virtually no money in such accounts, they would have to raid some other kind of investment.

            There’s only so balanced a portfolio can be.  With current interest rates, any seizure of investments would pretty much make a mockery of saving for retirement at all, no matter how balanced the portfolio.

    1. Also, (around my neck of the woods) rates in bank accounts don’t keep up with inflation.

      If my money is losing value the whole time, is it really saving?

      1. Just throwing money into banking accounts is not saving.

        Nor is taking all your money in hand and burying it safe either.

        1. Got any better ideas?  I put money into my IRA to get the tax break, but it’s losing against inflation.

          1. Easy.  A balanced portfolio.  There are real return bonds, preferred shares, warrant shares, principal notes, ETFs, segregated funds, annuities, insurances, regular mutual funds, trusts, etc,.  Besides regular stocks and bonds.  All much better then throwing money into banks and holding CDs.  This is not the 80s anymore.

            If you want numbers, I’ve noticed your earlier posts, my own version of IRA, I don’t live in States, is about +22%.  After commissions, fees and not counting dividend.  This is started in 2009, so roughly 5.5% average per year.  At least on paper.  If threw money into a Dow Jones index, just last year you’d be up at least in teens.  More importantly, when markets tanked to -40% in 2008, I got tanked too.  BUT, -22% is better then -40%.  I also recovered, 6 months later.  Average 7% a year in 30 years is doable.  Difficulty maybe, but not that hard.

            Funny I have to say this to you Antinous, but not surprising.  Why not take what you do on BOingboing and do it on your personal finances?  Learn about taxes, do your taxes.  Talk openly about finances.  Of course people look at you funny.  Funny, happy mutant.

            Saving is kinda wildly optimistic, when you got cancer.  But it’s also prudent.  It’s also liberating, because that stash you’ve worked can give you more options in life then not saving.

    2. “Zero job security”

      So, while you HAVE a job, you shouldn’t save money for the future?

      “Negligible safety net”

      So, if there’s no government program to help you out when you are older, you shouldn’t bother saving your own money for when you are older?

      “.. a political consensus determined to destroy Social Security”

      And again . . . why does this mean you shouldn’t set aside money for when you are older?

      I think all three of the things you note are true, and they do mean retirement planning tough, but that doesn’t mean you shouldn’t.

      1. Question is, how do you save?

        401k plans do not provide enough funds at retirement, even if you contribute 15% of your income every year. U.S. companies have demonstrated a clear willingness to gut employee pensions when they need to pay off creditors for a board’s stupid mistakes or even unforseen economic circumstances (e.g. United Airlines circa 2002, among countless others). 
        Not only should the crisis in Cyprus demonstrate that the money you save in your bank (and FDIC assurances) might not be as secure as you’d hope, but even if you did save money in a bank interest rates do not keep up with inflation. 

        You could invest in the stock market (by yourself or with a paid adviser), but risk-free investments deliver near 0% returns and everything else… well, let’s just say that there are a whole lot of traders and MotUs who know a lot more about the market than the average college-educated investor. We’re fodder for them.

        So, what do you do? I ask this question out of genuine interest, although as one of the countless Americans who literally live paycheck-to-paycheck, I’m going to have to file away your advice for a future when, maybe, if i’m lucky, I make enough money to save even a tiny bit of it.

        1. Obviously, if you’re up against the wall, this is as you write all academic. I have siblings and many cousins and friends in that boat. But if you do have a small surplus, saving SOMETHING is better than saving NOTHING.

          Yeah, the day of cushy pensions and care free, work free retirements is over. But even if your 401(k) isn’t going to let you kick back and do nothing during your golden years, what is controversial about having some savings for when you are older and less able to deal with the 9-5? Maybe you’ll be fortunate and be able to work “only” part time. Or you’ll use your savings to deal with the disasters and dislocations that you would have been able to “roll with” when you are younger.

          CDs? Savings accounts? Money market accounts? Yeah, a total joke right now. You only keep a month or two of emergency money there. (Yes, I know that’s probably a luxury to many people.)

          When you invest in stocks and bonds, unless you’re actually doing something stupid like Day Trading, you’re not actually competing with the MBA barracudas. For retirement, you invest in bone-head simple things like municipal bond funds (for your state, if possible) and mutual funds made up of dividend stocks in consumer staples. Right now the returns on these “safe” investments are just staying ahead of inflation . . . but this is better than a matress or a savings account. You can count on more booms and busts in the coming years; when times change you change the mix. Maybe getting in on the cold fusion boom of 2030 will make you rich. Maybe you’ll end up using your investments to buy the palette of ramen noodles that gets you through the Great Drought Decade. But if you don’t put aside something when you can, you have no flexibility at all.

          Please don’t mistake this as pollyanna optimistic bullshit. My father retired at 55 from public school teaching and my folks live comfortably. That’s sheer fantasy territory for me. But I save and invest what I can, and plan on staying flexible.

          1. I understand completely. There is of course nothing wrong with saving for retirement; it is not only prudent to do so, but also necessary in the U.S. given that the Social Security system will almost certainly be (unnecessarily) dismantled in our lifetime. Saving is a necessity if you want to retire. The problem is that for many Americans saving the amount required to retire is simply not an option and therefore neither is retirement. Older folks will work for as long as their employers will have them while young people struggle to find jobs they once exclusively filled. For example, are you more likely to see an 18-year-old bagging groceries these days or a 70-year old?

            I understand the point of Xeni’s post of course. But as the discrepancy between rich and poor in the U.S. widens, saving for retirement will be another luxury many cannot afford.

            That is, unless young people decide to move elsewhere…

          2. I hope that none of my observations and suggestions in any way imply that I don’t think things don’t massively and unnecessarily suck.

            When I buy a lottery ticket I don’t imagine myself getting a mansion and a yacht; I picture myself paying off the house and not having to work at Wal-Mart at age 70 . . . but most of all, giving my sister enough money to afford health insurance here-and-now.

          3. The Daily Mail has been running a series about a couple of losers who won £1.8 million and are now broke. They bought a big house, sports cars, etc., etc. etc. and the money ran out. Well, duh. That amount of money would just about buy a modest home and keep two people from going cold and hungry for 20 years of retirement.

        1. I’ll roll my odds in the Thunderdome if it means I get to drive a blown V8.  (Or even better something with a jet engine.)

  3. How is saving money for retirement a wild gamble if there’s a chance you will get a second round of cancer?  If you threw the money in an IRA and then the cancer came back, you could make a medical hardship claim and take it out without hitting the 10% penalty.  If you died, your spouse (or kids, or whatever) would get the money.  Depending on your choices, you’re going to get 7-10% in your IRA and if you’re lucky maybe 1% at a bank.  I know, stock market evil, ice cream maker good, but seriously, just save the damn money.

  4. One retirement investment we had had a 28% cumulative return over the years and when the subprime crisis hit, it lost 58% of its value…so at that point it was worth less than we put in. Since we were also paying a fee for that to be managed, we were actually paying the bank more money to have the investment than it was making each month. Btw this was at one of the investment banks that was acquired 3 times during the crisis.

    We had friends who were forced into retirement by the companies they worked for at a time that their 401k’s had lost 50% of their value. 

    Here’s the retirement strategy you want to have. Own everything outright, have no debt. Other than that…live it up. What good will a huge retirement account be when you aren’t young enough or healthy enough to enjoy it? Live your retirement when you are young. 

    1. But if you left that money in the 401k it would have recovered all its value and then some by now.

      An average American can save 50% of their take home pay and retire in a decade or so.  If you’re “living it up” now, enjoy it, but it’s not the smartest course.  Money doesn’t buy happiness but spending it all and finding yourself destitute can get you a whole lot of misery.

      1. An average American can save 50% of their take home pay

        Are you joking? I can save about 25% of mine, and I live very frugally. My health care premiums alone are a sixth of my gross pay.

        1.  Not joking.  You live in California, right?  That’s a very expensive place to live so 25% might be really the best a person making an average income can do out there.

          1. Median income, including benefits, in the US is 60K. Which means about 40K in salary, 30K after taxes. I’d be amazed to see someone saving 50% of that unless they’re living in a trailer.

  5. buy land! they are not making any more of it…  when your starting out, buy an “affordable house” or build a house… then as you advance you sell it and buy a bigger and bigger home… then when you retire you sell the big house and downsize! this can give you a real retirement! 

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