Nothing from nothing
We're a zero-saver nation full of excuses, unwilling to give up lattes
By Paul B. Farrell, MarketWatch
Last Update: 7:22 PM ET Feb. 13, 2005
ARROYO GRANDE, Calif. (MarketWatch) -- Want to retire with a million in cash? Here's the perfect solution, for you in particular and for America's retirement system overall. In fact, if everyone were using this simple strategy today all of America's 294 million citizens could retire in comfort and with dignity. Guaranteed! What's this marvelous secret?
Save 10 percent!
Too simple? You expected some wisdom about the magic of diversification? The beauty of no-load index funds? Maybe some insider tips on the best stocks for the long haul?
Nope, just "Save 10 percent!"
OK, you've heard it before. But after writing a thousand columns and several books, reading hundreds of great books on investing, all the newspapers and magazines, and spending every day tracking news online, everything always comes back to this one fundamental equation:
Zero saved equals zero invested.
Fundamentals are boring, but they win games, including the game of investing. No fads. Good coaching means drilling home familiar themes. Repetition. Discipline. Focus on what works over the long haul.
Don't get me wrong. When it comes to retirement nest eggs, solid advice about indexing, diversification, best funds, the economy, rates and privatization is great. But it's totally useless if you have no savings!
Nobody's listening. Not Wall Street. Not Washington. Certainly not Main Street America. Look at the stats: Back in the early 1980s America's savings rate was 12 percent. Today, it's about zero. Americans are saving exactly nothing. And another sermon praising frugality or demonizing commercialism won't help.
It's time we realize that most Americans don't really care enough about future retirement to take seriously the "Save 10 percent" rule. And here are the Top 10 reasons we give for not saving:
No money left after monthly bills paid.
Money math is too darn confusing.
Planning isn't how many brains work.
No interest in financial matters ever.
Dependent and can't make decisions.
Love spending every extra cent on fun.
Naïve, novice, new to the money game.
Money's the root of evil, the devil's work.
Never trust politicians and brokers.
No time, too busy making money.
Add up all the "reasons" and that's how you get a savings rate of zero.
The American investor's brain has made a cosmic shift. Wall Street and Washington think it's negative. Actually, the new "Zero Savings" mindset reveals our new values, and that's good news!
We're all like characters in a Jerry Seinfeld rerun. Despite all the national and global drama, our daily lives are really quite mundane, a bizarre situation comedy of absurd and incomprehensible contradictions that invite knowing smiles and occasional belly laughs.
We're a mass of contradictions. Saving 10 percent may be the best way to retire with a million in cash. But we mortgage our future every day, "voting" for bigger plasma TVs and SUVs, extra iPods and videophones, more credit-card debt and bigger home-equity loans.
We act scared to death about the Social Security "crisis" of 2032, afraid we won't be able to retire and enjoy our sunset years 27 long years from now. And yet -- ironically, laughably -- we refuse to do anything about it today. We won't even sacrifice a little now to save for the future!
The 'Starbucks Retire-Now' crowd
In fact, many of us have decided to "retire" in a whole new way. Many of the zero-savers are "retiring" today.
Don't believe me? Go spend an hour in your local Starbucks. Member dues are cheap, maybe five bucks a day. Millions go there every day to relax and retire. "Retirement" means something different to them. It's a tradeoff: Retire now versus later. No contest! Retiring an hour every day is worth more than retirement in 2032!
Do the math: A triple Caffe Americano and muffin might cost you five bucks -- roughly $150 a month. If instead you saved that money every day and let it compound slowly in an investment account, it might build to half a million dollars between age 20 and retirement at 65. Maybe to a million if you double the amount and then put the maximum into your IRA and 401(k).
But America's zero-savers are members of the new Starbucks Retire-Now Club. They're exercising their "freedom of choice." Every day they spend future retirement dollars. Why? To enjoy their "retirement" today! In the two decades that America's saving rate disappeared, Starbucks has exploded from five stores in Seattle to almost 9,000 worldwide and the company has a market capitalization of $20 billion.
Millions of Americans are already voting to "retire" a little every day. Most don't give a hoot about the distant future. They may debate privatization at The Club. But if Social Security really is going to collapse in a huge financial mushroom cloud in 2032, that's just one more reason to "retire" today to the Starbucks Retire-Now Club, an hour every day, all year!
That's the new retirement folks! I love it, and so do millions of other Americans! |
