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I Thought I Was Ready to Retire, but…

I’m 59 and getting ready to retire. I’m doing all the right things.

• Catching up on 401ks. Check.
• Selling the house to downsize. Check.
• Eliminating the mortgage. Check.
• Reducing costs. Check.
• Getting the right insurance. Check.

As near as I can tell, I’m set up. There should be enough money to go all the way.

So, I am worry-free, right? Wrong.

I am still worried because I am watching the world, and the world is serving up a lot of consternation.

Challenge #1: No One Plans for a Continuation of the Pandemic

The longer we deal with COVID, the longer we may continue to deal with it. Vaccines help and so will the new pills Merck and Pfizer are testing now. But their primary benefit is not to prevent infection, it is to reduce hospitalization and death — at least of this particular strain of the virus.

We don’t know how the virus might change.

We don’t know if it will go away.

Given that, it seems prudent to plan that it will not go away. And if the virus does not go away, retirement may look very different than I was thinking.

• Traveling to many places may not be allowed.
• Condominiums may not be attractive places to live.
• Social activities, like dancing, may be dangerous.
• Supply chain inflation could continue.

It seems to me a good retirement planner today would ask: If you assume these ramifications might occur, how would it change your plan?

But no one does.

If you are close to retirement, you need to have a plan B that makes addressing COVID relatively easy.

Challenge #2: Climate Change

This one is inevitable. The climate is changing. And without radical shifts in the economy, the world is not going to be able to stop it.

Let me put this to you straight. You must account for climate change in your retirement plans.

• Insurance companies are doing it — and they have been since the 1990s.
• Corporations are doing it — and they have been since at least the 2000s.
• The Pentagon is planning for it — they started in the 1990s.

But we are not accounting for climate change in our retirement plans — the most important planning and decision-making part of our lives?

Look, the big money knows it is coming. It is going to affect so much.

Questions to ask:

How does this affect your portfolio balance and asset allocation?

How much of your wealth do you want in real estate, which may be illiquid and find itself in a high-impact climate change zone?

Where do you want to live? Where can you live? What areas might become uninhabitable?

What might you need to get through disasters, like the more frequent and powerful storms, or drought, or permanent sea level rise?

And especially, what about late retirement when moving may be impossible?

Challenge #3: Dictatorship

I know… this one sounds crazy. But bear with me a second.

All retirement planning is based on a basic assumption that America will continue more or less as it has. The pendulum swings from one side to the next, then back again. But the basic principles of the democratic republic persist. America is a beacon for democracy. America is the home of the stock market and corporate capitalism, and each will persist. America will never default on its debt.

But what if it’s not true?

What if either one of the big fears in our political discourse — either that Democrats create a socialist regime or that Republicans manifest a fascist dictatorship — comes true? How do you, as a retiree, want to be positioned in that case?

Perhaps many planners discount this idea. However, a recent poll showed that over 18% of Americans, when aggregated from both sides of the political spectrum, and a whopping 30% of Republicans, believe that violence may be necessary to save the country. It is a shocking change.

“It is an alarming finding,” said Robert Jones, CEO and founder of PRRI. “I’ve been doing this a while, for decades, and it’s not the kind of finding that as a sociologist, a public opinion pollster, that you’re used to seeing.”

Dictators tend to rise over many years — it is rarely a single event. In the USA we have been at this now for about 20 years. The body politic is splitting and we are identifying more with political ideology than we are as co-Americans. We are beginning to see other Americans as enemies rather than as worthy opponents who simply see different ways of getting to fairly similar ends. Today, the goals are different, too.

In the 1970s and 1980s, retirees didn’t need to consider this possibility. Maybe not even well in the 2010s. But with the polarization as bad as it is, retirement planning that ignores the potential could be dangerous.

Let’s assume the worst for a minute: A regime takes power that you disagree with. There is violence involved, and that violence spills into citizen-vs-citizen violence. Perhaps a government begins to nationalize key industries. Maybe they cancel IRAs as accounts for the Bourgeoisie. Or maybe they cancel social security.

How do you want to be positioned for this outcome?

Considerations from My Plans

With this unprecedented uncertainty ahead, how do we prepare for retirement? I’m not a financial planner so I don’t give advice — discuss all this with your advisors. But here’s what I am considering.

More Liquidity

It may be prudent to have more cash available if I can. That would give me more flexibility to respond. I have no idea what I will be responding to, but more cash will help.

Crypto

Many people treat cryptocurrency as a roulette wheel, and I want to avoid that. On the other hand, crypto kept in a wallet, especially a cold wallet, can go with you anywhere in the world, and you can access it online. This could be an excellent way to facilitate flexibility, but I am wary of the volatility. I’m only thinking about this.

The main reason would be if something occurred that made me feel I need to leave my home temporarily or permanently. For example, people who have had to suddenly flee fires could have their cash with them in the form of their crypto wallets.

Real Estate

Everyone needs a home, but I want to go light on real estate. It is a long-term investment, and if something goes wrong in that location, I can’t be very liquid.

There are parts of California, right now, where you cannot buy homeowner’s insurance at any price. The state has become the insurer of last resort, but that creates a huge risk. What if the state decides not to do that anymore? Homeowners will have a huge investment that is uninsurable, thereby limiting the market of potential buyers and reducing the value. This is a serious risk.

Would you want to buy a home in Vegas right now? They get over 90% of their water from the Colorado River, which is drying up. Tucson gets about 80% of its water from the same river. I don’t want to be holding real estate in a city experiencing a mass exodus. Where else does that risk exist?

Finally, the type of housing and how to finance it. The pandemic is a strike against condos right now, even though I love their convenience as a 55+ person without kids at home. There is also a strike against urban areas where I’d be dependent on systems like water, sewer, and food distribution, and where political instability usually manifests.

That said, if things get crazy, renting provides far more protection than owning, and owning with a larger loan is better in a disaster than owning with cash. This works in direct opposition to most advice to eliminate debt.

What am I going to do? No idea yet. But at least I will have these considerations in mind, and you will too.

If you liked this article…

You should check out Anthony’s next one on Medium:

Real Estate in Your Retirement Plan: COVID, Climate, and Catastrophe

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Anthony Signorelli

Ideas on Men, #MeToo, and Masculinity to help men be better men.

Exploring the future of digitalized, postcapitalist society (i.e., climate change, green energy, new economy, social changes, cryptocurrency)

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