Retirement Savings

While checking out at Kroger recently I asked the guy bagging my groceries if he was from New York state since he was wearing a Geneseo sweatshirt. (The name is familiar since I know a couple people from college who are from there) He responded that he went to school up there and proceeded to ask me if I was a professor at UK.

One of my golfing buddies texted our group wishing us a Happy New Year and informed us that, as of January 1, 2022, as far as he is concerned, we’re all starting the new year as scratch golfers. In other words, we’re now all WAY better than we actually are.

When I was a freshman in High School I wanted to invest in the stock market. I, of course, had no idea what that really meant or how to do it, but it seemed interesting to me. Now remember, the stock market wasn’t nearly as accessible as it is today. Because of that, my parents equated the stock market to something akin to three-card monte in Times Square, so they told me I could invest when I had saved $1,000 from my paper route. If I had invested my hard-earned $1k into the “stock market” as measured by the S&P 500 then (1979), it would have grown to $93,050 as of the end of 2019. And, get this, if I had added just $500 each year to that initial $1,000 investment, the total would now be $476,597. Holy compound earnings, Batman!

As I penned this blog on the back of a barf bag while stuck on a Southwest plane waiting to have it’s malfunctioning electro-optical peanut butter sensor repaired, it seemed an appropriate time to remind myself of a few of the many, many things I’m grateful for.

Ever use one of those aging apps where you take a photo and the app ages you 20 or 30 years into the future? I won’t look like that! That’s crazy! Delete! Well, not so fast my future wrinkled friend. Maybe an app like that can inspire us to invest more for our retirement or exercise more or cut out sweets…well, let’s not get carried away.

In a study by Hal Hershfield, an economist from UCLA, people who viewed aged images of themselves were more inclined to increase their savings for retirement. Hershfield used software to age half of the subjects in his study with jowls and wrinkly skin – all those things that won’t actually happen to me or you, thank goodness. They then gave all the study subjects a fictional $1,000 and gave them four choices for how to use that money: investing in a retirement fund, give a gift to a friend now, planning a fun event or putting money into a checking account. People shown their aged images put twice as much money into their retirement fund as those who weren’t. If shown aged images of someone else, though, their choices weren’t affected.

Should I invest in that man below?

It’s still a year off but seeing all these graduation ceremonies and commencement speeches on Twitter started me thinking of what I’ll tell our daughter when she graduates college next spring. Plus, I know she just can’t wait to get more advice from me, so why not start early?

The term “sandwich generation” commonly refers to those people who are caring for aging parents and their children at the same time. Today, I introduce a new term – The Financial Sandwich Generation.

Back in the late 1960’s the Stanford psychologist, Walter Mischel, studied delayed gratification by placing a marshmallow before a child and offering them a choice: eat the marshmallow now or, if they wait a few minutes, get 2 marshmallows later. The original study found that children who were able to wait longer for their reward tended to have better life outcomes – educational attainment, better health statistics, etc. Suffer now, enjoy later. As a side note, although I am definitely a saver by nature, I wouldn’t wait 2 seconds to eat something chocolate placed before me.  

There is a common narrative that savers will eventually reap great rewards by delaying gratification, but only after suffering first. In financial terms, one can eat their marshmallow only when they retire or reach financial freedom, but must drool until then.

There is, of course, a different way to view saving and accumulating wealth. I recently came across an advertisement from 1969 by the First Federal Savings and Loan Association of St. Petersburg. Florida, not Russia. I think it captures quite well the satisfaction and peace of mind one can enjoy NOW by saving and accumulating wealth. (I haven’t edited it, so replace their use of “man” with “person” in your mind while reading)

It is far from uncommon for faculty to get a late start on their retirement saving. A Master’s program followed by a Doctoral program followed by a long and daunting dissertation process and then, maybe, even a post-doc somewhere. Finally, when you get that first teaching gig then the real work starts, right? The long and challenging process to earn tenure when the hours are long and the pay is not. As a result, when other 35-40 year-olds already have 10-15 years of saving for retirement under their belts, a university professor may only have a handful.

So, fast forward to 50 or 60, ages when we naturally start to think about retirement. Are you on track for retirement? Have you saved enough to sustain your current lifestyle through retirement? If not, what can be done now?

I have a faint memory of a family in our church when I was in middle school, probably, selling their house and all their possessions to buy a boat and sail around the world. I occasionally wonder what happened to them. Did they find happiness? Fulfillment? Adventure? Terror? Were the kids able to finish school? Are they, ahem, normal after such an experience?