Most of us either aren't smart enough to manage our own retirement portfolio or aren't well off enough to leave it alone. Be honest. How many of you dipped into your IRA or into the equity in your house to pay for essentials like house repairs or college educations for your kids? Not quite 100% but close, I would imagine. I certainly have. I'm not proud of it, but sometimes you do what you must to survive until the next financial hurdle looms. That means retirement looks rather like a distant dream despite repeated attempts to put my financial house in order for the long haul. I have been grasping for help in understanding this dilemma and came across an interesting resource.
The American Society on Aging has recently published a definitive reflection on how older Americans are coping with the Great Recession of 2008/2009 in their quarterly journal Generations. Some of it is hopeful. Nancy Altman makes the case for using the crisis to make necessary fundamental changes to Social Security and Medicare to strengthen them, and reinforce them as core economic values. Rick Moody, who is Director of the Office of Academic Affairs for AARP, refers to the moral economy of retirement. This is not a new concept. Adam Smith, yeah, the guy who wrote Wealth of Nations, also authored a lesser known book called The Theory of Moral Sentiments where he presented the dangers of relying solely on the market to sort out the relationship between the economic sphere and the ethical and cultural ideals of a nation.
The safety nets of Social Security and Medicare, both enacted during times of great upheaval, have softened the impact of this recession on older Americans. Where 50% of older Americans fell into poverty during the Great Depression, this time it has been significantly fewer. Of course, we all pay for these programs through payroll taxes, but over time, we have gotten used these "taxes." They have become part of our social contract with each other, across generations.
As we debate the issues of how to broaden healthcare coverage and how to provide adequate national retirement benefits, I am looking at myself and wondering if I can be smart enough and tough enough to be frugal enough with my personal retirement monies to be able to look forward to retirement, someday. So far, my track record isn't great. Social Security and Medicare are two ways to "pay it forward" that I don't have to think about. They are there regardless of the tuition bills and new roof that persuaded me to tap into personal resources I should be leaving alone. They are public resources, thank goodness. Check out ASA's Generations to find out why "paying it forward" as a nation makes America a better place to live.