A quick request before we dive in today, and I promise we’ll only ask this one time. We’d be honored if you’d consider nominating us for the Plutus Awards. Last year we were finalists in the Retirement Blog category, which pretty much made our year. This year, we’re eyeing the much more competitive Financial Independence Blog category, and we’d love your support making the finals. We don’t do this for money, but you know we won’t turn down gold stars. :-) Thanks for considering! (And for those of you who write your own blogs, you can nominate yourself! We know we’ll be nominating lots of you!)
New Series: The Retirement Lie
Today we’re kicking off a new periodic series called The Retirement Lie. We recognize every day how lucky/fortunate/privileged/rare we are for being able to pursue early retirement, primarily because we also recognize that just being able to retire at all is becoming increasingly unlikely for a large majority of people in the U.S. especially. And sure, some of the fundamental problems that pop up again and again in personal finance discussions apply here: It’s more fun to spend money than to save it, people get caught in the consumerism trap, health care costs eat up a lot of people’s savings, etc., etc., etc.
But we think there are other forces at work that are keeping people from being able to retire confidently and securely, and we’re going to dive into them in this series.
Last year, we wrote our first ever Rockstar-featured post on how retirement calculators don’t factor in the whole picture, lamenting that most calculators would only factor how much we need to save based on how much we earn, not how much we spend. That post featured this laughable nugget, straight from the USAA calculator:
As if there’s some world in which we could ever possibly “need” $16,000 per month. But the bigger issue is that, if we actually listened to this calculator, we might never retire. We certainly wouldn’t retire next year! And why shouldn’t we listen to this seemingly credible advice? It’s from a financial institution that we trust, one that’s not even a for-profit company! Surely that’s worth listening to! We’ll go deep into the motivations of the financial services industry in a future installment of the series.
But today, for the first post in the series, let’s take a look at the media, and how they report on retirement preparedness.
Reporting On Retirement Savings
If you’re not just crawling out from under a rock for the first time, headlines like these will look familiar:
These stories are technically factually correct: Americans are not saving enough for retirement, pretty much across all age groups. And though these stories seldom report ethnic and racial disparities, focusing mainly on generational ones, the situation is even more bleak for people of color.
The problem: These stories paint undersaving for retirement as entirely normal, not as an emergency that needs dealing with right this very second.
In that last headline from CNBC, check out the subhead. “Short on savings? You’re not alone.” It sounds like some frivolous headline in any magazine. Struggle to keep your house tidy? You’re not alone! Or like it’s giving you a pat on the arm and saying, “It’s okay. We’re all in the same situation.” Implication: What we’re all doing is fine, not a cause for massive alarm.
Even worse are the stories that characterize retirement undersaving in terms of “average”:
“Average” sounds a whole lot like a C, which is a passing grade. But how much does the “average” American have saved for retirement? That would be a whopping $10,000. Having $10,000 saved for retirement is not passing, it’s not even “barely failing.” It’s holy-crap-millions-of-people-are-in-trouble-and-we-need-to-do-something-about-it-NOW. It’s a major fail that will affect all of us, not just retirees who run out of money, because everything is interconnected in the economy. Framing this story as “Do you have as much as the average?” tells people, hey, as long as you have more than $10,000 saved, you must be doing pretty well. You’re above average!
“Average” and “Normal” Create the Wrong Social Norms
Telling people they’re not alone gives a false and dangerous sense of security. We’re in this together! (Sounds nice, right?) Telling us we’re “normal,” “average” or even “above average” all contribute to this same feeling: that we don’t need to have a major reckoning as a society, and either help incentivize people to save more or beef up Social Security. And that we as individuals aren’t in trouble because we’re just doing what everyone else is doing.
These are lies. If not outright ones, at least lies of omission.
If the average grade is failing, then we can’t measure ourselves against average. What these stories seldom mention is that the odds say that most people will run out of money in retirement. Run out of money. That more than 80 percent of Boomers and Gen Xers in the bottom income quartile will run out of money in retirement. Again, run out of money. That even a quarter of people in the top half of the income distribution will run out. Maybe that doesn’t seem so dire because we have Social Security as a safety net, but Social Security was never meant to replace an entire income or provide for all of a retired person’s needs — it’s meant as a supplement.
The Stories That Need to Be Told
What if, instead of making us all feel deeply normal and average (or even above average) for undersaving, the headlines were more like:
Bottom Half of Savers Will Get Eaten By Giant Space Monsters
Then being middle of the pack wouldn’t feel so acceptable, so shrug-worthy. You can bet everyone would be working a lot harder to find ways not to fall into that bottom half, or even to risk sitting somewhere in that average middle. People would be demanding policy solutions to help, and an expansion of space monster protection programs. The social norm would be for everyone to save today, not put it off til later, because the threat would feel a lot more immediate, instead of this far-off nebulous thing like retirement.
It’s an extreme example of course, and I’m not actually advocating for sensationalism in journalism. Just a more truthful set of headlines. For starters, cutting out any mention of average and stopping the language meant to comfort us. (“You’re not alone.” Journalists who write that might as well bust out in a cover of James Taylor’s “You’ve Got a Friend.”)
Applying the Lessons of the FIRE Community
There are a massive number of problems contributing to the undersaving situation — it’s not all people sitting around spending their money on frivolous consumer goods and piling up credit card debt. Minimum wage in America doesn’t even pay people enough to be above the poverty line. We don’t provide enough child care to low-income workers. Many people are priced out of college. There is systemic racism, sexism, classism. All of these and countless others are very real barriers to climbing the ladder to a comfortable existence where saving is even possible.
But, words matter too. The narratives we hear and the stories we tell ourselves have a powerful effect on our beliefs and behaviors. And for those who are able to save but don’t save enough, the FIRE community is a perfect example of what’s possible when you realize that your old narratives were wrong.
That’s why the headlines reporters and editors write matter a whole heck of a lot more than they might believe. They are driving a skewed narrative right now, which is both giving people comfort that they’re not alone in undersaving, while also failing to show people what is possible. By slouching toward average, we’re missing a huge opportunity to show people that it takes far less saving per month to retire securely than they might imagine, even if they’re getting a late start.
Your Voice Is So Important
The FIRE blog community is a great example of how quickly we can change minds and behaviors when we shift the narrative and show what’s possible. So to all of you out there telling this story on your blogs, keep it up. And to the non-bloggers, you’re not voiceless. When you hear your friends and family mention how hard it is to save, help them see that small changes can lead to big savings. Flip the script to show them that secure retirement is in reach for many people who don’t imagine that they’ll ever be able to stop working. This community isn’t mainstream yet, but we’re picking up steam every day, and we can all make a difference together if we keep beating that drum.
How Else Can We Change the Narrative?
Please tell us in the comments: What else can our community do to help change the social norms around retirement savings? What else can we do as individuals to inspire those around us? Let’s discuss!
Closing note: If you haven’t already read it, please go over to The Resume Gap and read Matt’s latest post: Our Frugality Is a Sham. Matt is consistently turning out phenomenally thoughtful content, and this latest one is perhaps his best yet. A must-read for all of us.
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