What Shall We Do With Our Savings?

Long ago, when I retired, I met with the advisor the retirement company assigned to me, to decide what to do with my retirement savings.  (My employer and I had been giving them a little bit each month, which they had been investing in corporations on my behalf, and hopefully by the time I retired, there would be so much money that I could take a bit each month, and as long as my wife and I lived, we would not run out of money.)

Now, the retirement company--any of them, really--offer a deal.  They offer to take all your savings in a lump sum (scary, huh?) in exchange for which, they give you an income for life.  No matter how long you live!

They'll tell me in advance how much I'd get each month; it would depend on how much I gave them.  This is called an annuity.  The agreement is called buying an annuity.  It is the responsible thing to do, if you don't want to gamble with your retirement.

Alternatively, you could leave your savings invested in the stocks and bonds the company invested it in, and hope that the stock market would not take a nose dive.

Well, guess which road I took? 😭😂

Ñobody knows (excuse my Spanish) what's going to happen; the economy could rebound (probably not very soon), and anyway, the retirement company will hedge their investments by buying bonds, which are loans that companies take from my savings, at a negotiated interest rate, which will not dive like the stock market.  All sorts of crazy things could happen, many of which are bad for my savings.

If I had to do it all over again, here's what I think I should do.  I should divide my savings in half.  With half, buy an annuity, which will give me an annual income of half what I would have gotten if I had bought an annuity with all my money.  The rest of my savings I would keep where they have been, going to the moon with the crazy stock market.  This way, if the stock market goes sick and is on life-support, I won't be completely helpless.

I know lots of friends who know all about stocks, and who are in the insurance business (which depends heavily on the stock market), but I hesitate to get their advice.  Nobody has lived through a recession as crazy as the one on the horizon, and they cannot advise; they just don't have the background to do so.  So this 50-50 strategy is the best we can do, I think, in the total absence of reliable information.

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The So-called Economy

Continuing a pattern that has really never worked for me, I'm writing about something I don't know anything about.  Why should I change now?

Like lots of other retirees, I am living off savings, which are managed by a retirement company, and these savings have declined by about 20% since they peaked.  So that tells you just how much my thoughts are worth.  If I knew what I was talking about, I would have requested the company to move the money into precious metals, or bonds, or just cashed it out, or something.  Now I'm going to have to hope that I die before the money runs out!  (Just kidding.  Or ... am I?)

See, the 'value' that my savings is supposed to have is what the stocks that I own are valued at.  (In principle, I can sell them for that price if I act fast.). But these prices are really based on what investors think they're going to be worth.  Right now, investors don't know what's going to happen, so their guess at the prices of stocks is low.  If they think that trump is going to be president again, and give big investors a tax cut, the stock market would go through the roof, and the value of my stocks, too.  But trust me, I'd rather lose half the value of my stocks than have the afore-mentioned team get the white House.

At one time, the value of the dollar was tied to gold.  But not today.  Today dollars are auctioned off, and what the buyers are offering for dollars are the value of them.  Actually, something similar goes on with stocks.  Investors in a lousy mood will be unwilling to buy stocks, so the price goes down.  Once the price going down is observed, the price goes down even more.

After election day, stocks usually go up if Republicans win big.  Investors usually think Republicans are good for business.  If Democrats win, investors will buy stocks in the undertaker's industry, betting that lots of Republicans will be slitting their wrists, or storming the Capitol, or whatever the plan du jour is.

This brilliant idea to base the value of stocks on their asking price--or whatever--makes it impossible to plan.  Retirees have to gamble, and most of us hate to gamble.  We're "risk adverse," as they call it.  My wife and I were asked, some years ago, whether we would prefer to buy an annuity.  This is an interesting idea, where the retirement company signs an agreement to pay us an income for life.  No matter how long we live!  They are gambling that we won't live too long, in which case they keep all the money they've set aside for us.  At the time we were considering this idea, my wife and I were really wondering whether the economy would tank.  If it is likely to tank, the safe decision is to buy that annuity.  If it is likely to keep healthy, it would be better to keep control of our savings.  Well, what do you think we did?  And what do you think happened?  My only consolation is that Trump's stocks must be shrinking too, and faster than mine!  Unless he owns a lot of gold, and you know, be seeing how obsessed he is with gold --i mean, he paints everything gold.  As soon as he buys (or steals) something, he paints it gold.  Good thing the FBI found all those documents before the painters got hold of them!

I have no advice for you.  We don't know enough--or I don't know enough--to advise.  If I were still contributing to my retirement savings, I would be delighted, because the retirement company would be buying up all these low-priced stocks on my behalf, and whenever this economic slump ended, I would be sitting pretty.  So I guess all my young readers would be happy, while other retirees would be just as anxious as I am.  Sucks to be us.