This is an excellent column by Joe Nocera in the NY Times relating his own realization that he will not be able to retire. It's a very familiar tale to me:
Like millions of other aging baby boomers, I first began putting money into a tax-deferred retirement account a few years after they were legislated into existence in the late 1970s. The great bull market, which began in 1982, was just gearing up. As a young journalist, I couldn’t afford to invest a lot of money, but my account grew as the market rose, and the bull market gave me an inflated sense of my investing skills.
I became such an enthusiast of the new investing culture that I wrote my first book, in the mid-1990s, about what I called “the democratization of money.” It was only right, I argued, that the little guy have the same access to the markets as the wealthy. In the book, I didn’t make much of the decline of pensions. After all, we were in the middle of the tech bubble by then. What fun!
The bull market ended with the bursting of that bubble in 2000. My tech-laden portfolio was cut in half. A half-dozen years later, I got divorced, cutting my 401(k) in half again. A few years after that, I bought a house that needed some costly renovations. Since my retirement account was now hopelessly inadequate for actual retirement, I reasoned that I might as well get some use out of the money while I could. So I threw another chunk of my 401(k) at the renovation. That’s where I stand today.
Unlike him, I had periods of unemployment and career changes and some of my friends had health problems that led us to a similar place. But even among professionals and otherwise successful people --- not to mention the middle and working class toilers who never had any money to save in the first place --- this is the story of many of my generation. I'm certain we were all terrible people who should have been much better savers and not made the decisions we made. Looking back I'm sure many of us would do it differently. But it is what it is.
And what it means is that we can't afford to retire. Which is bad. We will be clogging the workforce long after we want to be in it and that's not healthy.
Nocera goes on:
When I related my tale recently to Teresa Ghilarducci, a behavioral economist at The New School who studies retirement and investor behavior, she let out the kind of sigh that made it clear that she had heard it all before. The sad truth, she told me, is that I’m the rule, not the exception. “People have income shock, like divorce or loss of a job or a health crisis,” and those crises tend to drain retirement accounts, she said.
But even putting income shocks aside, she said, most human beings lack the skill and emotional wherewithal to be good investors. Linking investing and retirement has turned out to be a recipe for disaster.
It works out well for some and badly for others. Unfortunately, there are far more for whom it hasn't worked out and who will be working and/or living very meager existences on whatever's left of Social Security until they die. That isn't a good situation for anyone, especially their kids. I'm guessing we're about to see a big spike in elder poverty when the congress inevitably "compromises" and agrees that we must destroy Social Security in order to save it.
I suppose we deserve it for our failures. But I think most people, even the "deserving" rich ones, are surprised by how life unfolds in ways they don't expect. Anything can happen, even to very responsible people. You just don't know.