(2017-11-01) Rao So You Think You Can Retire Punk

Venkatesh Rao: So You Think You Can Retire, Punk? One of the big taboo subjects in the New Economy is long-term financial planning. (tldr: the classic planning strategies/investments don't work anymore, but there are (still uncertain-outcome) new strategies)

The world emerging today has a tiny fraction of big-exit winners, a slightly larger fraction of people who win options lotteries and make big gains in secondary markets, and a vast majority -- including most with "new economy skills" that on paper prepare them for surviving and thriving -- who are basically in complete denial about the financial realities of their lives

Like the infamous "Food Pyramid" of the 90s, our financial lives today are governed by an implicit "Retirement Pyramid."

The retirement pyramid in every country is different, but all reflect roughly the same set of politically convenient industrial age assumptions about long-term societal stability.

In the US, the base is early education (student loan) debt, viewed as an investment.

Above that is home ownership

Above that was a mix of investment

Every assumption in single layer of the stack is now under threat.

Unless you're really smart about your choices, your education "investment" is likely to be a deadweight loss

Home ownership is not just more expensive: outside of major metros with very high demand and limited supply, it is no longer a guaranteed positive investment.

Much of the wealth-building opportunity has shifted to secondary markets (startup stocks)

This isn't the end of the grim realities.

In particular, most retirement calculators assume you will not just have a predictable paycheck-like income through your life, but that it will increase predictably

this best-case scenario was not particularly accurate even at its best, in the 1950s. Today it is becoming wildly inaccurate, as "best" and "median" diverge rapidly.

"Middle management" is fast vanishing as something for people to do in their late 30s and 40s

The net of this is that some element of entrepreneurial risk-taking is now necessary, not an option, to make the financial equations of life balance out for most information workers entering the workforce today.

Not surprisingly, many who recognize these realities react with extreme strategies. One is extreme early retirement, represented by sites like Mr. Money Mustache and Early Retirement Extreme.

To many, however, this approach will be socially unrealistic (since it requires a certain degree of social withdrawal from communities with more conventional financial lifestyles).

It is also, to some extent, a case of what Bruce Sterling calls acting dead.

It is not surprising that many think the equations cannot be balanced at all at the individual level and that societal support systems need radical upgrades. Such as through a universal basic income.

there are a few bright spots

One big one is technology-driven deflation: things getting cheaper is good for smaller retirement bills.

Another big one is a very special secondary market that we all have access to, whether or not we are accredited investors legally able to invest in startups: ourselves.

Dollars invested in your health (physical fitness) are dollars you don't have to save for retirement. Dollars spent learning Spanish or Thai are dollars that open up cheaper global retirement options for you.

And of course, more traditionally (yes this is "traditional wisdom" by now), money you invest in growing a blog, an Etsy store, or a podcast, or going carless, is retirement savings.

Another huge one is defining your own community of belonging creatively and carefully. This is particularly true in the West, and even more true of the New Economy. Why?

when communities are dying, they can take you down with them, faster than you would go down alone.

So being careful and conscious about what community you invest in, by "belonging" to it, is a big smart retirement move.

The wrong choice is not just psychologically risky. It poses direct financial risks: you will end up following spending, child-bearing and saving norms that make no sense for your actual income prospects, based on an illusion of egalitarianism.

The right community/belonging choices -- the right kinds of streams -- otoh, open up new worlds of opportunity.

Is it going to be tough? Yes. But if like me, you prefer the truths of a more powerful reality to the delusions of a less powerful reality, then you wouldn't trade your lifestyle for your parents' lifestyle.

Figuring all this out is a challenge, an unquestion with no definitive answers. But asking it honestly, and swapping intelligence candidly with those of your friends in the same financial boat as you: that's a start.


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