Why You Shouldn’t Save For Retirement (Five Things to Do Instead)
The standard, unquestionably reasonable advice about saving for retirement goes like this: Save a portion of your paycheck for retirement. Put it in a 401k or IRA. Invest it in good mutual funds with an appropriate mix of stocks and bonds. But is it actually a good idea for us today?
As you probably know, the whole point of retirement accounts is to get tax breaks in exchange for not touching the money until you retire. This model of saving for retirement works well in a stable economy with three requirements: strong growth, low inflation, and a predictable future. If I were writing this post 10 years ago, or even five years ago, this model is exactly what I would have recommended.
But now, I don't believe any of the three requirements are likely to remain true. Here's why that matters.
Without strong economic growth, the money you set aside won't gain sufficient interest to justify not using it immediately. Without low inflation, the real value of that money will disappear quickly even if the dollar amount continues to increase. And without a predictable future, locking yourself into long-term financial commitments is not a good idea.
We can all agree that the world is especially wild right now. Regardless of your opinion of COVID, the economic damage is clear. We can’t be growing economically when businesses have been shut down for so long, unemployment is still high, and large rent-seeking corporations have expanded to take over so much of the market share that was previously held by small businesses.
We're seeing levels of inflation that the Fed and the talking heads in the media continue to tell us is either not there, or is actually good for us. Meanwhile the prices of gas, food, and vehicles have shot up dramatically. Inflation is very much here, and it hurts.
On top of all that, the political uncertainty seems to be increasing all the time. Trust in institutions and experts has plummeted. It feels like battle lines are being drawn; it's hard to dispute that our economy is being divided into two as Big Tech and other leftist corporations continue to deplatform right-wingers, who increasingly flock to new right-wing platforms and institutions. This is all inherently unstable, and thus the future is less predictable.
Considering all this, I believe we are on the verge of a major financial collapse so severe that it might even destroy the US dollar through hyperinflation, and there’s a decent chance it could bring our country's governing regime down at the same time. Even if you don't believe in so drastic an outcome, how certain are you that our country is going to remain stable for the next fifty or sixty years? After all, stability is what you're betting on when you save for retirement in traditional financial vehicles like 401ks and IRAs.
What do I do instead?
Here is the alternative viewpoint that I have adopted: there's no point in locking money away for the future, because I may not have a future; at least not one like today. I don't have any confidence that money I set aside now will still be there in 50 years, no more than I believe that I'll ever see a dime of my Social Security contributions.
The fight is now. The time to use all resources at my disposal is now. I have to fight for my community and for my children's future while I still can.
Most critically, I'm focusing on my local community. In the event of any sort of financial or societal collapse, my community must be strong. Because I'm not putting money in global investment funds backed by faceless corporations, I can use it locally in a few different ways—here are five
First, I can invest in local real estate. This is of course still somewhat vulnerable, but it's much better than the stock market and at least it's something real. In the worst-case scenario, my tenants can pay me through bartering, perhaps even with their time or a percentage of the food they grow in their home gardens. Owning real property also gives me the ability to help out my friends who may need a place to stay.
Similarly, I can invest in local businesses. I can fund business ideas from within my circle of friends and contacts. With my skills, I can even buy local businesses from old guys looking to retire, and use them to provide employment and economic stability within my community.
Second, I can buy local, even when it's more expensive. For example, paying extra for organic grass-fed beef from the ranch outside town is a better investment in my future than saving for retirement because I want that rancher to still be there next year and the year after, able to provide food to me. (As a bonus, the meat is also far tastier.)
Perhaps the rancher will use the money I pay him to buy something from one of my friends, or someone else in our community. That makes us all more stable and self-sufficient. Letting small operations like this rancher go out of business because something is cheaper at Walmart is one of the greatest economic mistakes we've ever made, and it’s time to reverse it.
Third, I can invest my time networking and making friends within my community, rather than working more hours and saving up money. This is one of the best investments you can ever make. Not only do you gain socially by having new friends, but you also come across opportunities that you would have never thought possible before. Maybe someone needs your exact skills to start a business, or wants to give away a free piano. Plus, if there ever is a disaster, there are people you can rely on.
Fourth, I can have lots of children. It's not only fun to do, but it's also an investment! If we become a big family like so many of our friends, then it will be easier for our children to provide for us in our time of need just as we are providing for them now in their time of need. Rather than saving money so that I can use it later, I'm better off using it now to make sure that my kids get the best education and are as likely to succeed in life as I can make them. For us, that means sacrificing the common dual-income paradigm to homeschool. And perhaps I can provide the down payment for their first homes; isn’t that also better than keeping the money in an IRA?
Finally, I can be generous with donating money to my church and my community. The ancient rule of tithing is to give 10% of your income, and that's a good rule of thumb. If extra giving can help build a new church where people will gather or help some local families who have fallen on hard times get back on their feet, that's also a better investment for my children’s future than simply saving up the money.
The nest egg I leave my children is not going to be merely a fat check delivered upon my death in a faraway nursing home. Rather, it's going to be a thriving local community full of life, friends, love, and family. And certainly, plenty of material wealth as well.