Your Golden Years Don't Have to Be Tarnished
by Ben Stein

Monday, July 10, 2006
I have a lot to say, and it's all important (but not all-important), so pay attention.

This country is in terrible trouble. First of all, we are major debtors to the rest of the world. We borrow a billion dollars a day just to buy oil. We have a net debt to the rest of the world of about $3 trillion dollars, which is very roughly the value of all the assets in a large, powerful state like Ohio. We'd have real trouble financing our lavish standard of living if we didn't have the rest of the world to lend us money.

Inevitably, barring some strange turn of events, this means that foreigners will want to hold less of our currency and bonds. This will lower the value of the dollar and raise the value of the currencies of other nations that export more then we do. This, in turn, will mean that oil and gasoline and other commodities will be more expensive in dollars.

This immense debt to the rest of the world might also mean that we have to pay more interest on our bonds to attract foreign lenders. This will raise interest rates and further increase the cost of living. Scared?

It Gets Worse

Now consider that we're literally bankrupt because of our future Medicare obligations. The total cost of Medicare through the balance of the century, discounted to present value, is a number so large that it exceeds the total wealth of the nation.

That is, if you liquidated every farm, factory, home, office building, oil well, port, warehouse, apartment building, and every other darned thing in this country and put the value into one huge bond, it would not be enough to pay off our future Medicare liabilities. And that's not factoring in the drug benefit.

And then there's Social Security, defense, and interest on the national debt. Not to mention the cost of living for 300 million of us.

Let's face it, this is a terrifying scenario. But it gets even worse. The Securities Industry Association (which, of course, wants us to buy securities) says that retirement saving is so inadequate that about half of us will have to substantially lower our standard of living in our golden years. About 20 percent of us will face genuine poverty in retirement.

The Silver Lining

But this is a column about living in the solution, not living in the problem. So here are a few suggestions to get us through the crisis.

First, we can't assume that the federal government will act sensibly. They haven't done so for a long time, and that's a clue to how they'll behave in the future. This bounces the issue back squarely to us. We have to take up the slack by saving more and more. Economists call this the theory of rational expectations.

Whatever we thought the government would do for us probably will not happen. We're on our own. So go to your financial advisor and make a serious plan to save until it hurts. If it doesn't hurt, you're not saving enough.