Annual report
On the morning of January 1, 2020, Jes and I will mark the start of the new year much as we have the last three: with a blanket, two cups of tea, and our budget.
We observe this New Year’s tradition for two reasons. First, because a new calendar is as good an occasion as any to take stock, Jes and I use January 1 as an opportunity for a little fiscal “where are you going, where have you been.” Our budget, a spreadsheet that organizes our income and expenses by category and then autosums and averages out all the data, helps us know what questions to ask. How much did we take in this past year? How much did we give back? How much did we fork over to our greedy old friend “Dining/Eating Out,” and was it, finally, enough to turn us into majority shareholders of our favorite Chinese restaurant?
Our finances being what they are, the answers to these questions rarely change: not much, some, too much, and no. Still, they do give us some sense of where we stand. And that, in turn, gives us a sense of how much of the year’s surplus, if any, we can sock away for retirement.
Because retirement is the other reason for our New Year’s tradition. The main reason, in fact. Since we contribute to our retirement accounts sporadically over the course of a year, Jes and I try to invest a little bit extra at the turn of the calendar. So taking advantage of that “lost hour” between the closing of one year’s spreadsheet and the opening of the next one, we dump what we can into our Roth IRAs. Then we kick back and trust the market to work its exponential magic.
At least that’s the idea.
In practice, saving for retirement these past few years has brought us about as much joy as pitching money down a well. Less, actually. Most days it feels like a bottomless well, so we don’t even get the satisfaction of a splash.
Securities
The first time I ever seriously considered that my future might look radically different from that of my parents, I was at a public lecture. I was a first-semester graduate student, and the lecturer took an impromptu poll. How many of you expect higher education, as it exists now, to be around in ten years? How about twenty? How about thirty? By fifty, everyone’s hand was down. And while thoroughly unscientific, the poll made a compelling point. After all, those who had expressed their unanimous belief in higher ed’s impending sea change—they were almost all of them grad students. Which is to say that almost all of them, under other circumstances, would have asserted that there was, for them, a plausible, desirable future in the academy.
Now, whether expecting major change qualifies as pessimism, I’m not sure. But I do know that I’ve come to think of my retirement account in similar terms. And it’s not just that the possibility of retiring in the first place has become an overfamiliar joke: “Oh, you think you’re going to retire some day? Har har har.” Rather, it’s that the long-term, low-risk investment strategies that I’ve always been told would produce a comfortable nest egg forty years down the line seem a far shakier prospect than they once did. How will an economic model organized around risk management and predictable growth weather the coming decades? How will it handle, for instance, a warming planet in which unpredictability and unmanageable risk become the new global norm?
Sure, some folks will probably still make a killing. But the rest of us?
These aren’t the kinds of questions I tend to put to my family—to my parents or grandparents. I don’t want them to worry. But to Jes? To friends our age, who grew up in the shadow of the Great Recession? Among that crowd, the possibility of another global economic collapse, triggered by climate or unrest or financial malpractice or all three of them at once, often feels like a fait accompli—a lamentable certainty that shares its conversational orbit with things like sea-level rise and the drying up of Social Security. Not many of us really expect to find our retirement savings waiting for us at the other end of our working lives.
In fact, some of my friends have even put their money where their mouth is—which is to say they’ve disinvested entirely. But, again, that’s not the sort of thing I share with my family.
Bear market
“Nobody likes to fail, but failure is an essential part of life and of learning. If your uniform isn’t dirty, you haven’t been in the game.”
-Ben Bernanke, Chair of the Federal Reserve during the 2008 financial crisis, speaking to Princeton University’s 2013 graduating class
“She couldn’t help smiling. ‘You always know economists are in deep shit when they start talking about trust and value.’”
-Kim Stanley Robinson, New York 2140
Risk tolerance
Strange, isn’t it, the words we use to describe our relation to the market? We’ve taken an impossibly complex arrangement of global exchange and exploitation, of national economies and supranational businesses, of labor and wage theft—all of it wrapped up in layer upon layer of historical contingency and material specificity—and abstracted it. Systematized it. Made a science of it and then pinned it like a bug to a board, using big words like “liquidity” and “standard deviation” and “median market cap.” With such words, we presume to model the movements of the market’s weird, invisible hand. And not just presume, either. In many respects, our modeling succeeds. Indeed, how else could we account for the dizzying profits that get made on Wall Street? Or even for the paltry gains that my own IRA has turned?
But then models should never be confused with the thing itself. And words, as we know, never just describe. They persuade. They reveal. They conceal. Browsing J. P. Morgan’s “Glossary of Investment Terms,” I’m struck by the vision of the world encoded in its dry and sometimes Latinate vocabulary. Through its lens, change is merely risk. Upheaval, a recession. And global capital? Yes, it’s complex, but if you’ve got someone who knows what they’re doing, who can navigate its many eddies and hidden currents, it’s comprehensible. Actually, it’s more than that. It’s a retirement plan.
Only, as we know, sometimes it isn’t. Sometimes this great, abstract Titanic slams into something its models did not anticipate—the proverbial iceberg, calved from a melting glacier and dumped into our acidifying oceans. At such a moment, our collective dream of comprehensibility and control abruptly ends. The fantasy exposes itself. The bubble bursts.
Volatility
Can you mourn a future you haven’t lived?
In a way, that question underlies this whole post. After all, a retirement plan reflects faith not in a future, or in some general notion of futurity. It reflects instead faith in a particular kind of future, one that emerged out of a particular historical moment and at the intersection of particular social forces. On its surface, then, this particular future demonstrates a middle-class expectation that comfortable retirement should be the reward for forty years of working hard and carefully managing one’s finances. Meanwhile, at its base, this future reproduces confidence in the steadiness, the slow change and predictability, of the world. It assumes that the way life is now is pretty much the way life will continue to be.
It’s this future that prompted my dad in 2011 to take me to a Schwab office to set up my retirement account. Likewise, it’s this same future that inspired my grandparents, just last year, to gift Jes and me a book titled Yes, You Can. . . Achieve Financial Independence.
And now it’s this future I find myself doubting. Mourning.
But am I really? I’m not convinced. If to mourn begins with a recognition of loss, what should I make of our New Year’s tradition—of the fact that on January 1, 2020, Jes and I will ring in the new decade by powering up a laptop, reviewing our finances, and transferring a certain sum of money from one account to another? That doesn’t look like a recognition of loss. If anything, it looks more like inertia, or denial—a holding pattern. Like staying the course, because—well, because why?
Because staying the course is easier, maybe.
Or because change is scary.
Or because it’s hard to imagine a future for yourself that looks different from the one you’ve always been taught to want.
Or maybe it’s because, in the end, you don’t want to be convinced, not really, that the life you know, the one that’s most familiar to you, can’t last in the long run.
Probably it’s all these things at once.
Oh, for a crystal ball, or a perfect market forecaster.
Ben DeVries (’15) graduated with degrees in literature and writing. He and his wife Jes, a fellow Calvin grad, live in Champaign, Illinois, where Ben is looking to add some letters behind his name. On the academic off-seasons, he reads fantasy and works as a glorified “go-fer” at the Champaign Park District. He’s been known to make a mean deep-dish pizza.
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Ah, financial security–never as stable as it seems. You make compelling concerns, and while I do believe in making plans and preparing for futures, all we can do is live one day at a time. Hold on to that, too.