Monthly Archives: May 2013

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Greeting card tyranny

greeting_cardAt this point in the development of capitalism, it is well understood that the most profitable businesses are those that sell a product that consumers cannot resist buying. Cigarettes, oil, electricity, insurance and heroin are all examples of products that once a consumer is hooked, he cannot help but to buy. I put greeting cards in this category.

Americans purchase 6.5 billion greeting cards each year, blowing $7-8 billion for the privilege, according to the Greeting Card Association.

Sure, it’s not much money per person, maybe $30 each on average. But for what?

Trees are mowed down or, in the best case, recycled paper fiber is processed into sheets of printing stock. These sheets are then printed with cute little phrases and pictures (often in China), are shipped to the U.S. then distributed to individual stores. At the local stores, the customer plays his or her role, flipping through the cards as quickly as possible until one is found that will “work” — not perfect, just “good enough.” The card is mindlessly purchased, a name is unemotionally signed and the card sits until it’s time to hand it over to the receiver. That moment is funny, too, with the giver anxiously waiting while the receiver opens the card, fakes a chuckle at the joke and says a heartfelt “thank you.” If it’s a group setting, the card is then passed around so everyone can enjoy the hilarious joke. And, then, of course, after the journey from forest to factory to store to lucky recipient, the card is usually recycled into an eggshell carton, fulfilling the much more important job of gently cradling an egg.

My biggest complaint, though, isn’t about the environmental waste of greeting cards nor is it the financial cost, which is relatively small on an individual basis. No, it’s the societal pressure to acknowledge these special dates with a decorated and branded piece of paper. Somehow the greeting card industry has managed to create a world where I must buy something to remain in good social standing. Instead of getting points for buying something for you, I get punished for not buying something. Now by spending my money on a greeting card, I get to zero. It has become, literally, the least you can do. (OK, actually sending birthday greetings on Facebook is doing even less, but you get the idea.)

For many years now, I’ve mostly opted out of buying cards for people. I feel no pressure to tape a card on top of a gift just to complete the picture. I don’t buy a card for someone to acknowledge their birthday. Cards I’m OK with are condolences card for deaths in the family, thank you cards (buy in bulk to have some on hand for less money) and occasionally I’ll spring for one just to hold a gift card. My wife and I have an understanding about this, which helps a lot. Occasionally we’re still caught by this exploitation for certain special occasions, such as a parent’s anniversary or similar event, but it’s been liberating to largely free ourselves from this tyranny.

What about you? Do you still buy greeting cards or have you found a way to escape this trap? Or do you not look at as a trap and buy cards without feeling it’s a such a horrible thing?

PBS Frontline: The Retirement Gamble

frontline

I finally had a chance last night to watch the excellent PBS Frontline documentary on the American retirement “crisis”. If you have a spare hour, it’d be worth your time to watch the whole thing. (Here’s the transcript if you want to take a quick skim.)

The piece covers a lot of ground, but the two biggest points were that the burden of retirement planning has been plopped into the unprepared public’s lap in the form of 401(k) plans and that the 401(k) bucket of cash has been too tempting for plan managers, who have been grabbing the money for themselves in the form of fees.

In fact, the most powerful punch of the show is when it’s illustrated that the fees actually eat up as much as two-thirds of the gains over your working career. Fortunately, they also point to a solution: low cost index funds. Interestingly, it’s the exact same strategy espoused by none other than Mr. Money Mustache. They even interviewed MMM’s hero, Vanguard’s John Bogle! That was pretty cool to see and it was great to get reinforcement of my preexisting opinion about 401(k)’s and financial advisers.

Of course the program had to include some “real people” to add some emotional weight to the story. This is where the piece was at its weakest. One gaping hole was that they didn’t talk about these people’s spending rates and didn’t even mention whether they still carried a mortgage or not. For example, one woman said she had $500,000 in retirement funds at age 48, but somehow can’t imagine being able to retire until she’s in her mid-70s! Another fellow was shown at what looks like a waterfront home, talking about how he has to work part-time in his senior years. I actually liked him because he said he’d downsize into a tent if he had to. I think that’s the attitude that got him his waterfront house.

The reporter, the always intrepid Martin Smith, uses his own retirement as an example, noting that he dipped into his nest egg multiple times over the years. The financial adviser tells him he has to work full-time until age 70 and “from age 70 to 75, I have you working part-time.” The reporter notes that his savings went to his kids’ education, a divorce and “the crash of 2008.”

The real tear-jerking segment featured Debbie Skoczynski:

I freaked out when I took the money out of my 401(k). It was hard. I mean, it’s— you know, you never— every day on the news, I’d listen to it and I’d be, like, “Oh, God, it’s really bad. Will I be able to keep my house? Will—” you know, “I— what if my car breaks down? I can’t afford a car payment.” It just can’t be this hard to make— it can’t. You know, you hear these big companies with these people taking these huge bonuses. You’re thinking, “Well, what happened to the average Joe?” They just don’t care. They made their money already.

Now, I feel bad for Debbie, but you can see her one-dimensional thinking here. She asks “What if my car breaks down” and answers that with “I can’t afford a car payment.” I don’t want to pick on her, after all she’s having a rough time, but I was thinking, “Um, you can’t think of ANY other solutions to that potential problem?” Like maybe “car repair”? Or “cheaper car”. Or “the bus”? To me, she really represents how Americans have been trained to deal with life: just throw money at the problem and if I don’t have any money, that’s OK because I’ll have money later.” Had she not been too far stretched with (apparently) a large house payment and other expenses, she could have easily weathered the storm without tapping her retirement money.

The remainder of the show was mainly the strongly worded accusations and squirming insiders that make Frontline such a fun show to watch.

Unfortunately the show didn’t once talk about buying too much house, how to get rid of your mortgage, mindless spending, how much one needs to retire, or whether people should pay for their kids’ education.

If the show had a fatal flaw, it was that it uses a “Retirement Plan Consultant” to endorse the proposition that Baby Boomers don’t have enough to retire but then calls such advisers out at the end of the piece for giving bad advice and scooping up all the money in fees.

In fact, the financial planner at the beginning even pulls out the old “$1.5 million” trope again, saying one needs 10-20 times your yearly income to retire. Um, why? Not explained. Just gulped down by the reporter as if it were just handed down on a stone tablet.

I advocate trying to “pretire” as soon as possible, which means generating enough money through passive means to support yourself indefinitely. If you reach that stage before traditional “retirement”, then you should be able to get a nice raise when you retire. If we accept that as the goal, then your yearly salary becomes completely irrelevant to how much you need to have in your nest egg when you retire. There is NOTHING about how much you make today that helps you determine what you need to retire. The only thing that matters is how much money you need each month and how you’re generating that money.

The program does a great job of exposing many problems, particularly that the general public is completely clueless about this stuff and that they’re being robbed via fees. Sadly the reporter himself is in this category. His ending has him exploring online calculators(!) and finally comes to the conclusion “I will keep working.” Hopefully they’ll go deeper next time and explore the real math of retirement and pretirement: bringing in more than you spend.

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