Do you ever find yourself asking, Will there BE any income in retirement?  I’m hearing it more and more, since the United States was downgraded from an AAA rating to AA+ by Standard and Poors.

In listening to several hours of “news” broadcasts last night, intentionally switching between CNBC to Fox to CNN it became eminently clear that the “progress” to airing 24 hr. financial news was surely a mistake.  There is clearly NOT enough viable, actionable financial news to occupy much more than perhaps 4 hours each night, if that, but I digress.

I was watching with a friend, who was interested in my opinions, and upon looking at a CNBC British reporter wax on un eloquent about the Bunds for almost 3 minutes, complete with his Ross Perot type charts, and making EVERY attempt to understand a modicum of what he was talking about and further, HOW in the world did they cull that information out to disperse to the public, with such an animated and enthusiast delivery was beyond me.  OK, I’m not the sharpest tool on the bench, yet I blurted out, “EXACTLY what does that mean, and furthermore WHAT relevance to the “average” viewer.  I was then reminded that perhaps in Garrison Keillor’s Lake Wobegon, where all the children are above average, it was meaningful; I’ve been looking for their phone number ever since, to call them for an explanation.

Seriously now, Friday’s downgrade by Standard & Poor’s bond rating agency–yes, the same bond rating agency that Novel Prize winner, Paul Krugman so eloquently wrote yesterday in his New York Times column, heavily contributed to the financial demise of Lehman and others in 2008–from its comfortable AAA perch which it had occupied since forever, was strikingly important, yet few Americans fell asleep last night knowing why.

Too many Americans feared there would be sufficient Income in Retirement if the markets continue their slide, or don’t recover swiftly.  Well, Income in Retirement will still be there, provided we don’t need to withdraw all our money at once, and provided we keep a watchful eye on the balance of our investments, always employing an effectively diversified portfolio–some invested in stocks, perhaps dividend paying stocks along with some stocks that will provide us growth so that our purchasing power is in tact, living in an inflationary environment as we have for the last six or so decades.  In other words, we need to ensure that our investments will keep pace with inflation.  I paid more for my car in 1978 than my parents paid for their house!  You know the drill.  So, we can’t invest all our money in Treasuries, even if we disagree with the Standard & Poor’s downgrade.  That won’t buy us goods and services in 10 and 20 and 30 years.  So, we need growth in our portfolio and so long as we quantify our risks, we can live with them.  As a matter of fact, we can’t live WITHOUT some risk (read growth) in our portfolios, precisely because of inflation.

Now before we go any further, my non-financial friend with whom I was watching the news, asked, “isn’t Standard & Poor’s the index for large stocks?”  Yes, indeed the terms can be confusing.  The Standard & Poor 500 aka S & P 500, is indeed the best known Index against which people measure their US large-cap stock performance against.  Standard & Poor’s is one of the 3 major Credit Agencies that rates all bond issues.  The other two bond rating agencies are Moody’s Investor Service and Fitch Ratings.

Ok, so the Credit Agency Standard & Poor’s downgrade-of-US-debt move all the more galvanized the urgent need for the Congress and the House of Representatives and our President to come together like adults and discuss adult-sized problems that affect each and every American citizen, as well as citizens the world wide.

As former Senator Alan Simpson said this morning, “if you can’t compromise issues without compromising yourself, you shouldn’t be a legislator!”  I couldn’t agree more.  I mean, I was one of four children in our house, and whomever cut the pieces of cake chose their particular slice last; a palpable, early test of accuracy and fairness in our home.  What….were all these bozos in Washington only children, who NEVER learned how to compromise?

We need ALL politicians to remember the 14.9 million unemployed Americans, the great majority of whom desperately want to be employed, who are uttering the “NO” word to themselves, their partners and perhaps to their kids on a daily basis, and certainly “NO” to the bank’s notices of home foreclosure.  That’s enough “NOs” to fill every NFL football stadium in the country, many times over.

Our politicians, on the other hand, need to stop using the unequivocal and immediate “NO” word to any idea of value, especially ones that originate from the opposite political aisle.  We need to realize that our debt has spiraled to whole new levels since President Clinton left office with a pristinely handsome fiscal balance sheet.  Even if you remove Social Security–incidentally, Social Security was running a significant surplus in 2000–the surplus topped 86.4 billion in 2000.  The deficit of earlier years was erased and the budget was balanced.  These facts refute the repeated assertions from several Tea Party members that were interviewed in the last 2 weeks, that “our out-of-control spending has happened in the last 2 years”.  For the record, we have been under a Republican President for 8 of those years and a Democratic President for 3 of these past 11 years.  So, if anyone is STILL interested in blame, chew on that fact bone awhile.

I would hope, however, that we could get beyond the “blame game” since so many of us non-billionaires’ lives and livelihoods and retirements depend on it.  (An awful lot of fear abounds today that people, and women in particular, will have no reliable income in retirement, so they will have to give up on any dreams that they could ever stop working.)  I “get” why we get so mired in the “blame game” however, because I hear the “mud slinging” from each party, and fully understand the impulse to “truth tell or defend the truth”.  The fact is that the Federal Budget has so many tentacles of the truth, and each proposed budget is so entangled with “ornaments” and “pork laden provisions” benefiting every state in the union–blue or red–that it is really difficult to pin point “the truth”.   I mean some of the spending on wooden tipped arrows from North Dakota or somewhere, or better yet, birth control for wild horses?  Not only is some of this sheer stupidity, this is exacerbated by our twitter-sized communication sound bites, where it is difficult to vet a whole thought before our ADD listeners are on to their next question.

Surprisingly yesterday the downgrade of Treasuries was supposed to infer that Treasuries would not be a “safe-haven” anymore, yet the emotional volatility in the stock market, drove stock market sellers into Treasuries, pushing the US Treasury prices up and their yields down.  As a matter of fact, on the world wide stage, where it was feared China, perhaps, might sell off US Treasuries if it believed that the US could default on their sovereign debt, it didn’t happen.  The world central banks actually bought in excess of 2 Trillion dollars of Treasuries in the last week.  Go figure.  The fact that our Treasuries are so liquid and so safe (and that we’re still a AAA rated credit rating from both Moody’s and Fitch and in the eyes of most of the world, as the President indicated in his speech yesterday) is the reason.

My question is, who WAS selling yesterday?  I think it was the billionaires and huge hedge funds and Goldman.  First of all, to say the banks tanked, when the bulk of the reason’s for Bank of America’s drop was the pending block buster AIG lawsuit–not mentioned on two of the networks I watched last night–was horrible reporting.

My hope is that the average investor will continue to remember that their portfolios need to be effectively diversified, and that much of their portfolio is “earmarked” for several years into the future; i.e., 5+ years.  And just as much as the markets were roiled in the past 2 weeks, the markets can and will (if history is any indication) recover.  And the number of days and the extent to which that percentage recovery happens is anyone’s guess.  Which is precisely why we will stay invested, in order to not miss those recovery days.

While the US can’t continue to borrow 40 cents for each dollar we spend, nor can we put people back to work without investing some capital in job opportunities, one of the biggest components of economic growth.  Examples of smart spending abound, including spending 10 trillion dollars to fix our bridges and roadways now, which would create serious jobs, or wait 3 years when the cost will balloon to 40 trillion?  Just like setting aside depreciation expenses on a balance sheet, we must “care for” and keep our infrastructure safe, making down payments so that we don’t face future catastrophic measures and compounded damages as well.

The markets are emotional, and so it was forecast that yesterday would be negative, after the unrest in Europe that Italy and Spain may teeter on default, with Germany and France holding much of that bag.  If Europe’s economy is on caster oil, they can’t afford our exports, less demand for our goods, so more American jobs on the chopping block.

What I think we can expect for at least the short term, is continued volatility.  Today the Fed will meet and decide policy that will hopefully be settling to the markets.  Of course, our politicians left town having failed to do anything but exacerbate that uncertainty, a further challenge to this particular Fed meeting.   I wish the President would immediately call them back into Washington–abandoning their vacations that the rest of us can’t afford to take this year–and get crackin’ on some sound legislation.

Yes, there will be income in retirement for those of us with level heads and nerves of steel.  We may face a later retirement, especially with regard to Social Security, yet if we continue to save and invest, particularly in depressed-price markets like these, we will succeed.


We Can Do It Women!