This summer we visited the FDR family sites maintained by the National Park Service in Hyde Park, NY – FDR’s Springwood Estate, the FDR Presidential Library & Museum, Eleanor Roosevelt’s Val-Kill, and the remarkable Top Cottage private retreat that FDR designed for himself.

The Top Cottage guides went out of their way to explain that more than 60 years after his death, many don’t fully grasp that FDR “was unable to stand, let alone walk unaided, yet he was determined to maintain his independence.” 

Two recent publications focus on what will be needed to maintain the future financial independence of the country’s retirees.   If you happen to sell mortgages – particularly Ginnie Mae’s -  for a living, the articles reinforce the importance of government guaranteed obligations in times like these.

Brookings’ Gary Burtless: Stock Market Fluctuations & Retiree Income – An Update

As Gary Burtless puts it in his 30 Oct 2008 paper:

• The recent dive in stock prices and home values offers a painful reminder of why government-guaranteed pensions seemed like a good idea in the 1930s…
• The collapse of stock prices and [thousands of bankruptcies] … wiped out the lifetime savings of millions of retirees and aging workers.   Many … pension plans became insolvent, leaving former pensioners with no dependable source of income in old age…
• Recent market gyrations give a vivid demonstration of the impact of lower asset prices on retirement incomes. Between October 2007 and [October 2008, US ] … stock market prices … fell [more than 40%].

Center for Retirement Research: How Much Risk Is Acceptable?

Alicia Munnell, Anthony Webb, and Alex Golub-Sass cover similar ground in their Nov 2008 Brief.  Their work examines how much “risk is acceptable” in a new tier of retirement accounts that could be included in a reformed  US retirement income system.

In developing their analysis, they include the following disturbing graph [Figure 5, Page 3] that should prove invaluable to anyone who sells bonds for a living, or plans on retiring when they don’t:

                          
Source: Center for Retirement Research at Boston College, Investment Brief 8-20 (See References).

As the caption indicates, it depicts the real (inflation adjusted) 15 year average returns provided by stocks and bonds investments held before the indicated date. 

Notice how that red (equity) line keeps seating itself  as it repeatedly comes back home to the gray one. Think it’s a keeper. 

 
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I used to work with numbers for a living, and would like to do so again, even if that looks like the most risky thing in the world that one could do. Till next time.

REFERENCES [Accessed 19 Nov 2008]

 
G. Burtless, The Brookings Institution – Stock Market Fluctuations and Retiree Income: An Update,  31 Oct 2008. 

 
A.H. Munnell, A. Webb, & A. Golub-Sass, Boston College Center For Retirement Research -  How Much Risk is Acceptable?, Number 8-20, Nov 2008.

Quotes:
FDR,  Wikiquote – Advice to his son James on how to make a public speech, as quoted in Basic Public Speaking (1963) by Paul L. Soper, p. 12. 
Eleanor Roosevelt, Eleanor Roosevelt National Historical Site, Val – Kill.

 
Abbey Lincoln & Stan Getz, You Gotta Pay The Band – Brother Can You Spare A Dime, Rhapsody/Verve International, 1991.

Dave Brubeck & Paul Desmond, Brubeck Time – Brother Can You Spare A Dime, Rhapsody/Columbia, 1955.