American Retirement Woes as Explained by the Behavior of Bees
View from my apartment (2017-2018)
American retirees do not know what they have been cheated out of.
Practicing a second language via Skype with Europeans expands more than your vocabulary in your second language. It expands your perspective about life in your own country. For years, I have spoken via Skype regularly with Spaniards about just about every topic. When you talk every week for several years, you can cover a lot of ground.
One of my language partners is 66 years old and lives in Valencia, Spain. During a recent chat, he told me about his last trip to Pennsylvania to see his son, wife, and new granddaughter. He said what surprised him most about the trip to the US was how many “old people” were working. Once again, as in so many other issues; healthcare, guns, educational systems, I hung my head in embarrassment imagining the gray-haired store clerks and ticket-takers he encountered during his trip. If I were a country, I’d say I felt third-world.
One of the things I have come to learn in these conversations is how Americans are being short changed. My practice partners in Spain are not worried about healthcare or making ends meet. They are not wealthy, but they have a sense of peace about their retirements that only my wealthy friends in the U.S. have.
It’s an established fact that millions of Americans cannot afford to retire after a lifetime of work - people who have “followed the rules,” saved, sent children to college, and taken care of aging parents. When you talk to retired and pre-retired people from other countries as often as I do, its particularly discouraging to see how our society has not kept this basic social contract. Out of the 33 developed countries, 32 have universal healthcare.
The budget-busting expense of retiring at 62 for many are healthcare expenses. Vanguard research from 2018 shows that the median cost for a middle-of-the-road healthcare plan for a healthy 64-year-old totals $12,800 per year, including out-of-pocket expenses and deductibles
When Pepin, my Valencian friend, and I started practicing Spanish together, he had already been retired for several years. Most people in Spain work until they are 62 or so. Some in professions such as banking and government positions often retire sooner. Corporations have worked out a deal with the government to help create jobs for younger people through a kind of golden parachute deal that’s impossible to turn down. Retiring at 60 or so is not considered odd or indolent.
All my practice partners in Spain had children who completed college yet none were financially burdened with its costs. Pensions are enough for a reasonably comfortable lifestyle by local standards. Pepin and his wife live a somewhat modest lifestyle, but one that still includes owning a vacation flat on the beach for their family and occasional travel to the U.S.
Another practice partner is a homemaker. Her husband is a nurse in an emergency care section of a hospital and is the sole breadwinner. Most Europeans own what that we call condos (flats), not single family homes. My friend manages to have a comfortable life in a beautiful part of Seville and don’t worry about running out of money in old age.
They have three children they are sending to college or trade schools, and they travel several times a year within Spain. These elements - a home, education for children, healthcare, and an annual vacation are what sociologists have traditionally defined as indicators of a middle class life.
Are taxes high in Spain? They can be. If you earn over $60,000 euros a year, taxes can be as high as 45%. Two of my practice partners were top executives of international corporations. They do not own limited edition cars or mega mansions. They drive nicer cars, have bigger homes and take foreign vacations. They are completely satisfied with that. In the four years we’ve talked, not once have either of them complained about their additional tax burden while they were working.
Mexicans also retire earlier
I have noticed the same crazy phenomenon of retiring at a decent age in Mexico. On a recent trip to Durango, both of my hosts, women ages 49 and 50-ish were retired. They owned houses, drove decent cars and traveled together, most recently taking a trip to Cuba. It appears good dentistry fits into their budgets. Both were wearing braces.
Surveys show many Americans think they will work full-time until they are 72. I’ve never known a single person over 70 who works a full time job. Nor does working until that age appear to be a solution. Studies are finding that working past regular retirement age does not fix the problem of creating a stable retirement.
Other costs Europeans don’t have in retirement
Consumers in the U.S. are consistently gouged by corporations. Author Thomas Philippon, who recently released a book called “The Great Reversal: How America Gave Up on Free Markets” proved in studies how Americans pay an average of $5,000 more a year for services and consumer goods than their European counterparts. Philippon moved from France to the U.S. twenty years ago, and received his Ph.D in economics from M.I.T. His studies demonstrate how lack of competition in the U.S. is keeping wages low and prices high.
The story of the bees: How consumerism traps us
Undoubtedly, consumerism affects what we feel we need to retire. In my Mexican book club, one of the members spoke about a fable she had read about a beehive. One beehive in particular had the sweetest honey. The word got out among the bees, and this beehive attracted all the bees. Once there however, their little insect feet became embedded in the honey. They were unable to fly.
Americans’ materialism, highly noted around the world, probably plays a part in many people’s inability to retire. When I heard this fable, I couldn’t help thinking about a doctor I met in Denver. She and her husband, a software engineer, lived in a million dollar home in one of the most expensive neighborhoods of the city. She complained wistfully of not being able to retire at 62.
Another friend recently renovated her home in an expensive neighborhood, has a new car, expensive clothes, a healthy 401(k) and inheritance from a deceased brother. She is waiting to retire at 65. She told me once she always wanted to live on the ocean (like I’ve been doing since 2014 on less than $30,000 a year.)
I hope she lives long enough to do it. Most cancer diagnosis occur between the ages of 55-64. Everyone knows stories of people dying months after retiring at 65, after years of planning, working, and dreaming of what they would do when they could finally live life on their terms. Such thoughts were a driving force behind my decision not to take a job offer in Washington, D.C. six years ago. and opt instead for a less expensive, high-quality life in Mexico.
The FIRE movement
If life in Mexico or another cheaper country is not for you, or you simply cannot go (for example you are taking care of parents), the FIRE (Financial Independence, Retire Early) movement is a lifestyle movement whose goal is financial independence and retiring early. There are many FIRE blogs written by advocates of this type of financial planning.
Income data says many Americans can’t afford to both live a typical middle-class lifestyle and save enough to finance a 20+ year retirement. Those in the FIRE movement see the new reality and shine a light on options like the one I favored. Their newsletters and blogs emphasize frugality, simple living, sound investing, and debt avoidance as a solution to the challenge of developing a plan to retire early.
A simpler life and more years to enjoy it in Mexico
Mexicans and Spaniards do not need many of the things that are common to American life; the homes that are larger than necessary, Whole Food shopping, food delivery, or the assorted new electronics in order to feel and be perceived by others as middle class.
Pundits claim a majority of retirees experience “downward social mobility” in the U.S., that’s how simple living is often defined and viewed by others if you are retired. If Americans could get past these symbols, we’d do better as a society and probably go a long way towards saving our environment dreams.
In Mexico, I consider my quality of life excellent without a car, a dishwasher, or cable television. I have a Galaxy 10 smart phone I bought used. But like my retired European friends, in Mexico I can have good healthcare, eat very well, and live in inspiring spaces. My budget permits domestic travel and going out with friends. To do all this would cost at least twice as much in the U.S. As a pretty damn big bonus, I learned a second language and my life is more interesting than it’s ever been.
I’ve found my solution. I hope you find yours too.
Related links:
How will your financial planner react to your idea of moving to Mexico? [blog} Ventanas Mexico
How online tools help you live in two countries for less than the cost of one. Ventanas Mexico
Next up:
What you might be doing if you lived in Mexico right now.
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Travel to surrounding towns on luxury buses is the way to go in Mexico, even for those with cars, as demonstrated during my recent trip to Durango.
About the author: Kerry Baker is the author of three books. “If I Only Had a Place, is about renting in Mexico long-term. Her most recent book is The Mexico Solution: Saving your money, sanity, and quality of life through part-time life in Mexico. Bored stiff by other how to’s on Mexico? This book will show you how it’s down without leaving you numb and overwhelmed.
The Lazy Expat: Healthy Recipes That Translate in Mexico is a cookbook for travelers, snowbirds and expats trying to maintain a healthy diet in Mexico (You must cook.) Over 150 recipes that can be made from the simplest of kitchens.