Pensions or a cruise?

A columnist for The Economist says people should ensure their pensions are adequate before they think of a world cruise.  I think the world cruise should come as soon as possible and worry about the gas bill later.

It could be that we have conflicting conflicts of interest in these recommendations.  One of my stepsons and his wife are entertainers on a cruise ship and the columnist probably has friends in the investment industry and gets some of his income from advertising and subscriptions from the industry.  You can read the column here.

Retirement is important for a lot of people.  A few years ago it was fashionable to plan for retirement at the age of 40 or 50.  Now that columnist is suggesting people may have to work beyond normal retirement age in order to have the lifestyle they desire.

Retirement planning is easy when the economy is growing and everyone believes that growth will continue.  But when growth ends all those plans and savings are likely to fall apart.  There are three things that can happen to savings and retirement funds:  inflation can wipe out their value, firms can fail or governments can decide to give haircuts.  It is not clear that there will soon be a return to economic growth.  Given the current economic uncertainty, any one of these could happen at any time.

The columnist suggested that inflation-linked government bonds  “should be the building blocks  of a pension portfolio.”  This ignores that most governments are carrying more debt than they will ever be able to repay.  When the Ponzi scheme explodes a lot of people will find their dreams destroyed.

In the meantime, those in the investment industry are doing short-term well out of all those people worried about their retirement income.

So far the economic crisis has mostly hurt young people.  If or when it hits older people and they can no longer afford cruises the cruise industry will have a surplus of ships.  They may then have lots of work for an Italian cruise captain with some experience at decommissioning ships.  I encourage people to take a cruise before he gets called back to work.

Here’s a Irving Berlin/Fred Astaire song from 1936: “Let’s face the music and dance”  or cruise.

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