Page 29 - Psychology of Money - Timeless Lessons on Wealth, Greed, and Happiness-Harriman House Limited (2020)

was not until the 1980s that the average Social Security check for retirees
exceeded $1,000 a month adjusted for inflation. More than a quarter of
COBACOBA
Americans over age 65 were classified by the Census Bureau as living in
poverty until the late 1960s.

There is a widespread belief along the lines of, “everyone used to have a

private pension.” But this is wildly exaggerated. The Employee Benefit
Research Institute explains: “Only a quarter of those age 65 or older had
pension income in 1975.” Among that lucky minority, only 15% of
household income came from a pension.

The New York Times wrote in 1955 about the growing desire, but continued
inability, to retire: “To rephrase an old saying: everyone talks about

retirement, but apparently very few do anything about it.”⁶

It was not until the 1980s that the idea that everyone deserves, and should
have, a dignified retirement took hold. And the way to get that dignified
retirement ever since has been an expectation that everyone will save and
invest their own money.

Let me reiterate how new this idea is: The 401(k)—the backbone savings
vehicle of American retirement—did not exist until 1978. The Roth IRA was

not born until 1998. If it were a person it would be barely old enough to
drink.

It should surprise no one that many of us are bad at saving and investing for
retirement. We’re not crazy. We’re all just newbies.

Same goes for college. The share of Americans over age 25 with a

bachelor’s degree has gone from less than 1 in 20 in 1940 to 1 in 4 by 2015.⁷
The average college tuition over that time rose more than fourfold adjusted
for inflation.⁸ Something so big and so important hitting society so fast

explains why, for example, so many people have made poor decisions with
student loans over the last 20 years. There is not decades of accumulated
experience to even attempt to learn from. We’re winging it.