America May Have Brighter Days Ahead. But Your Retirement Might Not

“And now, after that doom and gloom, let’s turn to…”

I cringed inwardly as the MC intoned those words. It probably showed outwardly as well.

My presentations at Jeff’s recent Future of Wealth Summit in Dublin weren’t meant to be overly negative. It’s impossible not to include push factors when arguing why people should be considering investing and living abroad… but I’d hoped that my ultimate message was positive.

The Dangerous Assumption Most Americans Never Question

My case to the attendees can be distilled as follows:

1. The United States is treading a well-worn path. History is replete with examples of societies that reached dizzying heights of individual prosperity, only to collapse or fade away. As an economic historian by training and temperament, I take my cue from them.
2. History doesn’t end when this happens. Instead, new opportunities present themselves. Sometimes those opportunities are domestic, but in our modern globalized era, many are abroad.
3. Those of us who’ve lived a productive life are perfectly entitled to protect what we have built for ourselves by seeking opportunities outside of our home country. But “continuity bias”—the tendency to assume that things will continue to be as they always have been—is a powerful obstacle. Continuity bias is basic to human nature, and we’re not the first to experience it.
4. Thriving in an historical context like this one requires a willingness to see threats and opportunities clearly. That’s why the Future of Wealth Summit exists.

So, my argument was really a platform for opportunity. Admittedly, I left most of those opportunities to Jeff. But when it comes to physical residency abroad, I made it clear that time is of the essence. Some doors to popular programs are closing at the same time that Americans become the number one clients of international migration agencies.

That might sound doomy and gloomy… but in my experience that’s what’s needed to break the back of continuity bias.

Washington Knows the Problem. It Just Can’t Fix It

The core problem is that the US has become essentially ungovernable. We know what the problems are. We know what the solutions should look like. But thanks to a confluence of long-term trends, the mechanism we’re supposed to use to implement those solutions—our system of government—is stuck.

I agree with Jeff that public debt and financial mismanagement is the immediate problem. But our politicians are caught between the proverbial rock and hard place. Their electoral incentives have pushed them into a cul-de-sac where compromise is impossible. Blaming them as though they have complete freedom of choice misses the big picture.

The bottom line is that conditions in the US will have to get a lot worse before they get better.  But conditions elsewhere will present opportunities along the way.

The Retirement Trap You Can’t Afford to Ignore

Now, as Jeff argued at the summit, some of those opportunities will arise when the US is forced to devalue the dollar and stop being the issuer of the world’s reserve currency. But those opportunities will present to folks a lot younger than most of the attendees. Those of us who’ve already put in the hard yards and accumulated our wealth can’t sit back and wait for them.

That’s because our goal is primarily wealth preservation. Call it doom and gloom if you will, but it’s my firm belief that wealth that is not mobile will suffer greatly over the next decade. The purchasing power of the dollar will decline. Interest rates will rise. Caught between this financial Scylla and Charybdis, the US federal government will have to engage in financial repression to pay down its debts. Wealth, particularly retirement wealth, will decline precipitously in purchasing power.

The solution is straightforward: Move some of your wealth into currencies other than the dollar. Invest in societies that are on their way up rather than down. Find yourself a plan B abroad; preferably a plan C, too. If you’re living in a foreign country, make sure you’re earning at least some income in their currency.

Even if the US eventually recovers and thrives again—as Jeff expects it will—anybody who doesn’t expect to live more than another two or three decades can’t afford not to do this.

My argument is no different from that of a physician telling a patient that change is needed to preserve one’s long-term health. Any decent doctor knows that promising the joys of future fitness isn’t enough. You’ve also got to explain the consequences of failing to act.

So, call me “Doctor Ted”… and if you’d like an individualized prescription, book a consultation.