Every now and again, I think of my father and his goal to earn back the substantial fortune his mother had squandered that her father, the 19th-century buffalo hunter, had accumulated in the process of clearing the Plains of Indians and wild livestock.
She herself was an Indian woman: Choctaw. If you happened to know that and you looked at my father closely, you’d realize “yup! Injun lad.”
Not surprisingly, she had no inkling of what money was or how to manage it.
When she refused to accede to her husband’s demand that she abort the unplanned, late-in-life pregnancy that produced my father, said grandfather(again!)-to-be climbed on his horse and trotted off into the Texas boondocks, never to seen alive by her again. Supposedly, he shot himself, but when you get into the facts of the story, it looks suspiciously like he was murdered by a guy who had been an inmate where he — the father — had been a prison guard.
WhatEVER…the whole drama essentially burned a brand into my father’s psyche. It produced an obsession:
He would earn back the entire sum that his mother had squandered: $100,000.
Today, that wouldn’t seem excessively difficult.
Hell, I’m worth three times that…and what am I? A freakin’ teacher!
In those days, though, a hundred grand was a LOT of money. By 1962 (when he tried to retire), it would have been something in excess of $300,000.
Understand: my father dropped out and joined the Navy a year or two before he finished high school, out in the Texas boondocks. So his target actually represented much, much more money and MUCH more work than he understood. In today’s dollars, it would come to $3,131,660.
Can you imagine? For a guy who doesn’t even have a high-school diploma…
Well, he did it. By dint of canny investment and a lucky choice of investment counselors, when I went off to college in 1962, he had his 100 grand in the bank, and he retired from his job with a pocketful of dollars.
That didn’t last long.
Remember: this was a guy who did not understand the first thing about economics.
By the time I graduated with a BA, we had hit a recession and his vast fortune went down the tubes. He panicked, packed his bags, and went back to sea, leaving my mother in Sun City…a hole in the middle of the Sonoran Desert into which to dump elderly folks.
That which he did not understand — the mechanics of inflation and deflation — eventually came to pass, and by the time he died he did have a pile of dollars to leave to me, despite having moved into a rapacious old-folkerie.
All very nice…but the point to the story is that the workings of the larger economy have a much greater significance for the individual’s savings and retirement plan than most of us realize.
For one thing, you need to bear in mind that the absolute value of the dollar slips and slides over time. Sometimes, yes, over time the value goes up. But more likely, it will go down…and down…and down. By the time you’re ready to retire, a hundred grand will be worth….far from a hundred grand!
This implies, of course, that you need to inflate your savings goal by some extravagant factor if you are to arrive at a sum that can be expected to support you through your dotage. Take the amount you think you need to live in retirement and multiply it by about 3: that will probably be the minimum you’ll need to have on hand when you finally quit your job.
Because, y’know: inflation.
