Thursday, November 4, 2010

Planning for Retirement

Nassim Taleb told Business Week this year that "Citizens should not depend on financial assets as a repository of value . . . ."  Translated into plain English, he means sell your bonds, sell your mutual funds, sell your stocks. Don't count on Social Security.  Don't rely on anything that you think of as money.  Place your reliance on income producing hard assets.  If the government inflates away its problems, your hard assets will rise in value and the income that they produce will rise as well.

Well then, what should I do, you ask?  Now we are going to get into my advice, not Nassim's, and he has a lot more economics education, training and historical success than I do.  So be warned.  In my opinion, the safest retirement plan is the one that leaves you independent of the financial system entirely.  Self-sufficiency.  If you, and your close friends, family or community, produce everything you need to survive, no financial crisis can affect you.  Inflation cannot erode away your Social Security or other retirement payments.  You are insulated against financial ruin because you have opted out of finance as your source of security.

Well how can I do that, you might ask?  Here's an idea I have been toying with for around a decade, but have yet to implement, even for myself.  Secure a plot of land, erect a completely energy independent dwelling and grow 100% (or more) of your own food.  It's not as hard, nor as expensive as it sounds.

In my dream I see a community of between 40 and 80 people living in the approximate equivalent of an apartment house on a standard midwestern (United States) farm of 160 acres.  The buildings are designed and constructed to produce rather than consume energy.  The land is put to use growing fruits, nuts and vegetables, pasturing animals such as cattle, sheep, goats and poultry, and growing wood or remaining wild.  Perhaps a pond is created to supply local and fresh fish.  If the residents so desire, they can start a little business marketing their excess production to local consumers.

The residents could radically cut costs and consumption of resources by sharing all sorts of things that we commonly think we need to hold individually now -- we have a tremendous amount of redundancy in our society in everything from TVs to transportation to toilets.  By design, any waste produced on site would be recycled or composted on site to provide support to other operations.  To the largest extent possible, residents would examine their daily consumption and figure out how to produce what they consume.  Residents would provide mutual support as older people are mixed with younger people and knowledge and muscle are exchanged within the community.

How much would all this self-sufficiency cost?  Not much in this model.  The top prices for midwest farmland are no more than $5,000 per acre.  So the total cost for land would be less than $800,000.  Add a very generous building and furnishings cost of $1,000,000 and leave some left over for (initial) livestock and such and this little idyllic community could be founded at a cost of between $60,000 and $30,000 per person.  Which works out to less than $800 per month per person if the money is borrowed.  If the residents were industrious enough, the place would pay for itself.  (The whole operation could be translated in California costs and as usual, the cost of living in California would be about 2-3 times what it is in the midwest.)

So if it's all so simple, why haven't I done it?  I am still waiting to meet the right people -- a home builder, a farmer, a community organizer or planner.  But I am convinced that this model could be the future of retirement, or even lifestyle, for a reasonable proportion of our population and almost everyone who participated would likely be a lot happier than they are as world trade consumers chasing the never ending stream of new and improved products being pumped at us.

If it can't be done, leave me note and let me know why.

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