In Loving Memory of
Jean Constance Ray, “Grandma Ray”
March 3, 1919 – October 27, 2022
From the time I was just five years old until I left for college, my grandparents (my dad’s parents) lived right across the street from us. Grandma and Grandpa Ray had a huge, gorgeous home with a nice deck at the private Bigfoot Country Club in Fontana-on-Geneva-Lake, Wisconsin. They dined out at nice restaurants regularly, and they had sporty convertibles that were the envy of their neighbors. They seemed to replace their cars quite often. I remember the smell of Grandpa’s cigars and heard the stories of how good of a golfer he was. They let me hit golf balls in their backyard, and it was so much fun for me that I now play golf regularly.
I was a lucky kid to have my generous, doting grandparents living so close by. It was fun to see them enjoying themselves. Their lives seemed perfect.
Well, they weren’t. Far from it, in fact. Isn’t it interesting how the picture we have of people’s lives can hide a sad, distressing truth?
The High, Long-Term Cost of Instant Gratification
My wonderful Grandma Ray was born in 1919 and came of age during the Great Depression, the worst economic downturn in the history of the industrialized world, lasting from the stock market crash of 1929 to 1939. She married my grandfather at age 18, and he joined the service. After the service, they had kids, and Grandpa Ray took a job and joined a union.
When he was filling out his retirement paperwork, he checked the box on the pension plan for just him — instead of the two of them. He did this because he would receive more money upon retirement, but only for his lifetime. That unfortunate choice ended up being very costly years later, especially for my grandmother.
Grandpa Ray died in 1994, when my grandmother was 75. Because of his choice decades earlier for him to receive a pension but not her, she instantly lost access to his pension. As a result, she ended up living for many years on a poverty wage from his monthly Social Security payment. That became her only source of income. Within five years of his death, she had depleted all her assets. She was completely broke.
Because my grandparents were children of the Great Depression, they never trusted investments in the markets. They kept their money in the local bank, so their money did not grow over time. And then, when interest rates on bank accounts declined in the 1980s and ‘90s, the minuscule interest they had been earning shrunk even further.
When I began my financial services career in 1998, I focused on taking care of my family, and that’s when I found out that my grandmother was broke. When I learned of Grandpa's pension decision, that they saved money in the bank, and how Grandma ran out of money after my grandfather passed away, she said to me, “Save your money, kid. Poverty sucks.”
I found out that from the time Grandpa Ray retired until he passed away, he blew all their money. They spent everything on cars, golf memberships, and dining. This was shocking to me; I had no idea! Learning the truth shattered the image I had long held of my grandparents as being financially well off and happy, without a care in the world.
The Biggest Risk to Your Financial Future
As Grandma Ray’s story clearly demonstrates, our decisions have consequences. In hindsight, my Grandpa’s biggest mistake wasn’t choosing the pension for his life only. The greater mistake was that he did not create an investment strategy to fund their future.
In my opinion, the biggest risk to your investment strategy is failing to plan for your longevity. Yes, it’s difficult to know how much you’ll need in retirement without knowing how long you are going to live. That is the classic challenge with retirement planning — but that’s why planning is so incredibly important. We want to make sure you have enough money to sustain you through retirement.
Running out of money in retirement is one of the biggest fears Americans have. A December 2022 study from GOBankingRates found that 66 percent of Americans fear they will run out of money during retirement. Thoughtful planning is essential for achieving confidence and alleviating worry about the future.
When Grandma and Grandpa Ray got married in 1937, the average life expectancy was 62.4 years for a woman and 58 years for a man. By 1970, overall life expectancy had increased to 74.7 years for a woman and 67.1 years for a man. It wasn’t common for people to live into their eighties or nineties, and certainly not past the age of 100.
Based on that information, my grandmother didn’t figure she’d live past 70. This is another factor that led her and Grandpa Ray to make financial decisions based on the short term. They got caught up in their daily responsibilities and didn’t worry about the future. Plus, they simply didn’t realize the benefit of setting money aside for the long term — or anticipate the very real possibility that a failure to plan could leave them with nothing.
Please work with your financial advisor to plan for the future. Err on the side of caution, and assume you will live longer than this! You worked hard all your life, and when you reach retirement, you want to be able to live confidently, not worrying about running out of money. It is just as important to plan for the future during your working years as it is to work hard to pay your bills.
Timeless, Valuable Lessons to Learn from Grandma Ray
Here are some hard-won lessons we can all learn from Grandma Ray’s story:
- Without a plan to fund your future, you can overfund instant gratification. Work with your financial advisor to strike a healthy balance between taking care of your family’s current needs and planning and saving for the future. Enjoying too much too soon can lead to regrets.
- Downsize your home when it makes financial sense to do so. Grandma Ray told me, “We should have downsized a little sooner than we did, when we could no longer afford the upkeep on our house.”
- There are long-term consequences to having all your money safely saved in short term investments at the bank. Work with your advisor to grow your money through investments.
- Resist the urge to replace your vehicle often. Grandma Ray said, “We could’ve driven some of those cars a little longer.”
- The more things you own, such as houses and cars, the more of your income you have to spend to maintain them. These expenses can become difficult to manage, especially if your income is fixed.
- Plan for what you need and want in the future, not for what you didn’t have in the past.
- Take advantage of the ability to grow your money by investing in the stock market as early as possible. As Albert Einstein said, “Compound interest is the eighth wonder of the world. He who understands it, earns it…he who doesn’t…pays it.”
Please remember — the greatest risk to your investment strategy is not planning for your longevity. Let Grandma Ray’s experience prevent you and your family from making devastating, costly, irreversible missteps. Work with your financial advisor now to get on track for 2023.
The information contained in this post does not purport to be a complete description of the securities, markets or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Tyson Ray and not necessarily those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice.
Returns are based on the S&P 500 Total Return Index, an unmanaged, capitalization-weighted index that measures the performance of 500 large capitalization domestic stocks representing all major industries. Indices do not include fees or operating expenses and are not available for actual investment. The hypothetical performance calculations are shown for illustrative purposes only and are not meant to be representative of actual results while investing over the time periods shown. The hypothetical performance calculations are shown gross of fees. If fees were included, returns would be lower. Hypothetical performance returns reflect the reinvestment of all dividends. The hypothetical performance results have certain inherent limitations. Unlike an actual performance record, they do not reflect actual trading, liquidity constraints, fees and other costs.
Also, because the trades have not actually been executed, the results may have under- or overcompensated for the impact of certain market factors such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. Returns will fluctuate and an investment upon redemption may be worth more or less than its original value. Past performance is not indicative of future returns. An individual cannot invest directly in an index.