Upbeat Predictions From a Futurist

At a gathering of financial planners at a Palm Springs, California retreat in May, the talk was titled “Imagining the World of 2020.” Recognizing that 2020 is not far off,  fanciful prescience is not required to theorize future scenarios. One may merely examine current trends and extrapolate.

 Speaking was Lowell Catlett, Ph.D., dean of the College of Agriculture, Consumer and Environmental Sciences at New Mexico State University. A futurist with positive predictions, Doctor Catlett offered economic factoids that justify faith in the future.

 At the most basic level humans seek sustainable food sources and comfortable shelter. On average Americans spend 9.6% of disposable income on food. Since junk food is included, families could eat on less with nutritional prudence. Nevertheless, that figure, says the professor, is the lowest in history and one of the lowest in the world.

 Catlett states that now is the cheapest time ever to own the average home, defined as 2400 square feet, 3 bedrooms, 2 ½ baths. Young families take note! Mortgage money is amazingly cheap. It takes 21.4% of disposable income to pay the mortgage and utilities, including phone and internet.

 Food and shelter combined absorb roughly 31% of disposable income. What do people do with the other 69%? They buy “crap,” says Catlett.

 Catlett emphasizes, nations need a high crap factor to grow. What do we buy with our 69%? Cars, among other things. One car? Two? Per Experian Automotive,  three or more vehicles per household is a growing category at 35%. The number of vehicles in a family, type of car, operating expense including fuel correlated with commuting distances, and insurance costs, will determine how much disposable income gets chewed up. Prioritized thinking will govern how much is left over for other things, like saving for educations, retirement, travel and fun.

Education expenses loom large for some families. The Council for Private Education notes that 10% of PK-12 students in the U.S. attend private schools, and that 25% of all schools are private. In 2010, 68% of high school graduates went on to college and 21% of those attended private institutions. For young families, what part of your 69% will go toward Coverdell Education Savings Accounts which can be applied to PK-12 education, or College Savings Plans for higher education?

 Jobs and advancement opportunities drive spending and saving and Catlett sees positive trends in technological progress and emerging economies. The crap factor is growing rapidly around the world, everything from cars in China to air conditioning in India. An expanding global middle class is good for equity investments.

 In 2020 the leading edge of the baby boomer wave will turn 74; the trailing edge, 56. Planning for retirement and sustaining retirement income will remain as a big conversation. For Generation X coming up behind the boomers, how you allocate your 69% will have a major impact on financial freedom. Full retirement age under Social Security may be age 70 for those under age 50 when reforms are enacted. Medicare may be means tested; in effect, it is now with higher premiums based on earnings levels.

 Aging in place grows in importance. Dr. Catlett notes that those who maintain rich and deep social and family connections generally outlive those who do not sustain relationships. Pursuing meaning and purpose, more people will work past retirement age or supplement retirement with work.

Plants and animals make people happy. New designs for retirement and care homes are coming. Sterile rooms and no views are out; trees, flowers, and pets are in!

 Technology will enhance connections to family, caregivers, and medical personnel as we age, providing peace of mind. Monitoring resources linked to medical teams exist now and will get better and cheaper. Technology will help to alleviate doctor shortages. Imagine a consultation on Facetime while you are hooked into in-home diagnostic technology.

The deck continually is being reshuffled. It takes vision and planning to come up with a winning hand. What are you doing with your 69%?

Lewis Walker is President of Walker Capital Management LLC. and Walker Capital Advisory Services, Inc., a Registered Investment Advisor (R.I.A.) Securities and certain advisory services offered through The Strategic Financial Alliance, Inc. (SFA).  Lewis Walker is a registered representative of SFA which is otherwise unaffiliated with the Walker Capital Companies. ▪  3930 East Jones Bridge Road ▪ Suite 150 ▪ Peachtree Corners, GA 30092 ▪ 770-441-2603 ▪ lewisw@theinvestmentcoach.com