Why is no one concerned that the USA is about to default on its debts?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 621.7 million views in recent years.

In the answers below I focused on the following topics and issues:

• Why is no one concerned that the USA is about to default on its debts?
• What are the practical steps for expatriating in retirement?
• What do financially successful people do to maintain their wealth during hard times?
• What are some common mistakes people make when planning for retirement?

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Why is no one concerned that the USA is about to default on its debts?

There are two things here.

Firstly, those in the know realise that this extremely unlikely to happen.

These things happen periodically. Google ‘2013 US debt ceiling crisis’ as one recent example.

Second, there has been concern in the media, as the media makes more money through negativity.

There will be the usual suspects predicting a once-in-a-lifetime stock market crash, and the US Dollar to lose its status as the world’s reserve currency!

It reminds me of government shutdowns.

Whenever it happens, the usual hysteria occurs.

Those in the know realise that these things come and go, and markets have tended to increase during such moments, as per this graph from Yahoo Finance

What are the practical steps for expatriating in retirement?

The biggest one is sorting out the boring things, such as:

1. Visas

This one shouldn’t be too difficult as many countries have retirement visas, or permits that can be equivalents to full retiree visas.

2. Health insurance

If you are older and/or have pre-existing conditions, insurers might not insure you.

The stats below suggest that healthcare in the likes of the US and Germany cost more than in other places, even if the governments sometimes pays via taxes.

If you live overseas those costs fall onto you. What is more, the figures quoted above is just an average for the whole population and not for the elderly.

As soon as you live overseas, you pay the higher premiums.

3. A budget and a basic plan

People who plan too much never take the plunge, and engage in analysis paralysis.

However, you do need to factor in:

• How much it will cost to live locally?
• As health insurance will get more expensive as you age, what is the future likely inflation rate.
• Taxes.
• Do you like living in the new place full time?
• If you are the kind of person who gets lonely easily, how will you have a social life overseas?

Basically, are you financially and socially prepared for vivir en el extranjero in retirement.

The best way to know this is to start spending time in a place before making the big move.

If you can hack living in a place for one or two months at a time, that is a good start, provided the finances and visa work.

Even better is if you can work remotely before you retire.

If you are financially prepared for retirement, then of course the rest will be easier, as you will just need to pick a destination that you like which is within your budget.

What do financially successful people do to maintain their wealth during hard times?

You have to remember something.

With the exception of the Great Depression, all crisis in “modern” times have came and went rather quickly.

What is more, they are usually only a crisis for a small percentage of the population.

Some examples:

2020 – Covid and the lockdowns. Was very hard for many businesses focusing on the face-to-face economy, yet almost all online businesses did well, and I have ran out of the number of people who told me it was a record year for their business.

Furthermore, the economy rebounded in 2021 and 2022. People who bought assets at depressed prices did well.

2008 – By 2010, most economies were rebounding. Large parts of the developing world saw high growth. Some countries, like Ghana, saw the highest growth in recent times. Once again, those who bought assets at depressed prices did well.

2001 – After 9/11, it seemed like a crisis for the US, but the economy only had one or two quarters of negative growth. Most of the world was unaffected economically.

1997-1998 – The East Asia Financial Crisis. Affected South Korea, Hong Kong and much of South East Asia. Most of the world was unaffected. In fact, the late 90s was considered a golden time in the UK, US and beyond.

And these are big crisis. In most crisis, unemployment goes up marginally for a few months or years, and doesn’t affect 95%+ of the population.

The commonalities about these times are:

1. If there is a crisis in one part of the world, another region is booming. That is one reason it is good to have a diversified investment portfolio, and to focus on many regions if you have a private business.

If you google “world GDP growth by year” you will see it is much less volatile than individual countries performance which tends to be up and down.

The same is true in 2023. Some countries are doing poorer which were doing well in 2020 (for example Taiwan), and others are doing well now.

2. Even when there is a global downturn, like 2008 or 2020, growth and asset prices comes back.

3. Those (wealthy and non wealthy) who are conservative about debt/leverage, diversify and adapt can do well in crisis.

4. The media tries to say we are in unprecedented times. Then you look back years later and realize that crisis comes and goes, like the rest of them.

Here is the media reporting the crash of 1987:

Even if somebody would have bought at the peak before the crash, they would have 20x their money, if dividends were reinvested.

5. Most people want to get greedy when others are greedy. It is better to be greedy when others are fearful, and vice versa, as Buffett and others have said.

Rationally speaking, using leverage in 2009, when asset prices were so low, made more sense than in 2007!

What are some common mistakes people make when planning for retirement?

For expats, the biggest mistake is usually not saving and investing enough to begin with.

This is a problem all around the world, but if you live in the same country all your life, there is a lot of “compulsory” saving.

That is because most people:

• Pay taxes on the same day they are paid. This counts towards a pension in old age.
• Take care of the mortgage on the same day (or day after) they are paid. Doing so builds up equity regardless of the negatives associated with home ownership.
• Have at least a small private pension which comes out on pay day. There is a lot of auto enrollment schemes these days.

All of the above means that it is normal for people to retire as millionaires in some countries, even if they struggled most of their lives.

All that is required is for the house or pension to appreciate by a reasonable amount.

Now sure, some people might have to downsize the house to live a reasonable retirement, but the point is that it is doable.

In comparison, if you live overseas, you are typically outside the safety net. That has many positives, as you are often paid more and/or taxed less.

The issue is how that extra disposable money is used. Back home, most teachers can’t go on four holidays a year or have maids!

International school teachers can sometimes live like that, in some countries at least, and usually executives and high earners can live much more lavishly than that.

This saying, stated on Brainy quotes, is as true for retirement as it is for other domains:

If you can automate retirement by yourself or with the help of an advisor you are 80% there, regardless about whether you at home or overseas, via investing.

I know it sounds obvious, but various studies have shown how much and how long you save and invest is the most important variable for a comfortable retirement.

The other 20% is things like:

• The returns
• Tax optimization
• Asset allocation and many other things.

Therefore, it makes no sense to delay retirement planning because you aren’t sure about taxes, or the markets or whatever.

¿Le duele la indecisión financiera?

Adam es un autor reconocido internacionalmente en temas financieros, con más de 830 millones de respuestas en Quora, un libro muy vendido en Amazon y colaborador de Forbes.