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Confront the Brutal Facts of Your Retirement

There's plenty of pessimism about retirement these days. According to the Fidelity Retirement Index, the typical working American household has just $18,750 saved for retirement. Hundreds of pensions are underfunded, and the Pension Benefit Guaranty Corporation, which insures private plans, is facing a $23 billion deficit. And we've all heard about Social Security's problems. So things look pretty bad. You may be feeling pretty pessimistic about your own prospects.

But at least you're not in a prisoner-of-war camp in Vietnam.

That's how Admiral James B. (as in Bond) Stockdale spent seven and a half years of his life -- a fascinating life filled with adventure and philosophy that ended quietly early this month when Stockdale died at the age of 81. He had been battling Alzheimer's disease for years.

It is a true tragedy that Stockdale will be mostly remembered as Ross Perot's running mate in 1992 and for his less-than-stellar performance during the vice presidential debates. Stockdale let Perot put his name on the ticket just as a formality necessary to get on the ballot, with the understanding that Perot would find a more seasoned politician later in the campaign. That never happened. And Stockdale didn't know he would be debating Al Gore and Dan Quayle until a week beforehand. So he was unprepared. And it showed.

Certainly, if you're holding yourself out to be the No. 2 guy in the country, you should be expected to think on your feet. But to judge Stockdale by that one night is a lost opportunity to learn from a man who led an extraordinary life.

Checking in to the Hanoi Hilton
Stockdale graduated from the Naval Academy in 1947 (no small feat in itself), then went on to attend flight school (future astronaut and senator John Glenn was one of his classmates). In September 1965, while leading the first American bombing raids over North Vietnam, his plane's control systems were destroyed by flak. He ejected over enemy territory and was set upon by 10 to 15 locals, who managed to break his leg before a policeman in a pith helmet dispersed the crowd and took Stockdale into custody. For the rest of his life, that broken leg (which was subsequently re-broken during one of the many torture sessions he endured) would give Stockdale a distinctive gait.

For the next seven and a half years -- four in solitary confinement, two in leg irons -- Stockdale was the highest-ranking American in the Hoa Lo prison, more notoriously known as the Hanoi Hilton. As could be expected from someone with the first and middle name of James Bond, Stockdale developed a way for the prisoners to communicate with one another via a code based on tapping on cell walls. "We organized a clandestine society via our wall tap code -- a society with our own laws, traditions, customs, even heroes," Stockdale later wrote.

When the Vietnamese told Stockdale he was going to be used in propaganda films, he cut his head with a razor and beat his face with a wooden stool so he would look too mutilated for film. On another occasion, Stockdale used a windowpane to slash his wrists rather than be tortured into providing information. Seeing this determination to resist, the North Vietnamese scaled back its prisoner abuse. For this, Jim Stockdale was awarded the Medal of Honor when he eventually returned home. Fellow prisoner and now-Sen. John McCain wrote this in his autobiography: "As a resistance leader, Jim Stockdale had few peers. He was a constant inspiration to the men under his command."

The Stockdale Paradox
Readers of the best business books should also be familiar with Admiral Stockdale. He shows up in Good to Great, Jim Collins' illuminating study of how mediocre companies made the leap to extraordinary companies.

After Stockdale returned to America, he stayed with the Navy until 1979, becoming the president of The Citadel. He then became a research fellow at Stanford University's Hoover Institution, allowing him to study stoic philosophy. Collins taught at Stanford's Graduate School of Business and had a student who wrote a paper on Stockdale. They got together for lunch, and Collins asked Stockdale how he dealt with his hellish imprisonment when he had no idea when (or whether) he would ever be released. Stockdale replied: "I never lost faith in the end of the story. I never doubted not only that I would get out, but also that I would prevail in the end and turn the experience into the defining event of my life, which, in retrospect, I would not trade."

Then Collins asked, "Who didn't make it out?" Stockdale replied, "Oh, that's easy. The optimists." Collins was confused, since this seemed to contradict Stockdale's earlier statement. Stockdale explained that the optimists were the people who said, "We're going to be out by Christmas," then Christmas would come and go. Then they'd say, "We're going to be out by Easter," and then Thanksgiving, and then it was Christmas again. According to Stockdale, "They died of a broken heart."

"This is a very important lesson," Stockdale continued. "You must never confuse faith that you will prevail in the end -- which you can never afford to lose -- with the discipline to confront the most brutal facts of your current reality, whatever they might be."

How did Collins apply this to business? He found that the truly great companies were made great partly by how they handled challenges:

Every good-to-great company faced significant adversity along the way to greatness, of one sort or another -- Gillette (NYSE: G  ) and the takeover battles, Nucor (NYSE: NUE  ) and imports, Wells Fargo (NYSE: GWF  ) and deregulation, Pitney Bowes (NYSE: PBI  ) losing its monopoly, Abbott Labs (NYSE: ABT  ) and a huge product recall, Kroger (NYSE: KR  ) and the need to replace nearly 100% of its stores, and so forth [including Kimberly-Clark (NYSE: KMB  ) taking on Procter & Gamble (NYSE: PG  ) after it entered the consumer paper business]. In every case, the management team responded with a powerful psychological duality. On the one hand, they stoically accepted the brutal facts of reality. On the other hand, they maintained an unwavering faith in the endgame, and a commitment to prevail as a great company despite the brutal facts. We came to call this duality the Stockdale Paradox.

Back to retirement
So what does all this have to do with your golden years? If you're feeling pessimistic about your retirement, that may not be such a bad thing, especially if that pessimism is based on the brutal facts. If you haven't saved enough, the time to act is now. Start by running your numbers through a retirement calculator, or give my Rule Your Retirement newsletter service a 30-day free trial.

Then act -- do something with that information, despite how discouraging it may seem. Just hoping that everything will work out (counting on an inheritance or a penny stock or a lottery ticket) will not get you where you want to be. You must act.

And do so with the faith that doing something now will undoubtedly improve your situation. What you do today really can make for a better retirement years down the road.

Robert Brokamp, editor of theRule Your Retirementnewsletter service, is looking for great stories of people who saved their retirements in mid-life. Have a story of turning your finances around?Email Robert.


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