Posted by Tim Stobbs on July 21, 2014
Three doors door down from my parents cabin a natural disaster has struck, the slope that nine cabins sit on is unstable and now slowly falling into the lake. This isn’t anyone’s fault and in fact the entire event would have been impossible to predict as a perfect storm of conditions occurred to cause it to happen. In short the flood of 2011 cut the toe of the slope, then the recent heavy rains saturated the soil and raised the water table which lubricated a shale seam and presto you get a slow moving landslide on a slope that hasn’t moved in 60 years prior.
Now losing your cabin at the start of the season sucks, but the real shit hit the fan for the cabin owners when they started to look at their insurance coverage. This is apparently classified as an “Act of God” thus in all likely hood their insurance on their properties are nil and void. Ugh, but you may think they could get something from disaster relief from the government. Well so did I until it was pointed out that only covers primary residences, not second homes like cabins. So in the end, they have no cabin and also no means of getting a dime of compensation from anyone.
If that isn’t a black swan event for those people, I don’t know what is. So the owners of these cabins are getting out what they can and trying to accept that rebuilding isn’t an option unless you happen to be sitting on a far bit of cash. Needless to say this has also freaked out my parents who are just down the road from this. It also likely means that my father’s retirement project to rebuild the cabin (which is almost at the drywall stage) could end up falling into a lake or not (so far their property is stable). They just don’t know what will occur in the long term (at least in their case the cabin is their primary residence so they could get some money).
The point is tale is you can’t plan for everything. With retirement planning we tend to pretend we can cover all our bases when in fact they are very real situations that can occur that you can not predict, defend against or even do anything about when they occur. In short, shit happens. So what can you do? Really not much other than have a robust plan with some slack in it.
The other lesson I learned on this entire disaster is you can’t depend on your equity of your vacation property in your retirement plan. Actually in fact, any house equity isn’t a stable long term investment as you local market can go to hell just when you need to sell. So I would suggest never being at a point to depend on it, which makes me feel good about my choice not to include the house equity in our retirement plan.
So have you ever seen a black swan event? What happened and how did the people cope with it?