How Not to Feel Trapped? Advice from Andre Agassi

One of my coworkers, I will call him Frank, is trapped in his job.  He is approaching 70 and forced to continue working to pay for his wife’s medical expenses. His wife has been bedridden for several years due to M.S. Frank is loud, abrasive and intimidating.  His constant complaining brings his entire department down.  Frank is also at the top of the list of employees my company hopes to force into retirement with our software conversion.

I read Andre Agassi’s book Open: An Autobiography earlier this year for my savvy reading challenge.  While thinking about my new series staying relevant over 50 I couldn’t help, but think of Andre Agassi.

The surprising thing you learn early in Agassi’s book is he hated playing tennis.  From an early age when his dad bought a fire breathing dragon contraption that shot tennis balls out of its mouth he hated tennis.  Tennis was his dad’s dream not his own.

Andre thinks a lot about what he can control in tennis and in life:

I tell Perry that I having no choice, having no say about what I do or who I am, makes me crazy.  That is why I put more thought, obsessive thought, into the few choices I do have – what I wear, what I eat, who I call my friends. (Pg. 66)

I obsess about the few things I can control and racket tension is one of them.  (Pg. 13)

The time has come.  I need to take control of my money.  I need to take control of my F***ing Life. (Pg. 114)

I find peace in his claim that perfectionism is voluntary.  Perfectionism is something I choose, and its ruining me, I can choose something else. (Pg. 189)

And lastly, his life and his tennis (he was losing a lot) didn’t improve until he chose tennis:

I play and keep playing because I choose to play. Even if it’s not your ideal life, you can always choose it. No matter what your life is choosing it is everything. (pg. 359)

Agassi also began using the money he made from tennis to make a difference. In 2001, Agassi opened the Andre Agassi College Preparatory Academy in Las Vegas, a tuition-free charter school for at-risk children in the area. According to Wikipedia, he personally donated $35 million to the school.

Do you feel trapped in your job?  According to Forbes, 52.3% of Americans are unhappy with their work.

From time-to-time I too feel trapped in my job.  My husband retired last year and ever since we’ve been bombarded with unexpected bills; ranging from helping a family member, to dental and medical expenses to a new vehicle for me. Plans of early retirement continue to get pushed further into the future.  

What can I do?
I can change my attitude and choose my job. I can remember why I decided to become an accountant – I thought it would be a reliable and lucrative career.  And be grateful that for the most part my career has been both.  I can try to stay present at work instead of writing blog posts in my head all day and I can help others.

From time to time I ask Frank how he is managing and he breaks down and tells me not good. That he never lets his wife see his anger or his fear.  I listen and suggest he look into signing his wife up for Medicare (she is 68) and a supplemental plan – and don’t judge why he hasn’t done this already or why our HR manager hasn’t suggested this.

I also find it helpful to leave work at a reasonable time, go to the gym and use my vacation days.

Frank has to choose his job too.  He has made the decision to continue working until his finances are under control and in the process has become difficult to work with.  Management will only put up with a difficult employee so long. If he truly wants to meet his goal he will have to change his attitude.   

Do you feel trapped in your job? How do you cope?

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Rethinking My Decision to Prepare My Own Tax Return

I have always considered my ability to prepare my own taxes a side benefit of my CPA license. I work in industry, so I don’t prepare anyone’s taxes other than my own, but felt I was proficient enough to prepare my own return. This year was different than prior years in that my husband had pension and social security income for the first time, we sold investments and I was hoping to use the personal energy credit for the water heater and gas furnace we had purchased in 2015. I spent three weekends preparing our returns and in hindsight think perhaps I should have used a professional preparer. Here are a few things I learned:

Only 85% of social security benefits are included in taxable income.

My husband started receiving social security last year, since I work full-time I knew we would pay tax on this income, but was surprised TurboTax included only 85% of this benefit as taxable income. According to the SSA website: 

No one pays federal income tax on more than 85 percent of his or her Social Security benefits based on Internal Revenue Service (IRS) rules.

Pensions are taxable, but not according to my husband’s 1099-R.

On the form 1099-R my husband received for his pension, the taxable amount box was blank and the taxable amount not determined box was checked. When I entered the 1099-R exactly as provided, TurboTax concluded the pension wasn’t taxable. After reading TurboTax guidelines concerning pension income, I decided the pension income had to be taxable and entered it accordingly.

Remember the personal energy credit I was so excited to take advantage of:

From my post Appliances Don't Qualify for Energy Credit:

The $500 lifetime credit (10% of cost up to $500) for energy efficient improvements has been extended until 12/31/16. I am excited about this one since we installed a new furnace and water heater in 2015 – although $500 doesn’t come anywhere close to covering 10% of what we spent.

It turns out:

The energy credit for natural gas, propane, or oil furnace or hot water boiler with an annual fuel utilization rate of 95 or greater is capped at $150.

TurboTax did not ask for any information on water heaters, so we did not receive a credit for the new heater. Today I found the following on the Energy.gov website:

Natural gas, propane, or oil water heater which has either an energy factor of at least 0.82 or a thermal efficiency of at least 90 percent: $300.

Perhaps I missed something for the water heater, but at the time I determined we were only eligible for the $150 credit. 

Establishing cash basis for our sold investments was kind of nightmarish:

The 1099-B I received for our sold securities included basis for only a portion of our sold investments – there was a section for transactions for which basis is reported to the IRS and another section titled transactions for which basis is not reported to the IRS.

My boss, who prepares taxes on the side, informed me there was a law change about four years ago requiring brokerage firms to provide basis information for mutual funds purchased after January 1st, 2012. Since the assets we sold included mutual funds purchased both before and after January 1st 2012, the 1099-B provided basis only for the assets purchased after this date.

I called our brokerage firm who was able to provide the original cash basis for all our sold investments. I then had to reconcile the basis by each individual asset by date (there were several pages of these). The final cash loss I calculated did not equal what was on the 1099-R. In the end, my husband pushed me to file with the information I had. The loss wasn’t off by a lot only about a hundred dollars and I did use the lessor loss. If we are ever audited and I was wrong at least the IRS will owe us money.

Taxable losses can be deducted up to $3000 and the excess can be carried over to future returns:

According to the IRS website:

Generally, realized capital losses are first offset against realized capital gains. Any excess losses can be deducted against ordinary income up to $3,000 ($1,500 if married filing separately) on line 13 of Form 1040.

Losses in excess of this limit can be carried forward to later years to reduce capital gains or ordinary income until the balance of these losses is used up.

Okay I am sure I knew this when I took the CPA exam, but didn’t make the correlation when we sold the assets. I deducted the loss and am not questioning this one further.

Our taxes are filed – I paid $92 for the federal and state TurboTax Premier. I know of a tax preparer who sets her fee based on the number of forms she prepares, so I imagine I would have paid $250 or more if I’d have hired someone to prepare this return. My co-workers tell me my boss’s fees are reasonable, but I didn't want him to know my entire financial situation. I think I will be okay preparing my return next year, but if we ever sell securities again I will strongly consider seeking professional help.

Do you prepare your own tax return? Are you sure you took advantage of all the incentives available?

Financial Considerations in a Collaborative Divorce

 
Last week I ran into an acquaintance who is in the process of getting a divorce. She tells me things are going smoothly; it is a collaborative divorce with no attorneys involved.  Both she and her spouse are going out of their way to be civil towards each other for their children – a 12 and 14 year old.  They are also amicably splitting their assets and will have joint custody.

The accountant in me had to say, “Don’t forget to discuss which parent gets to deduct the children on future income tax returns.”

She responded with “I never thought of that.” and “How do you know that?”

I’ve worked in some aspect of accounting for almost 30 years and have my CPA license, but to be honest, most of what I’ve learned about the financial pitfalls of divorce comes from co-workers and friends complaining after things have gone badly.

Here are a few tips:

Claiming your children as dependents:

Usually the parent who has custody of the children for the greater part of the year will claim them as dependent exemptions on their income tax return. This is an important designation because most often the parent who can claim their children as deductions is also the parent who receives other tax related benefits and credits.

Head of Household

This filing status is only available to the custodial parent. It provides a bigger standard deduction and looser tax tables than single taxpayer status.

Higher education costs:

The spouse that claims the children as a dependent is the parent allowed to claim the American Opportunity Lifetime Learning Credit (this can be worth up to $2,400 during the first four years of a child’s education). If you do not claim your children as dependents you can’t claim this credit even if you were the parent paying their college bills.

Get it in writing:

In joint custody situations parents can take turns claiming the children, but this has to be in writing. Make sure it is part of the divorce agreement.  If the non-custodial parent wishes to claim the child, the custodial parent must waive their right to claim the child on IRS form 8332.

Don’t assume you are entitled to the exemption because you pay child-support:

A newly married co-worker filed a joint tax return with her new husband claiming his daughter from a previous relationship as a dependent. (She thought the first parent to file gets the exemption).  The child’s mother also claimed the child despite being told my-coworker had claimed her.  His return was audited, the IRS deemed the mother as the custodial parent and eligible for the deduction.  My co-worker and her new husband had to pay back taxes were fined and required to pay interest on their return.

Alimony:

Alimony is considered taxable income for the recipient.  If you receive alimony make sure you make estimated payments or set aside a portion of each check so you are prepared for your tax bill the following year.

Alimony payments are deductible by the person paying them, but only if made on account of a divorce decree or written agreement. An oral agreement will not suffice and payment must be in the form of check, cash or money order.   

Retirement savings:

401(k) distributions are taxable.  If you want your spouse to be responsible for taxes on distributions they receive from your retirement account make sure your divorce papers include a (QDRO) qualified domestic relations order. Without a QDRO, you may end up paying the tax bill.

Spouses do hide money:

This is probably the biggest lesson I can give you.  During my 30 years of working in accounting departments I have been asked more than once to not pay a commission, bonus or to withhold a raise until after an employee’s divorce is final.  I’ve seen this at more than one company and the request is always granted – it is the employee’s money.

I’m not familiar with how collaborative divorces work, if lawyers are not involved I recommend consulting with one anyway to make sure all interests are covered.  Consulting with a tax accountant can’t hurt either.

Are you aware of financial pitfalls in a collaborative divorce?

Do Software Conversions Force Older Employees into Retirement?

I’ve joined a real-life book club. Our first selection was Fredik Backman’s book A Man Called Ove.

What is A Man Called Ove about?
Ove is a grumpy old man. So when a chatty young couple moves in next door and accidentally flatten Ove’s mailbox, he has some choice words for them. But the altercation is the lead-in to a comical and heartwarming tale of unkempt cats, unexpected friendship, and the ancient art of backing up a U-Haul. All of which will change one cranky old man and a local residents’ association their very foundations.

Highlights from our book club discussion:

Since Ove is considered a curmudgeon, we started the meeting with a definition:

From Merriam-Webster::
A curmudgeon is a person (especially an old man) who is easily annoyed or angered and who often complains.

I was offended that Backman considers Ove, who is “only” 59 at the beginning of the book, as old and a has-been in the work place. (My fellow 50-something book club members nodded in agreement at this observation). Ove is forced to retire from a job he’d held for more than a third of a century because he did not have adequate computer skills. This led to a lively discussion about whether companies are properly guiding older employees through change.

The current trend at many firms is to convert their client-server business software to a cloud-based system. Supposedly this will eliminate manual processes and allow employees to access information from anywhere. Managers and business owners especially like the idea of better access to crucial information at their fingertips.

When I stated I had been privy to discussions at both my professional organization and in my own company of employers hoping these changes will frustrate older curmudgeon-like employees and force them into retirement, a book club member piped up:

In her twenty years of working as a manager of HR she has yet to see a company implement change properly. 

At my own company I’ve seen over and over where a software upgrade, a new program or tool is rolled out with almost no instruction or training given. This is after thousands of dollars have been spent on the new feature. If we are lucky, we are given a link to an on-line demo to review. The most adventurous of us may read the on-line tutorials and teach others, but the majority of the long-term employees continue to perform processes the way they’ve always done them or manipulate the new system into the old manually or with excel causing more work in the long run.

As to whether the soft-ware change will force the older employees into retirement:

I think not. Most likely these older employees would have already retired if they could afford it. They will continue to work holding onto that paycheck as long as possible, but will become more caustic. Making them even more susceptible to layoffs.

Behind Ove’s bitter exterior is there a softie inside?

All our book club members seemed to think so and that the circumstances of Ove’s life had made him bitter. Again I can relate this question to one of my co-workers. He is going on 70 and continues to work to pay for his wife’s in-home care and medical expenses. She suffers from M.S. and has been bed-ridden as long as I can remember. This co-worker is loud, abrasive and intimidating. Other employees are terrified of him. He is also at the top of the list of employees my company hopes will retire during the software conversion. For some reason, I’ve always gotten along with him and will volunteer to call him when others are afraid to. Just last week he told me how he had recently almost lost his wife. He choked up as he told me she was his sweetie. I asked about his dog (we both have labs) He mentioned how the dog wouldn’t play or eat while his wife was in the hospital.  I am positive I changed his mood for the better when I asked how the dog reacted to her homecoming. Definitely a softie at heart.

Can a relationship between two opposing personalities work when one is black and white and the other is rainbows?

Ove describes himself as a man of black and white. And his wife as color. All the color he had.

Our book club facilitator didn't think so, but the rest of the group thought it could work if they didn't have children. Again I can relate this question to my work place. Some of the largest conflicts in my organization are between departments or employees where one has a black and white personality and the other is rainbows. As my boss likes to say about a colorful employee, “I will agree to disagree with her.”

The one and only comment from the lone male member of our group – he enjoyed the Saab references.

In closing, I don’t want to give away any of the plot, so I will just say my fellow book-club participants thought A Man Called Ove was a good book. I thought it was good, not great, but an excellent book club selection. 

Have you read this book? Did you like it?

Does your company manage change well? Do you think too much change forces older employees out of the work place?

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How to Pay off Your Parent’s Mortgage?

 

My Parents divorced when my Mom was 55. One of the first things she did after securing full-time employment was to purchase a condo. Despite refinancing her mortgage for a more favorable interest rate (than the outrageous balloon she originally incurred) and a shorter mortgage term she still owed $60,000 of principle when she was forced to retire at age 75. She quickly discovered with almost no accumulated savings, making ends meet on a fixed income with a mortgage was difficult.

My siblings and I began discussing how we could assist her in paying off her mortgage, then recoup our investment when she eventually sold it.

My mom met with an elder care lawyer to discuss deeding her condo to her children. I knew it had become more difficult to transfer property since President Bush had signed the Deficit Reduction Act of 2005 (this Act increased Medicaid’s look back period from three years to five), but was surprised when the lawyer flat out refused to help us. She said with my mom having virtually no savings she would be ineligible for Medicaid for the next five years until every penny of equity transferred to us had been paid to her nursing home. What if her children couldn’t come up with this money? She refused to put my mom in that situation. 

We asked, “What if my mom doesn’t need nursing home care in the next five years?”
The lawyer didn’t care, she felt my mom’s condo equity should remain with my mom to cover her long term care or other expenses whenever they may occur. The discussion was over.

$60,000 split four ways was too great of an expense for my siblings and I to handle. There were spouses and grand-children to consider, child-care expenses and our own mortgages; $15,000 was a lot of money to hand over to your mother-in-law with no guarantee of ever getting it back. We explored other options such as selling the condo and having my mom rent or live with one of us, but she wasn’t ready for that. Plus, monthly rental payments cost almost as much as her mortgage expense. Instead, my brother reviewed all of her bills and cut every unnecessary expense. It literally made us sick to see how she had been taken advantage of over the years by cable companies, insurance agents, car repairmen, investment advisors, etc. When he finished her monthly expenses were manageable.
Her condo will be paid off next February and I’m confident she’ll make it.

I was reminded of my mom’s mortgage when my husband and I met with a Wisconsin title employee last week. As the representative was going over our mortgage paperwork she said something about it not being a good idea for our children to make our loan payments. Instead, she recommended they refinance the mortgage in their own names if they wanted to make payments.

After the closing was over, I asked her to explain what she meant about children refinancing the mortgage in their own names and if this was the preferred method for a child to pay off their parent’s mortgage.

She actually recommended children not pay off their parent’s mortgage and if needed do so only if:
- A written agreement was drafted by a lawyer and signed by the parent and the child prior to the child making any payments.

- All siblings were aware of the agreement and a written repayment plan was discussed and agreed upon by all siblings.

- Every mortgage payment was made with a paper trail. Never give a parent cash to make a payment.

She knows of several children (including herself) who paid mortgages and other expenses on behalf of their parents assuming they would be reimbursed from their parent’s estate only to have these repayments disputed by siblings. Lawyers were involved, the child was never reimbursed and the siblings no longer speak to each other.

Her bottom line advice on how to pay off your parent’s mortgage:

Don’t do it.

Have you or your siblings paid expenses on behalf of your parents? Has it been a favorable experience?

Switching my Goal to Financial Independence

This week a 60-year old asked me, “How much money do you think the average couple needs to retire?”  I answered 1.2 million.

That was the number I had initially come up with for myself last fall when my husband decided to retire at the end of 2014.  The initial plan was for me to join him in retirement when our total liquid assets reached 1 million.  I added the $200,000 to cover taxes on our 401(k) distributions after hearing horror stories from a couple that didn’t plan for taxes on their 401(k) money.

The 60-year old has been asking this question to everyone he knows.  Most answers fall between $1 and $2 million.  For himself, he thinks he and his wife need between $3 and $4 million. His plan is to retire at 63.  He recently bought a condo in Florida on a golf course where he will spend the winters. He will sell his home in Wisconsin and buy a condo here where he will live in the summers.  His only hobby is golf.  He can play for free at his Florida condo.  His company offers retiree health care and he will receive a pension.

$3 to $4 million!  If that is what a couple needs to retire comfortably I will never be able to retire. 

Which is why I am changing my goal from retiring early to financial independence.  In addition to saving for retirement, I am going to spend the next 5-6 years building an alternative income stream to supplement our retirement funds.

In other news, I had to let my temp go last week for underperformance and am starting over on Monday with a new employee.  My boss told me not to count on having much of a summer…

Financial independence is looking very attractive right now.  What steps are you doing to create financial independence?

Also, how much money do you think the average couple needs to retire?

Stop Using the Fax Machine if You Want to Appear Relevant

This morning I read a great post from Bob Lowry of A Satisfying Retirement. Bob recently read Graeme Thomson’s book George Harrison: Behind the Locked Door a biography of George Harrison. In his post, Lowry writes about the similarities he shares with Harrison. Here is the parallel Lowry makes between his career and Harrisons:

My tie to this story and his life? For the last 6-8 years of my radio consulting business did not evolve. I stayed with the same message, the same ideas, and the same approach that had proved so successful for me through the 1980's into the mid 90's. Even though my industry had changed dramatically, I stopped learning and listening. I didn't change my message or my methods. As a result, my business slowly slipped away until, in the same year that George Harrison died, I found myself faced with retirement, several years before I would have felt financially more secure. I had been passed by. I had stopped changing and found my approach irrelevant.

This post got me thinking about how to stay relevant in the workplace. My company has lost several employees this year to early retirement. When asked why they were leaving, they all responded the same way; their jobs were too stressful and they felt they couldn’t keep up with the changing technology. They weren't forced to retire, but I did hear grumblings about them and their failure to embrace change in meetings. Some managers had recommended phasing these employees out. Fortunately, other managers knew their value and protected them.

How do you know you are becoming irrelevant?

You still use the fax machine:
Last week during a meeting with our bank’s relationship manager, she recommended we stop receiving wire confirmations via fax. This service was costing our company $15 per fax while an email confirmation was free. This led to a conversation about how the fax machine was obsolete, expensive, inefficient etc. Our bank account manager has even contemplated removing his fax number from his business card. He only gets a couple of faxes a month and they are credit confirmations. I immediately knew why this was happening. His clients hadn’t updated their credit reference sheet which still listed fax numbers. (I may be one of them).

My former employee who despised and fought change with a passion was the only employee in our department to still use the fax machine on a regular basis. Every time I walked past the fax machine I’d pick up her faxes then drop them off at her desk. Her replacement refuses to use the fax machine. She also dislikes voice mail and instructs almost everyone who calls her to email her in the future.

You can’t find files after you save them:
Recently my company transferred our computer's data to a new server. During the process our IT manager complained about one of our employees, “She never takes classes to improve her skills or learn better ways to do her job.” His gripe: she didn’t know how to use windows and hadn’t been saving her Microsoft files to the server. I knew right away what she was doing wrong, since I used to do the same thing. When saving files that had been emailed to her she just hit save rather than moving the files to her documents folder and then saving them. My former employee from above used to do the same thing and I and my co-workers were constantly helping her find her files.

After this conversation I suggested our outside computer consultant conduct a class on windows for our administrative staff. He wasn’t keen on the idea saying everyone younger than 45 would be bored. Since most of the employees that struggled with windows have now left the company, this class is now on hold.

If you struggle with windows I suggest you take a class. They offer them at most tech schools, also some libraries and employment agencies offer them at minimal cost or for free.

You are still using the original version of your company’s software; new employees are no longer trained on this software and it doesn’t have the latest software enhancements.
All of the employees who retired early were using the old, outdated version of our company’s software.

You don’t know how to use pivot tables in excel:
A few weeks ago one of my gym buddies, who works in health care, approached me at the gym to tell me she had started using pivot tables and that she loves them. “Hmm… pivot tables doesn’t that have something to do with graphing.” She told me this knowing I’m an accountant and assuming I used them. I said something like great! Then went back to my workout. Afterwards I found an 8-hour class offered by my professional organization on pivot tables and considered signing up, but it is offered the same day as my scheduled doctor’s appointment. You know what a hassle it is to reschedule doctor's appointments, so I didn't sign-up. Someday my department will be filled with 25-year olds whispering behind my back, “She doesn’t know how to use pivot tables.”

Speaking of irrelevant, I still have blogspot in my blog’s URL:
How long have I been blogging? Too long to not have my own domain name. I have an excuse though – I want a domain I can continue to grow and work with throughout the remainder of my blogging career. This year I’m trying out different topics other than work and careers to see what I am comfortable with. With this post – on relevancy – I feel I’m one step closer.

How do you stay relevant?

5 Things I Learned From my Mother’s Audiologist

I recently accompanied my mom on her appointment with an audiologist to be fitted for new hearing aids.  My siblings and I have had many discussions as to which doctor appointments require one of us to attend and which do not.   Normally, accompaniment to an audiologist appointment wouldn’t be a necessity, but since my mom was to make a substantial prepayment on new hearing aids I decided to tag along.  I am so glad I did.  Here a few of the things I learned:

My mom can’t hear:

The audiologist had my mom remove her current hearing aids so she could test and clean them.  After she left the room, I began talking to my mom and quickly realized she was unable to hear a word I said.  She didn’t even acknowledge I was speaking. It was eye-opening to witness how severe my mom’s hearing loss actually is.

The cost of hearing aids are not covered by Medicare:

My mom has one year of medical benefits remaining on her retiree medical plan. This policy will contribute $2,000 towards the purchase of a pair of hearing aids. Her remaining out- of- pocket cost will be $1,900. Since hearing aids are not covered by Medicare, we decided she should purchase the hearing aids now.  

Hearing aid life expectancy is 5 to 7 years:

My mom’s current hearing aids are 7 years old.  One of them is cracked (she told me later she had tried to clean wax out of it with a needle and tweezers).  Also, hearing aid technologies have become quite sophisticated, they are now considered mini-computers.  With her advanced hearing loss she needs to take advantage of new technologies.

The bricks in hearing aid drying boxes need to be replaced every two-three months:

This was completely new to me:  My mom currently stores her hearing aids in a drying box when she’s not wearing them.  This box is equipped with drying bricks that absorb moisture from the interior of her hearing aids prolonging their life. The bricks eventually become saturated with moisture and need to be replaced – typically every two to three months.  My mom stopped replacing these bricks a couple of years ago in an effort to cut expenses.   

Hearing aids are just that – an aid:

According to the audiologist, the biggest misconceptions family members have when getting their loved one hearing aids is that they will restore hearing to normal levels or completely correct hearing loss.  Hearing aids are an AID to assist patients with hearing; hearing will not be 100% normal with hearing aids.  

There are additional devices included with the new hearing aids to assist with hearing.  One of my mom’s biggest complaints is not being able to hear during large family gatherings.  Her new Phonak Naida Q50 hearing aids come with a remote mic.  She can hand this mic, which is wirelessly connected to her hearing aids, to a person who is talking or place it in the center of the table.  She’s tried both, but her favorite use for the mic is to set it in front of her TV speakers so she no longer has to blast her TV.  In the past, she has received complaints from neighbors when she blares her TV after 9:00 p.m.  

In conclusion:

My mom is happy with her new hearing aids and her hearing has improved substantially.  Even my siblings noticed she doesn’t ask them to repeat themselves as often.  The cleaning system is easier- she no longer has to wipe off excess wax every morning. And it’s cheaper – her new drying box doesn’t require bricks. Getting the proper fit wasn’t easy. The mold in one of her hearing aids needed to be remade twice before it felt comfortable. Her only current complaint is a slight ringing tone in one of her ears.

As to what doctor’s appointments a family member should accompany her on, it appears all of them.  I find it interesting she choose not to replace the dryer bricks in an effort to cut costs.  A quick Google search indicates this decision saved her $40-60 a year.  If I would have known I'd have gladly purchased these for her.  I wonder what other cost-saving decisions she has made.

Do you accompany your parents on doctor appointments? If so, have you been surprised by something you have learned?

Early Retirement One Year Anniversary

One of my former co-workers had been miserable in his position for several years – actually he had been perfectly happy with his job until our company hired another family member and put this co-worker in charge of him. The new employee was like a bull in a China store and my co-worker was forced to work long hours attempting to control the damage.  

He began talking regularly about retiring early and asking questions about finances related to retirement. My post, "Should I pay off my house with 401(k) monies?" was for him. He did end up using his 401(k) money to pay off his home. His wife had retired at age 58. I am not sure, but think she receives a pension from the hospital where she worked for 30-years as a nurse. She also has a part-time job working one day a week for her church. There would be no pension for my co-worker, just his 401(k).  My co-worker’s biggest retirement concern was the cost of their health care. He went over and over the numbers eventually concluding he couldn’t afford to retire early.

Then a good friend of his died at 61 from cancer and his 90-year old mother in-law stopped recognizing him when he visited her in the nursing home. He began not caring if he ran out of money; he surmised from his mother-in-law’s experience that when he is 90 he probably won't know if he is living in a dump eating cat food (his exact words) or in a nice home receiving expert care. He retired on his 62nd birthday not even taking my advice to work until the end of December to receive his holiday pay.  

I thought of him on his birthday a few weeks ago and sent an email congratulating him on first retirement anniversary. I also asked if there had been any financial surprises he had incurred or words of wisdom he could give me since my husband plans to join him in retirement at the end of the year and I still plan to retire early. Here is his response:

THANK YOU for remembering my retirement anniversary. Retirement is one word: AWESOME!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Between kids, grandkids, remodeling, gardening, dogs, travel and sleep there is not enough time in the day for everything. I can honestly say I have yet to have a boring minute, hour or day. I think one of the biggest differences between work and retirement is stress. For "me" retirement equals ZERO stress. Physically and mentally I feel twenty years younger. During the first couple of months I would feel "kinda" guilty when I would encounter people that were still working. No more. I paid my dues and have arrived. I used to look at retirement as winning the "race". Now I look at it as just "finishing" the race.

Notice he doesn’t even acknowledge the financial aspects of retirement. As my husband’s benefits come to an end, I am forced to enroll in my company’s inferior and more expensive benefit plans. Add in the $800 I just spent to replace my two-year old computer that crashed and my nervous Nellie tendencies are operating at full capacity.

Then I look at how stressful my husband has been in his job this past year, the long hours he worked including Saturdays and the occasional Sunday. How much I enjoyed him being laid-off last winter. How far behind we've gotten on basic home maintenance and cleaning. A real vacation; what is that? Then I think of my co-worker and how awesome his year has been. I want that for my husband and eventually for myself. My co-worker is right in that we don’t know what the future holds – whether we will be blessed with a long healthy life or succumb too early to a horrible disease or that we will end up penniless in a nursing home. As to our finances, I will never be able to control everything; appliances will need replacing, medical premiums will increase and I will need procedures like gum recession surgery. We have our 401(k) plans and we are maximizing his social security benefits by waiting until next year when he is 66 to begin collecting. If our finances become unmanageable we can always sell our home which is paid off. It is time for my husband to cross the finish line.

Are you retired?  Do you have any words of wisdom?

Career Reinvention at 52

Today is my Birthday, I am 52 years old.  When I graduated from high school my mother was 42, at that time I couldn't contemplate ever being 42 much less 52.  My goals at 18 were to get as far away from my family farm in western Wisconsin as possible and to live a life as unlike my mother's as I could.  I envisioned my life to be much like my high school French teacher's. She lived, what seemed to me, a cultured life in Madison, Wisconsin and traveled to Europe each summer. Unfortunately my life didn't turn out quite like that.

Instead all I do is work.  When I'm not working I'm thinking about work or not sleeping because I'm stressed about work.  As you may recall last year I didn't use nine of my earned vacation days and this year I'm heading in the same direction.  It is always something - a deadline I am required to meet, an audit that needs my attention or a meeting I am required to attend. This week I went in while sick to calculate commissions that were too difficult to explain over the phone. Part of the problem is my company's A-type work culture and part is my ingrained dairy farmer work ethic. A small dairy farmer never takes a vacation day and has to milk the cows even when sick.

My only plan of escape is to retire early.  If all goes well that will be six years from today.  One of my former co-workers retired early last November.  He too had an over-developed work ethic. As a stress reliever he began counting down his work days until retirement.  Instead of answering the phone with hello he would say "232 days."  The other day while commiserating with another co-worker about our heavy workloads I said, "6 years and 3 days."   He replied, "Don't start that."  He thought our retired co-worker's count down was super annoying.

I don't want to become the annoying co-worker with the bad attitude and besides 6 years is a long time to be miserable.  It is also a long time to never take a vacation day and to work while sick. Plus, I don't think I'm the type of person who could lounge in retirement bliss. I will want to do something. Instead I need to figure this out and somehow reinvent my career. Ever since I started blogging I've had visions of living where ever I want and making a living in some fashion from my laptop. Doing what is the question.

My favorite career reinvention post is James Altucher's The Ultimate Cheat Sheet For Reinventing Yourself. He says it takes five years to reinvent yourself.  Here is his recommended five-year plan:

• Year One: you’re flailing and reading everything and just starting to DO.
• Year Two: you know who you need to talk to and network with. You’re Doing every day. You finally know what the monopoly board looks like in your new endeavors.
• Year Three: you’re good enough to start making money. It might not be a living yet.
• Year Four: you’re making a good living
• Year Five: you’re making wealth

So in my 52nd year I plan to read everything and start to Do.  Altucher claims reading 200-500 books are equal to one good mentor. I'm not going to write about how difficult it is to find time to read.  I love reading, so I'm just going to get busy and read.  I will keep you informed about what I learn.

I also plan to continue my career interview series.  My interviewees have been informative, passionate and helpful. If you would like to be part of this series please email me at savvyworkinggal@gmail.com. 

Have you reinvented your career?  If so, what helped you the most? 

Will You Have Enough Money To Retire?

In honor of Financial Literacy Month, I selected Helaine Olen’s book Pound Foolish: Exposing the Dark Side of the Personal Finance Industry for The Savvy Reader Book Club’s April/May selection. Today’s post is the first in a series of posts I will be writing based on the book.

In Pound Foolish, Helaine Olen writes:

Countless studies have been conducted about Americans and retirement post-2008, but they all say the same thing: we’re petrified and getting more scared by the day. “If we find a consensus about anything in America, this is it,” said pollster Bill McInturff, whose 2011 annual National Voter Survey found almost nine out of ten people worried they did not have enough money set aside. The folks who administer the United States’ corporate retirement plans feel similarly. When Deloitte and the International Society of Certified Employee Benefit Specialists surveyed plan sponsors, they found a mere 15 percent of those queried believed the employees their plans were supposed to be serving were saving enough money for their golden years. (Pgs. 75-76)

Why are we so scared?

The guaranteed pension is becoming extinct:

In the early 1980’s, 62 percent of workers had a pension plan, a guaranteed stipend paid by an employer to an employee when they retired; by 2007 the same number only had access to a 401(k) or similar employee-not employer-based savings plan, where one is expected to put their own money aside to pay for retirement.

Here are the problems with this new 401(k) retirement model:

No guaranteed stipends:
During retirement, my father-in-law had a pension and retirement health benefits in addition to his social security and Medicare benefits. He was content. He didn't travel or live extravagantly, but he did have enough money to give his grandchildren expensive gifts from time to time. When I think of my own retirement I know I won't have that luxury. The luxury of knowing exactly how much money I will have coming in every month. I don’t have a pension, just 401(k) savings and a few other after-tax investments. If a large unknown expense occurs or the market is hit with another huge correction my portfolio could be decimated leaving me without enough money to withdraw an adequate monthly stipend.

Is social security guaranteed?
I also think people, especially those who are under the age of 50, are worried the social security fund will run out of money and either the benefit won’t be available for them or it will be reduced.

We have to be our own investment manager:
I remember the first time I had to allocate my 401(k) contributions. I put 25% into each of the four funds offered. Later, I would put 100% into the fund that performed the best in the previous quarter. Currently, my financial planner selects the funds and provides the allocation for my 401(k) account.

Not all employees have a financial advisor:
In the past, my company’s 401(k) administrator would advise employees to direct their money into a target based fund when they were unsure how to allocate their contributions. After he learned these funds were not the panacea they were marketed to be he stopped giving advice altogether.  He is now interviewing 401(k) administration companies that offer financial planning services. My own financial planner recommends he proceed with caution. It has been his experience that these companies show up for an initial consultation then you never see them again, but your plan still pays the fees.

Retirement calculators don’t account for stock market corrections:
How much will your portfolio actually grow? Many financial planners, including my own, provide retirement worksheet projections indicating huge portfolio gains. My planner uses an earnings assumption of 8.42% and an inflation rate of 3%. Under closer examination I see the 8.42% is a blended rate ranging from cash and equivalents return of 4% to a special sector funds return of 12%.

When I left my last place of employment in 1998 my 401(k) account had a balance of $29,000. Fast forward 16 years and it now has a balance of 55,392.75. That isn't exactly an earnings rate of 12% (the standard rate used in most retirement calculators) or even 9.75% (the average annual return for the S&P from 1927 to 2011). I calculate the return to be less than 5%.  In case you are curious it is currently invested in Thornburg Limited Term Income Class C and Washington Mutual Investors Fund. When I complained to my financial planner about my measly return he reminds me this is just one piece of my entire portfolio which is diversified in totality.

No access to 401(k) plans:
As the popularity of contract workers continues to grow, I am concerned in future years retirees will have even less money saved for their retirement.

Will I have enough money to retire?
As I told my financial planner, I can't afford another major market correction. If my portfolio can achieve an 8.42% return and if I don't incur an unexpected hardship I should have enough money, if things don't go as planned...I have no idea what I will do.

What about you, will you have enough money to retire?

 *Part of Financially Savvy Saturdays on Femme Frugality and Debt Debs*

How to make the most of your social security benefits

I recently attended a social security workshop that changed my views on when a retiree should begin collecting social security benefits. We’ve all heard the rumors, “Start collecting as soon as possible, before the Social Security fund runs out of money” or “don’t wait to collect benefits - if you die early you will lose out on retirement money you’ve earned.”

Here is what I learned at the workshop:

Despite the grim outlook politicians and the media like to portray, the social security fund actually has sufficient reserves to pay out full benefits until 2036. After that if nothing else changes additional tax income will cover at least 77% of promised benefits from 2036 to 2085.

This means a person who is age 55 today probably won’t have to worry about benefits changing until age 79 at the earliest. Future changes that may occur include:

• Increased Social Security tax rates.
• Higher earnings maximum subject to Social Security Tax.
• Increase of Full Retirement Age
• Decrease of future retirement benefits
• Reduction of future Cost of Living Adjustments (COLAs)

Why should someone consider delaying benefits?
For people born in 1943 or later, each year you delay receiving social security your benefit increases by 8% per year up to age 70. After age 70, there is no additional monetary gain for waiting. Where else can you get a guaranteed 8% increase in earnings?  

Unlike many pension plans Social Security is adjusted for COLA:
Social Security payments are adjusted each year to keep up with inflation, as measured by the Consumer Price Index. Since automatic cost-of-living adjustments were added to Social Security in 1975, they have ranged from 14.3% in 1980 to zero in 2010 and 2011. The 2012 COLA increase was 1.7%. It is important to note some pension plans do not come with a COLA adjustment. Thus, a monthly pension payment that seems sufficient in 2013 may not go nearly as far in 2033.

You and your spouse should work together to make the most of your benefits:

The “Spousal Benefit”:
A married person who has little or no earnings history can receive spousal benefits equal to half of the working spouse’s primary insurance amount (PIA). 

- You must be age 62 or older to qualify.
- You can’t collect a spousal benefit until your spouse files for their own benefit.
- Your benefit will be reduced if taken before full retirement age, but it won’t increase if delayed past full retirement age.

The “File and Suspend” Strategy:
This strategy works best for the married couple who has one spouse with little or no earnings history. Begin by comparing the benefit this spouse would receive on their own to what they would receive for a spousal benefit; if the spousal benefit is higher consider the following strategy:

The higher-earning spouse files for social security at full retirement age then immediately suspends benefits. Once this spouse files, the lower earning spouse is entitled to 50% of the higher wage spouse's benefit. 

This strategy increases the lower wage-earner's monthly benefits now. It also allows the other spouse to wait until full-retirement age, increasing their benefit in the interim. Plus, it allows the lower wage earning spouse to receive the maximum survivor benefit.

The “Claim Now, Claim More Later” Strategy:
In this strategy the lower wage earner begins receiving his or her own reduced benefit.  The high wage earner files at full-retirement age for the spousal benefit. When this higher-wage earner reaches 70, he or she should switch to their own higher benefit. Note both spouses can’t receive spousal benefits on each other’s record at the same time. For this to work, the high-wage earner may not file for their own benefits before full-retirement age.

This strategy allows the low wage earner to start receiving benefits as early as possible. It allows the high-wage earner to receive a monthly benefit between the ages of 66 and 70 without having to reduce their own benefit. Plus, this allows the lower wage earning spouse to receive the maximum survivor benefit.

The Strategy for Two High-Earning Spouses:
One of the spouses files for the spousal benefit at Full-Retirement Age. Then switches to their own benefit at age 70. By collecting only a spousal benefit, this spouse can receive benefits at full-retirement age and still allow their own benefit to grow to its maximum.
 
The "Pay Back Strategy" is no longer allowed:
Previously you were allowed to begin collecting benefits at age 62 and then were able to pay all the dollars you had collected back, and restart your benefit at a new higher amount. As of December 2010, you are only allowed to do this if you change your mind and pay back benefits within the first 12 months of starting your social security retirement benefits.

The break-even age for collecting benefits at age 62 vs. full-retirement age is 78:
If you are in good health and have longevity in your family history, you will be better off in the long run to wait until full-retirement age to begin receiving benefits. 

I don’t think my husband and I will be able to utilize any of the above strategies, other than putting off collecting social security as long as possible, but I feel it is important to know what is available.

If you enjoyed this post, you may also like:
Do You Review Your Social Security Statement
Be Informed About Social Security
How do I know my 401(k) assets are safe from my company?

 

Things New Grads Should (But Never Do) Think About Come First-Time Employment

The newly graduated 20-somethings in the world today face a lot of struggles in the personal and professional realms. Of course, college grads have a long history of struggling with the transition from college dorm rooms and heated academic lectures to office politics and frenzied company meetings. While our college careers certainly prepare us for some aspects of adult life and self-preservation, there are some areas of becoming a true adult that college, term papers, and frat parties just can't teach us. With the added challenges facing college grads in today's society, most 20-somethings are simply thrilled to be employed at all. But, even after all the resume sending, cover letter writing, and eventual employment, there are still many aspects of becoming employed for the first time that newbie graduates need to consider. These three things are employment musts that many first-time employees overlook and underestimate.

The Retirement Plan

I know, I know. How can you possibly start to think about retirement, if you only just found a job after months of searching? Trust me—I shared your sentiments as well. But, as far away and dull as it sounds, retirement plans are a very important aspect of becoming a responsible, employed adult. Look into your company's retirement offerings. You want to begin thinking about the future right away. By starting to think about and plan out your retirement now, you can set yourself up for a very comfortable future. At the very least, when you start your first "real world" job out of college, look into the retirement options you have. What types of plans does your company offer? What options might make the most sense for your situation? By simply becoming better educated on the topics of retirement and IRA accounts, you can more responsibly plan for your future and manage your finances.

Actual Financial Planning
While retirement falls in place with financial planning, there is much more to the topic than just thinking about starting a retirement plan. For many newly employed college grads, "saving" is not necessarily at the top of our to-do list. This is the first time that you're making "real" money for yourself and have only yourself (and your college loans) to spend it on. With this freedom comes a lot of reckless or at least thoughtless spending. You want to celebrate the fact that you've actually graduated from college, landed a job, and survived. Spending is easy to do and it seems logical in the first few months. However (and this is a big however), it's a very wise idea to look into your financial situation very carefully after you get your first paycheck. Sit down and look through things. See exactly how much money you earn, learn where that money is going (loans, rent, groceries, gas, etc.), and try to create a financial plan. Divvy up your finances and try to make a plan as to where things will go. How much will you spend on necessities (rent, gas, food), how much goes to "fun", and how much will you put towards savings?

Professional* Networking

One of the most challenging aspects of entering the professional world is learning how to navigate the social world of an office. This is by far one of the things I struggled with most in the first few months of my first "real" job. The bottom line is that communication and friendships just can't be the same when you're in a professional office atmosphere. Though you may be surrounded by people your age day in and day out (much like college), you can't treat these colleagues the same way you would college dorm mates. Of course, you're going to make friends and build relationships with your coworkers after a period of time. It's good to be friends with your coworkers, but you want to be careful with your interactions. The professional world is different from any other realm. You need to keep things professional. Watch the way you talk about certain aspects of your work like. Try to compartmentalize to some degree. If you become close friends with a coworker, remain solely coworkers in the office and solely friends inside the office.

An education blogger by trade, Maria Rainer loves to explore the connections between the web and a college education. She writes for www.onlinedegrees.org on online student advice columns and substantive posts on the latest trends in online education. Please share your comments with Maria.

How to save for retirement when you don’t make a lot of money?

Ever since I read the book Shortchanged: Why Women Have Less Wealth and What Can Be Done About It by Mariko Chang, I have been more cognizant of how difficult it is for low-wage earners to save money for retirement. When I heard about the Tax Savers Credit at a seminar this week I took notice.

What is the Tax Savers Credit?
The tax savers credit was designed to help low and moderate income workers save for retirement. Unlike a tax deduction, a tax credit reduces the tax you owe dollar for dollar. This credit is available to anyone who meets the income limitations and made contributions to qualified retirement plans including 401K, traditional or Roth IRAs, 457s, 501c, SEP and SIMPLE. The credit can be taken even if you don't make a contribution for the previous year until April 15 of the current year.

The tax savers credit provides a credit of between 10% and 50% of the amount contributed to an eligible plan up to $2,000. For someone filing as a single taxpayer who meets the income requirements would receive a maximum credit of $1,000 on contributions of $2,000. Taxpayers filing jointly would receive a maximum credit of $2,000 on contributions of $4,000.

The credit does not affect your eligibility to exclude your savings from your income, and does not impact your earned income credit or your child care tax credit.

The credit is non-refundable. It will reduce the taxes you owe, but will not help you generate a tax refund. For example, if you are eligible for a $1,000 credit, but owe taxes of $800 the tax savers credit will reduce your tax liability to zero, but will not provide you with a $200 refund.

The adjusted gross income limits to claim the savers credit in 2012 are as follows:

• For Married couples filing jointly : Maximum adjusted gross income (AGI) –$57,500
• For Heads of Household : Maximum adjusted gross income (AGI) – $43,125
• For Married individuals filing separately and $28,750 in 2012.

If you would like to see a table that provides the percentage of credit allowed by income for 2011, please see this article. I can't locate a similar table for 2012.

Adjusted gross income is your taxable income after you have subtracted personal exemptions and itemized deductions.

Other rules that apply to the saver’s credit:

• Taxpayers must be at least 18 years of age.
• Anyone claimed as a dependent on someone else’s return cannot take the credit.
• A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student

In the Los Angeles Times article Retirement Saver's credit could significantly reduce tax bill Kathy M. Kristof wrote:

"Hardly any of the people who qualify for the credit are aware of it," said Catherine Collinson, president of the Transamerica Center for Retirement Research. Collinson's organization surveyed thousands of individuals and found that only 12% of the respondents who earned less than $50,000 — those most likely to qualify for the credit — had heard of it. And just 17% of those who were aware of the credit had claimed it.

I am a CPA (working in industry not tax) and only became aware of this credit, which has been around since 2002, last week. If I hadn't heard of the credit, how are those who are not as financially savvy supposed to be aware of it. Let’s get the word out:

Have you checked to see if you are eligible for the TAX SAVERS CREDIT?

If you enjoyed this post you may also like:

Gender Wealth Gap is the Greater Problem

Be informed about Social Security

Worker embarrassed to attend retirement party after being fired

Jennifer writes:
I was recently fired from my janitorial job after 20-years of service.  I am 75 years old.  My manager and co-workers had asked me numerous times over the past three years when I planned on retiring.  I always responded with, “never.”  I loved my job, enjoyed the people I worked with and needed the money.  Having been a stay-at-home mom before divorcing my husband at age 55, I still have a mortgage, almost no money saved and a mere pittance of a social security check.  Three weeks before my birthday my manager called me in for a meeting, she had written me up for working too slow stating others had complained they had to complete my work.  I strongly disagreed with her statement and spent the next three weeks keeping to myself and working hard.

Around my birthday, my co-worker gave me an empty swag bag he had found in the ladies restroom (the company I worked for hosts numerous on-site conferences) and asked me if I wanted it.  I took it (despite knowing the rules – we are to turn in any left behind items to lost and found).  A week later I was called in to HR.  This very same employee had turned me in to his manager for stealing the swag bag.  I told them he had found the bag and had given it to me, though, I did admit to taking it.  He denied giving me the bag instead saying he had witnessed me stealing it.  I was fired.  

One more fact to note, my-coworker and manager are husband and wife.
Yesterday I received a phone call from one of my other co-workers; the company wants to throw me a retirement party.  The party will be held at my former place of work and supposedly everyone will be there.  I am embarrassed to show my face after what happened.  Am I obligated to attend?

Jennifer,

I sincerely believe you were not fired for stealing an empty $2 swag bag; you were forced to retire because you are 75 years-old.  Companies can’t tell you that though or they risk being sued for discrimination.  They now feel guilty and want to give you a proper send-off and thank you for emptying their trash cans and scrubbing the company urinals for the past 20-years I highly doubt your former manager and her lying back-stabbing husband will show their faces.   Go.  You deserve a proper send-off.

Also, I believe in Karma. Setting you up like this was truly shameful. I predict your company will eventually outsource their janitorial services and your former manager and back-stabbing co-worker will be the first ones to be let go.

Enjoy your retirement. You deserve it.