Maybe MAGI is not a gift

We got to visit the Aalsmere flower auction facility near Amsterdam a few years ago.  They have a cafeteria for visitors and workers, welcomed by what I call scary Chef!

Scary Chef

The Gift of the Magi

The original Gift of the Magi is an O. Henry story about a young couple sacrificing their individual prized possessions to give the other a special Christmas gift.  For Social Security and Medicare, MAGI is a whole different ballgame that gives you the potential opportunity to plan (a gift to yourself!) to avoid sacrificing (money.)

This blog post will be a little technical, but could contribute to tax savings when you plan for MAGI.  I will try to keep it as entertaining as possible given the subject matter.

What is MAGI

MAGI is Modified Adjusted Gross Income and is calculated by taking your Adjusted Gross Income (AGI) and adding in tax-free income, like interest on state and municipal bonds.  There are some other, less common items, that get added back also, for example savings bond interest excluded from income because it was used for post-secondary education; check with your tax advisor.

Why is MAGI important?

For pre-retirees, a higher MAGI may restrict your ability to contribute to a traditional pre-tax or a Roth IRA.

For retired people, a higher MAGI may subject some of your social security income to taxation and may cause you to pay higher Medicare Part B premiums.  The Medicare higher premium, the Income Related Monthly Adjustment Amount, is called IRMAA (I pronounce it like the name, Irma.)  The wind is called Mariah. (The Mariah link is fun, really.)

But I’m not rich!

Most of us aren’t rich, but MAGI can still affect us.  A MAGI as low as $25,001 for a single person (or $32001 for a married couple) will start to subject Social Security payments to income taxes.

How can I plan around MAGI?

First the disclaimers – If you’re a wage earner, like me, your planning possibilities are limited.  Small business owners have more control over wage versus business income and can exercise some control over timing of income.  I have to warn you again to discuss planning with your qualified tax advisor; we are discussing generally available information here that will not directly apply to your personal tax situation.

For pre-retirees, you may be able to use a technique called the ‘backdoor Roth’ to fund a Roth IRA, regardless of MAGI.  A good article from Ed Slott, an IRA expert, on backdoor Roth IRAs is here.

For both pre-retirees and retirees, the ways to lower MAGI are fairly straightforward:
-lower your W-2 and/or 1099-R income
-lower your tax-exempt income.

One way for retirees to lower 1099-R income is to take out less from the retirement accounts you have control over (IRA, SEP, 401(k), 403(b), etc.), subject of course to the Required Minimum Distribution (RMD) for those 70 ½ and over.  If you have a Roth IRA, withdrawals from the Roth won’t count towards MAGI.

Zero coupon municipal bonds exist that would pay out no tax-exempt interest until maturity.  Your financial advisor could help you plan the use of municipal zeros, instead of municipals paying semi-annual interest, to support MAGI planning.

If you have bank accounts, you could use withdrawals from savings accounts or CD’s as a substitute for the 1099-R income that you are avoiding.

Finally, selling mutual funds or stocks that have capital gains will contribute to AGI and MAGI only to the extent that you have a gain when you sell.

MAGI – gift or not?

I guess there are similarities to the Gift of the Magi because MAGI planning and executing requires you to give up something special, your time and perhaps payments to a tax advisor.  The gift you get back (a gift to yourself and loved ones) is the tax and Medicare Part B premium savings from your efforts that could be significant.

Citroen

When I was a child I lived in France for a while courtesy of the USAF.  Citroen cars were popular and this model of a DS in the window of a toy car shop in Haarlem, NL brought back memories.

Citroen

Actions you can take include:

-Consider how MAGI can affect your tax situation pre- and post-retirement.

And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here.

A correction

Back in the post Why not make money on your groceries? I thought a quote was from the movie ‘An Officer and a Gentleman’.  A reader informed me it was from ‘A Few Good Men’.  Thank you for the correction!

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.

Old and dangerous?

The Minnesota Marine Art Museum (Winona, MN) is hosting an ‘eagle’ collection for the National Eagle Center (Wabasha, MN).  MMAM is an outstanding museum which usually does not allow pictures, however they did allow the eagle collection to be photographed.  One of the eagle items that caught my eye was this 1918 WW I logistics poster from James H. Daugherty for the Emergency Fleet Corporation:

ships are coming

The AAA says…

Per the AAA, “With the exception of teen drivers, seniors have the highest crash death rate per mile driven, even though they drive fewer miles than younger people.” Part of this is due to the more fragile physiology of the older person, but part is from driving skill (or lack thereof).

Good news, there’s a class

A number of organizations offer senior driving classes which allow you to refresh your driving knowledge, learn some new tricks, and save some money.  AARP notes, “By taking a driver refresher course you’ll learn the current rules of the road, defensive driving techniques and how to operate your vehicle more safely in today’s increasingly challenging driving environment. You’ll learn how you can manage and accommodate common age-related changes in vision, hearing and reaction time.”

You save money, too

In my state, completing a state approved defensive driving course (8 hours) saves to 10% off your auto insurance for three years, and then you can take a renewal course (4 hours) to extend the savings.  The discount is on applicable coverages, which I think means collision.

More good news, you save you and others

Even more important than the cash you will save on your auto insurance is the flesh you’ll save by not getting in a vehicle accident.  At the minimum accidents are a huge inconvenience and eat up time and money.  At the worst, accidents maim and kill.  A defensive driving refresher could save someone’s life or limb.

Some defensive driving course links

The National Safety Council (Green Cross for Safety!)

(Look for discounts on the NSC class.  I know that the GEICO and the Minnesota Safety Council links to NSC cut the cost.)

AARP Smart Driver  There’s a 25% discount of the AARP class right now with the code ‘25OFF’.

Check with your agent to make sure a given course works for a discount with your insurer.

Ironically, when we researched the classes we found we’re both out of date, as you need to take the refresher within three years of completing the full class!  Mrs. NoSurprisesRetirement is signing up for the 8-hour AARP class right now.

We had the chance to visit the French monastery island of Mt. St. Michele in the off season. Here’s a picture of Mt. St. Michele with a helicopter ferrying out detritus from the cloister garden as it was renovated.  Last time they did it with hundreds of monks on the steps…

mt st michele

It turns out that Nationwide actually is on your side…

A friend of mine told me about a professional development class he took from Nationwide on their retirement health care estimator.  It is a free and interesting tool that your agent can have the Nationwide home office run for you. Nationwide worked with some actuaries to have a minimal set of questions that give some quality results back to you, like your overall monthly Medicare and supplement costs. Oh, and your life expectancy.  (Humming Nationwide tune…).

What, you don’t want to call an agent?  Nationwide also has a decent, free DIY tool to estimate your healthcare costs in retirement (and your life expectancy).  This one has a lot less detail, but you don’t have to talk to anyone.

Actions you can take include:

-Take a defensive driving class (or a refresher) and go get those auto insurance discounts.

-Try the Nationwide healthcare cost estimator.  Then call your financial professional and have them do the full version for you.

And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.

Why not make money on your groceries?

First, Happy Bastille Day, here’s Raoul Dufy’s 1905 ‘July 14th at Le Havre’ (Fridart Foundation):

Dufy cropped

Why pay more if you don’t have to?

A friend of mine is travelling in Europe.  Before he left, we were discussing using credit cards while travelling. As it turns out, he has credit cards that charge foreign transaction fees.  Ouch, that’s pay to pay.  Not only that but the credit cards gave him zero cash back.   Let’s examine how to avoid that retirement (or pre-retirement) bad surprise and even turn it to our advantage.

As a retiree, you’ll want to stay within your budget and as a pre-retiree, who can still get raises, you’ll want to increase your retirement savings. Properly used, credit cards may be able to help with that by:
-paying you cash back when you make purchases
-not charging you foreign transaction fees when you travel
-providing other benefits like extended product warranties, travel emergency assistance, and your FICO score.

Not for credit card souvenir purchases – a gold marten head (Northern Italy, 1500’s) from the Musee de Cluny in Paris:

Early Famous Dave's.

Examine your credit

First, examine your credit.  Do you pay off your balance in full monthly?  Do you at least pay off all new charges in full monthly?  If yes, you’re a candidate for credit cards to pay you.  (If not, please Google techniques to pay off credit cards so you can avoid paying the bank before yourself.)

Check out your cards

Sign on to your card website(s) and look at your cards’ benefits. Are there fees that you are paying that you should not be – annual fee, foreign transaction fees?  Are you getting cash back for purchases?  If you’re paying fees or not getting cash back, it’s time to examine your cards, unless you really love the credit card issuer and want them to make more money.  Legitimately, you may have an affinity card (Friends of the Siamese Cat Foundation! spot cropped ) that has costs and they benefit – no problem as long as you have made an informed decision.

Does your card help you by providing:

  • cash back
  • no fees
  • product warranties
  • travel assistance
  • chip/chip and pin?

Look for card advantages

Cash back can be a big one. Capital One is 1.5% on everything.  Costco Visa gives 4% on gas, 3% on restaurants and travel (travel when purchased through their agency), 2% at Costco (makes that hotdog and pop $1.47 instead of $1.50!), and 1% on everything else.  Amazon Visa is 5% on Amazon purchases, 2% on gas, restaurants and drugstores, and 1% on everything else.  Discover has 1% on everything, but 5% on quarterly specials. USAA Visa has a chip/pin combo which can be helpful when traveling in Europe.

None of the above have foreign transaction fees.  Interesting fact, I ordered some delicious essential Waitrose sugar-free bitter lemon juice for Mrs. NoSurprisesRetirement from the British Corner Shop , used the wrong card and ended up with a foreign transaction fee. Ouch – that card is now gone.

The cards? You can’t handle the cards. (A play on An Officer and a Gentleman)

What can you handle? An extreme carder (is there such a word as carder?) would have:

  • Amazon card for 5% at Amazon and 2% at drugstores
  • Discover card for the 5% quarterly cash back special
  • Costco card for 4% on gas (anywhere!), 3% at restaurants, 2% at Costco
  • CapitalOne for 1.5% on anything not on the above
  • USAA for the chip/pin combo.

What’s in your wallet?

You’re probably not an extreme carder, so figure out what is most important to you and get cards that pay you for using them.  Even if you just had one paying you back 1% and not charging foreign transaction fees, that’s a win.  Remember, perfection is the enemy of the good.

Be careful

Even if you have cards with benefits, please do not get carried away. Stay within the budget, pay the balance off monthly, and enjoy that percent.

Actions you can take include:
-Review your budget and make sure you’re either not paying interest on credit cards every month or you have a plan to get to not paying interest.
-Examine your cards and see if you are getting benefits or paying fees that you don’t need to pay.
-Determine how much of a ‘carder’ you want to be and obtain cards to optimize your  percents back and no fees.  Cancel cards you will no longer use.
-Use the card website to check your FICO credit score monthly.

And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.

A short, valuable Medicare primer

First, a picture of the world’s best raspberry-iced Bismarck from Grandma’s Bakery, White Bear Lake, MN:

The roll - c

I’ve been a little busy with work and the holiday this week, so you’re getting an abbreviated but meaty post, 99.8% created by one of the website ‘Seeking Alpha’ contributors who goes by Tipswatch (from Treasury Inflation Protected Securities).  The article is titled, “Nearing 65? Don’t Get Caught By Medicare’s ‘Money Traps’”.

I think it’s a definite read, so here’s the link: Don’t get caught by Medicare’s money traps.

Now, ‘In the Lenin Mountains’, (1958), B. Talberg & Y. Korolev; The Raymond & Susan Johnson Collection of Russian Art; The Museum of Russian Art, Minneapolis, MN:

Lenin Mountains

 

Note – outstanding smaller museum in south Minneapolis. Make it a stop if you’re visiting.

Actions you can take include:

-Think about your medical needs and budget and make a Medicare plan.

And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.

Mid-year Check Point – Dollars & Sense

First, a picture of the best Ile Flottante in Paris, from Restaurant Georgette:

ile flottante

We travelled to Paris in the off-season, and before we left I checked Trip Advisor for the best Ile Flottante because that is Mrs. Nosurprisesretirement’s favorite French dessert. Ile Flottante is basically a delicious soft meringue (the ile or island) floating (French flotte – to float) on an even more delicious custard.

The overwhelming sentiment on Trip Advisor was for Georgette and they were right.  Take a walk from the Left Bank Sorbonne area across the Jardin du Luxembourg and you’re there.

Check Point One – Budgeting (Dollars)

Thinking back to our budgeting post,  ‘Oops, or New Year Fiscal Fitness’, we discussed using a spreadsheet for budgeting and tracking.  We ended up trying the ‘Personal Budget Planner – Extended’ and have been satisfied, especially because I did not have to develop the spreadsheet myself.

Positives:
-we have been tracking a very high percentage of expenditures, so the ‘actual’ portion of the budget v. actual tracking is accurate
-the budgeting experience was enlightening (a polite word for occasionally opposing and sometimes loud opinions) as we determined what to include and at what amount
-actual v. budget tracking is available for any given month.

Negatives:
-the comparison feature does not support a year to date comparison of spending to budget
-the available rows for budgeting may cause you to combine budget items on a single row (likely not a problem for most people, but I wanted a lot of individual tracking).

The tracking has been going well and I would recommend this spreadsheet.  In areas where we go over budget, we often learn we under-allocated at the budget level. Surprisingly, since we track ‘everything’, the ‘pocket money’ budget line is always almost 100% under budget!

So far it seems like our retirement budget could be appropriate and achievable, barring any bad surprises.

And now a picture of the finest Indian Taco in Phoenix from The Fry Bread House:

Indian taco

The Fry Bread house is a small but popular establishment in central Phoenix.  We can definitely recommend any of their fry-bread tacos (or ‘fry-bread sweets’ desserts!) and the rich and spicy green chile stew.

Check Point Two – Fitness (Sense)

In the ‘What Was I Thinking’ post I talked about exercise and flexibility.  On the plus side, I have been relatively active, especially with walking in the neighborhood since the weather got nicer.  I document my activity on a free phone app called Microsoft OneNote, so I actually know where I stand v. my goals.   On the minus side, I have not met my goal of 30 minutes 4 times per week as much as I wanted.

Here is ‘The Drummer’, (1989-90), B. Flanagan (Wales); Hirschhorn Sculpture Garden, Washington, DC:

The Drummer

Note – not a great sun angle on the photo, because we were there in the off-season!  No crowds, so it was like a private sculpture garden on the Mall!  Also, it seems like all the museums in DC are free – excellent deal!

Funtirement!

Funtirement is my daughter’s name for when I take a Friday off for my own three-day weekend.  This week for Funtirement, I used the firm’s preventive care benefit and went to the clinic for a science experiment. It turned out well and it looks like I only need the ‘experiment’ every five years now.

Actions you can take include:

-Do your own mid-year checkpoint.  What’s going well and what could you improve? Remember, perfect is the enemy of the good.

And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here.

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.

 

Carp time! (a play on Carpe Diem)

Well golly, we had a couple of bad retirement surprises this week.  One was that a father of some of the kid’s high school classmates passed away at a young age, only 66.  The other, less bad, was finding out that a relative would need surgery at a much younger age that we thought.

If you’ve followed No Surprises Retirement for a while, you know that we focus on avoiding bad retirement surprises.  No one can avoid every bad surprise (but you should be trying!), so remember to enjoy some carp time.  Carp time would be fishing for those who enjoy it, but others can carpe diem (seize the day) and enjoy their favorite activities.

There is a balance

One could completely abandon planning and work and instead seize enjoyment until the money runs out, then live like a pauper.  On the other hand, one could work like a dog, scrimp and save, plan, buy annuities, wait until FRA or 70 ½ for Social Security and then not live to enjoy it.  There is a happy median of enjoying what you have while judiciously planning for the future.

Savor what you have

Those of us who are not retired usually have to go to work.  Since it’s a requirement, what are you doing to savor and enjoy it?  Without going all Zen on you, I can tell you that in my job, I look for the good parts to savor in several areas:
-colleagues – their banter, their admirable traits which include technical skill and adaptability, their quirks which can be irritating and endearing at the same time
-customers – their ability to collaborate, their humor, their gratitude when we deliver for them
-routine – the gift of routine which provides a sense of stability
-change – the excitement of something new, like a new project (admittedly, not all changes have been fun over the past thirty some odd years…)
-coffee – our cafeteria makes a perfect Starbucks Pike Place and I REALLY savor that with half and half daily.

If you’re already retired, you likely have established some routine that meets your needs and, hopefully, provides opportunity for savoring.

I’d like to hear from you in the comments or by email to nosurprisesretirement@gmail.com on what you do to ‘carp time’ (or carpe diem) in your usual life.

A reader wrote in!

A couple of weeks ago a reader wrote in and shared Barry Ritholz’ ‘Retirement Pyramid 2.0’.  Thanks, reader, for sharing.  Barry’s pyramid focuses a little differently than mine, more toward financial behaviors, but it is excellent and I recommend that you click on the link and review it.  Barry and his team usually give very sound advice – I follow a number of them on the Twitter.

Funtirement!

Funtirement is my daughter’s name for when I take a Friday off for my own three-day weekend.  This week, the three days of Funtirement found us waking up about the same time as a work day, enjoying lunch at a British pub style restaurant, and cleaning up some paper work at home.  We also got our license plates updated, watched two episodes of Live PD, and had a pizza from the pizza place in the old neighborhood.  I read the latest issue of The Economist, economically sourced from my local library, an article on Faroe Islands food in The New Yorker, also from the library, and a retirement study from Aegon. (The Faroe article used the words ‘rank’ and ‘fermented lamb tallow’ in relation to the food – not going there soon ever.) Finally, we enjoyed a Father’s Day ice cream sundae gathering at my daughter and son-in-law’s house.  All the kids and wonderful grandchildren were there.

Next week’s Funtirement will be scientific!  I’ll be headed over to the clinic for some routine maintenance.  For those of you old enough to remember, it will be a replay of Fantastic Voyage…

Actions you can take include:

-Pause, reflect, and see what you can find to savor in life.

And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here.

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.

Risky retirement talk

Remember that the goal of No Surprises Retirement is to help you minimize or eliminate surprises that can damage your retirement.  A risk is defined as “exposing something valued to…loss”.  We’ll discuss a couple of risks today, both involving healthcare; inflation and coverage.  The goal here is preparation and risk mitigation or avoidance, not fear and depression.  We will review a change in the Federal government direction on pre-existing conditions that may affect your retirement date.  On the inflation side, we will look at the healthcare inflation trend and see what that does to your retirement lifestyle.  Let’s start with the pre-existing conditions situation.

Pre-65 retirement risk – pre-existing conditions coverage is unstable

If you are planning on retiring before Medicare (pre-65) and don’t have retiree medical care from your employer, this might be a good time to consider continuing to enjoy your work colleagues and workplace a little longer, until a potentially expensive change to individual health insurance is more settled.

The Patient Protection and Affordable Care Act, sometimes called PPACA or nicknamed Obamacare, mandated that insurance companies take all applicants regardless of any pre-existing conditions and charge them on a community-rated basis.  Since the general audience of No Surprises Retirement is likely in the retirement age range, a lot of us likely have pre-existing conditions.  Examples here could include a diagnosed knee condition, heart problem, cancer treatment in the past, or abnormal liver test results.  Basically, under PPACA, pre-existing conditions were not a problem for anyone.

But, there’s a change!

It’s kind of a long, involved story, but there are a number of states who are suing in Federal court to have the PPACA declared unconstitutional. Winning was not a slam dunk, but if they won, all of the PPACA could go away, including the coverage of pre-existing conditions part. Risk level – moderate.

Just this week, the Federal Government’s Department of Justice decided to not defend the PPACA against the state lawsuit. This makes it much more likely that the PPACA will go away.  Risk level – high.

If the PPACA goes away, pre-existing conditions would then come back in to individual health insurance underwriting.  People (think pre-65 retirees here) applying for individual health insurance could be rejected or have exclusions for their pre-existing conditions.

What can I do, you ask?

Remember that without health insurance or with insurance with limitations on pre-existing conditions, you could be liable for some very large medical bills if you have a serious illness or accident.  I had a knee infection that cost about $25,000 (and is now a pre-existing condition!).  If you incur a large medical bill without coverage because of a pre-existing condition, that money would likely have to come from your retirement savings and potentially lower your retirement income for the remainder of your retirement, a bad retirement surprise

In my case, I am very concerned about what will happen to coverage for pre-existing conditions.  I have decided to avoid the risk of a change to the way pre-existing conditions are insured and now plan to do my best to stay employed and covered under my employer’s plan until we are eligible for Medicare. If, for some reason, the risk for pre-existing conditions coverage improves, I can always re-plan.

What does FRED say about healthcare inflation?

Remember that inflation is “a general increase in prices and fall in the purchasing value of money”.  You’re paying more for the same thing.

FRED is Federal Reserve Economic Data.  The St. Louis Fed, using FRED data, states, “…Going back as far as the series are available, since 1948, the price of medical care has grown at an average annual rate of 5.3% while the entire basket, headline CPI, has grown at an average annual rate of 3.5%. In the past 20 years, in the regime of stable inflation, headline CPI has grown at an average annual rate of 2.2%, whereas the price level of medical care has grown at an average annual rate of 3.6%—about 70% faster.”

What does that translate to?

Let’s be optimistic and assume that healthcare inflation will stay toward the lower side at 4%.  That means that healthcare costs will double approximately every 18 years, or once or twice over the span of a typical retirement.  Inflation is reverse compound interest working against you.  If you retire at 62, by the time you’re 80, your insurance premiums and out of pocket costs will likely have doubled; they increase a little each year.

The question here is what will have happened to your income in the same time period?  While Social Security is inflation adjusted, that inflation adjustment may not keep up with healthcare inflation.  US Government and Military pensions are inflation adjusted, but most defined benefit plans are not inflation adjusted. Depending on your investments, IRA investment returns can offset some inflation.  In any case, you will likely need to plan to spend more on healthcare and less in other areas.

What can I do, you ask?

Use less healthcare by getting in and staying in the best shape you can.  Proper exercise, diet, and sleep.

Monitor your personal healthcare prices and shop around for the best non-emergency prices.

Learn about healthcare prices and different approaches.  When you find one that you like, register and vote for political representatives who will represent your position in state legislatures and the U.S. Congress.  As an example, some people want Medicare to negotiate prescription drug prices while others want Medicare to stay away from negotiating.  Whatever your position, if you don’t vote, you are letting others decide your health insurance inflation fate.

Actions you can take include:

-Plan your risk strategy around pre-existing conditions and health insurance.

-Spend some time on healthcare inflation and potential solutions, then register and vote.

If you have not seen the “Why you should read this blog…WIIFY” post, it’s here.

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.

Interesting question – take two

Last post we took a detour to discuss travel.  Travel is the most cited ‘want to do’ activity in retirement.  This week we’ll really spend time on the interesting question.

The interesting question

I was reading a practicing financial advisor’s article in a financial planning magazine and ran across an interesting question; “Is your goal to be the richest person in the graveyard?”

If you’re like me, the first place you went with the question was money, particularly a legacy to heirs of money.  Your legacy is important and financial planning around a monetary legacy is critical if it might be large. However, let me suggest that while money is a consideration, perhaps money should be the lesser part of your legacy.  You have already built a part of your legacy, cash and non-monetary, over the course of your life.  You now have the chance to add to your legacy in your pre-retirement and retirement years.  Let’s consider legacies.

What’s in your legacy?

In my case, my family members left me the values of honesty, hard work, perseverance, adaptability, and continuous learning.  I hope and believe that we passed these on to our children and that they will pass them on to the grandchildren. I have some friends that are retired teachers.  They are childless, but I hear stories of how even today former students will stop them in stores and remind them of the values and lessons they learned in their classes.  The legacies of some of my coworkers (many still living) to me included exemplary work ethics, technical excellence, generosity, sharing, caring about, and humor.

Values

You have already left a value legacy.  You can build on it by making it explicit; consider writing an autobiography and pointing out the values you were trying to pass on.  One of my most treasured possessions is a copy of a typed transcription of my great-great-grandfather’s diary from several months in the 1860’s.  Your autobiography could connect multiple generations with your values legacy.  Don’t worry about the grammar and spelling, they will treasure your history and memories.

Actions

A number of our friends continue to create their legacy in pre-retirement and retirement by contributing to the community.  Some are committed to environmental causes; one keeps an entire mile of street free of litter as part of an adopt-a-highway program.  Another group helps with youth development by volunteering for Scouting.  Some friends do genealogy to document their family lineage. Still another set helps with anti-poverty and disaster relief through religious institutions and non-profits. Others help maintain our democracy by volunteering with their political parties.

I have attended a number of funerals where “the dash” was read.  Think about your ‘dash’ and consider how you might engage in the community.  Here’s a link to Volunteer Match which can help you find opportunities to meet your interest and abilities.

Back to the money

“Is your goal to be the richest person in the graveyard?”  The financial advisor indicated that he strongly encourages clients to definitely not be the richest person in the graveyard.  A different way of saying this is, ‘die broke’.

Why not be the richest person in the graveyard? A few reasons come to mind:

-quality of life

-estate tax

-smaller gifts instead of a large inheritance.

Hopefully your RIP is set up to provide you with a lifetime retirement income, regardless of how long you live.  If you spend too frugally, you could end up with a lower quality of life than you could afford, leaving a larger estate that was necessary.  Consider the balance in your retirement spending between quality of life and monetary legacy.

Even though the Federal estate tax limit has been raised, that does not mean your state’s estate tax has followed.  Dying with a large estate and no estate tax plan can cost a literal fortune.  I know of one middle-class family that wrote a $40,000 estate tax check because of poor planning.  With minor planning and gifting they would have had no estate tax due – ouch.  Charitable donations and gifting are a couple of techniques for avoiding any estate taxes.  If you will have retirement income outside of Social Security and/or a defined benefit pension, a checkup with an attorney specializing in estate planning will likely be well worth your time.

If you are fortunate enough to have some financial assets that you think might pass on to your heirs, consider multiple smaller gifts while you are living.  One advantage here is that you will get to see the next generation enjoying the gift, which may have been used for a home, car, or vacation.  One key rationale for smaller gifts is that they are less likely than a large inheritance to enable sloth or other moral hazards of wealth without work.

Consider what legacy strategies fit best for you, including dying broke.

Actions you can take include:

-Consider how you might answer the question, “Is your goal to be the richest person in the graveyard?”

-Consult an estate planning attorney to see what, if any, estate plan you might need.

And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.

Interesting question.

The question will come a little further down, let’s think about Memorial Day first.

Memorial Day

It’s Memorial Day weekend in the US, commencing with Civil War remembrances of those who served and died for our country.  Many have served and died for our freedom and values since.  Take a moment and reflect and respect their sacrifice.  Many died in combat, many others as a result of combat; wounds visible and invisible.

We ask much of our defenders and they deliver.  We should first demand that our leadership use force only as a last resort, as the human cost is incalculable.

Off-season travel

Last month we were able to take an off-season trip to the Netherlands (note the link is an official Netherlands site in English; how polite and kind), Belgium, and France.  We were a little later this year than usual, early to mid-April, so the weather was warmer and there were more people.  I said more people but we did not really see crowds, except for the amazingly long line (1km?) to a ‘Fallout Boy’ concert at the Amsterdam ArenA on the way to our hotel.

Since we were a little more towards Spring than Winter, the hotel prices were a somewhat higher, but still within our retirement travel budget.  Restaurants were open and uncrowded.  The best part was that most of the museums and parks were like having private viewings.

We have been fortunate to travel to Europe a few times and have already seen the more popular tourist spots.  The ‘few times’ comes from a discussion we had some years back on how peoples’ motivation and ability to travel declines over time.  We made a conscious decision to make the most of our ‘now’ and attenuate our spending in other areas in favor of travel.  We try to mitigate the cost of travel by going off-season, shopping for the best air travel price, and using public transportation.  Typically, we’ll have breakfast in the hotel room, have a nice lunch at a restaurant, and sandwiches and desserts from a local supermarket in the room for dinner (usually an Albert Hein in NL and BE, Carrefour and Marks & Spencer in FR, Waitrose, Pret a Manger, and Marks & Spencer in GB). Bob and Sarah from the Success story! post gave us that tasty and money saving hint.

Many museums and attractions are free or can be discounted with city cards (Paris Pass, London Pass, Antwerp City Card).

The smaller museums we enjoyed this time included:
-Museum Our Lord in the Attic – Amsterdam
-Jewish Historical Museum – Amsterdam
-Rembrandt House – Amsterdam
-Maidens House Museum – Antwerp
-Museum de Reede – Antwerp
-Museum Eugeen Van Mieghem – Antwerp
-Ruebens House – Antwerp
-Cognacq-Jay Museum of 18th Century Art – Paris
-Zadkine Museum – Paris
-Andre Jacquemart – Paris

Every museum was uncrowded and in some we had the exhibits completely to ourselves. My personal favorite this time was the Zadkine.  I had never heard of Ossip Zadkine before, but in my opinion he was an amazing and gifted sculptor.  I definitely recommend the Zadkine a part of any visit you make to Paris.  The museum is run by the City of Paris and entry is free.  The Zadkine is also very time friendly as it is compact – 45 minutes would be a very long visit.

Here are a couple of my Zadkine favorites. First, one I don’t have the title for:

zadkine lyre

La Foret Humaine (1957-58):

la foret

We also got lucky and were able to get an Antwerp harbor tour.  They opened a week early because of the excellent weather and we just made the 2:00 boat.  Great harbor tour.

We navigated a construction zone to get there:

on the way to the boat

The tour was great – plenty of giant industrial stuff:

on the boat

And the way back had its challenges:

finding our way back

The interesting question

I was reading a practicing financial advisor’s article in a financial planning magazine and ran across an interesting question; “Is your goal to be the richest person in the graveyard?”

Minor surprise here – I ran out of space, so we will (re)visit the interesting question in the next post.  In the meantime, see the actions you can take, below.

Actions you can take include:

-Consider how you might answer the question, “Is your goal to be the richest person in the graveyard?”

And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here 

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.

Wow, that’s a surprise!

I was surprised, shocked even, by what I learned in a continuing ed class on Social Security last week.  A large insurance company sponsored a Social Security study; we learned about it in the class and the survey results were a wake up!  This post will cover some of the key things you really need to know about Social Security. That company? Think whistling quarterback.

Let’s try a few questions to see if you can ‘test out’:

  1. How many years of earnings are counted in your benefit calculation?
  2. True or False – There are different claiming rules if you were born before January 2, 1954.
  3. What is your full retirement age (FRA)?

Answers later.

Pig legs!

More precisely, prosciutto on the hoof, so to speak, at an grocery store in Florence, Italy.  Enjoy!

pig legs-cropped

How important is it?

My first surprise, and I believe the insurance company’s also, was that approximately 25% of people think Social Security on its own will be enough for a comfortable retirement.

To avoid a bad retirement surprise, please consider that Social Security as your only retirement income source is too low for a comfortable retirement.  The official Federal poverty level for 2 is $16,460.  Per Business Insider, the average Social Security benefit is $1410/month. A couple who both receive the average benefit (total of $33,840) would be at approximately 200% of the poverty level.

A valuable, extremely underestimated, benefit

52% of respondents did not know that Social Security guarantees income for life.  Good news, it pays for life, and the life of your surviving spouse, if you’re married.

60% (I’m crying here) did not know that Social Security is protected against inflation. Social Security does have COLAS! (The cost of living adjustment kind, not the pop.) The inflation protection is my favorite part!

Honestly, life income with a COLA is a good retirement fact, or surprise if you did not know about it before.

How much per month?

The survey noted that 55% of people say Social Security will be their primary source of retirement income and they over estimate their Social Security benefit – per the survey, future retirees expect $1,628/month, while current retirees actually average $1,257/month. That’s about a $4,400/year difference and that is an amount that can change your lifestyle.

Avoid a bad retirement surprise and head over to my Social Security, order a benefits statement, and use their website tool to estimate your benefit.  Also, figure out how to remember the complex password they require you to have. (My ‘my Social Security password requires both hands, my left little toe, and a llama to input. Not really, but it’s challenging.)

When will I collect?

The survey found that future retirees think they will collect Social Security four years later than the age at which retirees actually commenced their benefits. Collecting later = more money per month, collecting earlier = less money per month.

Avoid a bad surprise and plan when you will collect to achieve the best retirement income you can for your situation.  Many financial advisers have software tools to help you (and spouse if you have one) maximize your benefits.  I found one online that I was comfortable with, but if you’re not really into financial planning, you may want a pro to help you.

The answers

  1. How many years of earnings are counted in your benefit calculation?

The highest 35 years, and if you don’t have 35, they average in zeros for the missing years.

  1. There are different claiming rules if you were born before January 2, 1954.

True – if you were born before 1/2/54, you can take advantage of ‘file and suspend’.  Born after 1/1/54, no ‘file and suspend’ for you, as there was a bipartisan law change in late 2016 that eliminated this planning strategy.

Note – the law change did not change some claiming rules for people who are divorced but were married over 10 years to the former spouse.  The divorce claiming rules can be advantageous with planning.  If you are in this situation, you definitely need to learn about them and incorporate them in your Social Security planning.

  1. What is your full retirement age (FRA)?

It depends! If you were born on or after 1943, it’s at least 66 and if you were born in 1960 or later it is 67.  You can find your FRA on the chart here.

Actions you can take include:

-Register on www.ssa.gov.

-Order your Social Security statement on www.ssa.gov.

-Go to www.ssa.gov and get a benefit estimate for when you believe you will retire.  Use it in your RIP.

-Consider how you will do your Social Security income planning and develop a plan that works best for your situation and constraints. Talk to your trusted financial advisor; the insurance companies they work with have Social Security software available for them to use for you.  Alternatively, check online for Social Security planning software you might like.

And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here.

Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email.