But I’m not rich, IRMAA

What is IRMAA?

The Income Related Monthly Adjustment Amount (IRMAA) is an additional premium (aka surcharge, aka more money) you have to pay on top of your Medicare Part B standard premium (currently $170.10) and your Part D premium, if your Modified Adjusted Gross Income (MAGI) exceeds certain income levels. MAGI is your adjusted gross income (AGI – line 11 of your 1040) plus any tax-exempt interest (line 2a of your 1040).

IRMAA (for 2022) starts out at an additional $68/month for Part B and an additional $12.40/month for Part D for married filing jointly earning over $182,000 and less than $228,000. The maximum, per month, is $408.20 and $77.90 for those earning over $750,000. (Note – they are likely not reading this…)

Social Security sends you an IRMAA letter if you are going to owe IRMAA premiums. You will get it soon after Medicare enrollment when you first sign up. You can also get the IRMAA letter late in the year if they will assess you for the next year.

The full breakdown of filing statuses, incomes, and IRMAA premiums is here https://secure.ssa.gov/poms.nsf/lnx/0601101020

Rich or not

Regardless of your actual wealth, Social Security and Medicare will look at the latest income level they have for you from the IRS. Typically, that is from 2 years prior.

You may be rich enough for IRMAA even if you see yourself as a humble retiree just making it. One scenario is right as you retire and your 1040 showed a couple of high (over $182,000) earning years prior to retirement.

Another scenario might be a DIY! You might cause yourself some windfall that places you over the limit by selling an asset or winning a lottery. This could be selling assets that have appreciated (stocks, investment real estate) or taking a large distribution from your 401(k) or IRA.

Some real, painful, cases

One tragic case was when an acquaintance of mine had a family member with cancer. As you may know, medical insurance does not cover everything and this person ended up owing medical providers a significant bill. They took out large sums from their IRA to pay the bill and, bingo, got hit with IRMAA.

In another case, I heard of someone who cashed in an annuity as part of their income plan. They would not need all the money in the current year, but wanted to simplify their investments. Bingo, they hit IRMAA.

In another case, a friend did well income-wise and found out right after retirement and going on Medicare that he would be paying not only Part B, but IRMAA, too!

So, how can I avoid IRMAA – planning

The easiest way to avoid IRMAA is to plan your income. If the income that generated the IRMAA is not as a result of a ‘life changing event’ you are likely going to have to pay the IRMAA. So, let’s look at ways to avoid IRMAA without your life changing. Income and expense planning are your best friends here.

I like to lead with expense planning – find out how much money I will need for the current year, including things like mortgage, Medicare premiums, property taxes, food, gas, and the rest of my expense list. Basically, we build an annual family budget.

Once you know how much you plan to spend, look at where the money is coming from, including regular savings, Social Security, annuities, pensions, and tax-favored money (IRA, 401(k), etc.)

Watch the income at least quarterly so that you know where you are relative to quarterly tax payments, tax rates, and the IRMAA limits throughout the year.

On the income side, remember my friends who cashed in the annuity policy. Their goal was account simplification. Unfortunately, the simplification cost them. Their solution might have been to take the annuity money early in the year and then take smaller amounts from the other accounts as needed to meet their income plan.

The friend with the medical expenses might have been able to do a short term house second mortgage and then pay that off over a few years from their IRA while avoiding the IRMAA limits.

A wish? Wedding, car, trip?

If you know that you will have a large expense coming up that you will be funding, consider increasing your income withdrawals for a year or two prior to the year the money is needed so that you avoid IRMAA each year, but the money is all there the year it is needed.

So, how can I avoid IRMAA – life changing event

From my perspective, the most likely way to be relieved of IRMAA after it has been assessed is to have a ‘life changing event’. If you had a ‘life changing event’ you may be able to appeal. Per Social Security, life changing events include:

A Life-Changing Event (LCE) can be one or more of the following eight events:

Death of spouse (HI 01120.010);

Marriage (HI 01120.015);

Divorce or annulment (HI 01120.020);

Work reduction (HI 01120.025😉

Work stoppage (HI 01120.030);

Loss of income-producing property (HI 01120.035);

Loss of employer pension (HI 01120.040); or

Receipt of settlement payment from a current or former employer (HI 01120.043).

If you have a life changing event, you can appeal to Social Security using a form SSA-44. Work stoppage, such as retirement or being laid off, is a big one. Make sure that you use the Social Security reason first, then amplify as needed. Example – “I had a work stoppage because I retired on May 30^th, 2022.”

Fine points

Remember that if IRMAA is assessed, it will apply to each spouse’s Medicare premiums, if married.

Don’t wait. If you are assessed IRMAA and you can appeal, do so immediately. If you wait you will have to pay the higher premiums until your appeal is approved, then Medicare will not bill you until your overage is cleared. Also, if you wait to long, your appeal may be denied because it was filed too late.

Share, please.

Please share your IRMAA tips in the comments!

Actions you can take include:

If you have not seen the “Why you should read this blog…WIIFY” post, it’s here https://nosurprisesretirement.com/2017/07/09/first-blog-post/

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 Felon, Plumbing, and Risk Management

Risk and management

In my pre-retirement life, I spent a number of years as a project manager. One of the key functions of project management is risk management. Project manager or not, risk management is an uncomfortable activity that starts off with denial. However, denial is not a viable risk management strategy. Project managers and regular people benefit from risk analysis and planning. Risk analysis means identifying risks and assessing how bad they can be. After analysis, you determine the strategy to use.

The risk management strategies include:

Avoidance – avoid the risk so that it does impact you. Example: not going to the park when thunderstorms are predicted.

Mitigation – minimize the potential for risk impact. Example: using a licensed plumber to install a new water softener rather than DIY.

Transfer – hand off the risk to another entity who can absorb it. Example: homeowners insurance for fire, storms, and liability.

Acceptance – accept the risk and whatever damage it does. Example: not insuring your old car for collision.

A cabin

I have a friend who owns a vacation cabin in northern Minnesota. Every year they winterize it and as part of that process they drain the water and put anti-freeze in the drain traps of the sinks, toilets, and tubs. This way there is no water in the pipes or fixtures to freeze, expand, and cause plumbing leaks.

The felon

Several years ago, around the end of December, we had a local felon try to commit suicide by running his car into an electric pole at high speed. He lived, only minor injuries, but we had our power and heat go out for several hours while the power technicians completed repairs. No heat in Minnesota means that eventually your house will be cold. Potentially cold enough to freeze water, and your pipes.

Fortunately, in this case, we ended up getting power back before it got too cold.

Risk assessment

The winter power outage shook me out of my denial and I analyzed my risk of water pipes freezing. The probability of risk happening was low. The impact of the risk happening would be high, as we would not have water and when it warmed up again, we could have leaks in the walls and damaged porcelain.

We had already transferred the risk with homeowners insurance. But, was that enough? No, because if we froze there was the potential that a lot of our neighbors would freeze also. That would cause a huge demand for plumbers and fixtures as the heat came back on, so we could end up with leaks, broken fixtures, and a long wait for a fix, even if insurance would pay for the damage.

We decided that we needed the additional strategy of mitigation. We could not avoid the risk as we have no control over the weather and no control over power outages.

Mitigation

If we mitigated the risk, we might be able to manage the problem with only a minor inconvenience.

I looked at the plumbing and planned what we would drain if freezing was imminent. Turn off the water at the meter, then open faucets and flush toilets from upper to lower floors. Drain the hot water heater. We have a floor drain in the basement.

After watching my friend winterize the cabin, I followed his plan and purchased 4 gallons of RV antifreeze to put in the drains (sinks, tubs, showers) and toilets (tank and bowl). He puts in about 2 cups per drain.

I would then turn off the water softener and switch off the water to it. I would pack the city water connection in blankets to insulate it as long as possible.

Expected result

While I hope that no one would be damaged in a case like this, I would expect to be able to turn the water back on when the power is back with no issues. At worst, I would have a relatively small repair at the city connection.

Because a lot of people would not have mitigated their plumbing, we would not be in competition for fixtures, pipes, or plumbers and so be back up and ‘running’ quickly after the event.

Good news

The RV antifreeze has been sitting on the garage shelf for a couple of years now, so we have not had to worry. But we’re ready.

Share, please.

Please share your risk handling tips in the comments!

Actions you can take include:

If you have not seen the “Why you should read this blog…WIIFY” post, it’s here https://nosurprisesretirement.com/2017/07/09/first-blog-post/Questions, comments, or suggestions for retirement surprise areas you want to know more about?
-Leave a comment
-Use ‘Contact’, above, to send an email

My ‘70s Poli Sci class (also, vote!)

Problems of Democracy

I took a political science class in the ‘70s titled ‘Problems of Democracy’. Interestingly, even though I read the course description, I thought the class would be about the issues of the ‘70s: the war (the Viet Nam conflict to qualify it, as we’ve had several since), civil unrest, and the economy. It sounded interesting. Boy was I surprised when it turned out we were studying the actual issues of ‘democracy’ – people governing, usually through representatives.

One problem – participation

One of the problems we studied was citizen participation. Remember that when democracy was invented, few were citizens qualified to vote. Typically land-owning males made the cut. Early democratic theorists were concerned about too few or too many citizens voting. Too many citizens could lead to mob rule.

Election Day – 2020

One could argue that in the US we have had too few voters participate in the past, leading to a gradual loss of legitimacy of our government. This a very bad thing. Fortunately, you can help – please vote if you have not already. Please ask your friends to vote. The larger the vote, the more legitimate the outcome will be, regardless of which candidate wins (true at all levels, from President down to city councilperson).

Need help?

https://iwillvote.com/ will help you find out where and when to vote. https://www.vote411.org/ from the League of Women Voters can help too. If you want a Republican version, it’s https://vote.gop/

Reminder

Please vote – Monday for early-voting or Tuesday on Election Day. The League of Women Voters vote411.org can help you see who is on the ballot.

Mail ballots – don’t, it’s too late – take them to an official drop off or your vote might not be counted.

Please ask your friends and family to get out and vote. Really.

Request

A friend of mine works at the polls. She mentioned that some people don’t wear masks to vote. Wear a mask, please. Remember – the mask is you protecting the other guy from getting sick. I know you would not want to be the one who got someone else sick. It’s not a political statement, it’s civic decency. Please wear an actual mask to vote and help keep my older friend from getting COVID and having a bad outcome. Thank you.

Actions you can take include:

If you have not seen the “Why you should read this blog…WIIFY” post, it’s here https://nosurprisesretirement.com/2017/07/09/first-blog-post/

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

Didn’t see that one coming…

COVID-19

Wow – I did not have Global Pandemic as part of my potential retirement surprises. I won’t make that mistake again…

The key risks are to those over 60 and with certain health conditions, but no one is immune. You and your family need to take precautions and be careful. I thought about it and suggest four areas of actions for you to take.

Action one – prevent further surprises

Personally, we are sheltering in place until at least April 10th – that’s the rule in our state. The less you’re exposed, the safer you are. You benefit the herd by not passing it on. Eventually there will be a lot more testing and a vaccine, but for now, stay low. #StayHomeStaySafeSaveLives

Action two – help where possible

Part of helping is playing your position. As part of shelter in place, you are likely playing right couch, kitchen counter, or center desk. I’m sidelined from my volunteer activity, but am playing left recliner. It’s what we need to do to help. We can get actively back in the game when we get the all-clear.

Most volunteer sites are shut down. You can help by sending money to food shelves. Their demand is up quite a bit, because a lot of people are losing jobs or having hours cut. Blood donations are needed so call your local blood bank. I bet they have procedures in place to have you, and them, avoid COVID-19.

Action three – your mental psychological game

Everyone is a little freaked out by COVID-19, some more than others. The shelter in place limits contact – it’s hard to have a good conversation from six feet away. You can be the ‘reach-out hero’ to family and friends.

We have multiple video conferences now each week, including family, friends, and some people whom we have not talked to as frequently as we should.

Based on our experience, people really need to connect – it really helps.

We have had excellent results scheduling Zoom(sm) meetings from ‘zoom.us’. It’s free. Sign up for an account and you can host meetings. Attendees don’t even need an account. There is an app for iPhone/iPad/Android devices and a simple download for PC/Macs. Zoom even has videos on how to use Zoom. The link is here: Zoom video tutorials

You can use this time as an opportunity for some mental self-care. I’m keeping a COVID-19 diary that records what we do during the day and significant events which I see in the news. It will become part of my book, “Esteemed Grandfather’s Book of Advice and Memoir”.

Online classes are not just for kids who are remote right now. FutureLearn has a COVID-19 class from The London School of Hygiene & Tropical Medicine. Your library and/or your company may provide some online classes. My library even has some ‘Great Courses’ to stream. Search OCW or open courseware to find classes you might like.

You can also refer to No Surprises Retirement’s Free stuff! or Pre-retirement or retired, why not RAP? blog posts.

Action four – physical self-care

The funniest thing I saw was avoiding the COVID-20 – that is gaining weight while staying home!

Get out and walk, but keep your social distance. I walked around the neighborhood yesterday and we all avoided each other. It was kind of humorous, as it looks like we all hate each other, but people still said hello and waved.

Disclaimer – before you start exercise – start slow, check with your physician. Don’t over do it and become a casualty.

If you’ve got exercise equipment in the house, use it.

If you don’t have equipment, no problem – believe it or not, apparently the armed services (Army, Marines, etc.) do not use a lot of exercise equipment in boot camp – they have the trainees do pushups, front-leaning rests (top of pushup without the ‘push’), and situps. (Pro tip – if you’re just starting doing pushups, use your stairs – start on like the third step up so you’re at an angle. It’s an easy way to transition into ‘real’ pushups.)

Please share your COVID-19 strategies and tips in the comments!

Actions you can take include:

#StayHomeStaySafeSaveLives

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.

Quirky Travel Tips

A selfie with the open-top of the dome over the German Bundestag in Berlin. If you’re going to Berlin, don’t miss it. Also, make reservations, they and the visit are free.

Phone and Tablet dependence

First, I need to admit that I am dependent on my phone and tablet. They let me be a cyborg in terms of finding important information, taking pictures, communicating, and keeping up with useless trivia. On the more serious side, my only camera is my phone’s camera, so I really do need it charged and ready to go in the morning.

The extension cord

I now travel with a 10-foot extension cord with three outlets on the end. Why? It all started in Europe when I had three of my five Euro plug adapters fail, break, or get lost. I was on the verge of not being able to charge my devices! I made it through the trip but needed a better solution than taking 30 plug adapters every trip.

Somewhere I read of someone who used one plug adapter to plug in the extension cord, which then allowed multiple devices to connect with their standard US-style plugs. The charging devices do not draw very much electricity. An adapter draws .3-.5 amp each (as a comparison one 100-watt bulb draws .9 amps), so it is safe to connect two or three to one cord. The length also gives me flexibility to have the device where I want regardless of where the outlet is located.

Now I carry one everywhere I travel, even in the US, just for the flexibility. Definitely consider one for your trips to areas with different plugs. I still carry five plug adapters and three chargers, just in case.

The compact phone battery pack

I was in a seminar (on life insurance!) at work and won a battery pack. Embarrassingly enough, I didn’t know what it was at first, as it was a promo item and didn’t come with instructions. Once I figured it out, it is great. It’s about 2.25”x 3.25” x 3/8” and weighs maybe an ounce. It has a built-in cord and connector for a non-iPhone and, even better for me, an adapter for that cord to charge an iPhone.

The fully charged battery pack will fully recharge my iPhone once in about an hour. That’s important, because a morning of taking pictures in a museum can drain my battery. I can charge it in my pocket, or hold the battery and phone together if needed – it’s that compact and light.

You can see one like it on Amazon here.

The Chip with PIN Card

All credit cards now have chips, so they are much more secure when using the card payment devices. Most US-based cards are chip and signature, which works fairly well in Europe, but far from perfectly. Most of the time when I charge something, the person helping us hands over a bill to sign and we’re on our way. We’re also likely among the few in the store that don’t use a PIN. Full disclosure – I was likely using a card with a 1.5% rebate to get the rebate rather than paying cash.

We pretty exclusively use public transportation when traveling and I have found that automated ticket terminals almost exclusively require a chip and PIN card. I have also been in a very few stores that only support chip and PIN. I have one card with a PIN that I use for these and it’s worked great. If I could find another with no-fee, I might get one as a backup.

Would you like to pay in dollars?

It’s fairly easy for European waiters/waitresses to identify US tourists. You might find that they kindly offer to let you charge your food bill in dollars, which makes it easy to instantly know your cost as opposed to multiplying Euros by 1.1247 in your head (or on the calculator on your phone).

Don’t take advantage of their offer. If you do, you’ll get their credit card processor’s exchange rate (and they will get a cut) which will be much less advantageous then your credit card company’s rate.

Share, please.

Please share your travel tips in the comments!

Actions you can take include:

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.

Mis-underestimated

Scottish

Scottish Widows is a life insurance company in the UK. I’d prefer not to to have the bad retirement surprise of an early death. She does look vaguely sinister….

Surprised!

At one of the Friday AM breakfast group meetings I posed the question of retirement surprises to my fellow diners. No one seemed to have had a severe bad surprise, thank goodness. Of the surprises that were mentioned, most indicated that home maintenance was the culprit.

Ken and Bobbi (pseudonyms) had a water heater go out, as did Sean and Deala (more pseudonyms). Sean’s water heater was particularly problematic and expensive due to code issues. Water pipe issues and remodeling project scope creep were also mentioned by the group.

Goal

Remember – our goal here is to try and avoid retirement surprises. After thinking about the problem, I decided to see what we might do with the useful life of home items, such as appliances and paint, combined with costs.

The solution, but stay tuned for the mis-underestimated part

I mentally walked through my house and developed a list of appliances and maintenance items. Once I had the list I researched the usual lifespan of the item and what the cost to replace it might be. This took a lot longer than I thought it would, but no gain without pain, right?

With the costs and lifespans, I put together a spreadsheet. We’ll talk about it next, but you can find one to use here, available in both Excel and Google Sheets versions.

Mis-underestimated

Well golly, I tried the house maintenance costs spreadsheet. According to the spreadsheet, I mis-underestimated fairly significantly the amount of money that maintenance costs for a house over time. Especially if you try to accrue the money for those costs on a monthly basis. On the other hand, when some things wear out, such as a furnace or refrigerator, they are hard or impossible to live without.

When you look at the spreadsheet, you will see average life and average costs. You can enter your estimate of the remaining life, in years (ex. 5 for 5 years or .25 for 3 months), of your item and what you estimate your replacement cost to be. The spreadsheet will calculate a monthly cost to accrue (save up), so that when you need the replacement, the money is already in the bank.

Good news – surprise eliminated. Bad news – shock at the amount needed per month. Seriously, mine was three times what I had previously budgeted. I was shocked, but now at least I can plan in advance.

On the plus side, it looks like plumbing, electrical wiring, and walls last a very long time, so I did not need to include those.

Some of the reference sites I used:
https://www.thisoldhouse.com/ideas/how-long-things-last
https://www.thespruce.com/lifespan-of-household-appliances-4158782
https://www.homeadvisor.com/cost/heating-and-cooling/install-a-furnace/

Actions you can take include:
Download and personalize your House Maintenance Costs Spreadsheet.
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.

I RAPped!

Blizzard, A. Goicolea, Phoenix Art Museum

Per the NWS, we’re getting a blizzard here this afternoon – three to eight inches of fluffy snow!

Don’t miss the retirement action calendar after ‘Rapping’.

Rapping

As part of my RAP (Retirement Activity Plan and Free stuff!), one of my goals is to remain socially connected. Connection is not usually a problem when you’re employed because you have coworkers. I’m still employed 80% of the time and my coworkers are great (now, please tell me where my laptop is…).

Fortunately, for the 20% of the time when I am retired, the gentlemen from the old neighborhood have invited me to their weekly breakfast meeting. They are interesting and engaged people and the restaurant has excellent coffee and is extremely generous with the meat on the country breakfast. They are now one key part of my social connection in retirement. Excellent people and good food – what more could one ask for?

If you’ve seen the RAP template, it has areas for creativity, social, personal, and activity.

Looking back at last year, I give myself about a C for activity. I tracked exercise and averaged almost 12 times per month. My goal is about 17 times per month (4 times per week) or better.

I was pleased with my personal work. I made it through Pimsleur French I and most of II. I watched a French subtitled movie. I read a couple of investing books. (The one I recommend is The Four Pillars of Investing by William J. Bernstein. Get the old version; it’s cheaper and has 99.9% of the content.)

I was also happy with my creativity. I continued the blog. I completed some house projects and fixed a few laptops.

Retirement Action Calendar

I borrowed a genius idea from Vanguard, Merrill, Kiplinger, and Forbes and synthesized (RAP – creativity!) a spreadsheet with key dates for pre- and post-65 retirees. Excel and Google Sheets versions are located here.

The one time events show some dates for my friends Rick and Jean (pseudonyms), but will likely be useful you, too. The one time tab includes Medicare sign-up, initial RMD, any initial pension payments, and starting Social Security. You’ll need to research and customize your own dates. As an example, Rick will sign up for Medicare on, or soon after, 6/1/2020 because his Medicate will start 9/1. If Rick is too late (after 12/1), he’ll have a Medicare penalty.

The annual events tab includes Medicare open enrollments, estimated tax payments, a budget and RIP checkup, and a medical (Obamacare) open enrollment.

Actions you can take include:

Download and personalize your Retirement Action Calendar.

Do a check of your RAP for 2018. How did you do? What will you change for 2019?

And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here https://nosurprisesretirement.com/2017/07/09/first-blog-post/

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

…and taxes

A picture of the other Emirates cable car over the Thames. You go for a very long way, on a cable, over water. Screaming was heard from our car.

emirates

Taxes – retirement may provide planning opportunities

“…in this world nothing can be said to be certain, except death and taxes.” Benjamin Franklin

“Anyone may arrange his affairs so that his taxes shall be as low as possible…” Judge Learned Hand

Dan and Mikala

I had the opportunity to talk to Dan and Mikala (pseudonyms) this week about their retirement plans. Because of their early planning and good benefits, they are in pretty good shape for full retirement next year. In fact, they reminded me of Bob and Sarah in the Success Story post. As part of the Dan and Mikala discussion, we talked about something that Bob originally discussed with me, taxes.

Mandatory, boring, but important disclaimer

I am not giving tax advice and do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Retiree planning opportunities

As always, you should strongly consider using an Enrolled Agent, CPA, or tax attorney to assist with your tax planning. That being said, there are constraints and opportunities for retiree tax planning that you may not have had when working.

Required Minimum Distributions (RMD)

As part of the tax deferral deal with the government, you got to defer taxes on 401(k), IRA, and certain other types of retirement money. The second part of that deal is that the government requires you to remove a portion of those funds, based on your life expectancy, when you turn 70.5, to collect the taxes on the deferred funds (and any growth).

The amount you will need to withdraw is dependent on the size of the pot of deferred money and your age. It may be small or it may be large, but, regardless of size, there may be planning opportunities for you. As an example, you may find yourself in a low tax bracket in your early retirement years (10, 12, or 22% marginal rate). If you look out to age 70.5, you may find that the RMD moves you to the next higher rate (12, 22, or 24%). (The rates go all the way to 37% – if the higher marginal rates apply to you, quit reading and go to your CPA and estate tax attorney now.)

You may have a planning opportunity in earlier retirement years to take post-59.5 distributions from your deferred pot of money and ‘use up’ your lower marginal tax rate for a given year. That would leave less in the pot for 70.5 and beyond and may leave your RMDs taxed at one of the lower marginal rates when you hit 70.5. If you, hypothetically, could get money out at the 12% rate early, you might save 10 percentage points over getting hit with the 22% marginal rate at 70.5. Heck, even a 2% saving, from 12% to 10%, is a win!

Even after age 70.5 there may be opportunities for planning for the lowest rate. One way could be taking a larger amount one year and lower the next, but it will depend on age, amount in the account, and tax rates at the time.

But there’s more

There are other factors to consider, such as capital gains on non-tax qualified accounts, non-taxable funds, eligibility for social service programs, and partial taxation of Social Security. You, and likely your tax professional, will need to factor these in also.

Martin Luther King, Jr. Day

I am writing this on Martin Luther King, Jr. Day, also known as the Martin Luther King Day of Service. Last week I finally got to attend the weekly retiree breakfast with the retired guys from the old neighborhood. I was happy to hear of some volunteerism – Habitat for Humanity. Good for the community and the RAP (Retirement Activity Plan). I just finished my IRS volunteer recertification and will again volunteer with the IRS VITA program for tax season. What’s your volunteer plan?

Actions you can take include:
Assess your opportunities for RMD tax planning. Talk to your friends about who they use for tax advice. Remember, only Enrolled Agents, CPAs, and attorneys can legally give tax advice for your specific situation.

Find a volunteer activity that engages you and uses your talents. www.volunteermatch.org is a great website to help find opportunities in your area that fit your time and talents.

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.

The Survey Says…

dutch teu huis

Condos made from shipping containers, Amsterdam, NL.

The survey results

The first key result of the survey that was included in The Road to Hell post is, per my daughter and the tiny but loyal number of respondents, don’t put the survey link at the bottom of your blog post. Thanks to those of you that responded. The next survey will be easy to find.

Good news

Our survey respondents, may they be representative of our entire readership, are in pretty good shape with written budgets and spending tracking, but they need a little more attention to written retirement strategies/plans. The numbers:

Do you have a retirement plan or strategy?
Yes, but it is not written – 77.8%
Yes and it is written – 22.2%
No – 0%

Do you have a household budget?
Yes and it is written in one place – 66.7%
Yes, but it is not written in a single place – 22.2%
No, we wing it – 11.1%

Do you track your spending?
Yes and track on paper, spreadsheet, or app – 66.7%
Yes, but informally (ex. look at bills and checks) – 33.3%
No – 0%

The other survey says

I just glanced at The Insured Retirement Institute 2^nd Biennial Study on the American Retirement Experience (with that long of a name it takes a biennium to write!) Their results show that 80% of retirees have the same or less income as they did pre-retirement. 53% have less income, 27% about the same.

Mrs. NoSurprisesRetirement and I took note of the above and have had some success offsetting the less income thing as a pre-retirement practice. We used a BOGO (buy one, get one free) coupon at Jersey Mike’s subs on Friday, then used our Walgreens Balance Rewards to score 4 containers of our favorite coffee at the lowest price we’ve seen in the past 9 months. We got a deal on Blue Diamond almonds, too! Sunday got sweet as we used another BOGO at Dairy Queen for Blizzards. Overall savings was near $30! And, we won’t need to buy coffee for a couple of months!

What Mrs. NoSurprisesRetirement and I did was consistent with another study I saw (and can’t find to cite right now) that people in retirement tend to pull back on their spending, even with reasonable resources.

Actions you can take include:
What coupons should you be using? What staples should you stock up on when the deal is excellent? By the way, Target is having the equivalent of a 30% off sale on household cleaning products this week – a $15 Target gift card with a $50 ‘household essentials’ purchase.

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.

I got surprised!

Me, surprised last year in Bayeux, France.

The surprise!

Well, Mr. Smartypants-no-surprises got a bad surprise! Ouch! For those of you that saw the last post that looked at budget to actual, you may have noticed that I said, “We did find some areas that needed refinement which will push us closer to the retirement income spending ceiling next year. I under-budgeted for home maintenance expenses.” That was the understatement of 2018.

While most of our retirement budget was pretty well researched, the one area for which we really ‘winged it’ was maintenance. Basically, we just guessed at it. The guess was way low for the year. I decided that we should do a better job of quantifying how much ‘maintenance’ would really cost.

First, find out what maintenance is

In our case, last year maintenance was a new water heater, a furnace service call, a dryer service call, and a new dryer. I suspected the water heater would need to be replaced soon, but not quite so soon. The rest were true surprises.

In the spirit of no surprises, we researched all the items that we know have a maintenance life. These included the roof, driveway, appliances, HVAC, outside paint, snowblower, mower, and bed.

‘Personal association fee’

An association fee is a fee from, for example, a condo association that takes care of outside maintenance, snow shoveling, lawn mowing, etc. You might think of a monthly allocation for maintenance as your ‘personal association fee’. Take the monthly allocation and put it in a savings account for when you do need it. I’ve seen savings accounts and money funds now yielding over 2%!

After we assembled our list of maintenance items, we looked at the cost for a new comparable item and estimated the life of our current installations. The cost of the new item divided by the number of months until replacement gave us our monthly maintenance cost. Wow, we were surprised that our new ‘personal association fee’ has tripled over our ‘wing-it’ maintenance budget. The good news is that now we plan for maintenance expenses that will, no doubt, happen. Advance planning will help avoid a bad surprise dent our retirement savings.

Thank you

Thank you for reading the blog this year. Health, happiness, and prosperity to you in 2019. Also, may you have no bad surprises in 2019.

Actions you can take include:

Try your own assessment of what your ‘personal association fee’ should include and cost.

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.