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.

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 2nd 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.

I surprise

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.

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.

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.

 

Oops, or New Year Fiscal Fitness

Oops!

One of our readers suggested more pictures and personal anecdotes, so here is an anecdote:

Last week Mr. and Mrs. No Surprises Retirement compared our actual spending to our proposed retirement budget.  Oops – there were a number of areas where we were way over budget!

The picture, below, is of me looking at the results of the comparison!

IMG_7256

The good news is that we’re not retired yet, so we weren’t overspending our ‘real’ retirement spending plan.  There’s still time to tune and track better.

Fiscal fitness

The goal of No Surprises Retirement is helping you avoid bad retirement surprises.  One of the worst retirement surprises is overspending in the early years and then running out of money in the later years.  Almost every TV show now has a lot of fitness and weight loss advertising (like every late-December through early-January).  This post will help you with improving your fiscal fitness in 2018.

Corporations and non-profits are experts at fiscal fitness (at least the ones that stay in business are!) They use budgets, income statements, and balance sheets to manage their business.  We may talk about income statements and balance sheets in some later post, but for this post we’ll focus on the budget.  The key parts to budgetary fiscal fitness are:

Budget – know what you plan to spend monthly/annually (and that the spending fits within your income).

Tracking – track your spending to the budget and determine where there you are going under or over, and why. (In corporate speak, we call these ‘variances’.)

Adapting – adapt to variances by adjusting future spending.  For example, if you spent too much on medical because you went to the ER, you may need to cut out movies for the rest of your life a few months.

Just like the stretches you’ll do in the three times a week aerobics class that one month you go to the gym, budgeting is something you need to pay attention to frequently (at least bi-weekly) but unlike the gym, you need to do it all year.

Tools for you to manage your budget – spreadsheets

Since we had the budget surprise, I decided to upgrade our budget capability by finding a better spreadsheet than we are currently using.  I decided to stay with a spreadsheet because I don’t need all the features of a personal finance software package and don’t want to maintain my finances on a website. I also decided to download (and don’t forget to virus scan!) because apparently a billion people have already shared their budget spreadsheets  online and this way I could start without having to reinvent the spreadsheet the wheel!

As usual, Google helped out with the search and I ran across ‘the balance’.

There are a number of budget spreadsheets reviewed and linked to on ‘the balance’ site, so you’ll probably find one to use and like.

I liked a couple:

It’s Your Money! in their ‘Free Budgeting Spreadsheets’ has a number of budgeting spreadsheets.  The IYM Spending Plan Spreadsheet looked promising.

Vertex42 also had budget spreadsheets.  Their Family Budget Planner looked excellent.

‘the balance’ also has a section for Google Docs Budget Spreadsheets. I think we’re going to try the cleverly named Best-Personal-Budget-Planner.  I downloaded it and converted it to Excel, but it looked very usable in Google Sheets as well (and if you don’t own Excel, Sheets is free.)

Most of the spreadsheets suggest budget categories.  Another excellent source for retirement expense budget categories comes from BlackRock.

Actions you can take include:

-If you’re not already using one, pick a spreadsheet or some software to track your expense budget.

-Put your 2018 budget in the tool and start tracking and analyzing!  Good luck!

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.

It’s about time…

Retired or working, you have expenses.  Some are optional (coffee at the barista’s place, new pine tree air fresheners for the car) and some are required and non-negotiable (water, electricity, gas, property tax).  Good news, some expenses are mostly required but are negotiable, so you might be able to help yourself to a positive retirement (or even pre-retirement) surprise by negotiating!

My wife is full-blooded Dutch and the Netherlanders are noted for being careful with money.  A couple of years ago, she renegotiated many of our mostly required expenses and ‘It’s about time’ for her to do it again.

It all started when I noted that our satellite TV service bill increased, a lot (it might have been DirecTV at the end of the promotion period).  The service was fine, but competitors were offering pretty similar service with much better deals.  My wife called around and saved us 50% on a new service.  It required a new installation, but a couple of hours supervising the installation was well worth the savings.

Later while we were discussing retirement planning and expenses, I noted that we had monthly trash, insurance, and phone bills, too.  The Dutch culture kicked in and soon my wife was calling firms, stating, “We’ll be retiring soon and we’ll be on a fixed income, so I need to bring these expenses down…”  Before I knew it, she had us saving significant amounts on trash, insurance, and internet.  Like over $1,000/year in savings (in all fairness, we did have a Cadillac trash plan, we just were not generating unlimited trash weekly…12 years of that – ouch!)

WIIFY?*

You too, can take advantage of these savings, but as usual, TANSTAAFL*; it will require some work:
-Find your semi required bills.
-Determine alternatives (Dish and Comcast were TV alternatives for us.)
-Call some alternatives and see what they offer.
-Call your preferred provider (perhaps it’s the one you have now) and let them know you’re retired (or nearing retirement) and will be on a fixed income and need a better deal. Let them know what the competition offered.
-Make your choice – stay with the deal your preferred option offers, or switch to the new one.
-Count your savings and use the money for other things that are important to you.

Now, here’s one you may not know about – life insurance. Talk with your trusted financial professional, because if your health has improved since your whole life or UL policy was issued (blood pressure under control, quit smoking), you might be able to get re-rated to lower premiums without having to get a whole new policy. If you have a term life, you may be able to save by re-rating or by getting a new policy. Always have the new one in hand before cancelling the old!

Let us know in the comments section if I missed some savings opportunities.

* – TANSTAAFL – “There ain’t no such thing as a free lunch.”  It shows up in No Surprises Retirement fairly often.
* – WIIFY – “What’s in it for you?’

Actions you can take include:

Bills to consider negotiating:
-TV/Cable
-Internet (Cable or DSL)
-Trash
-Homeowners insurance
-Auto insurance (is there a lizard in your future?)
-Landline phone
-Cell phone.

Look for the next update on Friday, September 8 at 12:30 PM.

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

Budget Teeter-totter

WIIFY (what’s in it for you) with this post?  Learn or refresh yourself on budgeting (and its counterpart – actual spending) from the Budget Teeter-totter!

Budget Teeter-totter

Budget Teeter Totter - v2

Budget Teeter-totter quick guide
Green – good – expenses and income in balance.
Red – bad – expenses exceed income.
Yellow – good and bad – income exceeds expenses but may cause ‘surprises’ with income or estate taxes.

Good news-bad news-good news
I’ve got good news and bad news and good news.  The good – you’re retired or thinking about it and want the best you can attain.  The bad – if you’re like 99% of us, you’re going to be on what’s called a ‘fixed income’.  The other good news is that with planning, prioritizing, and budgeting, you can avoid surprises!

Two pieces to planning – income and expenses
Bottom line from this section – know your planned income as it will dictate what you can spend without ‘surprises’. www.ssa.gov has a retirement estimator that you (and your spouse if you have one) can estimate your Social Security benefits. You will also need to estimate your income from any pension and IRAs/401(k)s/403(b)s and don’t forget required minimum distributions (RMDs).  Lotta letters/numbers there…  Frankly, if you don’t do this a lot, you might want to strongly consider a trusted financial professional.  Designation Check can help you find a Chartered Financial Consultant (ChFC) and here’s a place to find a Certified Financial Planner (CFP) finder.   On my personal income side, I include Social Security, a small pension, 401(k), and savings.  I reduce the income by my forecast of Federal and State income taxes.

Bottom line from this section – know your expenses and have a budget that leaves you in the green (or yellow) on the Budget Teeter-totter.  On my expense budget side I include:
-Utilities – gas, electric, water, phone/internet/TV (too much!), cell phone, trash, homeowners association dues
-Forecast medical insurance expenses (if I retire pre-65 COBRA or exchange rates, post-65 a Medicare supplement)
-Property tax
-Car licenses
-Homeowners insurance
-Car insurance
-Personal insurance (life, LTC)

Actions you can take:
-Learn about RMDs. IRS RMD information.
-Start researching your retirement income and/or budget.
-Let me know in the comments or via ‘Contact’ what else you’d like to see in the expenses.

Up next – You’re gonna die! But we can help with a surprise there, too.  Look for the next update on Friday, July 21 at 12:30 PM.

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