First, Happy Bastille Day, here’s Raoul Dufy’s 1905 ‘July 14^th 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! ) 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.

WIIFY

A primer on post-retirement health insurance and medical expenses. Transfer your health risks to an insurer for a known premium and avoid an uncertain and potentially retirement income busting drain on your nest egg.

tl;dr – Have a health insurance strategy. Know what the pre-65 strategies are and what direction seems to fit best for you..

FYI – if you see text in blue, it’s a hyper-link to a resource!

TANSTAAFL

A quick mnemonic – There ain’t no such thing as a free lunch (TANSTAAFL). Nowhere is this more true than medical insurance and expenses. Medicare is an example, Part A (hospitals) has no premium and Part B (essentially ‘doctors’) does, but you’ve paid Medicare tax forever, therfore TANSTAAFL

Two main kinds of ‘retirement’ medical insurance

One way or the other, you will need a retirement medical expense strategy. There are two kinds of medical insurance for retirees, pre-65 (before Medicare) and Medicare (65 and on). We’ll cover Medicare in a later post, so this post is for if either you or your spouse (or both) is going to be under 65 when you retire. Basically a must read unless both of you are over 65 right now.

When you retire you’ll need medical insurance unless you:
a) have no assets and low income and will depend on Medicaid
b) you have assets and are willing to assume the risk of spending them all on medical care, then going to a), above.

Pre-65 health insurance strategies

1. Keep working – Stay at your current job and don’t retire until you have your health insurance strategy or qualify for Medicare. Or, find a part time job that offers health insurance. I just checked and if you work 20 hours/week, Starbucks has health plans. I have no idea on the costs for the Starbucks plan.

2. COBRA – Not the snake, but the acronym for the Consolidated Omnibus Budget Reconciliation Act of 1985. COBRA lets you continue employer health insurance for 18 months at 101% of the employer’s negotiated premium.

Advantages: it’s guaranteed, the premiums, deductibles, and coverages are known. You have up to 18 months of COBRA coverage when leaving employment.

Disadvantages: the premiums can seem very high and there is no ACA subsidy. You only have 18 months of coverage. Since you only have 18 months, if either of you are younger than 63.5, you’re going to need more than one strategy, because COBRA will stop before you are on Medicare.

3. Individual health insurance through an ACA exchange or a broker – This is really up in the air right now, but when I last checked, incomes up to the $60k range received significant premium subsidies. Depending on your age, this may be the best option, but until the ACA direction is firmer, you may want to hold off on retirement if individual health insurance is your strategy.

Up next – Look for the next update on Friday, August 4 at 12:30 PM.

Actions you can take:

-Call your HR Department and ask what the current COBRA premiums are.
-Take a retirement knowledge quiz. It’s a tough one, but explains the answers at the end.