Catchin up

We took a vacation in September – this blog is about retiring after all!  While on the beach, we talked little about finances and pretty much stayed in the present moment.  In October we both celebrated anniversaries and vacationed some more and didn’t get together for any analysis.

We met in November to catch up. I shared my research on annuities.  With my risk-averse preferences, the idea of a guaranteed monthly income is appealing.  Millions of retirees enjoy the security of a monthly income through work pensions.  Those were eliminated for the most part by the time we retired and we’re on our own to manage our rolled-over 401Ks to achieve the same effect.  I like the idea of the single premium immediate annuity for at least a portion of my income.

Getting a little more adventurous, we talked about crowdfunding.  This is an investement option where you invest in a startup.  If they get the necessary funding from “the crowd”, the project is launched, hopefully with future returns of your principal and some interest.  Lending Club and EarlyShares are a couple of portals to explore as well as the charitable Kiva site

We both identified several smaller tasks that we need to wrap up.  I need to follow up on some deed paperwork the lawyer was supposed to file and apparently didn’t.  I need to figure out how to plan for my “digital” assets, i.e., when you die, how to close down blogs, emails, accounts online, etc.  And I need to move my investments more toward the allocations I want to have, despite the market going way up.  

Topics to explore more in the future – our money market funds safe?  Do we have them allocated to be appropriately insured?

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End of summer and end of waiting

I’m a bit chagrined at mentioning this but it appears I will be accepting a contract for another year of work.  I’d wanted to begin retirement and plunge into new things and instead I’ll be doing the same thing, although a little less of it, through next September.

With so many folks finding it hard to find a job, I am grateful.  I just didn’t see myself still working at this age, though heaven knows, most of my family worked much, much longer in their lives.

So my challenges this year will be to stop putting life on hold until “retirement” to make work a smaller part of my life instead of the driving priority and to see this extra year as a gift to be used, instead of a chore to be endured.

On another note, I generated some incidental income and learned how to self-publish a book for an author I met through an estate sale.  It was very rewarding to try something new and have it turn out well.

Our Financial Group met again in August.  We added to our list of tasks and crossed off a few.  We digitized some  important papers as well.  We signed up with Treasury Direct to learn how to buy TIPs and other government securities.

A funny story.  With all my efforts to use technology I was frustrated when I found out that the transfers I could do with my old bill pay system would now cost the same when done bank to bank.  Alternatively, I tried “transferring” funds by creating a bill payment from one of my bank accounts to the other which also fails because it takes 5 to 7 business days.

Finally, the obvious solution.  Just write myself a check from one account to the other! I plan to deposit it using the “phone capture” option.  Now I just need to get an iPhone.  Sort of defeats the whole idea of simplifying!

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Saying goodbye to old tools

Part of retiring is re-examining the financial tools I’ve been using while working.  I mentioned in a previous post that I cancelled a bank account I’d had for over 40 years to minimize the number of accounts I have to deal with.  No more reconciling that account!  Today I cancelled a bill pay service I’ve been using for almost as long.  When I started using it, the banks didn’t have bill pay services online.  I’ve kept the service the last several years because it allowed me to transfer funds between accounts in one business day.  Since I’ve minimized my number of accounts, I know longer need that feature either.  It will save me $10 a month, or $120 a year.  Every little bit helps. 

On the flip side, I setup my bank accounts with my investment company to be able to have funds transferred to my bank.  While I was completing this task, I updated and verified the beneficiaries on my investment accounts.  

We had our second meeting of our financial group last week.  The two of us had gotten at least one assigned task done and carried over the others and added some new ones.  I like the accountability of the group and getting new ideas for financial management.

What have you done in your financial life lately?

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Getting ready to spend

I launched a financial discussion group with my BFF this month. While I think a lot about how to manage money in retirement, I’ve taken very little action. Our goal is to hold one another accountable, learn about investing at this stage in our lives and report on the results.

One task I’ve been meaning to complete and have ignored for years is building a liquid asset (e.g., CDs) ladder. A CD ladder takes your emergency fund (6 months to 1 year of living expenses) and invests it in liquid assets with varying maturities. For example, take $25K and buy 5, 4, 3, 2 and 1 year CDs of $5k each. They will have varying interest rates because of the different maturities. As they mature, you reinvest in new CDs of the same timeframe and just keep rolling. It’s better than having the whole sum in one CD or not invested at all and there’s a small amount of earnings on money that hopefully just sits there.  Another note is it doesn’t have to be a huge sum.  CDs sell usually for about $1,000 so if you have $5k, you can build your ladder and when the CDs mature, add to the original amount until you reach your emergency fund target.

Another task is to simplify my investments by consolidating them in fewer places. This means less tracking and paperwork each month and makes it easier to see the overall picture. I had kept a couple IRAs separate for some time, thinking I would have been drawing on them before I was 59 1/2. There is a special tax provision that let’s you take IRA money before that age without paying the 10% penalty for early withdrawal. Well, that ship has sailed and there’s no need to keep them separate except to track the historical returns. And history is just that – the past! So I’m consolidating the IRAs.

The hardest task is to actually make some investments. I’ve committed to buying over time to get to the portfolio mix target I have in mind. More on that later.

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Financial maintenance

Whew, its a lot of changes when you decide to close a bank account.  I got feed up with my bank recently and decided to part ways, after over 20 years.  Unraveling all the connections for bill payments is time consuming but in the end I’ll have one less account to mess with.  I may even cancel my bill paying service and save a little bit.  I’m looking into having more bill payments hit my credit card so I can get the points on the card.

I verified with my credit union that deposits are insured up to $250K by social security number by the NCUA, rather than the FDIC.

Since its the beginning of the month, I’m reconciling accounts and looking at reports to see where the money went and where it came from.  I want to work to have more income from investments.

This is the kind of nerdy stuff I do to maintain finances.  What financial tasks do you have to tackle this week?

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Getting rid of the losers

Many years back I was persuaded by a broker to buy shares in a business that was paying a substantial (I think it was 6-8%) dividend.  I was making my annual Roth IRA deposit and it sounded like a good deal.  I knew nothing about the company and asked even less, trusting the friendly broker who I mistakenly perceived as caring about my financial success.  Well, the company went downhill and was taken over by another and bottom line is I lost the equivalent of one year’s contribution.  

So, fast forward to now and I’m still sitting on this loser because a) its an a Roth and I can’t get a tax benefit for the loss b) the new company is still paying a dividend which would make up the loss in about 10 years.  I did some research and discovered I could claim the loss **IF** I closed out the entire Roth IRA.  I consulted a financial blog I follow and got various comments the most meaningful ones were “would I buy this stock again?” and “what could you earn if you sold and invested the proceeds?”  

Duh.  I think I knew I wanted to sell I just wanted a little push.  Which seems to be a pattern with my investing.  I’m not courageous enough to make a decision on my own.  I want to discuss it and have reinforcements, although it is still my decision and I own it.  

So today I put in a sell order.  I immediately felt relieved.  Good move.

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rate of return vs. taxes

I played around with the numbers a bit this morning and realized that my rate of return (what I earn on my investments) is more critical to my monthly income then my tax rate.

What I used was a 3% return and varying inflation rates.  If I don’t beat inflation I have less income but still enough.  And if I assume varying tax rates (15-25%) I have enough.

What made the biggest difference is the rate of return.  If I can increase it even 1% it has the greatest impact on my projected income.  Lesson learned.

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So it begins…

I am planning to retire from working soon and I wanted to track my experience for myself. 

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