Monday, November 26, 2018

Embarrassment

I should be proud of my financial situation, right? I've worked hard, saved and invested, and reaped the benefits. But one thing I left out of my post the other day about some of my friends who remind me how lucky I am, is that I can't help feeling a little awkward or embarrassed sometimes when I talk about money matters with them. For all that I can empathize with their struggles, my own life is totally different. I don't have their fears and worries right now. And I wonder if they resent my situation or feel envious. I've realized that I share a lot less about my life on social media now because I worry that I'll sound like I'm bragging or rubbing people's noses in my good fortune. Perhaps that is also why my writing on this site has lagged so much in the last few years (though I have no excuse for losing momentum several years ago, well before I retired!). It's one thing to be striving and working and in the fray of trying to get ahead. But once you just stop and say "I have enough money and I'm just going to chill out for a while" it's not very relatable!

On this site, I can be quite open about things-- that's always been the whole point. And in "real life" I have always tried to be realistic about finances, if not totally transparent. Because our culture can be so caught up in materialism and keeping up appearances, I felt like I was doing a civic duty in a way whenever I'd say "I can't afford that" or "I've been saving a lot of my paycheck so I can afford that" or "I've been maxing out my 401k since a very early age." So many people fall into cliches when talking about money, somehow reinforcing the idea that it is okay and normal to be constantly spending money on nice things and having lots of debt-- I don't want to be part of that. But sometimes it's easier to tell little white lies about one's situation. I've met a number of people in our new community that have asked if I'm retired, with a sort of doubtful look, like "I don't want to insult you by implying you are older than you look but you don't seem to be working and you're not at home with children and I also don't want to insult you by asking if you've been laid off..." In a couple of these conversations I've ended up downplaying my financial freedom and talking more about being "between jobs" or "trying to change careers" or "doing some consulting projects" or "hoping to start a new job soon but it's dependent on funding..." The latter is basically true, but all of these things are easier to say than "well, I don't really have to work right now and yeah, I've basically retired 20 years before most people do, but no, it's not because I've inherited great wealth, I'm just a normal person who was fortunate enough to have parents who could support most of her education and give her a happy childhood while imbuing her with a lifelong penchant for saving money, and I've never been afraid to invest..." That's all kind of a mouthful, a bit TMI!

Ultimately, I can't control what people who don't know me think about me. The truth is too long a story. But I wish there was a way to convey it. Some of my situation is due to luck/privilege, but a lot of it is due to controllable factors. I suppose what would embarrass me most is to be seen as someone who has benefited from pure luck and doesn't "deserve it." But I feel proud if I can serve as an example of someone who has made good choices-- choices that anyone can make.

Monday, November 19, 2018

Tech Check

Back in my Palm Pilot days, I was such a junkie for the newest and latest device, it became a pretty significant part of my spending, even if I did lessen the blow by selling unwanted devices on eBay before they lost too much value. But nowadays, my relationship to tech toys is quite different-- I always seem to be holding on to whatever I have, and buying a new one only when it is absolutely necessary. Not just because I want to save money, but because the new things somehow don't seem as nice as the old ones. For instance:

In 2015, I posted about my decision-making process for buying a new iPhone. Seeing that post made me realize that I've now been using my phone for over 3 years, so the value I've gotten out of paying the full price up front for it is even better. It still works fine and I'm planning to hold on to it as long as I can. I don't like the even larger size of the iPhone X and newer models, so I might have to keep an eye on whether any future models will be produced in the size of the 6/7/8, and at least upgrade to an 8 before that size goes away.

My other electronic tool is a MacBook Air. I bought it in 2012. It pretty much works fine, at least when it's plugged in, but the battery tends to conk out on me when I least expect it, going from 35% or 40% to 0% without warning. They've just announced a new MacBook Air, so that's starting to make me think about an upgrade. But maybe I could just replace the battery on my current laptop? Would that be a good investment at this point? One other factor I have to consider is that I have the prospect of some work in the coming year. If I'm using my computer for work, it would make sense to get a new one, to have something more reliable. And I'd be able to deduct that expense when I do my taxes. I'm not totally sure if this job will pan out, so I will hold off on any purchase for now and see how things go.

One other technology-related purchase: I finally upgraded my Quicken software. I've ranted many times on this blog about how Quicken for Mac upgrades have SUCKED for years! I was still using Quicken for Mac 2007 because none of the upgrades seemed like an improvement. But a few weeks ago, it finally started acting up and my file got corrupted. I was able to salvage enough from backups to import most of my data into the new Quicken for Mac 2018, though I lost a few months worth of net worth data. I was able to export some snapshots into Excel so I have the last few years of income/expenses by category, and net worth as of year end. And eventually I will have enough data in the new Quicken for year on year comparisons to be valid again. The new software actually seems to do most of what I want, but I'm still pissed off at Quicken. They've gone to a subscription model, so I'll have to pay for it again on a regular basis instead of being able to stay with the same version for years. Oh well-- I guess I had a good run there with the 2007 version!

I just don't find myself tempted by any other tech toys right now. The Alexa and other such devices hold zero interest for me. I might get Sweetie an Apple TV for Christmas. Someday I'd enjoy having a really nice stereo system, now that we live in a house where loud music won't bother any neighbors. But otherwise the kind of tech that's on my mind these days is a lighter snow shovel or battery-warmed mittens!

Tuesday, November 13, 2018

Life Goes On...

I continue to enjoy my leisure as a "retiree." I'm healthy, I feel relaxed, I go to the gym a lot, I read a lot of books. I continue to feel incredibly lucky, especially when I hear about other people's struggles with money. Such as...

A friend who I don't think I have written about here before, so I'll call her Sally. She's been divorced for many years, and for almost that entire time, she's been chasing her ex-husband to try to get him to pay child support. She has often been working multiple jobs and is willing to do pretty much anything to make money, however menial or physically demanding. Her ex-husband works on and off, mostly for cash. He hides income via his girlfriend. He complains that it's "not worth it" to look for a job sometimes. He may or may not be using drugs at times. He owes her over $50,000. Meanwhile their two kids are in college and racking up huge student loans, even while attending state schools. Sally has a full time job with benefits now, which has helped her a lot, but they have crappy health insurance, so every time she or her kids have to go to the doctor, she is trying to get the doctors to not order too many tests, and questioning every prescription to see if they can stretch it out to a lower dosage. With regard to one medication, her doctor said "It costs you $900? I had no idea!" I guess it's a good thing to make sure doctors don't just over-prescribe and over-test, but I think it is better for medical decisions to be made on the basis of what a medical professional thinks is best, vs. what a consumer thinks they can afford. I just hope Sally will eventually get to a point where she doesn't have to worry so much about money.

And then there's Mortimer, who has appeared in my posts from time to time. Mortimer has been unemployed for almost 2 years now. His COBRA ran out and he's on Medicaid. He's kind of tapped out the friends who were able to help him find jobs in the past. I think he feels a bit paralyzed when it comes to next steps-- he's taken some classes to develop new skills, but I'm not sure if he'll be able to parlay them into a new career. Mortimer used to make around $75-100k, I think, and I think he is struggling with the idea of starting over at a much lower level in his late 50s.

Another friend, let's call her Tory, who has been dealing with the aftermath of divorce-- not her own, but her husband's, who she married relatively late in life. I'll call him Todd. He pays a large amount of alimony to his ex-wife, and unlike Sally's ex, he pays it regularly and on time. In his late 50s, his finances hadn't totally recovered from the divorce settlement, and then he lost his job. He set himself up to do some consulting but wasn't able to make much money. Then, fortunately, he got another job. But then Tory lost her job. And then Todd lost his new job. Todd is by now in his early 60s and Tory is in her late 50s. They have a 10 year old daughter. (Tory didn't mention it but I know it took her a long time to get pregnant so that was probably another big expense.) They lived in an upscale suburb of NYC, and after a couple of years with no success at finding new jobs, they realized they weren't going to be able to stretch out their assets long enough. So they sold their house and moved to the midwest to start a new, cheaper life. Just to kick them in the shins a little more, they ended up taking a loss on their house sale, since they'd bought it at the top of the market. Tory is happier now and seems optimistic, but I can't help feeling like there is an undercurrent of disappointment. For a few years, everything was falling into place for her, with a new husband, a new baby, a career and a nice lifestyle, and then she had to give it all up and move far away from family and friends. A tough choice.

I'm glad I have friends who are open about what is going on in their lives financially. I don't really know all the details of their savings and income and expenses, but they are honest about their difficulties and what they are doing to try to survive, rather than just pretending everything is fine. It's a good reality check.

Friday, July 20, 2018

A Millionaire Can Get Medicaid

So here’s an interesting development: I just found out I qualify for Medicaid, at least for the moment.

Now before you jump all over me saying I’m a greedy conniving cheat who shouldn’t be leeching services from the government, I will just say that it is very likely that I will never actually cost the government any money for using Medicaid. I’ll explain below. But I do think this is a great example of some of the perversity built into our current healthcare system.

I currently pay over $750 a month for COBRA coverage from my former job but in a few months, it will run out and I’ll have to buy my own insurance. I’ve been researching the plans offered through NY State’s marketplace under the ACA, otherwise known as Obamacare. I was going back and forth about what kind of plan to get and which insurance company to choose, but then realized that I shouldn’t be agonizing over it for just the last month of 2018— I could just pick the cheapest Bronze plan for that month since it was unlikely that I’d use medical care that month other than in an emergency, and then I could wait until the 2019 open enrollment period to decide on a plan for next year.

 I decided to see what the application process was like— I didn’t think I’d finalize and submit it right away, but I wanted to see what info was needed. The process is actually pretty straightforward, though if you aren’t sure what all the lines on your tax return mean, you might want to get some help. You basically have to give identifying information to be sure you qualify, and then income and deduction estimates for the year of coverage to see if you are eligible for any subsidies.

 The system is linked into NY State government data, so it knew I wasn’t earning any wages (via a paycheck with withholding) this year. For my estimated income for 2018, I just used the business income, interest, dividend and capital gains numbers from my 2017 tax return. (The business income is a little trickle from blogging, plus a consulting project I did last year, which is unlikely to be repeated this year.) They then ask about certain deductions that affect your adjusted gross income— again, I pulled this information from my 2017 tax return and extrapolated for what they would be in 2018. One of those deductions is what you pay for health insurance premiums if you are self- (or un-) employed.

 So here’s the thing— my taxable income this year is only likely to be around $20,000. When you subtract from that what I’ll pay in 2018 for my health insurance, which is over $8,000, boom, suddenly I’m at poverty level. Assets are not taken into consideration at all. It is also worth pointing out that the dividends and capital gains produced by my 401k and Roth IRA accounts are not taxable, so while I factor those in as “income” in my planning for the future, they don’t affect my eligibility for Medicaid. While I hadn’t originally planned to finalize my application, I sort of inadvertently did: a screen popped up saying I qualified for Medicaid, and that it would be effective as of July 1! I was very confused by this so I called the helpline and talked the whole thing through with someone to see what it would mean.

 Since I will still be paying for my COBRA coverage through November, any medical costs I have will still be covered by that primary insurance, but apparently Medicaid will become secondary coverage, if the provider I use accepts Medicaid. (That's a big if-- one of my doctors stopped being in-network for any insurance companies, so I’m sure she won’t accept Medicaid.) I’ll probably get a physical and maybe see another doctor or two before my COBRA runs out, but I’m guessing it may not be anything that Medicaid would cover.  There is also a slight possibility that I’ll get some work later this year— in that case I’ll have to go back into the application and update my projected income, and presumably that would put me back in the position of buying a bronze plan, with maybe a small subsidy towards the premium for 2018. And in 2019, without all those COBRA payments, I’ll probably no longer be eligible for Medicaid and will just get a subsidy for purchasing a plan. And depending on my actual income, I may end up paying all or some of the subsidy back when I do my 2019 taxes.

 I really wonder how many people fall into a situation like mine. I didn’t do anything to “game the system.” I just happen to benefit from a quirk in how the laws are currently designed (and yes, they should fix that quirk). If I had more investible assets, my dividends and capital gains would probably be high enough to disqualify me. And if I wasn’t paying for my platinum level COBRA, my adjusted gross income would be too high for me to qualify-- that, to me, is the most bizarre detail. But for the next couple of months at least, I am a millionaire who qualifies for Medicaid.

Wednesday, March 07, 2018

My Early Retirement Calculations

A commenter on the previous post asked if I'd share the calculations that made me feel confident about retiring early. I'll give you a simplified version!

There are a few different ways that people tend to look at retirement readiness. One of the simplest is the 4% rule. The idea is that if you can live on spending only 4% of your savings each year, you don't need to add to those savings, as investment gains should generally outpace what you are withdrawing. This is also sometimes expressed as a 25X rule-- multiply your annual spending by 25 to see how it compares to your savings.

My total net worth at the point of deciding to quit my job was somewhere around $1.2 million. (It has since been between $1.3 and $1.4 million due to stock market gains.) 4% of $1.2 million is $48,000. My lifestyle while living in NYC was costing me more than that, but by leaving the city, it was possible to realistically budget for a lifestyle where my half would be less than $48,000. And that doesn't include Sweetie's net worth, which is a little over $2 million (not counting the equity in the house we just bought and paid for in cash, as well as some money set aside for renovations). When taking both of us into account, 4% of $3.2 million is $128,000 and our combined yearly budget is well under that. (My current calculations have it as around $92,000 a year, including a generous travel allowance. We'll see how it plays out in reality as we adjust to our new life in the country!)

This method of calculation doesn't factor in Social Security benefits or other retirement income. My Social Security will end up being less than what they project because they don't take into account that I won't continue to make what I was making last year. (It will be interesting to see if the projections will update in the next year or two when my income goes way down.) Sweetie will get Social Security, as well as a defined benefit pension starting in about 7 years. The pension, which appears to be well-funded and safely on track to be able to pay out in full, will be additional income of about $87,000 a year. That obviously makes a HUGE difference in our projections for the future.

I also used the retirement calculator that is part of the Fidelity website (not sure if it's publicly accessible or if you have to have an account)-- it is a fairly complex tool that allows you to input all sorts of info for yourself and a partner, including life expectancy, assets on hand, sources of income, one-time events, budgeted retirement spending, and other goals like paying for college. It then uses a Monte Carlo simulation to model how things will play out under different market conditions, and projects your savings and spending until your "end of plan," which is their delicate way of saying "when you drop dead." You can see 3 versions of the results-- one assuming a "significantly below average" market, one "below average," and one "average." I plugged all our numbers into this, assuming we'd both live til 95, inflating our expenses (by about 50% over what they currently are budgeted at) to allow for plenty of fun and expensive healthcare, and keeping expectations of any future inflow from earnings or inheritance to an absolute minimum. When really pushing this to the absolute worst case scenario, it says I might run out of money in my early 90s after Sweetie is dead. But even by just changing the parameters to "below average" market instead of "significantly below" brings us back to having over $2 million left over after both of us are dead.

No prediction is 100% confident, and a lot of things could happen that would change these calculations, so of course I still have my moments of worrying about whether it will all work out as planned. But we're also allowing for so much leeway in our budgeting that there will be room for us to cut back if needed. And we'll naturally cut back on some things like travel as we age. The biggest worry is that we'll decide we hate living in the country and want to go back to NYC-- we wouldn't be able to afford to live as we did before, but we could most likely make it work if we really wanted to. I feel incredibly fortunate to have this kind of freedom-- Sweetie and I have worked hard and made good decisions, but I also know that pure luck is a lot of what separates us from the half of all Americans who say they can't come up with $400 in an emergency, let alone retire early.

Friday, February 09, 2018

A Whirlwind of Volatility

I'm not just talking about the stock market these last few days-- I'm talking about the last few months of my life.
You would think I'd have spent more time blogging lately, given that I quit my job and at least in theory have plenty of time on my hands. But the end of 2017 got a little crazy as we had to do a lot of work to put our apartment on the market, and then we sold it so quickly, it was a hustle to get ourselves packed up and moved out by the beginning of January!
I think we had pretty great timing, actually. We hit the market at a point when there weren't a lot of comparable listings in our price range. Within days we had multiple offers and a bidding war, and ended up with an all-cash buyer at above our original asking price. Seeing what's been going on with the tax bill and now the gyrations in the stock market, I'm very glad we weren't trying to sell now or later this spring.
The buyers wanted to close fairly quickly, but luckily we had also managed to find a house in an area that we liked, so we knew we'd have someplace to go-- sort of, anyway. The timing didn't totally work out and we couldn't move in right away, so our stuff (what's left of it after purging and donating and selling a lot) had to go into storage for a little while, but beyond that, the closing on our house went pretty smoothly too, since we were also paying cash. We also had good timing in that during our storage limbo, we decided to get away for a little mini-vacation in January when it got so cold and nasty in the Northeast, and not move into our new house til later in the month when it was better weather. And now we (by which I really mean Sweetie, whose apartment it was) are sitting on a big chunk of cash that we luckily didn't invest right before this stock market correction.

So we are just now settling down to the next phase of this new life, but still feeling a little at sea. Our expenses are going to be so much lower, it's kind of blowing my mind. Our HOA fee is a fraction of the maintenance on the apartment. The car insurance is cheaper, and parking is free. Even joining the local gym, which we did today, is going to be about half what we used to pay in NYC. The local grocery stores tend to have somewhat lower prices than in the city. Our utility bills may end up higher since we have electric baseboard heating. And at some point we may need to get a second car, depending on what we end up doing with ourselves in terms of jobs or other activities. So far, our main activities have been unpacking, exploring the area, and marveling at how beautiful and quiet it is here.
We'll see how it goes. I do miss the urban vibe of being in Brooklyn and going into Manhattan almost daily-- we drove back into the city for the first time the other day and ended up in a neighborhood I didn't know well and I kept thinking how nice it seemed and wondering what it would be like to live there if we someday decide we want and can afford a pied a terre. I kind of miss just watching people on the subway. It's weird to have to drive everywhere. But life also feels very peaceful now, and all the stresses of our former apartment, former jobs, and former expenses have just-- poof! -- gone away.

Monday, November 13, 2017

Another Down-to-Earth Heiress

Consider this a sequel to my last post, in which a woman's family money seemed to be funding some luxuries for an otherwise frugal couple.

This time, the story is about a childhood friend of mine. I hadn't really kept in touch with him for years, but some years ago I was at a party in my home town and met his wife. She was a lovely person who taught in a local nursery school, just really sweet and friendly and exactly the sort of person you'd want your child's teacher to be. My old friend worked in what sounded like a mid-level corporate marketing job. They had a child and another on the way at that point. They were renting a house and hoping to find one to buy. It all sounded totally typical for a young married couple of my general world, which I'll again describe as mostly people who have had a stable, middle-class to upper-middle class upbringing, college grads-- people with many advantages in life but who would not be seen as particularly rich. People who probably aren't living paycheck-to-paycheck, but who have worries about the bigger financial goals in life such as helping kids pay for college, and retirement. People who can't take money for granted.

As in my last story, an offhand remark by the wife made my head spin-- I was telling a story about my own job, with an example of a regular task I had at that time, and I referred to a company name. The wife said "oh! That's my family's business! [Things associated with this company, one of which I had just cited,] are named after my sisters and cousins and me!" This company is not a household name but it's one of those things that is actually pretty major in a behind-the-scenes way, which you notice everywhere once you know where to look. I didn't pry into all the family tree, but from doing a little research afterwards, it appeared that the wife's grandfather was at that time the richest man in the country where this company was founded.

Being the richest man in that country is not like being the richest man in the US-- our billionaires are way richer. But still... he's a billionaire! I guess there is no law that says grandparents have to provide money to their grandchildren, and maybe this woman doesn't get a thing, but even if she is one of lots and lots of grandchildren, she would surely inherit something someday. And at that level of wealth, I'd be surprised if there wasn't some sort of trust fund distributing some money already.

At some point after that party, I asked a mutual friend if he knew about the wife's background. He was aware that she came from money, as apparently a group of this guy's friends always joked about how he must have sold his soul to the devil because he'd gone from being kind of a nerd in high school to marrying this beautiful and wealthy woman! But they didn't even realize exactly how wealthy her family was.

I was just looking up this couple to see what they are up to lately, as I haven't seen them in a while and don't know much more about them other than what their kids are doing in photos posted on Facebook. The wife is no longer a teacher, and has what sounds like a management job at a tech company. My friend seems to still have more or less the same job. When the wife was a teacher, I thought "ok, that is the sort of job that is emotionally rewarding if not remunerative, so it makes sense that she would do that." Obviously I don't know any details about her current job, but it sounds more like the kind of thing people do when they need to make money-- she may find it satisfying in other ways, but I guess it is my own bias showing that I think anyone who has some family money would want to be an entrepreneur, or work for a non-profit, or teach-- in general, do things that are too risky or low-paying to do if you really need a steady income. I wish I could ask her a lot of questions....