What Can Go Wrong?

     We enter retirement with a financial plan that we've figured out will work for us. We have income from Social Security and our IRAs -- and a pension if we're lucky. We might have other investments, or plan to use some of the equity we have built up in our homes. Some of us will receive an inheritance; some of us will supplement our retirement income with part-time work.

     If we're smart we've devoted a good deal of attention to forecasting how much we'll spend in retirement as well, counting up our basic living expenses, then adding in travel and entertainment, car repairs and home maintenance.

     Whatever it is, if we've planned things out, we should be okay from a financial standpoint. Right?

     Not so fast. The question I'm worried about today is: What can go wrong?  What can upset your retirement financial plan?

     On the income side of the equation, we've already experienced one pretty drastic shortfall. Interest rates have collapsed. The savings you keep in a bank CD, or a garden-variety bond fund, used to pay out 4 or 5 or 6% in income. Now, thanks to Ben Bernanke, you're lucky to get 1 or 2%. I recall, when I first left work in the early 2000s, I moved my 401k plan over to an IRA at Vanguard. I was being credited with $700 to $800 a month in interest payments. Now I'm getting a measly $20 a month.

     You can also suffer from the vagueries of stock market, the real estate market, and the job market. It's fine to plan for part-time work. But what if you can't find a suitable job? And it's tough to cash out some of the equity in your home when the value of your house has gone down by $50k or $100k. I, myself, own a rental property -- something like 10% of retirees rely on rental property for a part of their retirement income. But that can pose its own problems (which I will tell you about in a future post).

     We worry about Social Security and our pensions, but in fact, those are probably our most reliable sources of income over time.

     Meanwhile there's the other side of the equation. Expenses. What are the unexpected expenses you might face in retirement? Last year I went to the dentist with what I thought was a routine cavity. I found out I needed to have the tooth pulled. I could have just left a gap in my teeth -- a lot of people do that -- but my dentist recommended an implant. I decided to go ahead. I have some dental insurance, but it didn't cover the implant. Goodbye to $5,000.

     So a big dental bill is one unexpected expense. You cannot put off spending money when you have a toothache.

     I've been lucky on the medical front. Yes, I've had a few problems. But so far they've been covered by my medical insurance. Last year I had to have two operations on my hand -- one because I cut my finger, the other for carpal tunnel syndrome. Neither one was a major operation, and my insurance company covered all but $200. But this year my deductible has gone up to $1,000, per incident. Would have cost me $2,000. So this year I'm trying to be real careful.

     In my state, the governor passed a law limiting real-estate tax increases to 2% a year. But, somehow, when we got our tax bill last month, the increase was 4%. Taxes are a major expense for us; but they are not unexpected. The difference between 2% and 4% is nowhere near the cost of a tooth implant.

     My insurance company tried to raise my car-insurance premium. But I took that auto-safety course, so this year my premiums will actually cost me a bit less than last year.

     But I'd like to know, from people more financially savvy than I am, or more experienced:  What are the financial pitfalls awaiting us in retirement? I don't have any grandchildren yet. Is that going to cost me? I'm just trying to get a handle on things.

Top 15 Auto-Safety Tips

     I took the American Safety Council safety course, on the recommendation of my auto insurance agent. No, I did got get a traffic ticket. He promised I would save 10 percent on my car insurance, for three years, which in my case will be a little over $70 every six months.

     The course cost $20 and took six hours to complete. You cannot go through it any faster, as the site requires you to spend a minimum amount of time on each page. If there's a way to beat the system, I didn't figure it out.

     Was it worth the time? I'm not sure. But I did learn a few things about auto safety. Some of the items were pretty high on the duh scale. But I found a few tips that, while pretty obvious, nevertheless involve driving errors that I make almost every day. And there were a few others that cover my own pet peeves.

     Will taking this test improve my driving habits? Obviously, the insurance company thinks so.

     Here are the top 15 things I learned from the course. You won't get any discount on your auto insurance by reading these. But you will save yourself about 5 hours and 55 minutes!

     1)  Don't drive if you've been drinking alcohol, especially if you've been taking drugs, such as heroin, at the same time. (Yes, they really had to warn us about this!) Alcohol is involved in 30% of fatal car crashes -- I actually thought it would be more.

     2) The American Safety Council advises, "Avoid roads with potholes, loose gravel and paving materials." I suppose that means you do not drive at all in Boston, New York or Philadelphia. Or in Cleveland, Detroit, Chicago or St. Louis.

     Now on to the ones that surprised me, or gave me information I didn't already know.

     3)  The top three reasons for car accidents are:  inattentiveness, speeding, and tailgating. Inattentiveness can of course be caused by talking on the cellphone. But the main cause of inattentiveness is fatigue. Nearly half of surveyed drivers admitted to driving while drowsy. (Who's guilty of that one? I must admit that I am.) Two out of every ten drivers actually admitted they had fallen asleep while driving! Truck drivers, according to the American Safety Council, are especially susceptible to fatigue related crashes.

     4)  Inattentiveness also comes from drivers being emotionally disturbed. If you're angry or depressed, you're not thinking about the road. This is kind of obvious. What I didn't realize is that certain medications can affect your moods. The nicotine in a cigarette can affect your mood. And think of this:  the caffeine in your coffee is a stimulant, and like other stimulants can contribute to overconfidence, irritability, and more impulsive behavior.

     5)  Auto accidents are the Number 1 cause of death for Americans age 6 - 33. No surprise there. There were 32,788 Americans killed in 2010, and over 2 million injured. But get this:  Since the first documented auto fatality in 1899, some 30 million people worldwide have been killed in auto crashes.

     6) The highest risk area is not the freeway, but intersections where there's congestion and crossing traffic. One third of fatal crashes are side impacts at intersections -- and you never see it coming.

     7) On a ten-mile trip, with average speed limit of 45 mph, going 60 should theoretically save you approximately 3 minutes. However; if there are lights, which are often timed to match speed limits, the speeding driver gets caught in more red lights, and ends up saving less than 1 minute on the trip.

      8)  And now one of my pet peeves. Picture this situation: You're at an intersection without a stoplight. A car is approaching on the cross road with its turn signal on. Can you go ahead and make your own turn? No! The other driver may have his blinker on by mistake, or change his mind and not make the turn. Or, there could be smaller car hidden behind the turning car that will smash into you if you pull out and try to make your turn.

     9)  Some 90% of car accidents are due to human error. But a few are caused by mechanical failure. We all know that properly inflated tires help a car grip the road. But did you know that tires lose one psi for every ten degree drop in temperature? When was the last time you checked your tire pressure?

     10) When you change drivers, do you check your mirrors? (I do most of the time, but sometimes I get lazy.) And do you regularly clean your windshield? According to the American Safety Council, "Windows are easier to see out of when they're clean." Okay, duh. But while I regularly clean the outside of my windshield, I do not keep up with cleaning the inside of my windshield -- and I bet you don't either.

     11) Per vehicle mile, motorcyclists are 34 times more likely to die in a crash than a passenger in a regular sedan.

     12)  You're supposed to adhere to the two-second rule when following another vehicle, meaning you're two seconds behind the car in front. You should increase it to three seconds if it's foggy, raining or snowing, or if you're following a tractor trailer.

     13) Another pet peeve of mine: failure to yield the right of way is among the top causes of accidents. How many times have you been traveling down the highway. You come up on an entrance and another car merges onto the highway . . . without signaling, without yielding, sometimes without even looking! Arghhh!

     14) Another pet peeve:  Vehicles not just tailgating but also traveling side by side. If cars are side by side, and something goes wrong -- a driver decides to change lanes for example --  there is no room to maneuver and no time to do it. So word of caution:  When merging or changing lanes, you should not rely on your mirrors alone -- quickly look to the side to make sure your blind spot is clear. And do not drive in someone else's blind spot.

     15) Believe it or not, there were over 300 car-related fatalities at railroad crossings. Now here's the advice, which seems kind of specialized, but it makes sense if you think about it:  If your car stalls on the railroad tracks, and a train is coming, and you can't move the car off the tracks, run away from the tracks. But don't run the way the train is going. Run at a 45 degree angle toward the train -- otherwise, the train might knock your car right into you as you're running down the tracks.

The No. 1 Reason Why Retirees Move

     B and I were at dinner over the weekend with two other couples. One of the couples had, until recently, been a neighbor of ours. They lived in a big house, in a development more upscale than ours, about two miles from us. But last year they sold their home and moved away, right after their youngest child graduated from high school and went off to college.

     The husband, in his early 60s, lost his job a few years ago. Now he's semi-retired, doing some consulting, although his wife still works fulltime for a nonprofit. They moved into a smaller house in a lake community, about 15 miles farther upstate. The wife told us they love living on their little lake. They go swimming. They go kayaking. They love the view.

     But a while later, the husband offered his own reason why they had moved:  Taxes. The real-estate taxes on their new house, in a modest community with a not-as-well-regarded school system, are less than half of what they were at their old place. Who needs to pay those high school taxes, he ventured, when your kids are grown up and gone away?

     It made me wonder. Taxes? Do they make really that much of a difference?

     On the one hand, it does seem like a waste of money to pay thousands of dollars a year in real-estate taxes -- the majority of which go to the school system -- when you're not getting a benefit because your kids are no longer attending the schools. But, do we not have an obligation to contribute to our community and help pay to educate the next group of children growing up in our neighborhood?

     Tom Wetzel, president of retirementliving.com, cites high property taxes as the single most important reason why retirees living on a fixed income decide to move elsewhere. John Brady, editor of topretirements.com, agrees. "The most significant tax threat to most retirees is the property tax," he explains, "because it is based on the value of your home and bears no direct relation to your income."

     Meanwhile, I found this map showing relative state-and-local tax burdens, state by state. (Go to taxfoundation if you want a bigger, clearer version of the map.)

   

     I'm not necessarily advising anyone to move away from their high-tax town, or their high-tax state, if that's where they live. After all, I myself live in New York State, which by all measures ranks among the Top 10 highest-tax states. And, I'd argue, sometimes you receive a lot in benefits and services for those high taxes you pay. Besides, high taxes are just one factor in what makes a state financially attractive for retirees.

     For example, Pennsylvania which according to the Tax Foundation ranks as the 10th highest tax state -- due to its sales tax, an inheritance tax and relatively high real-estate taxes -- nevertheless offers other incentives to help keep its retirees solvent. According to a Kiplinger website article, The 10 Most Tax-Friendly States for Retirees, "Pennsylvania is one of only two states (Mississippi is the other) that exempts all retirement income -- including public and private pensions, IRAs and 401(k) distributions -- from its state income tax."

     And of course there are plenty of other reasons to live where you live -- family, friends, climate and a host of other factors. But then . . . I see that school tax bill sitting over there on my desk. It arrived in the mail last week. It's due at the end of September. It's the single largest bill that B and I face all year long, by far. And our youngest child graduated from the local school system three years ago.

     Hmmmm . . . forget the Red and Blue states. Lemme take a look at one of those White states up there on the map.

     

Here's a Suggestion ...

  
     Go take a look at the current edition of the Blogging Boomers Carnival, brought to you by Laura Lee Carter at the Midlife Crisis Queen. She points the way to some of the interests of her fellow Baby Boomers -- from meditation to experimentation to the election.

     And get this:  One Baby Boomer is being so bold as to list nine reasons why she doesn't like September. You may agree or disagree with her; but you will definitely be entertained. And she's right about at least one thing:  all those songs about September -- like Wake Me Up When September Ends, September Song, The September of My Years -- do tend to be pretty mournful melodies. Still, I do like this one . . .

What Was It Like in 1958?

     Last weekend I started reading Stephen King's recent book, 11/22/63. I haven't quite finished it -- the thing is over 800 pgs. long! -- but the story has me entralled and so I enjoy plowing through it.

     The book tells the tale of Jake Epping, who in 2011 is a 35-year-old divorced teacher at a Maine high school. Epping is one of the few people in town who frequents Al's Diner, a silver trailer standing on concrete blocks near the railroad tracks. One day the owner of the diner, Al Templeton, calls Epping and asks him to come over. He has a secret.

     Epping arrives to find Al Templeton looking pale, coughing up blood. Al is dying of cancer. He escorts Epping into the pantry in back of the diner, and tells him to walk forward ... toward the steps.

     What steps? Epping wonders, as he slowly enters the pantry. But suddenly it seems as though he's stepping down, and down again. And then the warm sun comes out, and he has arrived in 1958.

     When Epping climbs back up the steps, back to 2011, Al Templeton explains how he's been going back in time for years. When he goes down the stairs, it's always 1958. While he's there, time proceeds normally. But whenever he comes back to 2011, it's only two minutes later. Al Templeton has been away for years, which is why he's now old and sick -- even though he has only been gone two minutes in 2011 time.

     Templeton was trying to stop the assassination of John Kennedy. But now he is too old, and dying of cancer, and he has missed his chance. His dying wish is for Jake Epping to do it for him.

     Epping travels back to 1958. He has a few scores to settle of his own; then over the course of the next five years he proceeds to put together his plan to stop Oswald from killing Kennedy.

     This explanation only scratches the surface of the book (remember, it is over 800 pgs.). But I was curious about the observations that Jake Epping makes regarding how the world was different back in 1958.

     The thing that first seduced him into taking on the project, into agreeing to go back in time, was the taste of the root beer. "I sipped through the foam on top, and was amazed. It was ... full. Tasty all the way through."

     As we look back on 1958, perhaps a lot of us can see that things were better then. (Do you have any opinions on that one?) I can certainly recall the sodas I drank when I was a kid. And I agree with Jake Epping. They tasted better.

     What else was different back in 1958?

     The first thing Epping couldn't help but notice. Everybody smoked their heads off, even on public conveyances. In 1958 nobody worried about smoke. They didn't worry about cholesterol either.

     As he settles in to his new (old) life, Epping notices that in 1958, you rarely saw a man in a supermarket. Men did not buy groceries in 1958. He also notices that the cars and the houses were not always locked up, and he observes, "People might not have been more honest, but they were more trusting."

     He also says there was less bureaucracy, and a lot less paperwork in 1958.

     Following on the trust theme, when Halloween rolled around he met a young girl with her dad, on the street, and to be friendly he bent down and offered her a piece of candy. The days of candy doctored with LSD, or spiked with a razor blade, were far in the future -- as were the days of "Do Not
Use If Seal Is Broken."

     In 1958, people read TV Guide. They read Life and Look and Reader's Digest.

     Of course, back then people had rotary dial phones; and there were pay phones at gas stations and drug stores.

     Milk was delivered to your door.

     According to Epping, in 1958, which was the heyday of Jayne Mansfield, full breasts were considered attractive on a woman, rather than the embarrassment they are today.

     And, yes, there is a love interest in the book. Apparently this was before birth control pills; but Jake Epping says the condoms back then were no better or worse than they are today. (I can't verify any of this myself; I was nowhere close to being sexually active in 1958.)

    Also, back then, there were plenty of good, fast roads crisscrossing the countryside. Many of them were new. By 2011 those roads were choked with traffic, but back then they were almost deserted, and driving was actually a joy.

     Epping doesn't offer an opinion about whether the cars were better or worse (although he seems to love the used 1954 Ford Sunliner convertible he bought for $315, when gas was 19 cents a gallon). He doesn't weigh in on whether the music was better or not.

     On a more serious note:  People worried about nuclear war, but no one worried about global warming or suicide bombers flying hijacked jets into skyscrapers.

     It was acceptable, back then, for people to make jokes about three jigs stuck in an elevator . . .  or three Yids on a golf course.

     Once, Epping stopped at a gas station in North Carolina to use the toilet. There were two doors and three signs. MEN was stenciled on one door, LADIES on the other. The third sign was an arrow on a stick, pointing down a small hill. It said COLORED. He walked down the path and saw, amidst some unmistakable signs of poison ivy, a narrow stream with a board laid across it on a couple of crumbling concrete posts.

     "If I ever gave you the idea that 1958's all Andy-n-Opie," writes Stephen King, "remember the path, okay? The one lined with poison ivy. And the board over the stream."