Covid-19, Emergency Preparedness, job loss, Retirement

Playing the ‘what if’ game if we lost our income.

apple business computer connection
Photo by Vojtech Okenka on Pexels.com

It’s no secret that it’s a huge mess out there.  This health crisis has caused so much loss, both in life and security.  My heart breaks for all those who have lost loved ones.  We lost a very good friend, not from Coronavirus, but from not going to the hospital when an emergency surgery was needed because they feared contracting the virus. A ton of missteps by both health workers and the family members.  But that’s not what this post is about.

I want to talk about the economic mess.  Many people have been furloughed without pay, or let go completely from their jobs.  Many small businesses have closed.  Unemployment is at an all-time high. Stimulus checks won’t be enough, and the government can’t keep printing money.  It will render cash worthless.  A recession may soon follow if we all can’t get back to work.  But we can’t go back too soon, or we will be right back to the health crisis.  It’s definitely a conundrum.

My husband, fortunately, has kept his job so far, but we are aware that he could lose it.  No job is safe, in my opinion.

So, we decided to play the ‘what if’ game.  What if my husband lost his job tomorrow?  What steps would we take?

This morning we sat down at the kitchen table and started listing in order what we would do if he were to be let go tomorrow.

Immediately:

  1. Apply for unemployment.  It won’t cover anywhere near his normal paycheck, but it will be something.  Virginia is in the top 10 for top balanced fiscal budgets and Virginians aren’t having a problem receiving it.
  2. Hoard money.  Stop paying for gifts, subscriptions, clothing, personal spending, travel (obviously). Eat from pantry, freezer and fridge.  No need to worry about credit cards, car loans — I’m debt-free.
  3. Look for another job.  This may be difficult for several reasons.  Timing and age.  It’s not the best time to find a job, and our age would make it nearly impossible, however, our area has many more jobs than most, and I’m pretty confident that we both could get some type of work in our field.  (We aren’t that old, but old enough. 😉

In a couple of months:

  1. Sell home (if not able to find employment).  This area is very expensive, and real estate is ridiculously expensive.   We have a very strong housing market, even during Covid-19.  We would sell our present home and buy a much smaller one in a less expensive area outright. (No mortgage for us!)  We already researched this, and there are three areas we would consider: Southern VA, North Carolina and Florida.  We could possibly walk away with $230,000 in surplus.
  2. Sell one of our cars.  If we decided to retire from paid employment, we would definitely not need to support two SUVs.  This would save us almost $3,000 a year in expenses.
  3. Cash in my pension account. We would only do this once I turn 59 1/2, (which is one year from now) and only if it were necessary.

Down the road…..

  1. Take Social Security at 62. If my husband lost his job today (at 56), we would have to live off the proceeds of our cash savings and real estate surplus until we could tap into retirement plans at 59 1/2.  That is 2.5 years.  Our investments would grow to a nice sum, but we would only pull 3% out to make it last more than 30 years.  This would create a small shortfall, so we would start social security at 62.   We will have more than enough for one nice trip a year as well.
  2. Find part-time jobs.  If we did move into a smaller home in a new area, we both would look for fun part-time jobs to supplement our time and income. (I have my eye on working at a golf-club – when they reopen, of course.)

Our current plan (before a lay-off):

  1. SAVE MORE MONEY IN CASH.  We are fortunate to have some savings, equity in our home, and a good retirement portfolio.  However, we do realize that we are a bit short on available cash and only have enough to see us through for 6 months.  I would like to see that grow to at least 9 months to feel secure in a layoff situation.

Of course if my husband keeps his job, which I hope he will, we’ll have a different financial plan.  It’s just nice to know what to do ahead of a crisis, instead of being blind-sighted by it.

Hope you are all doing well and staying safe.

 

Retirement, Retirement Journey, SAVINGS

The Stock Market Ups & Downs and My 5 Bucket Sources for Retirement.

grey metal case of hundred dollar bills
Photo by Pixabay on Pexels.com

Preparing for an ‘earlier’ retirement requires making sure our money lasts.  Having various ‘buckets’ of resources is how we won’t lose our minds when the stock market takes a bit of a tumble.

Before I begin, if you are worried about your money in the stockmarket, please watch this video.  You’ll feel MUCH better.

Buckets 1 & 2 – Our Retirement Accounts

We have amassed, in my opinion, a significant amount in our 401K retirement accounts.  I will always be an advocate of the stock market, as it has proven over and over again that it recovers.  Slow, steady and consistent investing will give you the money you need over time.  We are proof.

We have two retirement accounts, and consider them buckets 1 & 2.

The first bucket will have ultraconservative investments, and we will use it to get through the first 7 years of retirement.

The second bucket will be money we will let grow.  We figure we have another 12 years of growth.

Bucket 3:  CASH. 

My goal before we retire is to have $200,000 – $250,000 in cash reserves.  I believe this will be enough for us to weather a long down market.

Our cash goal is a lofty one, but one we could do.  Thanks to my husband’s career, the fact that he was never unemployed, and his hard work to get to the position he’s in, we are now able to bank 50% of his take home salary.  (Of course it doesn’t hurt that all four kiddos are off Mom & Dad’s payroll!).  If I’m diligent with our budget, this goal can be obtained in three years.  I will take the fourth year to pay off our mortgage, which is the only way my conservative husband will retire. 😉

Bucket 4:  Social Security

Of course, we will have social security (yes.we.will).  We won’t start receiving it until year 7 of our retirement.  (I’ll receive mine two years before hubby).  If we keep our expenses low,  it will cover 3/4 of our monthly expenses.

Bucket 5:  A Divorce Settlement Pension (My HealthCare Plan)

May I just say I earned every penny of this? For all those that may not know, I was married and divorced in my 20’s.  I will never go into the specifics of that, but I came out ahead  with two GORGEOUS daughters and a pension.  I will receive the pension at age 62 (the same year my husband plans to retire).  I will take it as a lump sum, then roll it into an IRA.  This should cover most of our healthcare needs before medicare kicks in.

I believe it’s imperative to have several ways to get money in retirement, and cash will play an even more important roll in the future.

How are you saving for retirement?  Or, how are you spending in retirement?  Please share in the comments.

Retirement, saving money

Seriously. What took me so long?

https://www.thecollegeessayist.com/wp-content/uploads/2015/08/procrastinate-on-these-13-websites.png
{via}

Procrastination.  It can be a true enemy to your financial life.  I procrastinated for many years by not looking at my fixed costs more closely.  Fixed are fixed, right?  Wrong.  And it cost me.  Big.  $3,240 to be exact.

I’ve been on a kick to save as much money as possible, as my desire to retire early is lighting a fire under my butt to get it done.  So, I’ve been looking at ways to lower our monthly bills which will allow more money to be saved.   In the last 30 days, I reviewed my fixed expenses, which included insurance policies, cable bills, cell phone bills, electric bills, water bills, and natural gas bills. The results were eye opening.

This is how I found more than $3,000 in savings:

INSURANCE

Homeowners.  I was being overcharged for home insurance by $400 a year.  They had an enormous replacement value on my home because they had in their records 1000 more square feet than its actual size.  If I had really read the insurance papers last June, I would have noticed it sooner.  I’d love to blame them for incompetency, but this one is on me.

Car InsuranceNot much to change here, but I did find an overcharge on my car for $80 a year.  $80 is $80, right?

CELL PHONE/CABLE

Our service provider changed it’s policies so I was able to get out of a cable contract that I had with no penalty.  I capitalized on this recently, and documented it here.   I also took advantage of internet/cell phone bonus and got 1 GBT internet and unlimited data for my cell phones .  This is where I saw the most savings, about $2,000 a year.   I am MOST happy about this change. 🙂

A side note:  If you are financing your phone through your cell phone bill, it’s not a utility bill, it’s DEBT.  It took me YEARS to realize this.  I’m glad we own all of our phones, and no longer finance them.

UTILITY BILLS

GAS & Electric:.  This should have been done YEARS ago, but I finally changed all of my lightbulbs to LEDs.  I’ve also lowered the temp to 68 degrees, lowered the hot water heater to 120 degrees, turned off the garage refrigerator, and started sealing up the windows.  I have yet to get the new bills with these changes, but based on the wattage usage, I should save $25-40/mos. just by unplugging the garage refrigerator.   By lowering the heat and hot water heater, I should be able to save another $20 a month.  Total savings for the year: $720.00.

Water/Sewer Bill: I changed out shower heads to get a slower flow, as well as other faucets.  The water bill has always been an issue, so I’m making a conscious effort to use less.  I am taking fewer baths, and shorter showers.  Hopefully small changes will add up to big savings.  I’ll keep you posted on this one.

I’ve realized, finally, that fixed bills don’t have to be ‘fixed’.  There are ways to save money.  And I have $3,000 more to prove it.  So, not only do I have $3,000 more in savings, but I have $3,000 less to come up with when I retire.  A win-win for sure.

If you have ways you save on your fixed expenses, please share!

 

 

 

Budgeting, Retirement, Retirement Journey

Series: Retirement Preparation. The retirement budget.

grey metal case of hundred dollar bills
Photo by Pixabay

Expenses.  This is probably one of the most important of all the areas of preparedness for retirement.  Without knowing how much you will need in retirement makes saving goals for retirement a guessing game.

I have been preparing my budget now, and will be living off of our potential retirement income over the next four years, while saving the overflow in a cash liquid account.

Of course, we don’t know exactly what will happen in retirement, but we do know we will need a good amount for health care.  I am not going to nickel and dime this category  because quite frankly without health, nothing else matters.

Another line item I want to have is a significant amount in travel.  For the first 10 years of retirement, we plan on taking full advantage of our current health (good!) to blow through our travel bucket list.  (a topic for a future post!)

white cruise ship
Photo by Matthew Barra

That leaves us with the every day expenses — mortgage, utilities, cell phone, car expenses (insurance, gas, maintenance) food, eating out, gas, gifts, clothes, subscriptions, giving, personal care, blow $, household, taxes and insurance.

Mortgage.  Ultimately, we don’t want a mortgage.  Unfortunately, four years doesn’t give us enough time to pay off our current home.  Our plan is to sell our current home and downsize to a smaller home in our area.  Our children and grandchildren are here, so moving to another area doesn’t appeal to us.  However, downsizing into half the space, half the utility bills and half the taxes and insurance does. 😉 We hope to downsize in the next three years before we retire.  Potential Savings:  $30,000/year.

Cars.  We will be going down to one car.  In Virginia, there is a personal property tax on cars each year.  If you have a fairly new car (which we do), it can be as high $1,000 or more.  Going down to one car would be a HUGE savings to several line items, including car maintenance, gas, taxes and insurance.  My husband never uses his car on the weekend, and I barely use my car during the week.  When he is retired, we don’t see needing both.  Potential Savings:  $3,500.00/year.

By rejiggering just those two categories alone, we would save over $30,000 in yearly expenses.

All other expenses.

We are in a good place with other line item expenses, so I’m keeping them all the same for retirement.  By saving on the big ticket items (mortgage and cars), the other line items can remain the same.

So, where does that leave us?

Here is our preliminary REALISTIC retirement monthly budget, and one we follow now except the $2,500 is our mortgage instead of healthcare, and our taxes and insurance is $1200/mo.

  • HealthCare:   $2,500.00** (This includes insurance, co pays, medications, and concierge service for my endocrinologist )
  • Travel: $1,500.00 (5 trips a year)
  • Taxes & Insurance: $550.00
  • Utilities: $275.00
  • Cell/Cable: $200.00
  • Groceries: $500.00
  • Household: $100.00
  • Subscriptions: $25.00
  • Eating Out: $100.00
  • Home/Car Maintenance: $250.00
  • Gifts: $200.00
  • Clothing: $150.00
  • Personal Care (makeup/hair): $100
  • Blow $:  $200.00

Total:  $6,650.00

**Healthcare will go down significantly when Medicare kicks in, although I anticipate spending some money for gap insurance.

Well there you have it.  After months of agonizing over our expenses, I can honestly say the above numbers are as accurate as they can be.  I’m not going to lie, that is a high monthly nut to cover.  $400,000 for the first 5 years to be exact, then $135,000 for the next 2 years (when medicare kicks in).  However, once we start social security at age 67 (yes, we changed our minds again 😉 ) our monthly draw from personal savings will be $2,625/month or $31,500/year.

Will we have enough to retire at age 60 given the above numbers? I think so.  But stay tuned for the next post in our series, OUR CURRENT SAVINGS.

If you are retired or planning to retire, how do your expenses align with mine?  Please share!

 

 

 

 

 

 

Retirement, Retirement Journey, Social Security

The 4 Years before Retirement

lose up photo of green flower
Photo by Vraj Shah

Spoiler Alert. We now have a date.  My husband is officially retiring in 4 years and we are busy gearing up for the day when he will no longer be getting a paycheck.  My husband’s retirement age will be 60!

I guess that doesn’t qualify us for the F.I.R.E. (Financial Independence, Retire Early) movement, but it sure beats waiting until 70 or beyond to retire.

I have been reading a lot of articles on pre-retirement planning.  While I may not have anything extra to add, I thought it would be advantageous to share how we will be preparing for our retirement.  I will document our personal journey in this space as a way to keep me accountable.

For us, we have concluded that there are five things we need to consider before we retire.  In general terms, they are:

  1. Our Health – what will our anticipated well-being be when we retire – and what we will do in the next five years to make that the best it can be;
  2. Our Wealth – what we will have potentially saved in our retirement accounts, how we will navigate withdrawals and when we will be the most advantageous time to take our social security benefit;
  3. Our Expenses – what our retirement expenses will look like including medical expenses;
  4. Our home – where we will live out our retirement years and if we will move, downsize or stay put; and
  5. Our Hobbies & Interests – what we will do with all that free time.

In future posts, I will be sharing how we will be preparing and addressing each of the above five considerations.   I hope you’ll join me.

If you are thinking about retiring, how are you preparing?  If you are already retired, am I missing something?