The state direct-deposited the $4450 it owes me for this year’s installment on my RASL (retiree unpaid sick-leave). Very nice…but what to do with it?
I’d figured to put $2500 of it in the Roth IRA and invest the rest in the brokerage account. This would plump up my retirement savings by another few thousand bucks. On the other hand…
I’m already in retirement. What we have here is a chunk of post-tax money in an era when income from Social Security and teaching doesn’t cover all my expenses. Right now I’m drawing down post-tax savings at the rate of $1093 a month to ensure that ends will be met, come what may. This left me, at the end of February when utility costs were nil, with a surplus of a grandiose $181, after all the bills were paid and transfers made to the savings accounts that hold funds for taxes, insurance, and extravagances like clothing and shoes.
Since I’m already having to draw down de facto savings (just not out of investment accounts—yet), does it make sense to invest this money only to have to start drawing it back out of the investment accounts in another few months? Just now, my projections show I’ll run out of after-tax savings in September, assuming I use my summer-school pay to cover utility bills and then spend the remainder on trash like a new washer and dryer or a new crown to replace the broken one. Videlicet:
Suppose, though, I were to fold the RASL into the survival fund and do the same with the post-utility bill net summer pay? Let’s imagine, too, that a miracle happens and I get another two courses next summer, netting three grand after the high-season utilities are paid:
This has a sterling advantage: it allows me to live on post-tax savings, minimizing 2011 and 2012 tax bills while my IRAs and brokerage accounts continue to grow (assuming any growth is left after the Libya unrest settles down—a big assumption, for you can be sure whoever takes control will not be our friends). This year, I do need to roll the pre-tax money out of the defunct whole life policy into the brokerage account; so far only post-tax funds have been withdrawn from that. It’s earning all of 1 percent (at best) at Northwestern, and so needs to be transferred to investment accounts, which have been averaging 5 to 7 percent the past few months. That need grows urgent, as inflation is about to spike, big-time. Living on money in savings will reduce my tax liability for that rollover.
The second strategy will require me to defer the dental crown indefinitely, and also to try to fix the ancient washer or to replace the washer only, not the dryer. I will not be able to use summer earnings to cover those needs, nor could I start stashing summer pay to save toward a new car, which I’ll be needing one of these days. Soon.
Of course, there’s no guarantee that I’ll get two sections to teach in the summer of 2012. But even if that doesn’t happen, I could in theory hang on until the end of July without having to draw down from investment savings.