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Times sez retiring set scared

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“Retirees Filling the Front Line in Market Fears,” says a New York Times report still online in the wee hours of Wednesday morning.

Damn straight! The craziness of expecting people to base their economic security in old age on the stock market is coming home in the current flirtation with worldwide depression. This country’s need for a better way to take care of elders who have spent their entire lives working with little or no chance of saving enough to support themselves into advanced old age is less widely discussed but every bit as desperate as our need for a decent healthcare system.

In the first place, you need to have stashed away a phenomenal amount of money to have it last you to the end of the life expectancy that most Americans now look forward to enjoying. If “enjoying” is the operative term when what you’re looking at is twenty or thirty years of poverty. If “enjoying” is what one feels when confronted by this circumstance:

At the same time, other parts of the economy are closing in around her. Though her home is paid off, her property taxes have risen to nearly $14,000 a year, up from $5,000 when she bought the house 10 years ago. She was counting on the annuity [through AIG, not federally insured] to pay the taxes.

Fourteen thousand dollars in property taxes? For the love of GOD! I’m faced with the possibility that I won’t be able to stay in my paid-for home with $2,100 worth of property taxes. Fourteen thousand bucks is more than my entire Social Security income would be if I retired today. It’s almost as much as the gross Social Security income I will have if I retire at age 66.

Consider: with a total life savings of around $550,000—significantly more than the average American’s nest egg—my total gross income will be about $38,730. That’s GROSS, folks: the federal, state, county, and city governments all expect their cuts from that. Imagine what my net will be. I’ll leave the imagining to you, since that picture is more than I can bear at 3:30 in the morning.

Interestingly, 38 grand is too huge an income to give a pensioner a break from county property taxes; and in any event, the “break” is no exemption from the rip. If your income is under $12,000 a year, maybe the county will freeze your taxes at the amount where it stands when you apply. So if I were too poor to afford to dine on cat food, I could get my taxes frozen at 17% of my income. How white of the county.

There’s no way I can pay $2,100 out of the post-tax remains of that income and still eat. If the housing market hasn’t turned around in a couple of years, so that I can move out of this house and into a place in Sun City where the taxes and insurance are a little lower, I am screwed.

And darlin’s, if your mom is screwed today, just imagine the screwing you’re going to get when you reach old age. If over half a million dollars and a paid-off house are not enough in 2008, what will you need to stay in the middle class come 2038?

What’s needed here is not assiduous scrimping and smart investing. It’s political action.

Small glimmer of light in the tunnel

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(Hope it’s not a headlight!)

Yesterday evening I walked Cassie past a foreclosed house a block to the west. The place has always been trashed: the people who lived there for years took pride in running it down, and so by the time they were tossed out, it was quite a mess. The “For Sale by Lender” sign has been up for several weeks.

Curious to look inside, I kicked the back gate open and found…lo! brand-new double-paned windows and Arcadia doors! A brand-new heat pump, merrily humming away in near silence. Through the windows, some of which still had the manufacturer’s plastic wrap clinging to the glass, I could see new cabinetry, appliances, and countertops in the kitchen. The house was tiled throughout with attractive Saltillos. A closer look at the structure revealed brand-new roofing, and it had a new paint job inside and out.

Dang! It looked pretty darned nice. Only things remaining to be done were to install a shade structure over a large patio slab, to revive the landscape, and maybe to put in a couple of shade or fruit trees. Since the grass is already pretty much dead, it wouldn’t take much to xeriscape the yard.

So I was standing in front thinking maybe I should consider buying that place, since it’s offered for significantly less than I could net on my house: it’s smaller (less work! lower utility bills!) and all the other houses around it are well maintained. Archie, the resident across the street, is a right-wing crazy, but that’s OK: for unknown reasons, he thinks I’m a right-wing crazy, too, so as long as I don’t disabuse him I’ve got a friendly neighbor. Pretty quick along came one of the other dog-walking regulars, a neighbor named Mike.

Mike knows what’s going on around the neighborhood, in extended detail. The house, he says, is in escrow: selling price is allegedly $260,000.

“That will pretty much set our prices for the next few years,” says he.

“Yup,” say I, knowing that now there’s no chance of escape.

Mike said the lender had put about $60,000 into the place. Some time back, Archie said he’d talked to the rep, and his story was that the upgrades cost $30,000. Assuming the tile floors were already in, I’d say thirty grand for the roof, air-conditioning, windows, and kitchen is closer to the truth.

Well. If the outfit that ended up owning that decrepit rathole fixed it up to this extent, maybe the same thing will happen with Dave’s Used Car Lot, Marina, and Weed Arboretum. Even a coat of paint on the outside would help: the place is a wreck. Right now the girlfriend has mounded the weeds she’s pulled during the past three or four weeks into a big haystack on the driveway. Somehow she manages to drive around the stack and park her car on the slab the between the closed garage and the stack—how, I can’t imagine. The garage, of course, is packed with junk, so there’s no way to get a vehicle in it. Take that back: about two weeks ago, Dave hauled away enough debris to get his pickup in there, but the mother of the new baby can’t put her car in out of the heat.

So maybe there’s hope: if a lender has to clean up a property to unload it, maybe the outfit that ends up with the Weed Arboretum will at least clear the brush and paint the tired (not to say “exhausted,” “debilitated,” or “comatose”) exterior. That would sure help a lot.

Mike has done a lot of renovating and upgrading on his house, another half-block to the west and dangerously close to the coming construction mess. Asked what he thought would be the effect of the train track project on our property values, he said he was disgusted when the City refused to give fair consideration to the residents’ request to turn the streets now opening onto 19th into cul-de-sacs but instead ramrodded its own half-baked concept past everyone’s objections.

During the construction of the trolley-car tracks, he said, our property values will drop significantly, and the foreclosure situation will drag values down further.(He’s calling it the “trolley”; I call it the “train”; no one who thinks the scheme is the biggest boondoggle to grace Arizona since the Freeway to Nowhere calls it by the City’s pet name, “lightrail.”) However, he has learned that neighborhoods near completed segments of the trolley-car tracks already are showing increases in property values. So, the folklore to the effect that trolley lines improve property values may contain a grain of truth.

We’ll see.

Anyway, I felt a little better about things after exploring the partially upgraded little house and imbibing Mike’s optimism. Maybe we’re not on a handcart to hell but on a roller coaster, instead. Roller coaster rides generally climb back up after they’ve gone down.

Moments of Fame

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Aryn hosts a vast Carnival of Personal Finance at Sound Money Matters this week, where Funny’s dialogue with the investment adviser appears. She offers an appealing autumn theme.

Most inspiring, Madison at My Dollar Plan describes how she escaped the workforce at the ripe old age of 29…hint: if you’re 16, it’s not too soon to get started. At Blueprint for Financial Prosperity, Jim reports next year’s projected tax brackets, along with a few other interesting details. And at Gather Little by Little, GLBL explains how to sell a used car. This is quite an eclectic carnival—you need to visit it and check out the whole show.

The 144th Festival of Frugality appears at My Two Dollars, who has kindly included Funny’s squib on no-purchase days. This carnival, too, is truly huge and full of interesting and useful posts. My attention was grabbed by Cheap Healthy Good’s disquisition on Angus beef, since my long-dead Daddy, an escaped cowboy who used to aver that the best thing about being from Texas was being as far from Texas as you can get, deeply believed that black Angus cows produced better beef than any other bovine. Not that he liked cows, mind you, except to eat them. Speaking of food, Jim at Bargaineering is rightfully pleased with the produce from his deck & container garden…and yes, there is a difference between real and grocery-store tomatoes. Sound Money Matters titles a very nice rumination “How to Invite Windfalls into Your Life“—tho’ to my mind it’s more like creating opportunities and making the most of them. At Car-buying Tips to Save You Money, there’s an interesting article on used car pricing; it’s not the only piece on buying used cars to hit this festival—go to the site to find more.

Moolanomy has posted the thirty-first Money Hacks Carnival, which includes Funny’s realization that there’s no need to pour money on the entire yard if you only use two or three parts of it as outdoor living areas. Lots of good money how-to’s here, such as Steward’s post at My Family’s Money on making your child a millionaire (literally or figuratively, depends on you). And hey, big spender—if you can’t figure out how to spend your money, Money Blue Book will explain how to get rid of it with an American Express Black Centurion card. Budgets Are Sexy urges readers to keep receipts at least three months—preferably a year—and describes the lazy man’s way to do so. And so it goes.

Photo by Ms. Tea
http://flickr.com/photos/59089068@N00/1218519

The least important bill

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Plonkee, spinning off a Simple Dollar post, contemplates her most and least important billsand asks, “If you order your bills from most important to least important, could you get rid of the one on the bottom of the list?”

Interesting exercise! After thinking about it, here’s what I’ve come up with. Some items tie for various places, because they’re of equal importance (or lack thereof). Some are automatically engorged from my paycheck, so I have no immediate choice in the matter.

From least to most important:

11.

newspapers, magazines
clothing
misc. junk
I can do without these, at least for a while. I have enough clothing to last for a year or more; none of us needs junk; and while I would miss my magazines and the newspaper, they’re strictly luxury items.
10.
yard man
Though I couldn’t begin to do all the yardwork around this house by myself, the world would not end if it were let go for several months. The yard is xeriscaped, so it won’t soon be waist-high in weeds. And besides, so many houses in my neighborhood are showing signs of blight, a neglected yard would not be noticed.
9.
whole life insurance policy
This policy is 30 years old. If I default on the payments now, the insurance part will go away, but I still can collect about $23,500 in cash value.
8.
long-term care insurance
This policy bets that I will need nursing care before I die. While that probably is so, if I quit paying the policy remains in force to a limited extent, and so it would still defray nursing-home costs to some extent. Given a choice between a long-term bet and groceries, I’ll take groceries.
7.

dental insurance
house repairs
homeowner’s insurance
My teeth are pretty good and require only routine care. At least temporarily, I’d be willing to do without the dental insurance. However, the cost is only about eight bucks a month, and so things would have to be very extreme for me to forego it.
House repairs are more urgent than yard care. Matters that have to do with safety or livability would need attention. But things like paint or a cracked window could be neglected without much harm.
Carrying homeowner’s insurance is tantamount to buying air. You make a bet that something bad will happen and that when it does you can’t afford to pay repairs out of pocket. While that may come to pass, people who don’t live in the path of natural disasters rarely experience catastrophic property loss. I probably could forego the home insurance for a time.
6.
gasoline
In a city where all amenities, including grocery stores, are miles apart, a car is an important tool. However, my age gets me a senior citizen pass on the buses to the tune of 50 cents a ride, and so in theory I could, if forced to it, commute to work, shopping, and doctors on our weak excuse for public transit. This would be extremely difficult and time-consuming, and I’d give up other things first.
5.
groceries
You’ve gotta eat. But you don’t gotta eat quite as high off the hog as I do. Food is my one consistent self-indulgence. With no risk to my health, I could cut my bill in half by eating cheaper food; foregoing wine, beer, and good coffee; and cooking frugally.
4.

car registration
property tax
Now we’re in the realm of costs that can’t be ignored. If I don’t pay my car registration, the state will rescind my registration and my car insurance will be canceled. It’s against the law in Arizona to drive without insurance or without registration. If I got in an accident before the police caught me, levied huge fines, and confiscated my car, I would be hugely liable.
Nonpayment of county property tax results in confiscation of the property and eviction from your home.
3.

electric
gas
water
phone
In our climate, you can’t get by during the summer without power. A person my age would die of heat exhaustion in 115-degree heat. Water also is crucial to survival here.

2.

second mortgage
The Renovation Loan is actually a 30-year fixed-rate second mortgage on my house. Although payments are small, if I default, my house could be confiscated. This needs to be paid.

1.

health insurance
In America, you can’t get health care without insurance. Well…you can, but a) it’s not easy; b) you won’t get it when you need it; and c) it won’t be adequate. You don’t want to gamble with this one.
So, could I get rid of my least important bill? No problem! I could probably dispense with my three least important bills (items 9 through 11) without much distress. About the time you arrive at level 7, things start to get ambiguous. The top five items are indispensable. What, then, would be my minimum level of expense if I stayed in my house and maintained my job?
If I dispense with my car and ride the bus everywhere, the monthly nonfood bills would be as follows:

$175/month: property tax
$225: electric
$ 24: natural gas
$120: water
$ 87: phone
$170: second mortgage
$ 26: health insurance
$ 30: bus rides, approx.
$857
Phoenix being a city whose designers noted everything that Los Angeles got wrong and then deliberately did that, living here with no car is not very practical. Keeping my nine-year-old car would make the rock-bottom monthly tab, before groceries, look like this:

$ 241/month: car insurance, property tax
$ 225: electric
$ 24: natural gas
$ 120: water
$ 87: phone
$ 170: second mortgage
$ 26: health insurance
$ 200:gasoline
$1093
But this assumes I would keep my job and that my employer maintains its extremely cheap EPO health plan. Obviously, I would not be in straits that required me to cut routine expenses unless I were unemployed. In that case, my health insurance would rise to about $500 a month, for a truncated monthly outlay of $1,593, almost twice my current routine monthly costs. Or a mere $1,357, without the car’s fuel bill.
Whoa! In other words, unemployment—the only circumstance that would require me to prioritize my expenses with an eye to lopping off the least crucial ones—could force me to cut the most important item on my list. Now there’s a thought!

Hold the dish detergent, please

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Here’s a little discovery: liquid laundry detergent works as well as (maybe better than) dish detergent, and it costs less. Possibly it can be made to cost a lot less.

In the past when I’ve burned food on a pan and not wanted to scrub it clean right after dinner, I’ve carted the dirty pan out to the utility sink, squirted a little laundry detergent in it, added water, and left it to soak. The laundry detergent seems to work a lot better than dish detergent to soak off stuck food.

I don’t like perfumes and dyes either in the kitchen or the laundry (but I draw the line at paying extra for so-called “natural” products because of the high scam potential), and so I buy Kirkland’s Ultra liquid laundry detergent and clear Ivory dish detergent. I transfer the Ivory into a vinegar cruet, partly because it gets the advertising off my kitchen counter (which is not Proctor and Gamble’s billboard!) and partly because you only need a tiny fraction of the detergent dispensed from a squirt bottle—a hard-sided container with a dripper top is a lot more economical.

Last week I was running low on dish detergent and on cash. Having made up my mind to stick to as many no-purchase days as possible, I decided that if I ran out, I’d substitute a little laundry detergent. That led me to wonder whether using laundry detergent would be more or less costly, per squirt, than Ivory dish detergent.

Wonder no more! The results from today’s Costco/Safeway run are in.

The Safeway brand of clear, relatively unadulterated laundry detergent is 7.99 cents an ounce; at Safeway, Planet eco-friendly detergent will cost you 19.98 cents an ounce. Kirkland’s clear, relatively unstinky liquid laundry detergent and its “green” variant are both the same: 7.64 cents an ounce.

Ivory was selling for 9.96 cents an ounce at Safeway.

You probably could get Ivory cheaper somewhere else, and if you don’t mind blue, green, or orange dye in your cleaning products, you’d no doubt pay less to wash your dishes.

The difference between the Ivory and the Kirkland detergent is 2.32 cents an ounce, not an inconsiderable amount—especially if you wash all your dishes by hand.

Now, laundry detergent is highly concentrated. If you wanted to use it at the kitchen sink, you could dilute it with water—probably by a fair amount!—and still have an effective dish detergent. And that would represent a real savings.

FDIC Runs Low: Credit unions unaffected

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The other day Finance Junkie picked up on an AP article to the effect that the FDIC is running low on funds. This creepy little gem of news is not as drastic as it sounds at first blush: the agency still has $45.2 billion dollars on hand, plus it has a $30 billion line of credit with the Treasury. But the fact that 117 banks with assets of $78 billion were struggling in the second quarter isn’t reassuring.

One of my RAs heard this news, too, and wondered if she should take her savings out of the bank. I advised her not to do so, but suggested if she was really worried, she could move her money to the credit union, which has a branch on the campus and which accepts students in the state university system. Credit unions are federally insured, too, but by a different entity, the National Credit Union Share Insurance Fund (NCUSIF). Like the FDIC, the NCUSIF insures your deposits in a single institution up to a maximum of $100,000, andit also covers an IRA held at a credit union up to $250,000.

A friend who works as a loan officer at the Arizona State Credit Union had this to say:

I know there is a lot of uncertainty regarding banks right now. However, I have not heard of any concerns regarding the FDIC and their ability to insure funds. The credit union has been fortunate that we are not dealing with the issues and concerns that the banks are having right now. We are solid. As you may remember, we just started really bringing on mortgage products about 3 years ago and we never did any loans that were interest only ARMS, stated income or any of the other “high risk” exotic mortgages that have caused this meltdown.

Unless things get a lot worse, your money’s safe in the bank. And if it’s not…well, then we’ve got bigger things to worry about.