Coffee heat rising

Got Parents? Keep an Eye on Them!

It is freaking amazing how vulnerable we old folks get to scams and sales pitches as we descend the steps toward the grave. Lissen up,  you young pups: if you have parents, it is sooo incumbent upon you to quietly keep an eye on whatever financial mischief they’re getting up to. If not to protect them (as most of them did for you when you were too dumb to know better), then to protect whatever assets you might inherit or to delay the day, as long as possible, that the old folks become dependent on you.

Here’s what brought on that outburst: Semi-Demi-Ex-Boyfriend called, all hepped up about having dropped something in excess of five grand on an improvement to his 35-year-old tract house in Sun City, a venue that most Boomers avoid like it was radioactive. While the house is ideal for a single person who doesn’t live there year-round, Zillow believes it to be worth $6500 less than he paid for it in 2004.

Here and there around Sun City, you’ll see old masonry houses that recently have been clad in stucco. Most of these get a layer of insulation under the new mud, which in theory should save on power bills.

Welp, one of SDXB’s neighbors decided to do this. Curious, SDXB stopped by to inquire, and that gave the contractor an opportunity to offer him a smokin’ deal if he would just sign on the dotted line before the guy moved his crew out of the area. So now he’s all excited because he expects this will increase the value of his hard tent (his term: a guy with terminal wanderlust, he wishes to spend his dotage in constant motion, using the place in Sun City as a place to camp out during the winter, when the weather’s livable). And it is true that the houses modernized with a layer of stucco do look a lot better than those with naked slumpblock walls.

So now he’s saying maybe he’ll sell the place, taking advantage of what he thinks will be spectacularly improved property value, and upgrade to a better place on the golf course.

Well. This sounds grand, until you think about it:

a) During the winter, it’s a rare day when you’ll turn on the heater. Today as we speak we’re in mid-November and it’s 73 degrees on my back porch. Last month my power bill was $66; this month it will be less. Ditto SDXB’s.

b) In addition to her house in Sun City, New Girlfriend owns a lovely home in Boulder, to which she repairs at the first sign of undue warmth. SDXB either goes up there with her or soon follows, every spring. She stays there until October. He spends most of the summer there, when he’s not hanging out with his relatives at the Hood River in Oregon or visiting boyhood friends in the Upper Peninsula of Michigan. Thus, when my  power bills run upward of $200, he has exactly no power bills. None. Nil. Zero. Zip.

c) The two of them have developed a love of ocean cruises. They are merrily squandering their kids’ inheritance on wonderful cruises, and having the time of their lives! In summers past, they’ve been all over the Caribbean, to say nothing of the trip to Italy. And just now he’s got NG persuaded that nothing will do but what they must head for the South Pacific. Thus, between the summer home in the high country and the constant peripatetic mode, they’re hardly ever there!

d) SDXB has taken his neighbor’s word for it. He’s done nothing to check this contractor out or to get competing bids. This is SO out of character that it defies belief.

Well. IMHO if you plan to spend the entire year in one of those hard tents and if you believe you’re going to live in it until you croak over, this stuccoing scheme may not be a bad idea. Although God only KNOWS how many years it will take to recover the cost if only utility bills are taken into consideration, SDXB’s slump-block home is fully painted. A new paint job, if it’s done with a decent grade of paint, will cost him two or three thousand bucks. Newer forms of stucco come dyed to the color you please and, in theory, never need to be painted. So assuming that’s true and assuming he lives, say, another 15 to 20 years, he could save as much in paint as he spends on mud. In that case, whatever savings he realizes on the air-conditioning (which could be non-negligible, should he ever break up with NG) would be gravy.

But as a practical matter, SDXB has no intention of EVER spending another summer here in the Valley of the We-D0-Mean Sun. So that leaves us with the question of

W

T

F

???

IMHO, this is a case where a competent family member — a son or a daughter, for example — needs to be on hand to keep an eye on big-ticket decisions for an aging parent.

Of course, none of us wants to give over our autonomy to the younger generation (or to anyone else, for that matter). And naturally, none of the young folk wants to have to take on the responsibility of riding herd on an increasing frail (and so increasingly annoying) parent. However…it must be recalled that, after all, those parents shouldered 18 years or so of responsibility for the pups. Or, less altruistically: our assets are their assets. Whatever we refrain from squandering will help to keep our kids in the middle class, to the extent that a middle class survives in this country.

So. Keep an eye on us old buzzards, you young thangs.

😉

.

 

Planning for Your Survivors: How Much Insurance?

   Over at My Journey to Millions, Evan has posted a very interesting article on the question of how much life insurance (and other preparations) you should have in place to provide for your family should you shuffle off this mortal coil in an untimely fashion. He details the amount of insurance coverage he now has — which is substantial — and then remarks that his wife thinks he’s overinsured.

He has things set up so that if she paid off the $355,000 mortgage (my estimate) and invested the rest of the life insurance proceeds, she would end up with a net monthly income of about $5,800. And he worries that it may not be enough.

Probably she can scrape by on $5,800 without having to run out and get a job.

However, it strikes me that he could be right to worry…or not. How much you need to provide for the event of an early demise depends on a number of circumstances, among them the time of your life, the time of your children’s lives, the part of the country where you live, the style in which your family is accustomed to living, and — most obviously — the number of kids or other dependents you’re supporting.

BungalowStyle07262007Evan is evidently a fairly high earner. They’re living in an expensive house — the mortgage represents only a fraction of its value — and that translates to high taxes, high insurance, and probably a pretty high cost of maintenance. Few women can earn that kind of money on their own, and so if anything happened to him, his wife might have a hard time finding enough to cover their present costs, even without his car to pay for, his medical insurance, and the cost of feeding him.

However, in his absence, her overall costs might drop. For example, she would presumably get rid of at least one car, thereby freeing herself of the payments, maintenance, insurance, and taxes on a late-model vehicle. The family might go out to eat less. Whatever costs are entailed in his hobbies and interests would go away, as would the cost of purchasing clothes and other necessities for a grown man.

These savings, though, might be absorbed by the increased cost of health insurance: covering herself and children on the open market would be staggering, and the Affordable Care Act seems not to be about to remedy that problem. Even though generous subsidies will be available for the middle class, a $5,800 net monthly income with a paid-off house does not fall under the heading of “middle class.”

On the other hand, it’s no foregone conclusion that she would stay home and take care of the kids, at least not indefinitely. Bright, high-earning men tend to marry bright, well educated women. In the vacuum that his absence would create, she would soon find herself bored and restless. She probably would get a job or start a small enterprise — certainly as soon as the kids are in school all day, she would. Even a part-time job would supplement the 4% drawdown enough to allow the family to live in comfort. They live in Long Island, where costs and salaries are high, so let’s figure she gets paid about $25,000 for a part-time, no-benefits gig. She’d probably net around twenty grand, bringing her net income to about $7,470 a month. If she couldn’t live on that, then she might need to downsize. But my guess is she could live like the Queen of Sheba on it.

So it looks like Evan is neither under- nor very much overinsured. As he remarks, he doesn’t want his wife to be forced to go back to work out of need. And that doesn’t appear to be likely; if and when she returned to work, she probably would do so because she wanted to, not because she would feel she has to.

§

In considering how much life insurance to buy — and what other provisions you make, such as college savings programs and the like — it’s a smart idea to visualize how your survivors will live in your absence, both in the short term and over time.

My former husband was (and is) a corporate lawyer. Like Evan, he earned a good living and we had a commensurately expensive house. I was a magazine writer and editor; the most I ever earned while I was married to X-DH was about $30,000. Saving was not his forte — the only reason he had a retirement fund at all was that the firm had to provide a plan for everyone if they were to provide it for those who wanted it — and we were in debt up to our noses. There was no way I could pay the mortgage on our house on my own, to say nothing of keeping our son in private school, maintaining a car, and paying the cost of air-conditioning 3300 square feet.

So, he had enough insurance to pay off the mortgage on the house, plus a couple of whole life policies that would have paid a hefty amount in 1970 or so, when we bought them, but not so much in today’s economy. The amount residing in his retirement fund had he passed away at the time I left might have covered most of my expenses, had my son and I lived frugally…but I might not have had access to it for another four years (i.e., if for whatever bureaucratic reason I’d had to wait until I was 59½). In any event, taxes would have reduced my net inheritance of that money by as much as 30 percent.

This would mean that, assuming he figured we were going to stay married (which he probably did), he should have been carrying significantly  more life insurance than we had. I would have needed enough to pay off the house and enough to put our son through an expensive day school and private college and enough for me and the kid to live on.

Graduation ceremony at OxfordToday, K-8 tuition at the school my son attended is $16,475 a year. The cost of operating that big house and paying tax and insurance on it is probably around $2,000 a month in today’s dollars. My present monthly cost of living, exclusive of house costs and absent a young son, is $1100. Let’s add another 50% to that to cover the cost of feeding the kid: $1,650 a month. Back when I paid for cars on time, my Toyota cost $300 a month (it probably would be more now, but let’s accept that figure). So, in today’s dollars I would need about $63,875 a year to maintain our normal month-to-month lifestyle. To net $63,875 a year (assuming a 15% tax rate, which is optimistic) by taking a 4% drawdown on investments, I would need $1,836,406 in savings.

We owed about $70,000 on the house. The cost of our son’s college tuition was about $130,000; let’s add another $8,000 a year to support him in his apartment and cover his incidental expenses. So, in addition to the ordinary living costs, I would have needed another $232,000 to pay off the mortgage and put our kid through a good college out of state (there are no top-flight colleges or universities in Arizona).

$1,836,400 + 232,000 = $2,068,400

That’s less than the amount of insurance Evan is carrying. We owed less on the manse than he does today, but the larger amount he’s providing should pay off their mortgage. So if he projected a lifestyle as grandiose as the one my X-DH had in mind (from day to day we lived no better than I do right now on $2, 355 a month, but the private schools, the expensive vacation travels, and the debt cost a lot), then Evan’s $2,150,000 death benefit should keep them in their home without her having to return to work anytime soon.

Evan lives in a more civilized part of the country, and New York has some very good public universities. It’s even possible that the public K-12 schools are adequate where he’s living. So, if he and the Wife plan to send the kids to public schools, then should anything happen to him, she’ll no doubt be in pretty good shape.

§

Life changes. The kids grow up. They do things you don’t expect, which is as it should be. Consider the situation now for me, a single woman with an adult son:

My son now makes his own way, which in Arizona, a right-to-work state with low wages for all but the 1 percenters, is a pretty meager way.

To get him out of the dangerous firetrap where he was living and put a decent roof over his head, I went in with him to copurchase a modest home in a modest central-city neighborhood. We owe about $201,000 on that. Exclusive of the cost of the roof, he earns a decent living: slightly above the median family income in Arizona — and he’s single and frugal. He covers all the cost of maintenance for the house and has accrued a large emergency fund to cover major repairs. So, I imagine that if the house were paid off, he really wouldn’t need all that much to continue to support him in the life to which he has become accustomed.

 However, what worries me is his future. If the dire predictions about Social Security are correct, he may not have much to support him in his dotage. As we have already seen, the idea that the average American can accrue enough in 401(k)’s and other savings instruments is a massive FAIL. Thus even though he does have a retirement fund, it would be enormously foolish to assume that it will carry him through old age.

Or even allow him to retire at all…  And my son enjoys his job about as much as I enjoyed working for the Great Desert University, which is to say “not much.” Ideally, if he is to take pleasure in any part of the life that remains to him, he needs to be able to retire no later than about age 65, and preferably sooner.

Thus…ah, yes, thus: I would like to leave him enough cash that, added to his own savings and invested wisely, over time it would accrue enough to allow him to retire in comfort sometime between his mid-50s and his mid-60s. Alternatively, I would like him to have enough to quit his job and go into a graduate program that would secure him a less unpleasant and much better-paying job. An actual career, one might say.

I can’t afford big insurance premiums, nor do I think much life insurance is necessary to accomplish what I’d like to do for my son.

My house is paid off. It’s worth about $60,000 more than the house M’hijito is living in. Obviously, I will leave the house to him. This will give him four options:

a) Rent my house, generating enough to pay the mortgage on the house he’s living in.
b) Sell my house and pay off the mortgage on his house.
c) Sell his house, break even on the sale, and move into my house.
d) Sell my house, invest the money, pay the mortgage on his place as best he can from his salary, and let the sale proceeds accrue in brokerage and Roth IRA accounts until he reaches retirement age.

The first two choices would not require him to move. If he used rental income from my house to accelerate payment of the mortgage on his house, then after he owns his place free and clear, rent from my house would be money in his pocket. In that event, by the time he reaches retirement age, he would have the inflation-adjusted equivalent of about $1500 a month to supplement whatever other sources of income he might have.

The third option could be depressing…in addition to hassle of having to uproot oneself, it would creep me out to move into my parent’s home. But people have done it. And my house is bigger, fancier, and in a nicer neighborhood than his, so the advantages would considerable. Whether he sold my house or his, he could get out from under the monthly cost of keeping a roof over his head.

The fourth option would do nothing to improve his life in the short term, but it would add about $240,000 to his life savings.

The whole life policy X-DH and I bought all those many years ago has a $40,000 death benefit, despite my having ceased to make premium payments. After cremating me, M’hijito would have enough left from that to buy a much-needed new car.

The remainder of my assets reside in investments. Unfortunately, most of this is in a large traditional IRA, and so taxes will gobble up a fair amount of his cash inheritance. I figure he’ll net about $300,000, all told, from the investments he gets from me. I could arrange things so he would get about twice that much by purchasing $300,000 in life insurance, but at my age, life insurance isn’t cheap. Just $50,000 worth would cost over $300 a month, and I don’t have a spare $300 laying around. Besides, to make up the tax gouge, I’d have to buy six times that much coverage!

Assuming he manages to save about $200,000 on his own and he does not sell my house and roll the proceeds into investments, with his net inheritance he’ll have about $500,000 or $600,000 (or its inflation-adjusted equivalent) by the time he retires. That’s not enough, of course. To fund a modestly comfortable retirement, he’ll need well over a million dollars — in today’s dollars, assuming no Social Security benefit. If he does invest proceeds from the sale of my house, by the time he retires, he might have enough to provide a livable drawdown.

If his father leaves him a like amount (no guarantee there! he has a wife and her dependent adult child, who has a minor child also needing support), then he would have about enough to retire on, assuming he always lives under a paid-off roof.

That also assumes he never marries.

However, many men his age do find wives, and with any luck at all, the Mother of My Grandchildren is searching for him right now. If she ever finds him and he notices, the situation changes: first, she adds to his wealth by working, but second, they add to their expenses by having children. In that case, a few hundred thou from me should help them a little, though it won’t ensure either a comfortable retirement or, given the way our country is going, any retirement at all.

You can’t really second-guess the future. Whatever my son gets from me and his father, he’ll need to handle it intelligently for it to benefit him…and yet not be so pinch-penny that he never gets to enjoy any of it.

Update: This post was selected for the August 19 Carnival of Personal Finance at Barbara Friedburg Personal Finance.

Gold-Buggered! Protecting Your Heirs from Con Artists

You don’t have to be poor to be snookered by con artists. One of the guys in my Thursday morning business group, affectionately known as George the Elder, is a financial manager. He has a client, an old gal who’s been with him for 20 years and has plenty of money in IRAs. He had things set up so that she was getting about $6,000 a month from now unto the end of time, with the fund unlikely to run out before she croaks over.

Somehow, this woman got involved with a scam artist who persuaded her that the world economy is about to crash in flames and that to save herself she must convert all her investments into gold!

Our guy tried his weenie-wurst to persuade her otherwise, but she simply would NOT listen to him — the crook had her convinced that George was ripping her off! — and so she has unloaded all her IRAs, sold all her equities, and drained her savings, paying hundreds of thousands of dollars in taxes, and is madly buying freaking gold coins!

George is beside himself, but there’s nothing he can do about it. He thinks she’s alzheimering out or otherwise has taken leave of her sanity…but she lives alone and there’s apparently no one to challenge her competence.

The obvious message here is don’t believe anyone who advises you to do anything drastic with your money. Anyone who tells you the world is coming to an end or the stock market is headed for an irrecoverable crash is either a nut case or a scam artist, especially if the person is trying to get you to change your way of doing business.

But there’s a subtler message. We are about to see millions of people enter old age. Following in their tracks will be millions of scam artists trying to take advantage of them. If you have any assets at all — even if it’s just a paid-off house, to say nothing of hundreds of thousands of dollars in savings — you and your spouse or partner should set up your estate to protect the survivor and your children from predators and their own stupidity.

Even if you’re not among the 1 percent, you can set up a trust to protect just about any kind of asset, be it cash and investments, real estate, or your beloved mattress filled with Krugerrands. These entities exist in a variety of forms, among them the irrevocable living trust, the revocable trust, the Kiss trust, and the like. Some work as tax shelters, because in effect you no longer own the assets — the trust owns them. Thus if you have a child who’s trying to get college aid, sheltering your family’s money in a trust can erase wealth that would be held against him or her in the application process, and you can draw funds from the trust without paying large taxes on them. The Kiss trust lends itself to this strategy, especially for middle-income families that are not wealthy, and it has the advantage that more than one person can contribute to it.

A trust should be set up by a lawyer. As with any decision involving your life savings, it pays to get professional advice — and to ensure that the adviser actually is trustworthy. Don’t do business with “experts” who want to sign you up in your living room. Hire a good lawyer and check the person’s credentials. Bear in mind that AARP does not endorse any living trust  products, and so if someone tries to play the AARP card with you, walk away. Also don’t walk but run away from anyone who tries to high-pressure you or speed you through some sales pitch.

In setting up a trust, be sure that you as the grantor have the say over how the funds will be invested; that you retain the right to decide how assets will be distributed among beneficiaries; that you retain the right to remove a trustee if you’re not satisfied with his or her services; and add a provision ensuring that after your death beneficiaries must appoint a qualified trustee from a legitimate bank trust department. Also bear in mind that it’s possible to set up a trust so that assets outside of it are transferred into the trust after you pass away.

If you have a complicated estate or a lot of money, setting up a trust will cost something in lawyers’ fees, although a Kiss Trust can be organized very inexpensively. But you get what you pay for. Consider: if George had his client’s investments set up so she was receiving 4 percent of principal, she had $1.8 million. All of which she is busily converting to gold coins…  The savings on taxes alone would be more than the cost of having hired a lawyer to protect those assets with a trust.  It’s worth checking out the pro’s and cons and exploring whether one of these instruments might help protect you or your heirs from questionable schemes and bad ideas.

How to Fight the Stay-at-Home Parent Penalties

Lest you hadn’t noticed, stay-at-home parents face a new punishment: if you’re an SAHP, a 2009 change in credit-card rules means that you now cannot get a credit card in your own name, because, after all, what you do is not work.

Yeah.

This is just another of several rules and attitudes that devalue a type of work still done mostly by women. Some of the penalties for raising children and caring for a home and spouse have severe long-term consequences. Most notable of these has to do with Social Security: if you’re not spending your days in an officially recognized “workplace” and so having FICA withheld from your salary, you’re not eligible for Social Security. Never mind that you work 24/7 at humanity’s most important work: bringing up the next generation. If you take time out of a career to care for children and spouse, you’re likely to find your Social Security benefit significantly reduced come retirement age. This certainly was true for me—even though I worked steadily as a freelance journalist while I was married, my income was small and it mostly served as a tax write-off, leaving me with $0.00 taxable income during those years.

Graduate school didn’t help: pay for teaching assistants is even more exploitive than adjunct pay, and when I was overseas doing research my income came from grants and fellowships; thus during that period there were a couple of years where no taxable income appeared on the books.

Besides the insulting implication that the work you do is essentially worthless, the new rule means that as a stay-at-home mom or dad, you can’t establish your own credit history and build your own credit score. This puts you at a huge disadvantage should you divorce or be widowed.

Clearly there are ways around this. Most of them are infantilizing or degrading: they involve your having to beg your spouse to cosign or make you an authorized user (good luck with that, if you’re married to an abuser!), or to prevaricate by filling in the blank for your income with what is really household income—i.e., your spouse’s income.

However, over at Daily Finance, which is reporting on a protest led by one Holly McCall, a commenter comes up with a freaking brilliant idea:

Sit down and discuss with your other half how much you want for being a stay-at-home mom (which in itself is basically considered a luxury by society.) Form an LLC, maybe Holly at Home. Have your other half cut you a check. Don’t forget to take out tax, in case you become unemployed, need SS, or a tax write-off.

—theycallmeroy3

Wow. Think of that. Wish  my ex and I had thought of it, thirty years ago. (And, btw, notice the attitude implicit in “basically considered a luxury”: bringing up your children in their home instead of warehousing them in daycare is a luxury).

I spent a fair amount of my time as a corporate wife and SAHM…during which I did not rack up a salary and did not pay into FICA. If my husband had been paying a household budget to me as “salary” or into an LLC as contractor’s pay for housekeeping, child care, and public relations and marketing, possibly I could’ve claimed unemployment when we divorced. But more to the point, I would have been paying into FICA, and when I suddenly found myself laid off at 64, too old to get another job, I would have had a significantly higher Social Security benefit.

When you’re married to a heavy-hitting lawyer, doctor, or corporate executive who can afford to keep you at  home, you’re doing a lot more than scrubbing floors and chasing kids. You’re helping to build and maintain his public image and community presence by engaging in volunteer activities (as high-profile as possible), serving on nonprofit boards, entertaining clients and colleagues, and hosting social events. Basically this is marketing and PR. And it has a significant market value: PR people earn a decent wage in our culture.

Housewives generally don’t. However, the cost of replacing a housewife, should a stay-at-home spouse die or leave, reflects what that work is worth. In 2006, nannies were earning between $15,600 and $52,000, plus benefits. In my part of the country, a cleaning lady—who takes no responsibility for raising the kiddies—typically earns between $80 and $100 a day: that would come to between $20,800 and $26,000 a year. So, in Arizona a SAHP who does not spend a significant portion of her or his time doing PR for the working spouse would be worth $36,400 to $78,000.

This assumes the conjugal duties are unpaid. Try hiring a call girl or keeping a mistress and tell us what that would cost. 😉

Clearly, then, the SAHP’s work has objective monetary value.

So, it should be reasonable to pay that person through an LLC or an S-corporation. The implications are huge.

First, as the person draws money out of the entity as salary, she or he pays FICA on it. That means s/he gets credit toward Social Security for work done for the household and the children. And it means that should the SAHP be widowed or divorced, she or he would not have to rely on the spouse’s Social Security credits—or be shorted if she spent some time working after the kids were grown but not enough to rack up the best possible benefit.

Of course, it would also mean the SAHP would be able to claim, without having to lie on a credit card application, an income. Credit-card issuers could not deny a card by asserting that the applicant does not “work.”

The SAHP might be able to create her own IRA or 403(b) through her corporation, allowing the couple to salt away a larger amount of tax-deferred savings.

And of course, tax advantages always accrue around corporations. If the SAHP’s business entails schlepping children around town, driving to grocery stores, and attending charitable events, obviously the car and gasoline become deductible. If she is paid to clean house and she supplies the cleaning supplies and tools out of her pay, then the Windex, the Simple Green, and the vacuum cleaner should be deductible. If her duty is to represent her husband in the community by maintaining a public profile, then the cost of entertaining clients, serving on boards, and belonging to organizations such as Junior League, the art museum guild, and the zoo auxiliary should also be deductible, assuming she pays those costs with her income.

Should the couple divorce, as some 50% of American newlyweds do, the implications could be significant. If the “working” spouse is paying a salary or contractor’s fee based on the market value of the SAHP’s work, it could limit the amount a court would award for support; or, on the other hand, it could serve as a floor for the amount to be awarded. That is, it could represent either a minimum or a maximum amount of alimony, depending on how courts viewed the arrangement.

Interesting idea, isn’t it? What say you, readers? Would you take a job as a stay-at-home spouse? How much do you think your services would be worth, objectively?

Image: Stay-at-Home Dad. BCantrallGNU Free Documentation License.

Net Worth in the Time of Cholera…

Over at My Journey to Millions, my favorite conservative Evan is doing his monthly net worth review. He’s performing well. This month he reports that over the past year net worth has increased a startling 95.30 percent. Yesssss! Great work, Evan!

The amazing progress Evan has made since he started blogging says a great deal about stating a goal and then making (and following!) a plan to make the goal happen. In theory, it can work for any of us. As we know, Evan’s goal is to become a multimillionaire. It must be said that he has the tools: he’s well educated, he’s still reasonably young but has been around long enough to build the experience needed to earn well, he’s energetic and focused, and he’s willing to work hard.  You can frame all the goals you want, but unless you’re prepared to make them happen, they’ll avail you naught.

IMHO the key factor is the willingness to work hard toward the goal, followed by focus, energy, and growing experience. To that we might add flexibility. While we’re still told that people with bachelor’s degrees outearn those with AAs and high-school diplomas and people with graduate degrees outearn everyone else, I think we all know quiet millionaires who own landscaping and carpet-cleaning services, college grads with $30,000/year jobs, and people with graduate degrees who qualify for food stamps.

Well, naturally, having seen what Evan’s been up to, I couldn’t let my own figures just sit there. Over the past couple of years, frankly, I’ve been too depressed about the sagging real estate values and the likely permanent unemployment to even think about net worth. However, things may be looking up a bit. In January, as I mentioned a while back, my investments earned 16 grand, causing me to wonder why I bother to teach at all. The crash of the Bush economy devastated my savings: when times were good (October 2007), total investments (not counting credit union accounts) came to just over $743,000. My paid-off house was worth about $250,000 in 2007. By December of 2009, when I lost my job shortly after reaching an age to make me eligible for Social Security (and ineligible for hiring even under the best of economic conditions), the combined value of my investments had dropped to $483,000, a $260,000 loss; Zillow claimed my house was worth $180,000, and the house I was co-purchasing with my son had a negative equity of about $60,000.

So how do things look now?

Better. Since the crash, investments have risen $63,000, with no further deposits from me (because on Social Security and adjunct pay, one has nothing to invest). A neighboring house similar to mine sold in two days for $205,000, suggesting it was somewhat underpriced; since my house is the same model and upgraded to about the same extent, I figure mine would sell for about $210,000 or possibly $215,000. The downtown house is still upside-down, but probably to a lesser degree; I think we’re about $20,000 or $30,000 underwater now.

In April 2011, the last time I could bring myself to add up net worth, it looked like this:

By the end of last month, the picture had changed slightly:

So what we have here is an “up but down” sort of picture. Despite a significant drop in investment values since the last time I could bear to look, and despite continuing depreciation of the 12-year-old vehicle, total net worth has risen by about 22 grand.

However, that figure is based on the Never-Never-Land valuation of the two pieces of real estate. We really have no idea what either house is worth, and besides: you can’t eat real estate. When it comes down to the money that matters—the funds I will have to draw down to live on when I can no longer dodder into a classroom—I’m merrily sinking beneath the bounding main. Since April, I’ve lost another $21,000 of the money I’ll need to cover expenses in my dotage. That’s despite the fact that I haven’t withdrawn a penny from those investments since I was laid off my job.

I am, in a word, screwed.

And that is why I need a real job. Now. Old age or no old age. Either that or I need Death to come a-callin’ in a timely manner.

Infographic: The Great Recession in the United States. Timetoast.

It’s Raining Money!

HOLY mackerel! The January statement for the IRAs came from the financial management firm. The large IRA earned as much in January as I make all year when I’m teaching the maximum load the District permits adjuncts to take on. Raining money, indeed. Wow…

In the past, when times were good (remember those times?), it would occasionally earn ten grand in a month. But this is ridiculous.

So why am I even being bothered to teach, or to do anything else, for that matter? As we’ve seen, it’s a question I’ve taken to asking myself more and more often.

Well, for one thing, under decent conditions I like teaching. I enjoy young people, and even though I don’t delude myself that I “teach” them anything (no one teaches anyone anything: you can take the horse to water…etc. The best you can do is serve as Virgil to the student’s Dante), I find it entertaining to watch them develop when challenged by whatever wacky stuff I throw at them.

And of course, the problem with a sixteen-thousand-dollar windfall is that it comes along once in a blue moon. Stock market investments can’t be relied on to generate any returns on a regular basis, and as a matter of fact for most months since the Crash of the Bush Economy (heeeee! :-D), returns have been negative. You can’t be pulling down what it takes to live on while your nest egg is steadily shrinking.

Hm. Speaking of money management, there’s still a chunk of money sitting in an old whole life policy. I’ve delayed rolling it over into a brokerage account because I haven’t wanted to trigger the tax on it. Plus it does provide my son with almost 40 grand worth of insurance, which would make him right-side up in the upside-down mortgage I got him into.

Financial Advisor and I have been engaged in a long-running disagreement over this little pot of gold. He wants me to draw it down to live on. I want to roll it into a brokerage account and put it to work, even though I’ll have to pay tax on it. Matter of fact, once the tax is paid, it could be used to fund the Roth IRA, which I’m not going to be able to contribute to for many more years.

Or, of course, I could use some of it to buy a much-needed new car.

Either of those, IMHO, would be better than letting it sit in the insurance policy, where it earns about as much as a bank savings account does. The thing returned $1,128 in 2011, plus an $888 cash dividend. LOL! I’ll never get out of the 99 percent at that rate!