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Retirement

Running around COBRA’s barn again

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Just realized I didn’t write a post this morning and then, whilst frolicking with bureaucrats, didn’t get to it this afternoon, either.

Another fine exercise in jumping through hoops and tearing around the Maypole today.

Not having heard anything more from the COBRA administrators over the past 15 days, despite having been told that a notice and a statement would be sent out, I called again to inquire.

Today’s bureaucrat harked back to the original claim that I needed to have sent them money a month BEFORE I was laid off my job. I explained that Arizona State University’s Human Resources people said that I was not supposed to send money while I was still employed there. She said well, then I wasn’t covered.

So I’ve now spent the last month without any health coverage at all, if you believe this one’s version.

She wants me to present myself in person on Monday—when I’ll be teaching until 2:00 in the afternoon about 25 miles from their office—with a check for $334 in hand. This, she says, will cover me through February.

Of course, that doesn’t make any sense, because the one who told me I’d been approved for the ARRAS discount said my premiums would be $185. Two times $185 is $370. So… who knows what this is about.

Entertaining, isn’t it?

First ASU’s HR people told me I would be not qualified for the ARRAS discount because my last day of work was December 31. Then the Arizona Department of Administration, which administers COBRA, told me I would be qualified for the ARRAS discount because my last day of work was December 31. I sent an application and was told I was approved.

Next, ADOA said I should send a chunk of money to the state no later than the first week in December. Then ASU’s HR department told me this demand was incomprehensible, that I most certainly did not need to send money for COBRA while I was still employed by ASU, and that COBRA would send me a statement after I was terminated, saying how much and when to pay.

In mid-January, ADOA informed me that I was not terminated and as far as they could tell I was still employed by ASU. Then ASU told me I most certainly was terminated and ADOA did not know what they were talking about. Then ADOA told me I was not terminated and was still a state employee.

After I spoke with my ex-husband’s former law partner, who is now Arizona State University’s general counsel, I was told the mess was cleaned up. At that point, I was informed that I had actually been canned not on December 31 but on January 10, but nevertheless because the Obama Administration had extended the ARRAS discount into February, I still would be able to get  coverage I could sort of pay for.

On January 14, I spoke to one Connie at ADOA, who said I did not have to send a check but that I would receive a letter telling me of my eligibility and letting me know where and when to send a premium payment. And by the way, no, I did not need to make a COBRA payment a month before my job ended. That was 15 days ago. No such communication has appeared.

Now I am told I need to pony up $334.04, which is supposed to cover me “through February.” Three hundred and thirty-four dollars is slightly more than twice the earned income I have received this month.

So, this afternoon I called the Feds.

There I learned that while COBRA is indeed a federal law, the federal government’s regulatory oversight is limited to private employers. If you work for a state university or government office, you’re on your own! I asked the woman who shared this gem with me if she thought I should call a lawyer. She said not yet…it’ll be another week or so before they’re actually in violation of the law. She recommended going back to HR (hah! words from a lady who’s never had to deal with ASU’s HR department!) and nagging some more.

I am nagged out. On Monday I will trudge down to ADOA in person, hand over $334, and demand a receipt that states exactly what the money is for, and not only that, ask that they produce a policy or a contract describing what I get and when. After that, I give up. If I get in a car wreck or have a heart attack before Medicare kicks in, I guess I’ll just have to drain my savings to pay the bills and then declare bankruptcy.

Ain’t workin’ for the State of Arizona grand?

State of Arizona Employ: Goodbye, so long, adios!

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Arizona’s bumbling state legislators, faced with a budget deficit that would challenge far better men and women, approved a 5 percent cut in pay for state employees.

This will more than negate the 6.2 percent increase they generously ladled out a couple of years ago. You have to understand, every raise for state employees is accompanied by what we call a “retroraise.” A retroraise happens when you get a raise but then your employer jacks up the cost of benefits so that your take-home pay actually drops. Often a state of Arizona pay increase is in actuality a retroraise.

For GDU employees, that 6.2 percent increase was quickly erased by GDU’s decision to inflict a $770 per year parking fee and by the switch from bimonthly to biweekly pay, which effectively meant a pay cut in 10 out of every 12 months. For me the change to biweekly meant a $480/month drop in gross pay.

Well, goodbye to all that! Just imagine: if I continued with GDU past the end of this month, the 5 percent pay cut would have worked out to a $3,275 drop in gross annual income.

If I didn’t have enough reasons to be happy they threw me in the layoff brier patch, there’s another one! If they keep that up, before long my salary would be the same as my cobbled-together postretirement income.

Surviving in penury

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Wow, did I get these figures wrong! My take-home salary is far more than what appeared in the original of this post…I don’t know where I came up with a figure of $32,900. I was even sober when I wrote this! Corrected figures appear in boldface next to my original wrong calculations.

Well, it’ll be interesting to see what happens next. In 2010, my gross income will be significantly less than half of what I earn today. Assuming state and federal taxes total no more than 20 percent (a big assumption!), the combined net of Social Security and teaching will be $9,700 ($17,710) less than I net from my salary today. That doesn’t count what I make freelancing, because next year I will not be allowed to earn freelance income. Since Social Security’s rules will limit me from earning a living wage, 2010 will be a year of real penury. It remains to be seen whether I can survive under those circumstances.

By “survive” I mean “stay in my home, eat, keep my dog, and live through a 118-degree summer.”

There are a couple of extenuating circumstances.

I’ll get a chunk of vacation pay that should net out to about $3,965 (assuming GDU doesn’t pull another of its numbers on me, another Big Assumption).

About $1,900 remains in the S-Corporation, after paying for the MacBook. If I can finish the page proofs I’m reading before Christmas, I could in theory push the 2009 drawdown to about $2,200. It probably would be better, though, to delay that job to 2010, so as to leave its payment in the corporate account to cover things like printer ink and computer repairs with nontaxable money. So, let’s say I net about $1,500 from what remains of freelance income.

This will give me a grand total of $28,985 (net, if taxes are not too extortionate) to live on next year. Compare that to my present net of $32,900 ($41,210).

Two strategies may enhance things a bit:

Even though I hope to avoid drawing anything from retirement savings in 2010 (so as to wait and see if investments continue to recover from the crash of the Bush economy), to have the state consider me “retired” so that it will disgorge the $19,000 it owes me for unused vacation time, I will have to draw a few bucks from my 403(b) until such time as the bureaucrat in charge of that program approves me. So the plan now is to draw down $500 a month until we know the sick-leave payment has been approved. That process can take as long as three months, and so I’ll probably have to pull out about $1,500, adding (optimistically speaking) another $1,200 net to the 28 grand.

Now we’re approaching a net of $29,200 ($30,185), which is $3,700 ($11,025) less than I bring home today.

My share of the mortgage on the Luke house will be paid with $10,000 worth of tax-free dividends from an antique whole life policy, giving me a year’s reprieve on having to draw those payments down from savings.

Still…where is that $3,700 ($11,025) shortfall gunna come from?

Well, I put $573 a month into savings right now. That adds up to $6,800 a year. Of that, only $3,900 is nonnegotiable: I have to self-escrow that much to cover the property tax, homeowner’s insurance, and car insurance. So if that’s the only money I set aside, in 2010 I can devote $2,900 to living expenses that I used to put into savings.

So, now I’m only $800 ($8,125) short of the amount I actually spend on living expenses. That, I’m sure, can be managed through frugality and tight budgeting. (Yeah, right! Only if I sell my home and take up residence under the Seventh Avenue Underpass!)

This scenario applies only to 2010. If I have to continue refraining from drawing down savings in 2011, then things will look different. I can earn about $10,000 a year freelancing—in a good year. So the net of teaching three-and-three will come to $11,520 (in the unlikely event that taxes don’t rise  much); the net of Social Security is about $12,000. Add net freelance income of around $8,000, and you get $31,250 ($31,520) as the base net income, not counting savings drawdown, in 2011.

On the surface, that’s not too bad—pretty close to what I’m earning now. (Holy Hell, it’s over ten grand less than what I take home now!) But it doesn’t count the cost of Medicare, eleven times what I’m paying for health insurance today; and it doesn’t count the cost of the mortgage, which on its own represents about 1 percent of my total savings. (I am screwed, screwed, ge-screwed!)

And we have to remember that taxes and insurance will not stay the same. On the federal level, sooner than later we’ll have to pay the cost of repairing the damage done by the past decades of ill-advised leadership. Locally, the state is still a phenomenal $1.4 billion short, even after the Draconian budget just passed by the legislature. If the most basic services are to stay in place—firefighting, police protection (forget services to the sick and elderly poor)—then our dim-bulb legislators must face the fact that they will have to raise taxes. Homeowner’s insurance, too, never goes down; and when I reach the point where I’m forced to replace my 10-year-old car with a newer model, taxes and insurance on that will increase, too.

If my investment advisers are right that my savings will return to something resembling their former glory after a year or so, then I should be able to get by on a 4 percent drawdown…as long as I can dodder into a classroom. (Dream on!) That, of course, will not be forever.

But the day after tomorrow will have to take care of itself. (By then I’ll have starved to death, so someone else can figure out what to do with the day after tomorrow.)

I must have figuredmy income on a 24-period basis rather than the actual 26 pay periods created by PeopleSoft’s hideous biweekly pay scheme, since I bank the so-called “extra” paychecks in savings. Even that is wrong, though: the annual total would be $38,040. What hat the $32,900 figure came out of, I can’t imagine!

Image: Men being served at a soup kitchen. Franklin D. Roosevelt Presidential Library and Museum.

Median income, median savings?

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Chug on over to Free Money Finance, where you’ll find an interesting article and discussion about some figures FMF has found, suggesting few Americans are ready for retirement. FMF is spinning off an article that dispenses advice on using your home equity to help finance retirement, but his attention is caught by some figures the authors refer to in passing. The passage he cites says this:

What’s more, the report noted the median value of financial assets is less than 1.5 times median income—$75,000— for the majority of middle-class households and that the median value of financial assets is just three times median income—$132,000—for the vast majority of affluent households. Read that report at this Web site.

The report indeed does suggest that most people have around 70 percent of their assets tied up in their homes.

Figures like these can’t tell us much until they’re correlated with age groups. It would help if we could know the median value of financial assets for people in their 20s, their 30s, their 40s, their 50s, and their 60s. Then we could have a reliable feeling for how many 80-year-olds will be competing with how many 20-somethings to find jobs greeting shoppers at the local Walmart.

Since we can expect young workers to have little or no savings, and since many workers of all ages live in right-to-work states where wages are low, a combined disproportion of young earners and lower-income older workers would work to push the median down, unless there were an equal number of very high income workers. And nationwide, I’ll bet there’s not, despite the widely publicized conspicuous consumption.

Also, take a look at the wording in this thing. It’s hard to tell what is being said:

The median value of financial assets is less than 1.5 times median income—$75,000—for the majority of middle-class households and that the median value of financial assets is just three times median income—$132,000—for the vast majority of affluent households.

Is the median income $75,000, or is that the median value of financial assets? Is $132,000 the median value of financial assets, or the median income for most affluent households? Probably, one would assume, it’s the median income…but how does $132,000 qualify as “affluent” for a household income? That would amount to two $66,000 incomes. Now, $66,000 is a helluva lot better than the $28,000 gross I’ll be living on post-layoff, but it isn’t a lot. In the large scheme of things it’s really just an average income—I get by on that amount now only because my house is paid off, I have no other debt, and I live frugally.

When you get into the PDF at the Society of Actuaries website, you see that the researchers do break their data down by age group, gender, marital status, and  alleged socioeconomic class. But the subjects’ ages range from 45 to 74; “retirement” is defined as the point at which “a household’s primary focus switches from accumulating assets to using those assets to supplement its income so as to maintain a desired standard of living.”  In other words, if you kept working full-time and simply stopped contributing to your 401(k) or other savings instruments, you could be considered “retired.” This category applies only to those in the 55- to 74-year-old range. Median incomes shown in these figures are surprisingly low: for single women in the 55- to 65-year-old bracket, it’s $28,000 (men do better at $41,000), and for women between 65 and 74 it’s $18,000 (men’s median income drops to $28,000). In the “middle-class” range, net worth for younger marrieds, single women, and single men (respectively) is $348,000, $111,000, and $125,000; for the older set, net worth figures drop to $285,000 for married couples but rise to $130,000 for both single men and single women (7). The report finds that a large part of these Americans’ net worth is invested in “nonfinancial assets,” which include not just real estate equity but also equity in small businesses, vehicles, collectibles, and art (15).

Well. A small business can return a nice bit of income, and depending on how the corporation is structured, it may or may not show up on your income taxes as earned income. Much of the income from my S-corporation, for example, will be realized as dividends. And owning your house free and clear is worth more than the face value of the dollars involved.

The value of my home represents 57% of my net worth. Because the house is paid for, I would say that its real value to me is significantly higher: every dollar that I don’t have to pay to keep a roof over my head is a dollar I can use to buy groceries. My son’s monthly payment on a house of similar value is $1,420: almost an entire paycheck (net) of my soon-to-be-former $65,500 salary. If I had to pay a mortgage on my home, I could not survive on Social Security and part-time work.

While my savings eventually will supplement those two pittances enough to keep me more firmly in the middle class, as a practical matter I’m having to delay draw-downs for a year, in hopes that the economy will recover enough to allow my devastated investments to come back to normal. If I didn’t have a paid-off place to live, I couldn’t afford to do that.

Life’s a little more complicated than these figures seem to suggest at first glance.

So this is retirement?

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With retirement like this, who needs work?

I read student papers till 11:30 last night (the result of having loafed half the day before, if reading page proofs can be called loafing); leapt up at 6:00 a.m.; shot across the city with La Maya to an estate sale (nice stuff: too expensive); shot home, delivering edited page proofs to a publisher on the way; worked till class met; collected another mound of papers to add to the mound from the other class (yet to be read); shot back out to Scottsdale to a business reception; flew back; fed the dog; took the dog for a walk, wherein we witnessed the immediate aftermath of a three-fatality wreck (teenagers from the tenements across 19th Avenue); trudged home; sat down to write a few lines of copy I’d said I’d do on a volunteer basis for the choir director; listened to the clock tick while trying to figure out what to say (it ain’t easy to praise God when you’ve just seen the end of three kids); heard the Mac boing at the arrival of a new e-mail message bearing not one, not two, not three, but twelve new documents from a client…

Oh, God. At this rate, I’m not going to live through retirement!

Job interview?!?

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This afternoon a phone call came in: one of the westside community colleges.

Was I the person at this number who had applied for a full-time teaching job in the English department there?

Why, yes…

Was I still interested in the job?

Absolutely!

Seconds later, she had me signed up for an interview next Tuesday afternoon.

Well. That was a surprise. It’s been three months since I sent in that application. I figured never to hear from them. By now, I imagined, they must have hired whomever they had in mind when they started the search. Because the community college district’s application form requires you to enter the dates of your degrees and the inclusive dates of all your jobs, there’s no way you can hide your age from a search committee. They don’t have to see me to know I’m too old to restart a teaching career.

It’s so radically unlikely they’ll hire me that for a moment I was given pause: why jump through the interview hoops when what’s on the other side of the hoop is a brick wall? On the other hand: why not? Nothing ventured, nothing et-ceteraed.

Truth is, I’ve pretty much adjusted myself, mentally, to the idea of not working full-time. I wonder if I really want a full-time job.

On reflection, though: cobbling together a living with adjunct teaching, Social Security, blogging, and sporadic editing adds up to more than full-time work at very low pay. Just now I’m hardly doing any work for the Great Desert University but I’m putting in 12- to 15-hour days, every day: seven days a week. There’s not even time to clean the house. The only breaks I’m getting from the work are choir practice on Wednesday evening and senior choir performances on Sunday morning.

Today I made a conscious decision to loaf. I should’ve been reading student papers but just couldn’t face it. A day of idling meant…

• writing two blog posts
• contending with the daily onslaught of e-mail messages (about 70 on a slow day);
• downloading and unzipping two files from our India client, after Tina’s system wouldn’t break into them;
• inspecting and assessing them, then sending them along to her;
• cruising news sites and PF blogs in search of some inspiration for the next post;
• finishing a proposal for an online course at PVCC;
• chatting with a client editor over the phone;
• reading the rest of a detective novel’s page proofs, about 100 pages…

Oh, and repairing the toilet, after having made a run on the hardware store for parts.

It’s safe to estimate that a nine-month salary at one of Maricopa County’s colleges would start at about what I earn on a twelve-month contract at GDU. The amount I earn today, over twelve months, was about the average pay for community college faculty eight or ten years ago. On a nine-month basis.

A full-time teaching job in the community colleges would entail actual work, something I’ve learned to evade delegate in my present position. However, 15 hours a day of nonstop labor on various freelance and contract enterprises strikes me as something akin to work. And the pay works out to something less than minimum wage.

If I have to work that hard, I might as well be earning a decent living and, while we’re at it, getting a few benefits. Maybe I could afford to hire a plumber to fix the toilet.