CLICK! Why didn’t I think of this one before?

Ever have one of those “CLICK” moments, when the light switch snaps on and the brain floods with Insight? They always seem to occur belatedly.

It recently dawned on me, as I was thinking of something other than how I’m going to get by during these summers of unpaid work, that an obvious source of summer funding is sitting right out there in plain view.

For a retired state employee to collect the many thousands of dollars owed for unused sick leave (“RASL”), she or he has to be taking a drawdown from accrued retirement savings—i.e., from the state pension fund or from the 403(b), whichever plan applies—over the three-year period in which the RASL money is paid out. By the time my job terminated, I’d never heard a straight story about how much or how little that drawdown had to be. So, in the absence of any credible facts, I decided to make it $500 a month—amounting to a $389 net.

That was more than I wanted to take out, given the goal of waiting till the stock market recovers some of the $180,000 lost from my savings, but not anything like 4 percent of total retirement savings. So…what the heck.

Time has passed. In that interim, I learned that the drawdown can be anything. Even, say, one dollar a month. That revelation was made by a guy at Fidelity not long before the end of spring semester. Since I didn’t think I could get by on Social Security and bankbook savings alone during the three months summer of full unemployment, I decided to delay cutting the drawdown until September, when a little teaching pay will start dribbling in again. Good thing—without the $389/month net drawdown, by now I’d be deep into the emergency fund. With it, I’m still in the black and, barring another unexpected repair bill, should stay that way until pay starts again in the fall.

But the black ink flows by dint of penny-pinching. And you know what? I’m tired of it. I was pinching pennies through the spring semester, so tightening the belt over the summer means real Scrooge tactics. As I write this, it’s 85 in my study and 90 degrees in the kitchen; the power bill for this month still may break the piggybank. Over at La Maya’s house, whence I just came, it’s cool and comfortable indoors. It really would be nice if my house could be so cool that the dog and I can breathe without panting. And it would be mighty nice not to have a $300 repair bill represent a minor catastrophe.

So. What we have here is 12 months of drawdown, of which 9 months are redundant. When I cut the drawdown to $1 a month in September and leave it that way until May, what will happen is $4,500  of tax-deferred savings won’t be spent. It’s money that I originally figured would have to be spent, so in a way we could regard it as usable dollars. The plan here is to draw a buck a month during the academic year and $500 a month ($389 net) in the summer.

What if instead I drew enough down in the summer to create a net of $1,000 a month? That would require a gross withdrawal from the 403(b) of $1,300 a month.

I’m already going to withdraw $500/month in the summer of 2011. To make it $1,300, I would have to take out an additional $800/month.

$800 x 3 = $,2400

But over the nine months of 2010–11 that I take effectively nothing out of the GDU retirement account, $4,500 of “spent” money will not get spent.

$4,500 – $2,400 = $2,100 to the good

In other words, although I won’t preserve all of that $4,500 saved by cutting the drawdown to $1, I’ll still be $2,100 further ahead than I would be if I continue the present $500/month drawdown until all the RASL payments are disbursed in February 2012.

Meanwhile, during the summer months, the $1,000 net drawdown added to the $975 net Social Security payment would yield $1,975 a month to live on.

That’s $575 less than came in while I was teaching three sections, but still one heckuva lot better than the $1,364 I’m trying to get by on now, during the costliest season of the year.

$ 1975 – 1240  nondiscretionary expenses – 800 discretionary costs = –$65

Not great, but better than I’m doing now.

Of course, the only reason I’m getting by this summer is that last semester the $389 net drawdown plus the $1,574/month net teaching pay added to the Social Security left a little money in the checking account at the end of each month. Enough had accrued over four months of frugal living to almost support me while nothing but Social Security and the piddling drawdown comes in over the summer. However, I’d only be running $65 in the red, or $195 for the entire summer. It’s very likely that $195 will be left over at the end of nine months, even with the drawdown cut to a dollar a month.

How likely is it?

By the time the spring semester ended, I was about $2,500 in the black. Subtract $389 a month from that: $2,500 – ($389 · 4) = $944. Prorate that amount over the 2011 summer months to get about $315 a month. In fact, by $2011, there should be twice that much, because the monthly accrual will have occurred over two semesters, rather than this year’s single semester of earnings. $315 x 2 = $630 a month in savings for summer survival.

$  630  left from living frugally over 9 months
+1,000  summertime net drawdown
+   975 net Social Security
$2,605 net summer funding
– 1240 nondiscretionary expenses
–  800 discretionary expenses
$565 theoretically left each month

How can I count the ways I doubt that? Nevertheless, even if this estimate is two or three times too generous, I could afford to run the air conditioning! And without having to try to keep discretionary expenses to $500!!

Matter of fact, with $565 a month left over, I could afford to go someplace to get out of this unholy heat for awhile! In theory, that would amount to $1,695 of summer vacation money. Holy mackerel! That would put me up in Santa Fe for almost a week!

Assuming I take my shopping cart and sleep under a freeway overpass…

Speaking of the scheme to cut the $800/month discretionary budget to $500 over the summer, that one didn’t work. The $300 air-conditioning repair pushed the June-July expenses for that budget cycle, which ended yesterday, right back up to $800. In fact, I spent about $12 more than $800.

It could have come out of monthly diddle-it-away savings. However,

a) that comes under the heading of robbing Peter to pay Paul; and
b) I’m trying to revive that savings account, which was much impoverished by the clothing spree and the glasses fling. It will take another three months to recover from those spending frenzies.

So, I decided to cover the AC repair bill with cash flow. {sigh}

Pretty clearly, it’s unrealistic to think I can cover discretionary expenses on $5o0 a month. Most months I don’t spend $800, but on average since January I’ve come in only $42 under budget. To get day-to-day costs down to $500 a month, I’d have to stop eating.

And it must be said: not living like an anchorite would make a 112-degree day a lot more tolerable.