Probably I’m better off if I don’t know. Sitting in front of the computer mulling over the money worries is not helping my mental health.
Any way you look at it, there’s no way my savings will support me for the rest of my life, unless I die tomorrow. Nor is there any way my lifestyle is going to get any better. I am so damn sick of pinching pennies…my whole life has become pinched. And especially I’m sick of working like an animal for sub-minimum wages. Our current client hasn’t paid us; I sent him a bill payable net ten days and haven’t heard a word. Ten days, however, won’t be over until next Friday. Meanwhile I didn’t finish the work I was supposed to have done for him because the perfectly excruciating piece of ersatz lit-crit I was editing expanded to fill all space—I’ll make a grandiose $360 for 30 hours of work on that thing, and the real truth is, it probably took more than 30 hours to drag through. Between that, the nonpaying client’s work, and the Holy Week frenzy of singing, I haven’t been able to break loose enough time to work on the real estate course.
I feel pretty discouraged about the real estate scheme, because I kinda doubt that I’ll make any more at that than I do at my various other schemes, largely because I’m not much of a people person.
Consequently, a view of my financial future goes beyond “pretty” discouraging to “radically discouraging.”
Yesterday I asked myself if I might take a small drawdown from savings to give myself enough extra money that I could pay the bills and have just a little bit extra to spend on things like clothing, shoes, an occasional concert or visit to a museum, or maybe just not having to feel strapped after the car has to be fixed. Math not being a stronger point with me than people skills are, I had to think this through each step of the way.
First, Social Security covers less than half my expenses, which include a $734 payment toward the downtown
albatross house. Teaching income is peanuts, and because it’s extremely irregular (I’m actually paid only 8 months out of 12, and for long stretches no two checks are the same), I put that into a money market account and then transfer a set amount to my checking account to cover expenses. Right now, the amount is $2,050 a month. It just covers expenses; in the summer, now that utility bills have gone up, it actually does not cover expenses (my winter bills are now almost as high as summer’s sky-high bills were two years ago). Nor does it cover expenses in a month like this one, when I get hit with a $450+ car repair bill. One out-of-routine expense will put me in the red, and “routine” does not include a meal in a restaurant, a hair styling, a trip to the botanical garden or a museum, a concert that I have to pay for, a day trip to a tourist attraction.
So the first question is, while I’m teaching seven sections a year, how much beyond teaching income do I need to pay my bills? Right now I’m pulling $930 a month from a long-term emergency savings fund (every month is an emergency when you’re permanently unemployed), which resides in the credit union making zip. Sooner or later, I’m going to be forced to buy a new car, at which point I will need that money to pay for it—seeing it drop by almost a thousand bucks a month makes me cringe.
Another way to look at this: presently I’m running in the red.
Retirement savings average about an 8 percent return, so a modest drawdown (up to about 4%) should not reduce principal over the long term. Can I draw down from retirement savings without having to eat into principal?
Another $500 a month would cover the rising bills (my homeowner’s just went up another $55) and give me enough extra to enjoy life in a modest way. It wouldn’t cover expenses during the summer or during the month-long winter break, when I have no income other than Social Security, but it would be better than nothing. What percent of my savings would I have to draw down to engineer a net $500/month increase?
A gross drawdown of $20,592 a year is 3.69% of savings. That’s almost four percent (the amount money advisers suggest to make savings last for most of your remaining years—and based on family lifespans, I expect to live into my mid-90s). Almost four percent while I’m teaching the maximum allowable number of classes!
Holy God! Does that or does that not mean I will end up in freaking poverty when I can no longer dodder into a classroom? Speak to me, ô Oracle of Excel!
Right now I need $3,040 a month to cover everything (that amount can only go up, but let’s avert our eyes from that inconvenient truth).
Got that? A near-four percent drawdown will not allow me to cover my bills if I’m not teaching! That $530 shortfall x 12 months comes to $6,360 a year, the equivalent of 2.65 sections of freshman comp. What it means is that I will always be short of what I need to live on unless I teach forever, until I die.
Uh huh. Can you imagine a 95-year-old Ph.D. in English getting hired to teach roomsful of fractious 19-year-olds?
How much will I need to cover my bills if and when I can’t teach anymore?
Lovely. I will need over 5% of savings to live like an ascetic. And I hate living like this.
Having seen what happened to an acquaintance when she ran out of money at the end of her lifetime, however, I can assure you that I do not want to draw down more than 4% of retirement savings! Better you should shoot yourself than go through what that woman did—and she had friends running interference with the horror show for her. If you were all alone, like, say, me…you truly would be better off dead than old.
Most Americans would be better off dead than old, IMHO. That’s the nature of our society.
Oh well. Moving on.
So, suppose I cut the proposed pay increase from $500 a month to $250 a month? Then how much would I have to draw down?
Okay. I could increase the monthly budget by about $250 if I continue to teach 3 +3 +1 and draw a little over 3% from savings. That’s more reasonable. But…what happens when I can’t teach anymore????
Wow! To get by with just $250 added to my present “income” from savings after I can no longer teach, I will have to draw down almost 6 percent from my savings.
That’s assuming a 20% tax rate, which is about what I’m paying right now. I ran the figures at 15%; that made almost no difference in the amount I would have to draw down to survive. It’s sure unlikely taxes will ever go down. And you can be sure expenses will never go down. Matter of fact, that 6 percent drawdown does not account for inflation.
We’ve seen the vagaries of the economy: what goes up must come down. I lost $200,000 in the crash of the Bush economy. It’s pretty well come back over the past four years—only because ever since I was laid off I’ve struggled to avoid drawing money from investments. But all it will take is one more (inevitable) market drop, and the amount I’ll need to take out of savings will be one hell of a lot more than 5.7 percent.
I’m screwed. Unless I die soon, screwed.