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An Alternative Option to a Standard Pension

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Like U.S. workers, the British have seen their pensions take a beating recently. Hard-earned savings have been eroded by economic contraction across the Eurozone, which is having knock-on effects in the U.K. People in retirement and those close to retirement age are having to rethink their spending habits and cut down on treats they’d been looking forward to enjoying in their retirement for their entire working lives.

A new survey by Primetime Retirement has found 36% of over-55s are cutting back on spending in certain realms of life including going out, 65%, holidays, 62% and buying clothes 61%. This is because of falling real incomes for the over 55s. For people ages 55 to 64 £318 per week is the average income. However for over 65s this rate drops by 24%.

As a result people are looking for alternative forms of income to their standard pensions. One option to consider is a pension annuity.

A pension annuity converts money locked away in your pension scheme into a regular income. Most people in ‘defined contribution’ pension schemes have to use their pension fund to buy an annuity, which, because it works like an income, is liable to income tax.

There are many types of annuities, and the market is filled with annuity providers claiming to offer the best rate. Before purchasing any kind of annuity it’s important you seek sound professional financial advice. The Money Advice Service is a good place to start before contacting a financial advisor. It offers an annuity comparison table to compare various annuity providers and types of packages to find one that works for you. You just have to fill in a few financial details and the comparison page is then tailored to your requirements making it an effective way of starting your search.

In the U.S., it is important to consider your own circumstances carefully when thinking about investing in annuities, which in this country are a type of insurance product. Although for some people they can be a reasonable part of a larger plan, for most people they’re not the best choice, for the following reasons:

a) Some (but not all) annuities have no provision for inflation-adjusted increases. Thus, although I might get a 6% return on investment by putting a chunk of money in an annuity today, 6% on, say, $100,000 would give me $6,000 now and evermore, whether or not the company issuing the annuity invested my money so that in grows or falls in value.

Thus in 20 years at a reasonable 6% return on investment, my $100,000 might have grown to about $320,700 if managed professionally in a diversified portfolio. But I would still be getting only $6,000 a year…which in the year 2032 ain’t gonna buy much. The annuity issuer would have paid out $$120,000 to me; but it would make a profit of $220,000 on the investment of the $100,000 I handed over at the outset.

If instead I kept my money, had the principal managed professionally, and drew down a more conservative 4% from my investment, at the end of 20 years I would still have control over my entire fund. It would not amount to $320,7oo, but assuming a 6% growth rate and a 4% drawdown rate, I still would have more than $100,000 in savings.

b) When your money is in an annuity, it is tied up permanently. If you need it for some unexpected reason (say, you or your spouse has to go into a nursing home and without it the person will end up in a grungy Medicaid home), you can’t get it back.

c) No matter when you die—whether you live to a ripe old age (God help you!) or you drop dead tomorrow—the money may not go to your heirs. Thus you leave your offspring without the financial capital that they should reasonably expect to inherit as members of a middle-class or higher SES family. Some annuities continue to disburse payments to heirs until the end of a specified period; others do not.

d) Most variable annuities have hefty commission charges and fees. These range from 5% to 14%. Other fees combine to make annuities a very expensive investment. There are no-load annuities, but these are not widely known and not used much. Regulations in the U.K. are undoubtedly different from those in the U.S.; investors need to familiarize themselves with what the laws in their countries allow insurance companies to charge for these products, and to know what the costs will be before deciding to invest.

e) In the U.S., annuities have some complex and onerous tax issues associated with them.

For some people, investing in an annuity is a smart move, and for some, not so  much. Factors to consider include your age, your “fear factor,” your potential longevity based on your  health and the longevity of your immediate relatives, and your projected income tax rates through retirement. Study the matter carefully before investing in annuities—or, for that matter, in any financial product—and consult a trustworthy financial adviser and a tax professional. Remember it’s important to get it right first time. There is no room for second chances in annuities; once you’ve picked, you cannot change your mind.

Image: Piggy bank from German bank HASPA, around 1970. Georgh HH. Public domain.

Dollars & Docs

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Today have to decide whether to cancel the stress test the Mayo has set up for me on Thursday, and by extension the endoscopy they want to subject me to next Wednesday. It’s a dollar decision as well as a matter of interminable distance (the Mayo Clinic is 20 miles from my house) and suspicion that I’m about to be overtested and that there are less invasive ways to diagnose the present complaint than by sticking a tube down my throat and cutting chunks out of my stomach.

I’ve made an appointment with a doc in nearby Sunnyslope, in a practice that’s part of John C. Lincoln Hospital. He will take Medicare assignment, which means just about anything he chooses to do to me will be almost free. The Mayo does not, and so I’ll be paying through the wazoo for the nasty test they want to subject me to as well as for the stress test, which they demand that I take first. So that’s issue #1.

Issue #2 is that I’m just getting over another bout of plantar fascitis, which hurts like hell. I’ve barely been able to limp around the house. This particular recurring annoyance is something that takes about 8 to 10 weeks to get over, and after two months of pain it’s finally beginning to fade. Another two weeks without excessive irritation, and it should be healed up. However, it still hurts to walk, and I can’t even imagine how I’m supposed to RUN on an inclined conveyer belt.

Assuming I can do it, a) the pain will shoot my blood pressure even higher than it already is and b) you can be sure trying to run uphill with a wrenched Achilles tendon and a screaming painful heel is going to set me back several weeks in the healing process. As soon as the weather cools enough, I want to start walking again, but with this kind of pain that’s out of the question. I really don’t want to aggravate it.

So my sense is that I should cancel these tests and, if they’re to be done, have them done at Lincoln where I won’t have to face yet another financial disaster. This summer has been hellish enough in the dollar department.

There’s about a 4% chance that what ails me is a gastric cancer. On the one hand, I suppose one would like to ascertain, one way or the other, whether that’s the issue. On the other, by the time a gastric cancer is symptomatic, it’s too late—if that’s what the problem is, I’ve got about 6 months of not very good life left, and one way or another, it doesn’t much matter what is done about it. So I suppose a delay of a few days, by way of preserving capital, won’t make much difference one way or the other.

The ER staff did an abdominal ultrasound and could not see any masses. Over at the clinic, the young Mayo doc says that gastric cancer spreads to the liver first, once it metastasizes, and they couldn’t see anything in the liver, the kidneys, or the gall bladder, all of which they were especially interested in. She takes that as a good sign. And I take it as another good sign that the pain is finally gone and I’m now only mildly bilious and even that, only occasionally—rather than sick as the proverbial dog.

A 4% chance that it’s cancer means there’s a 96% chance that it’s not. The two issues working against those odds are the plexiform neuroma, which ups your chances of cancer and which causes a type of gastro-intestinal cancer that’s virtually impossible to treat, and the fact that gastric cancers have a genetic component and my mother apparently died of one. Apparently. That’s one man’s opinion: my beloved, now semiretired old doctor’s speculation made long after she was reduced to an urnful of ashes. She never saw a decent doctor and so we don’t know what specific cancer she actually had. But…it’s there, as a possibility.

At any rate, I think if it were cancer it would not stop hurting, as it did abruptly yesterday morning. And if it were cancer, there would be signs of internal bleeding, which so far is not the case. Since this is the second episode I’ve had in the past year, by now surely it would have metastisized and would probably be shedding blood. So I think it’s safe enough to delay the torture until I can get to another doctor whose ministrations aren’t going to break me up in business.

It’s frustrating. I’m nervous about John C. Lincoln, whose quality is no better than any of the other ordinary hospitals in the city. The only one that consistently scores well in clinical excellence and patient safety is the Mayo; there’s one in Scottsdale that does pretty well most years. The rest…well, we saw what happened to SDXB’s mother, who was rescued from a post-operative heart attack only because a cleaning lady happened to wander into her hospital room to pick up the trash and noticed that she was in distress. And what happened to mine, for that matter: a nonstop horror show. That’s pretty typical.

So it may be better to shell out the extra dollars to stay in the Mayo’s system. But I am running out of money, and with all the expenses, planned and unplanned, that have happened over the summer, the savings I’ve used to live on since Layoff Day will be exhausted by November 1.

I mean, really: if I have the new guy order the tests at Lincoln and I just MUST continue to traipse out to the Mayo to see whatever resident they happen to assign to me on any given day, I can have the results sent over to the Mayo and not have to pay extra for the privilege. If I like the new guy, I’ll just continue with him, and he’s right around the corner.

The two senior guys at the Lincoln practice say they specialize in gerontology, which would be nice assuming they don’t patronize. Depends on their personalities and whether they have any common sense, I guess. One of them has been practicing for 30 years, so he should be getting long enough in the tooth to realize old people are not children and not idiots. Well…most doctors think patients are idiots, and half the time they’re right about that. But one doesn’t need the preconceptions about age layered on top of it. The two senior guys are both MDs, but at this time they’re not taking new patients.

The new kid, whom I’m seeing and who just joined the practice, is a DO, which may or may not be a bad thing. One DO I visited was heavy into woo-woo—tried to get me on homeopathic nostrums. But recently I saw a dermatologist with a DO who seemed to have a scientific cast of mind. At least, he didn’t suggest treating plexiform neurofibromas with herbs and roots. Or bottles of water containing .001 to the –100th percent of some supposedly active ingredient. At any rate, the young fellow has two senior docs who apparently have a lot of experience, and one would expect they probably consult with each other on occasion. So…there’s hope for an actual doctor-patient relationship here.

Interestingly, yesterday’s abrupt improvement seems to be holding. This morning: no pain, no discomfort, no burping, and no general annoyance. To the contrary, I actually feel very good just this minute. I suspect that would not be the case if the past two or three weeks’ manifestations were cancer. So, the alarm bell is turned off, for the nonce.

Welp, the hour grows late. I’d better go swimming if I’m ever gonna get in the water before the blasting sun rises over the yardarm.

New Washer!

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Okay, the new high-efficiency high-priced washer is ensconced in the garage: a Samsung double-whammy top-loading vast-capacity VRT (must stand for “vertigo,” which is what you get when you gaze through its glass lid to watch it running). It is really a neat machine, a computer with a wash tub attached to i t.

M’hijito blew his Sunday afternoon traipsing around the city looking for wash machines and prices. We found one of these marked down at Lowe’s—$900-plus—and having seen that price tag returned to the Sears Outlet store, where we snagged a brand-new model for a mere $775. The retail price is $1100, so that wasn’t bad.

Saved even more when M’hijito volunteered to install the thing. So we had them load it into the Dog Chariot (how does anyone live without a pickup or a minivan?), hauled it home, and before long he had it hooked up and running.

We looked at the “traditional” agitator-style washers available in the stores. Junk. For $350 I indeed could have replaced my old washer, with a much lesser machine—fewer cycle options, same old clothes-ripping agitator, cheap-looking construction. The Samsung looks sturdy. No question all these electronics will crap out expensively, and that it’s better to get a machine with mechanical controls. But I’m afraid those are pretty well phased out now.

And…

Holy mackerel what a change in performance!!!!!

Got some HE detergent and tossed in a peach-colored towel that has seen better days. Over the years it had acquired a 5 o’clock shadow of ground-in grime, especially on the ends where I wipe my hands and face on it. Well, I ran that thing through with the whites and out it came, looking like brand-new! It’s bright and clean and free of any trace of gray grime.

The other clothes came out looking good, too, and much softer than they were after washing in the old Kenmore. The Samsung must not only wash more effectively, it must be rinsing out the chemicals more efficiently, too.

The crazy glass lid is a hoot. There’s something mesmerizing about watching the thing in action.

Some time back, Trent Hamm wrote a long post at The Simple Dollar more or less justifying the purchase of one of these devices, arguing that over time it would pay for itself in reliability and savings on water and power. I dunno about that. At least for small loads, it looks to me like the Samsung actually uses more, not less, water than the decrepit Kenmore did. I’ve yet to wash a large load, so don’t know if the machine uses the same amount of water for all loads, in which case it probably would save water if you have a big family. But I will say it has so many washing options, from several different water heating choices (for me it’s usually “cold”) to responses to different “soil levels” to extra spin (or no spin), extra rinse, and even a delayed start option—if you’re on your power company’s time-of-day plan, you could toss the laundry in and then set the machine to come on when the rates drop.

Love the top-loading design. Really: I have paid my dues with front-loaders and never, ever want to bend over to haul wet clothes and sheets out of something that looks like a Bendix. Without an agitator, the drum is HUGE! It will easily hold a comforter without the traditional wrestling match.

One of the complaints I saw in reviews of these top-loader things is that they supposedly tangle and wad up clothes. So far, I’ve not seen it do that. In one load, I put two pairs of jeans in, a recipe for knots in the old Kenmore. No tangles, no wads.

Consumers also complain that high-efficiency machines take half a lifetime to run a single load. However, this one has a “quick wash” cycle that takes 34 minutes, just a few minutes more than the old Kenmore’s regular cycle. And it really got the clothes clean in that time. I can’t see why you would need to run a longer cycle unless you had to wash large loads of very dirty clothes.

After the house-painting endeavor, the S-corp is going to have to repay a chunk of the money I lent it so I can pay for this thing. But I love it.

Images: Samsung top-loader, shamelessly ripped off
from Amazon (whose price is not bad…)
Old Bendix that looks just my mother’s: shamelessly ripped off the Internet.

Vote for Donna!

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Our friend Donna Freedman has made it into the finals of the PF Olympics! They’ve asked her to write another story to be voted on, and she’s posted it at the Go Banking Rates site. The assignment is to explain what “golden rule” of personal finance you’ve abandoned since the recession, and why.

I think it’s a pretty amazing piece, and it speaks to the condition that many Americans will see themselves in—if not now, then in the future. The unspoken subplot is that Donna has adapted to changing economic conditions that sooner or later may affect most American workers. IMHO, she’s way ahead of the curve, psychologically and in terms of work strategy.

So, if you will, go to the post, “The Way We Work,” and vote for it there. Also let your friends and fans know about it on Twitter, Facebook, or wherever else you schmooze online. Here’s a tweet with tiny URL:

For the PF Olympics, Donna Freedman confesses breaking a golden financial rule! Read how & vote (daily, to 8/11). http://tinyurl.com/c6offx9

You can vote once a day from now thru August 11. So…vote early and vote often!

Go$h! Gasoline Gobsmack

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So yesterday afternoon I hear on the radio that gas prices are on the way back up. This noon I’m at Costco and notice on their sign that the price there is $3.09.

Huh. That seems like a pretty fair price, and so even though I’m down only a quarter of a tank, I decide to fill up on the way out.

Right.

The lines at the pumps are almost back to the street! So much gas is flowing out of there that they have not one but two tankers pouring more in. Apparently everybody else has the same idea–grab it while the grabbing’s good–because nobody lingers long at the pump. In a couple of minutes the lady in front of me and I both pull into the shade and jump out of our cars.

The dog chariot only takes $20 worth, but the woman before me is done even quicker than I am. Shortly I’m cruising south on the freeway, headed for the Funny Farm.

Price at the two off-ramp stations: $3.23.  Nice: a 14-cent savings!

But I figure gas stations along the freeway are always overpriced.

Approaching my neighborhood through the slum to the north, where prices should be lower, I spot the sign on the corner Circle K: $3.29!!!

Wow!

Though I’ve never bought gas at a Circle K, because at least around here they’re not the safest venues for a lone woman, I’ve noticed that sometimes they’re on the low end. But even at “convenience” prices: twenty cents a gallon more than Costco?

Mwa ha ha! I feel very smug.

Images:

Gasoline pump, Indiana. Derek Jensen. Public Domain.

Circle K, Japan. Artist’s name not given. Creative Commons Attribution-Share Alike 3.0 Unported license.

Quiet on the Western Front…for the moment…

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Bila the Bosnian Painter arrived on the scene yesterday. His business clearly is doing well: he now has underlings. These he set to work moving furniture and filling cracks. I see they missed a few spots, so I’ll have to point those out to him this morning.

He peeled off the mess The Three Stooges made of the crack over the kitchen door and had one of his slaves fill it properly so it would be dry this morning. Then he went off to order paint, leaving them to drag an old bookcase and a heavy four-drawer file cabinet away from the garage walls.

Painting the garage dirt brown adobe greige will make it even darker in there than it already is. However, with the money I’ve saved by canning the Jeff the Painting Entrpreneur’s stooges and hiring Bila, I should be able to afford a tube skylight over the washer & dryer, a desiderata that I’ve coveted for some time. Should have done that while I still have a job. But short-term diddle-it-away savings have grown enough that there’s about twice as much in that account as it will take to pay Bila and have someone install the proposed skylight.

Ugh! I’ve delayed doing this fall’s course prep to the last minute. It’s already August, and all I’ve done is prepare a calendar of due dates. Have to write a whole new Eng. 101 course to fit my current scheme of making the poor little things write on topics of my choice, not the clichéd blather they put into all those high-school English papers they want to recycle in my classes.

It was a good thing My Esteemed Chair insisted that I keep the third composition course that I was trying to weasel out of. As you’ll recall, I tried to simply shuck it off, so as to have time on Tuesday afternoons for the anticipated AAME meetings. He insisted, instead, that I accept a 7:30 a.m. Monday & Wednesday section. I cringed, but couldn’t see a way to get out of it politely.

As it developed, the AAME board rejected us—they decided that because I have to hold down a miserable teaching job to put food on the table while I’m trying to build The Copyeditor’s Desk into a paying concern, what I do in my business must be a “hobby.” (Right! I never take a vacation because working 16 hours a day, seven days a week is my hobby!) One guy’s attitude was so obnoxious that I decided if they accepted us into the program, I probably would decline.

One of the endless problems with freelance writing and editing is that even professionals with long publication records and lengthy stints on newspaper and magazine staffs are not regarded, by people outside of publishing, as “working.” For most people, work is a place, not an activity. Publishers and editors recognize this and, when confronted with an obvious pro will treat you as a pro, even though your office is a bedroom in the back of your house. (They also recognize that the fields are full of wannabe’s, and those folks are likely to be treated as amateurs and hobbyists.) But people like the character on the AAME board who went out of his way to be insulting just don’t grasp that distinction.

Probably, to be fair, trying to move the pro/freelance paradigm into the business world is going to be a challenge—for that very reason: most business people expect other businesses to run out of an office.

It’s entirely possible that, if we continue to earn as we have over the past two or three months, we may be able to afford a small office. There’s a nice place in Tempe where I could imagine setting up shop, and in town, I covet an ersatz Spanish-style garden office building on east Missouri that always has vacancies. The recession-that-is-not-a-depression is still in force here, despite improving real estate prospects, and so commercial office buildings have plenty of empty space. First, though, Tina and I each need an income. After that, we’ll think about other blandishments. Personally, I’d rather have the business buy me a car than set me up in an office…but whatever works, works.

Well, speaking of the Workman Waltz, as we were above, I’d better feed the dog and get something to eat myself before the first dance of the day begins. And so, to…heaven only knows what! Then, to work…