Obsessive again, I spent another day and a half rehashing, in a desultory way, next year’s income and outgo. And worrying. Worrying worrying worrying: can I make it?
It appeared very much as though I could not. In 2010, projected discretionary and monthly unavoidable expenses, all told, will run about $30,075. Net income from Social Security, teaching, and GDU’s one-time payout for unused vacation time would come to about $26,200. The problem is, the $14,160 that Social Security will allow me to earn in 2010 before a 50% penalty kicks in is just too little for me to live on.
Cutting costs every which way from Sunday (my expenses have already been cut significantly, preparatory to unemployment) brings the estimated outgo down to $27,675, still more than projected income.
The goal, BTW, is to avoid taking a drawdown from savings next year, so as to allow the investments in my major savings instruments to recover from the crash of the Bush economy. With that constraint, there was no way income was gunna exceed or equal outgo, no matter how many numbers I crunched.
Well, this morning a dim light dawned. The community college district issued my first full paycheck, which for the first time showed state and federal tax withholding. A little English-major math revealed that the total gouge, for everything, is only about 14 percent. I’d been estimating a 20 percent tax bill.
That 6 percent difference will make it possible for me to live on Social Security, my net vacation time payout, and teaching income next year! My share of the Investment House mortgage will be paid from a separate little windfall, and without that $800 a month hit, I should be able to live in something slightly more luxurious than full-out anchorite style.
Without cutting my current $1,200 a month budget for discretionary expenses (some of which are only nominally “discretionary”), I still run in the red, as you can see from the first four columns on the left. However, as a practical matter discretionary expenditures have averaged about $1,000 for the first nine months of 2009, despite several months with large budget overruns. Assuming straitened circumstances will lead me to keep those costs at or below $1,000 a month, I end up just within my 2010 net income—as shown on the right.
Add a $2,500 drawdown from the S-corporation, which I plan to take this December and stash in next year’s survival fund, and the picture looks even better:
In this scenario, if I manage to keep discretionary expenses around $1,000 a month (on average), I should have about $2,740 of play over the course of the year.
So, if no really huge unexpected expenses strike next year, I should survive the tight times of 2010 without undue suffering. It won’t be luxurious, but neither will I have to set up a campsite under the Seventh Avenue Overpass.
Whether 14 percent withholding for taxes will suffice remains to be seen. But that problem will have to take care of itself in April 2011.
By 2011, my investments should have recovered enough to justify a 4 percent drawdown. And the onerous restriction on the amount of earned income Social Security imposes will expire (for me) in 2011, so I can put all of my contract and blog income into the pot. As a practical matter, the combination of teaching, Social Security, and S-corporation income may be enough that I won’t have to draw down anything like 4 percent. I’ll need $800 to cover my share of the Investment House, and that’s only 2 percent of the present investment total. If, as my financial managers think, investments will have recovered substantially by 2011, it may be even less than that.