I’m such a bag lady. Not literally…but I suffer acutely from Bag Lady Syndrome. You can tell me till you’re blue in the face that I have plenty to get by, but I won’t believe it until the bills are paid and no one has carted me off to the poor farm.
Matter of fact, this morning after I’d run another Excel spreadsheet that showed, contrary to the present optimistic theory, an average shortfall in 2010’s enforced “retirement” of $740 a month, my financial adviser was on the phone, cooing in soothing tones, “You’ll be f-i-i-n-e.” Even though I don’t have anything like a million bucks in the bank, he says, there’s more than enough to supplement Social Security and cover all my expenses for about 50 years, at a 4 percent drawdown.
The other day Frugal Scholar, the professor with the penchant for thrift-store shopping, reported a delightful revelation: truth to tell, she and Mr. FS could rent their paid-for house and retire to Costa Rica. Today. Gone fishin’. Once and for all… If they so chose.
Ah hah! Financial independence: freedom to do as you please, absent the chains of debt.
Many of us, I think, assume that to enter that blessed state we need to have stashed enough in savings to make us wealthy by most anyone’s definition: a million bucks or more. But I beg to differ. With a reasonable standard of living and a paid-for roof over your head, you don’t have to be a millionaire to achieve financial independence and maintain a middle-class lifestyle. A much more modest stash can support you, given the right conditions.
The Scholars appear to be situated firmly in the financial middle class. With the exception of university presidents, certain deans, and the occasional patent-holding bioengineer, academics don’t earn much. At least, not in the larger scheme of things—compared, say, to the owner of a carpet-cleaning service, to a doctor or a lawyer, to a basketball player, or to a twenty-something kid on Wall Street. It’s unlikely that even between the two of them they’ve stashed a million bucks in their 403(b) plans. Yet they are financially independent. They could, if they wished, retire today with little or no change of lifestyle (other than moving to a tropical paradise…).
The first key to financial independence is to get out of debt. All debt, including the mortgage. You’ll notice that the Scholars had the initiative and self-discipline to pay off their house. In my own case, I’m especially grateful that I managed to do that a few years ago. Because I don’t have to come up with hundreds of dollars every month to keep a roof over my head, now that I’ve been laid off…hallelujah! I don’t have to get another day job!
And the other key? Come to terms psychologically with living within your means. Though I won’t be enjoying the Queen of Sheba’s lifestyle, neither do I expect to move to the poorhouse. The only real “sacrifice,” if you can call it that, is that I will have to drive my fully functional, very nice nine-year-old Toyota a few more years, rather than trading it in when it reaches the ten-year milepost. I will have to earn a few thousand bucks a year to cover my share of the house M’hijito and I are copurchasing, but that can be done by taking on a couple of easy, part-time teaching gigs. Pay is low, but work is minimal and mildly entertaining.
Debt, particularly mortgage and automobile loans, racks up the largest part of most Americans’ month-to-month costs. Once you no longer have to pay an outrageous slug of interest to keep a roof over your head and wheels under your feet, your ordinary living costs are surprisingly modest.
Financial independence doesn’t necessarily mean not working. After you’ve attained financial independence—that is, your living expenses are low enough that the proceeds from modest savings and other forms of passive income will support you—you’re free to do as you please. If you want to keep working at your job, you can. Or you can take up a more interesting line of work, try to do something less profitable that you’ve always dreamed of doing, or devote your time, energy and skill to altruistic pursuits.
A friend retired from his medical practice with plenty of zing still left. He and his wife spent a year working pro bono at a hospital in New Zealand. Another friend passes his time working for Habitat for Humanity, as does my step-sister. A third decided to become an organist in her old age, an enterprise that led to a wonderful adventure in Australia. With the possible exception of the anesthesiologist and his wife (who by and large live modestly, by Seattle standards), none of these people are wealthy. They live middle-class lifestyles, dwelling in ordinary homes in decent neighborhoods, driving nice-but-not-gaudy cars, staying out of debt, and generally doing as they please…within their means.
A meeting with the investment adviser yielded a little decent news on the pending unemployment (i.e., forced retirement) front. He figured out that $10,000 of the $25,000 sitting in the whole life insurance policy my ex- bought back in the early 1980s is not subject to taxes.
So, he proposes that I withdraw that in January 2010 and use it to pay my share of the mortgage on the investment house. This should keep taxes low and, because it’s not earned income, will not work against me in the Social Security earnings limit department. With the mortgage covered and the likelihood that the community college teaching gigs will max out the earnings limit, I may not have to take a drawdown from investments at all next year.
This, he thinks, will allow my much-battered investments to recover from the depredations of the Bush economy.
If, as planned, I add the net amount of the vacation pay GDU will owe me to the living expenses fund, I should end up with about the same monthly income that I have right now. It will delay having to raid my retirement funds for as long as a year, and meanwhile, it’ll give me a chance to apply for full-time work. The community college district has had a hiring freeze going for quite some time; that one job has opened up means the ice-pack may be melting. Between now and next fall, several more opportunities may arise.
O’course, the fly in that ointment is Medicare. Even with the inflated health-care premiums presented to us in this month’s open enrollment, the cost of cobbling together coverage comparable to my present health-care coverage will be about 10 times what I’m paying now. That’s going to be a big hit, and because of the earnings limitation, I won’t be allowed to use freelance income or take on a summer course to take up the slack.
So…2010 is gonna be a little pinched, but it should be survivable. As for 2011: it’ll just have to take care of itself.
Gawdlmighty! The 90,000-mile service on my aging Toyota Sienna is gunna cost $1,200!
It’s enough to make a strong woman faint. Well, luckily I knew about this and set the money aside. But that doesn’t make me any happier about having to sink 12 C-notes into a nine-year-old vehicle.
For the money, Chuck the Mechanic Par Excellence proposes to do the regular 90,000-mile service, change the timing belt, and replace the water pump, it being an opportune moment to do that—while the front end of the motor is off, anyway. I happen to know, too, that he’ll lubricate the squeaking steering wheel, probably for not much, and that he’ll check the brake pads, rotate the tires, and change all the hoses.
Suspecting that Chuck’s estimate was a little high, I called a couple of Toyota dealers. One proposed to charge me $350 for the basic 90,000 service; another wanted $300 for the same thing, claiming it was a “special” markdown from the usual price of $360. Uh huh. Then it’s another $300 for the water pump plus another $300 for three seals that may or may not need to be changed plus $65 for “outside belts.” Plus $335 for the timing belt. If I’m not mistaken, that would be $1,300 to $1,350, depending on which stalwart Toyota dealer one chooses to do business with.
Makes Chuck’s fee look like a bargain. And I know he’s not going to cheat me. Past experience suggests that is not always a given with automobile dealerships.
{sigh} So I made an appointment for a week from Friday.
Well, it’s a heckuva lot cheaper than buying a new car. Normally, I’d trade in a vehicle at ten years. But now that I’m about to be canned, with no hope (or desire…) of getting another job, this car is going to have to run until it falls apart. Chuck thinks it will easily get 150,000 miles, which should carry it another six years. And it could, in theory, run to 180,000 miles, or another nine years. Barring an accident, of course.
A crash that results in the insurance company totaling it (which right now would probably be a fender-bender) will leave me up the creek, since I do not and will not ever have enough cash to buy another car. Nor will I ever again have enough cash flow to make car payments. Every penny in savings, including the $18,000 I had set aside for the next vehicle, now will have to be rolled into the funds intended to support me in my dotage. If I can get this car to run ten more years, it will be the last car I’ll ever own.
Really, in ten years I’ll only be 74, and so I may still be competent to drive. What’s $18,000 now will likely be $36,000 then…hmmm… With no steady job, I’d have to set aside $3,600 a year to collect enough extra money to buy a car in 2019. {snark!} Now there’s a realistic goal!
😆 😆 😆 😆 😆 😆 😆 😆 😆 😆
Oh well. Thirty-six hundred bucks would buy 180 twenty-dollar cab rides. That’s a trip to the grocery store about every two days.
Too bad we don’t have decent public transportation here. Thirty-six hundred bucks—just one year of car savings—would buy 2,057 all-day bus or train tickets. That would be unlimited rides every single day for 5 years and 7 months! Alas, in these parts a single trip to the grocery store and home on the buses would consume a whole day. I could fill the entire remainder of my life with waiting at bus stops and then waiting for buses to get where I want to go.
Interestingly, I found a table on the Social Security Administration’s site that calculates how much your “full” retirement age SS benefit is reduced according to the number of months you retire “early.” GDU is closing our office and canning me a year and four months before I reach so-called “full” retirement age.
This has caused many hours of worried number-crunching, because you can’t earn more than $14,160 in a year without incurring a 50% surtax on the amount you earn above that threshold. If you have the temerity to overstep that boundary by a few dollars, Social Security withholds not just the amount you owe, but an entire month’s benefit! (Or more, depending on how gravely you’ve sinned.) You get it back, minus the amounted owed, the following January! That’s assuming, of course, that you haven’t starved to death by then.
It’s a real problem for me, because my savings, formerly adequate to support me in retirement, have been so dessicated by the crash of the Bush-Cheney economy that today a reasonable 4 percent drawdown plus Social Security plus the allowed $14,160 in part-time earnings will not yield enough to support me.
My financial counselor, however, advises me that my savings probably will outlast my lifetime even at a 6 percent drawdown, though he’s not happy at the prospect. On their own, the net of Social Security plus a 6 percent draw would leave my Ultimate Belt-Tightened Budget $5,544 in the red at the end of 2010.
Obviously, I’ll have to teach, do freelance editing, or some combination thereof as long as I’m splitting the cost of the downtown house with M’hijito. When that obligation goes away, I may just barely get by on Social Security and investment income. And of course…I can’t work forever—sooner or later the day will come when I can’t earn anything.
At the Social Security page above, I discovered that in January 2010 I’ll be “entitled” to 91.1% of my “full” retirement benefit. This comes to $16,026, about $2082 more than I’d been figuring.
Well. Every little bit helps.
It also occurred to me that I don’t have to put the $3,168 that I think I’ll net on the $5,280 GDU will owe me for unused vacation time, come next December, directly into savings. Instead, I could use it to live on in 2010.
In 2011, because I reach 66 that year, I’ll be allowed to earn something over $37,000 between January and my birthday in May (capricious as hell, isn’t it? the rules must have been written by a committee of asylum inmates!). This means that in 2010, I don’t have to worry about limiting earned income.
Taking the new Social Security estimate and adding estimated net vacation pay plus a 6 percent investment drawdown, I come up with a somewhat brighter estimate of 2010 income.
Without teaching at all, apparently I would end up only $2,376 in the hole at the end of the year. Since I will probably net about $1,920 for one community college course, this would mean I would have to teach only two sections a year to break even. That assumes that my estimate of the tax bite is correct, and that, at $39,672, I have not grossly underestimated my annual expenses.
However, if I chose to get off my duff and actually work, taking a 6 percent drawdown and applying the vacation pay to 2010 living expenses would provide a pretty generous income, without drawing any Social Security:
Teaching 5 & 5 (for a total of 4 GDU courses and 6 community college courses over a year), an unholy teaching overload, would give me plenty of money to live on in this first, terrifying year of unemployment. Even teaching a more reasonable load of 4 & 4 would provide an adequate cushion, assuming no really major expenses come up. The middle column in this table would have me teaching three sections a semester at GDU, which I think is disallowed—more than two would make you benefits-eligible, which of course is exactly what universities and colleges are trying to avoid by hiring adjunct faculty.
Advantages: It would free me from a lot of bureaucratic complications, and it would allow me to earn as much as I can.
Disadvantage: The massive workload would allow no time for freelancing, and over a year, I would lose my freelance clients.
A far better course load of 3 & 3 at the community colleges, combined with Social Security, vacation pay, and a 6 percent drawdown, also would keep me comfortably in the black. In fact, the result would be significantly better than working myself into an early grave:
Hot dang! In this scenario (if it’s accurate), I actually could bank the $3,168 vacation pay and still get by just fine.
Advantages: Though I still have to work, I don’t have to kill myself at it. The amount left here suggests I will have no problem covering expenditures, even if a large unexpected expense arises. There should still be time for freelance work, and every $2,400 earned there is one composition course I don’t have to teach!
Disadvantage: I’ll have to draw more than is desirable from savings.
Dropping the drawdown to 5 percent would reduce the total annual net to $45,170, cutting the year-end black ink to $5,500. Even at 4 percent, I stay in the black, but with a much smaller margin: about $1,950 at the end of the year.
What I ultimately do depends on what Social Security actually pays me, which will be different from my guesses. They’re missing two years of income that I can prove I had; though it’s not much, it may increase the benefits a little. More likely, though, benefits will be less than I estimate. That’s just the way my karma goes.
It also depends on the tax load: I’m estimating 20% based on the facts that not all your SS is taxed and that I will deduct everything I can think of from all this contract income. With any luck, the taxes won’t bankrupt me—but again, we’re depending on luck, and the way things have gone over the past year, it looks like the luck well is running a bit dry.
The safest course, it appears, will be to take a 5 percent or a 6 percent drawdown in 2010, start Social Security in January, and sign up for three community college sections in the spring semester. Then, in the fall, reduce the teaching load according to the amount freelancing brings in during the spring and early summer. Then in 2010 I can drop the drawdown to 5 percent or maybe even 4 percent, depending on how much freelance income is happening.
La Maya and La Bethulia have made up their minds to sell their beautiful, hacienda-like house down here in the Valley and move to Prescott, a more or less historic town in the cool upland parts of the Colorado Plateau. The redoubtable La B is applying for jobs there, and if she lands one (a foregone conclusion!), the house goes on the market forthwith.
So La Maya invited me on a real-estate expedition to Prescott in the near future. That should be entertaining. She’s already spotted a couple of houses online that she wants to see.
Cottonwood tree in fall
I’ve toyed with the idea of moving to Prescott myself, and with two of my best friends about to make the leap, it’s something to consider again. Summers here are getting really obnoxious. Temps of 110 degrees are tolerable, but when it gets up to 115 (or higher) and stays there, day after endless day, it’s just not livable. And whether or not you believe in global warming, it looks like what used to be a fluke is settling into the routine now: these extreme temperatures have happened for the past several years.
After the recent astronomical power bill, I turned the thermostat up to 85 degrees. Eighty-five is balmy enough when you’re outdoors in the open air, or when you can open up the house and let the outside air flow through. But when you’re cooped up in a boxful of stale air, 85 degrees is just plain hot. The house felt hot when I came in the back door from work, and it feels hot now. Most of the rooms, including the office where I’m writing this post with two fans blasting on me, really are uncomfortable.
And of course, there’s the ongoing drudgery (and cost) of pool maintenance.
Just imagine living someplace where it’s always cool enough to sleep at night! Where the locals think a 90-degree day is pretty darned hot.
Dang. With retirement coming up and GDU beside itself with joy at the very thought of farming out online scams courses to underpaid adjuncts, MOVE TO PRESCOTT oughta be a no-brainer. But being myself, of course I have to chew over all the possibilities.
Number One issue: What, really, is it gunna cost to move up there?
The last move I made took me across all of a block and a half. It cost about a thousand dollars. On the same day, a dear friend moved about five miles across the city. She paid two thousand dollars, and the difference in outcomes proved that my choice was radically penny-wise and pound-foolish. I won’t go into detail about the cocaine-snorting movers whose discarded baggy clogged the toilet, causing it to overflow at exactly the moment my Realtor called to say the buyer was on her way over for the walk-through… Suffice it to say that it was The Move from Hell. After this, Funny ponies up enough to hire a decent moving company.
Well. To move my belongings a block and a half, the cut-rate chuckleheads I hired had to make two trips. Assuming I hire a major cross-country carrier, presumably they’ll bring a truck big enough to hold everything. Even so, it will take the better part of a day to load the contents of a four-bedroom house, and then it’s a two-hour drive to from here to Prescott.
Let’s give them ten hours for the first day; they stay overnight (do I pay for their time in a Prescott motel?); then they spend the better part of another day unloading.
If I don’t have to pay for their down time while they overnight in Prescott, then we’re looking at about $2,000. If they get paid $100 an hour for sleeping in a motel, dining, and eating breakfast, we can add another $1,000 to that. I’ll bet about $3,000 is conservative for a city-to-city move.
Now we have the cost of selling this house and buying a new one. Guess who gets stuck with all the closing costs? These days, sellers routinely are being asked to pay for the buyer’s closing costs, meaning to unload this place I’ll probably have to pay more than just the Realtor’s 6 to 8 percent fee (on $270,000, that will come to $16,200 to $21,600!). And how likely is it, really, that a Realtor who is invested in getting me to buy a house in Prescott is going to press for a seller to cover an out-of-towner’s costs, especially if that out-of-towner has sold her own home and now has no place to live?
We’re looking at a bare minimum of $19,200 in selling and moving costs…and that’s before we learn that the water heater is crapping out, the dishwasher doesn’t work, the refrigerator leaks, and the wiring is not to code! Add the usual three percent of purchase price for the inevitable fix-up and nasty surprises: since I’ll only be able to afford about $250,000 for the Prescott dwelling, that will tote up to a mere $7,500 in first-year costs.
So: this proposed move could easily take $26,700 out of my pocket. Or more.
Compared to a $50 increase in summer power bills…uhm… Does that compute?
Number Two issue: Once I get there, then what?
Well, I’ll have two, count ’em, two friends: La Maya and La Bethulia. My son will still be here.
I kinda like being able to see M’hijito now and again. Sometimes he even drops by on the way home from work! If I lived in Prescott, I’d be lucky to see him three or four times a year.
Then, if seeing my pal who lives in Waddell takes an Act of Congress and logistics like those required to move the Continental Army, how likely is it that I’ll ever see her again? Or VickyC, whose social life is so vibrant she has to be trapped with a butterfly net to get her into my slow-moving orbit?
And then we have the choir. Ah, yes. The choir. Prescott undoubtedly has ladies who sing in church. But I can tell you for sher: it doesn’t have a choir anchored by a half-dozen professional singers, nor is it likely that any choir directors up there are engineering a lot of performances by members of the fifth-largest city in the nation’s symphony. Betcha no one up there has a multimillion-dollar organ and a church designed to accommodate it, either… Do I really want to walk away from that, now that the director has agreed to let me come back?
Number Three issue: What if I don’t like it?
Another friend, having served on her homeowner’s association board during a difficult time and felt alarmed about the wackos who rose out of the swamp to threaten board members, decamped to Cottonwood, the blue-collar suburb (as it were) of Californicated Prescott. Her son lived there, where he worked with his father building upscale housing for wealthy California expatriates.
She was sadly mistaken in imagining her son would welcome her presence. He and his second wife decided her highest and best use was to babysit their brats. She was in a wheelchair; they lived in a two-story house. You see the mentality, eh?
Before the car wreck that landed her in the wheelchair, she had been a high-powered corporate executive. Child care was, shall we say, not her forté.
On top of this depressing turn of events, she found herself in a place where she had no friends, no social infrastructure, and nothing to do. She hated it. But because it had cost her a lot of money to move, she was pretty much stuck. And that’s where she resides, unhappily, to this day.
Well. If I can’t afford $26,700 to move up to Prescott (and I surely can’t!), as you might imagine, I won’t be able to afford a similar hit to move back into Phoenix. Or anywhere else. Once I’m there, I’m there. And the prospect of ending up in my friend’s predicament does not appeal.
And finally…
Number Four issue: Is the grass really greener on the other side of that fence?
The lawn is already showing the effects of a certain amount of blow-torching, wouldn’t you say? But the above three matters aside, it’s not altogether clear to me that, other than slightly more clement weather during two or three summer months, Prescott has $26,700 worth of advantages to offer.
Trade-off for a warm summer? Cold winters! It snows in Prescott. Rarely does the snow stick on the ground, but what does stick on the ground is ice. I personally am not fond of driving on ice. And while I think 60 degrees is fine for sleeping, 30 degrees does not seem like the ideal snoozing temp. During the winter, Prescott’s lows drop into the teens.
Brrrr, I say to that!
Then it must be remembered that Prescott is a small town. I am a city girl. Not only that, but I’m a raving bitch. Make one enemy in a small town, and you might as well start wearing a red letter on your bodice. I know: I’ve lived in a small town. They can be even worse than homeowner’s associations.
The past few mornings, Cassie the Corgi and I have awakened to 70-degree mornings. These days have been truly lovely until 10:00 or so…and we’re still in early August. Temperatures were tolerable enough, if warm, until the middle of June. So we’re really only talking about maybe six or eight weeks of really awful weather. The rest of the time, this is a gorgeous place to live.
And a lot of stuff goes on here. In a couple of weeks, Kathy and I will go to an evening of jazz to benefit a charity that VickyC supports. Recently we attended a very fine chamber music concert in the Phoenix Art Museum. And, for that matter, every Sunday is chamber music morning down at the church meetin’ hall.
Furthermore, the Valley hosts the largest community college district in the country. As long as I live here, there’ll always be teaching gigs for me. Not my favorite work, but better than driving the zoo train or selling cosmetics at Walgreen’s. Prescott has only three institutions of higher ed: an aeronautical school; a junior college, and a small, rather eccentric private liberal-arts college. None of these will pay as much as the Maricopa County College District, which itself is presently offering adjuncts about $500/course less than the Great Desert University pays, nor will they have as many openings. And while it’s true that GDU offers many online courses, a) there’s no guarantee enough courses will be available to keep me going; b) if you’re not physically present to remind departmental chairs that you exist, you soon will be superceded by someone who is present; and c) I have some ethical issues with online instruction, which I regard as passing fraudulent.
Maybe if La Maya and La Bethulia make their way to Prescott, I can have my cake and eat it too: stay here, save 30 grand or so, and visit them when the weather’s hot here!
On rumors that the State of Arizona will offer only two employee healthcare plans, Cigna and Aetna, when open enrollment comes around, I once again reviewed the financial prospects for my upcoming enforced retirement.
Right now, the State offers employees an incredible EPO plan, to which I subscribe with joy. It covers my doctors at the Mayo Clinic, and it costs all of $13 a pay period—that’s right, folks: $26 a month! Earlier retirement calculations have assumed that I’d stay in this plan this fall, which would mean that the discounted COBRA would cover it until I turn 65 in May, 2010, at about $150 or $200 a month.
Cigna is roundly hated by medical care professionals, some of whom will not even allow you in the door if that’s you’re insurer. At one point, Cigna was our only choice, after every other insurer dropped out of the bidding, claiming that Cigna came in with a bid too low to cover reasonable costs. Healthcare professionals I know here say that Aetna is even worse in terms of slow payment, bogs of paperwork, and collection hassles.
And you can be sure that neither of these outfits will offer a plan that covers virtually all our costs for $26 a month. To coin a phrase: LOLOLOL! That means my healthcare costs will go way up in September, and the cost of COBRA may very well be unaffordable even at the discounted rate.
However, both apparently will cover the Mayo, so I figure that if they offer a high-deductible plan, that will be the thing to get…and hope I don’t get sick or hurt before next May.
Contemplating this state of affairs brought me back to the question of what the whole cost of cobbled-together Medicare coverage actually will run. I’ve been estimating around $300, but I really have no idea, because I can’t find out what Medigap costs in Arizona.
I’m determined not to be herded into an HMO, which is what the Medicare Advantage plans are. My mother died hideously at the hands of HMO doctors. She would have died anyway, but she didn’t have to suffer the way she did. The people who operate an HMO—doctors included, in my experience—do not have your welfare at heart; what they have at heart is the bottom line. It’s not in the organization’s interest to treat you when you develop an expensive, catastrophic illness. They longer they can delay treating you, the less they’ll have to pay for your care between the time they no longer can ignore you and the time you croak over.
Now, if you’re going to die anyway, really: who cares whether you get treatment for the disease itself? The issue here is that all the time your doctors insist there’s really nothing wrong with you, they’re not giving you palliative care. A disease that’s going to kill you is likely to be extremely painful. And so what happens is that until you reach a near-comatose state, you suffer.
You suffer a lot.
To stay out of a Medicare HMO plan, you have to cobble together coverage by combining Medicare Part A (free for most US workers), Medicare Part B (about $100 a month), the required Medicare Part D (about $30 a month), and private Medigap insurance to cover the large holes in the government coverage (premiums apparently a closely held secret).
You can get Medigap insurance through your employer, if your employer offers retiree coverage. GDU does: the present, magical $26/month premium morphs into something well in excess of $300 a month, bringing the tab for the total package close to $500 a month. That’s for one person who takes no meds and has no health issues—other than the stress brought on by working for the freaking Great Desert University.
That’s well beyond my price range.
Stop the presses! Just this minute, a volunteer for Medicare called and said she would send a sheet comparing premiums for local Medigap carriers, plus a bunch of other information. We’ll see what that amounts to.
While gnashing my teeth over this, I found a Web site showing that Medigap policies can range in price—for the SAME COVERAGE!—from around $100 to to around $500 a month. A site over a year old shows that in Arizona, the most popular Plan C ranges in price from $976 to $2,735 a year. Not only that, but cheaper policies are engineered to increase in cost over time, so that after a few years you can end up paying more than you would have paid if you’d bought a more expensive policy at the outset.
The whole system is a minefield of rip-offs!
This is a problem. I can’t afford more than a total of $300 a month for health-care insurance, and the munificent amounts I’ll be able to scrape together between Social Security, much-reduced retirement savings, and a part-time job whose de facto hourly rate is well under minimum wage will disqualify me for any help with these costs. People are advised to comparison-shop for Medigap policies, but it’s virtually impossible to get rates online. You have to track down your state’s SHIP office and hope to God their volunteers have built a list comparing the several score of Medigap offerings in all their various permutations, and got the figures right (these outfits are apparently staffed exclusively by volunteers, or nearly so). Good luck with that!
Good luck, indeed. The volunteer who just called reports that COBRA does not count as “credible” coverage. In other words, according to her if I buy COBRA to cover the five months between Canning Day and my 65th birthday, these Medigap carriers can refuse to cover me for any pre-existing conditions, real or in the minds of their bureaucrats. Now, I had understood that Medigap insurers were not allowed to punish you for being sick. But evidently if that was ever true, it’s changed. Although they can’t refuse you coverage, they’re allowed to refuse to cover whatever ailment they think they’ve identified, at least for up to six months. But according to this page, COBRA does exempt you from the six-month waiting period…so, as feared, the volunteer counseling that seems to be the only source of comprehensive information has its limitations. Such as, oh…say, accuracy.
Any way I massage the figures, under the best of conditions things are going to be excruciatingly tight once I enter my enforced retirement, at least untilI reach age 66 and can again earn a living wage—or as close to it as I can come after being out of the workforce for two years.
Unless I get a lot more Social Security than I expect or the tax bite is a lot smaller than I think it will be, a 4 percent drawdown from savings won’t let ends meet. Five percent will keep me in the black…by about $50 over the course of a year, assuming I never, ever overspend my much-straitened budget. Even a 6 percent drawdown will just cover expenses, with only a couple hundred bucks to spare at the end of a year. Those estimates are based on Medicare and Medigap costs of no more than $300 a month.
If the cost exceeds that amount, then I’m up the creek. I’ll have to sell my not-out-of-the-ordinary home and move into an apartment or a trailer.
Defies belief, doesn’t it? Especially when you realize that studies show average Baby Boomer retirement savings range from $38,000 to $88,000, with a mean amount (in 2005, before the economic collapse!) of $49,944. That would put my savings, from which a sustainable drawdown can be expected to generate $17,000 to 25,500 a year, at 4.8 to 11 times the typical total you’d expect someone in my age bracket to have accrued. How do people with “normal” savings rates afford health care and still have enough to live in retirement?
