Coffee heat rising

Surviving in penury

Wow, did I get these figures wrong! My take-home salary is far more than what appeared in the original of this post…I don’t know where I came up with a figure of $32,900. I was even sober when I wrote this! Corrected figures appear in boldface next to my original wrong calculations.

Well, it’ll be interesting to see what happens next. In 2010, my gross income will be significantly less than half of what I earn today. Assuming state and federal taxes total no more than 20 percent (a big assumption!), the combined net of Social Security and teaching will be $9,700 ($17,710) less than I net from my salary today. That doesn’t count what I make freelancing, because next year I will not be allowed to earn freelance income. Since Social Security’s rules will limit me from earning a living wage, 2010 will be a year of real penury. It remains to be seen whether I can survive under those circumstances.

By “survive” I mean “stay in my home, eat, keep my dog, and live through a 118-degree summer.”

There are a couple of extenuating circumstances.

I’ll get a chunk of vacation pay that should net out to about $3,965 (assuming GDU doesn’t pull another of its numbers on me, another Big Assumption).

About $1,900 remains in the S-Corporation, after paying for the MacBook. If I can finish the page proofs I’m reading before Christmas, I could in theory push the 2009 drawdown to about $2,200. It probably would be better, though, to delay that job to 2010, so as to leave its payment in the corporate account to cover things like printer ink and computer repairs with nontaxable money. So, let’s say I net about $1,500 from what remains of freelance income.

This will give me a grand total of $28,985 (net, if taxes are not too extortionate) to live on next year. Compare that to my present net of $32,900 ($41,210).

Two strategies may enhance things a bit:

Even though I hope to avoid drawing anything from retirement savings in 2010 (so as to wait and see if investments continue to recover from the crash of the Bush economy), to have the state consider me “retired” so that it will disgorge the $19,000 it owes me for unused vacation time, I will have to draw a few bucks from my 403(b) until such time as the bureaucrat in charge of that program approves me. So the plan now is to draw down $500 a month until we know the sick-leave payment has been approved. That process can take as long as three months, and so I’ll probably have to pull out about $1,500, adding (optimistically speaking) another $1,200 net to the 28 grand.

Now we’re approaching a net of $29,200 ($30,185), which is $3,700 ($11,025) less than I bring home today.

My share of the mortgage on the Luke house will be paid with $10,000 worth of tax-free dividends from an antique whole life policy, giving me a year’s reprieve on having to draw those payments down from savings.

Still…where is that $3,700 ($11,025) shortfall gunna come from?

Well, I put $573 a month into savings right now. That adds up to $6,800 a year. Of that, only $3,900 is nonnegotiable: I have to self-escrow that much to cover the property tax, homeowner’s insurance, and car insurance. So if that’s the only money I set aside, in 2010 I can devote $2,900 to living expenses that I used to put into savings.

So, now I’m only $800 ($8,125) short of the amount I actually spend on living expenses. That, I’m sure, can be managed through frugality and tight budgeting. (Yeah, right! Only if I sell my home and take up residence under the Seventh Avenue Underpass!)

This scenario applies only to 2010. If I have to continue refraining from drawing down savings in 2011, then things will look different. I can earn about $10,000 a year freelancing—in a good year. So the net of teaching three-and-three will come to $11,520 (in the unlikely event that taxes don’t rise  much); the net of Social Security is about $12,000. Add net freelance income of around $8,000, and you get $31,250 ($31,520) as the base net income, not counting savings drawdown, in 2011.

On the surface, that’s not too bad—pretty close to what I’m earning now. (Holy Hell, it’s over ten grand less than what I take home now!) But it doesn’t count the cost of Medicare, eleven times what I’m paying for health insurance today; and it doesn’t count the cost of the mortgage, which on its own represents about 1 percent of my total savings. (I am screwed, screwed, ge-screwed!)

And we have to remember that taxes and insurance will not stay the same. On the federal level, sooner than later we’ll have to pay the cost of repairing the damage done by the past decades of ill-advised leadership. Locally, the state is still a phenomenal $1.4 billion short, even after the Draconian budget just passed by the legislature. If the most basic services are to stay in place—firefighting, police protection (forget services to the sick and elderly poor)—then our dim-bulb legislators must face the fact that they will have to raise taxes. Homeowner’s insurance, too, never goes down; and when I reach the point where I’m forced to replace my 10-year-old car with a newer model, taxes and insurance on that will increase, too.

If my investment advisers are right that my savings will return to something resembling their former glory after a year or so, then I should be able to get by on a 4 percent drawdown…as long as I can dodder into a classroom. (Dream on!) That, of course, will not be forever.

But the day after tomorrow will have to take care of itself. (By then I’ll have starved to death, so someone else can figure out what to do with the day after tomorrow.)

I must have figuredmy income on a 24-period basis rather than the actual 26 pay periods created by PeopleSoft’s hideous biweekly pay scheme, since I bank the so-called “extra” paychecks in savings. Even that is wrong, though: the annual total would be $38,040. What hat the $32,900 figure came out of, I can’t imagine!

Image: Men being served at a soup kitchen. Franklin D. Roosevelt Presidential Library and Museum.