The Plot Lines of Your Second Act

Written by Jeffrey Steele - One Comment

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I have long contended there is a much better retirement saving strategy than saving increasingly humongous portions of your weekly earnings.

That strategy: Simply planning not to retire.

Think of it. If you don’t retire, and you go right on working, you won’t have to save as much as you get older, because you’ll be earning as you spend. You also won’t have to live most of your days fretting about inflation eroding your fixed income, or your retirement funds being blown up in risky investments.

One of the best things about never retiring is this strategy’s ability to make you feel ever youthful. If you’re 58 today, for instance, and want to be working at 80, you may be vying for a job at that time with a 21-year-old born this morning.

Beat out someone almost 60 years younger for a paying gig, and I’ll guarantee you won’t feel like you’re a member of the over-the-hill gang.

Your next move

So if the best retirement planning strategy imaginable is never retiring, how do you go about doing that? I’m not suggesting you continue working in the same tired job, or even career, the rest of your life. Just the opposite, in fact.

I’m suggesting you explore a few of the things you’d like to be doing the rest of your life, then match those to vocational opportunities ripe for older folks.

Such opportunities do exist, as I learned recently writing an article called “Best Jobs for a Second Career.” In the course of my research, I chatted with Marci Alboher, a New York City-based vice president with San Francisco’s Civic Ventures. That organization is a non-profit think tank probing the work and social purpose of baby boomers, and advancing the movement toward later-in-life work that melds “purpose, passion and a paycheck.”

Says Alboher: “We all know people are not retiring at the same age. The reinvention is widespread … At this life stage, many people are drawn to work that feels meaningful, and will have impact beyond themselves.”

Healthy ambition

Health care is one of the largest fields luring folks intent on what Alboher calls “encore roles.” Within this vast industry are jobs ideal for people with a lot of life experience. It only makes sense that the health care industry, which treats a disproportionate number of older people, would seek a similar demographic to fill staff posts, thus surrounding oldster customers with folks who look like them.

A favorite of Alboher’s is the new and growing field of wellness coaching. Just as career and life coaches routinely find work, so too will wellness coaches be in demand by private individuals and medical practices.

Health care navigator is another intriguing job title sure to attract some folks taking on Act II careers. According to Alboher, navigators help steer people through the increasingly complex health care and insurance landscape.

Then there’s the gigantic field of nursing, a field with tremendous growth potential predicted to continue for years, if not decades. Given the need for nurse practitioners, registered nurses and licensed practical nurses, to name a few, there are opportunities for virtually anyone drawn to the field.

A few others

If you’ve had a hard-knock life, or even just seen a lot in your days, you probably have much to offer as a counselor. That’s a reason theological schools are finding greater numbers of age 50-plus people enrolling, Alboher says. In olden days, ancient wise men were sought for advice. We may be returning to this paradigm, and there’s no reason you shouldn’t profit from the renaissance.

Don’t overlook the advantages of temporary work. Whether it’s working through temporary staffing agencies or as substitute teachers in elementary schools, temporary jobs provide the flexibility many older people seek.

There is also rich potential in transforming your passions into an entrepreneurial venture. Do you love animals? Consider a pet-sitting or dog-walking business. If you have a fascination with yesteryear, you may be well suited to running an antique appraisal or restoration enterprise.

Do you have good organizational skills and an ability to help folks divest themselves of possessions? A de-cluttering consultancy could be a real growth opportunity, especially considering the huge numbers of boomers sure to be downsizing into assisted living or continuum-of-care housing in the years ahead.

You also have a chance to turn something you’d be doing anyway into a labor of love and an entrepreneurial second career. Possibilities include house-sitting, operating a companion service for older people, tutoring children and adults in skills you’ve mastered, or teaching yoga classes.

So don’t assume you have to exit stage left into the abyss of an uncertain financial future in retirement. Your best performance may still be years in the future, in the role you take on as an encore.

TradeKing and Zecco are Merging

Written by Nickel - 2 Comments

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Earlier this week, I received an interesting broker-related tidbit in my inbox… It seems that TradeKing and Zecco are merging in hopes of challenging what they refer to as the “big five” online brokers (Schwab, Fidelity, TD Ameritrade, E-Trade, and Scottrade).

In case you don’t recall, Zecco is best known for having pioneered the free trading model, whereas TradeKing has consistently offered cheap trades (in the $5/transaction range) along with award-winning customer service.

Going forward, customers will continue to pay $4.95/trade, which is what both brokers currently charge, with Zecco having abandoned the free trades approach awhile back. They’re expecting regulatory approval to take 1-2 months, after which they’ll begin integrating their operations.

This deal is just part of a larger pattern of consolidation across the industry, with Schwab having acquired OptionsXpress last year and TD Ameritrade having acquired Thinkorswim back in 2009.

As for me, this won’t mean much. Though I did open accounts with both of these brokers in the past, I never really used them and have long since closed them. What about you? Do you use Zecco or TradeKing? If so, what do you think about this deal?

Choosing Between a High Deductible and Traditional Health Plan

Written by Nickel - 2 Comments

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In response to my article about HSA contribution limits for 2013, a reader named Stephanie asked the following:

Is there any good way to calculate which health plan is right for you? I’ve been having trouble the past few years deciding between the regular PPO and the HDPPO, but my health care costs are usually pretty high (I reach my deductible mid-year).

I’ve actually talked about how to approach this decision in the past, but today is as good as any for a refresher…

When choosing between a high deductible health plan and a more traditional PPO or HMO plan, you need to consider factors such as the monthly premiums, the difference in deductible, possible differences in the co-pay levels once you meet your deductible, the annual out-of-pocket limits, possible differences in the types of care that are covered, etc.

If you go with an HDHP, you also need to consider your ability to meet a fairly major financial obligation (the deductible) in a short period of time. This means you should have sufficient emergency savings, or other liquid assets that can be deployed at a moment’s notice.

From the sound of things, Stephanie is in a pretty good position, as she referred to her plan as a high-deductible PPO. This is what we have, and the coverage is very similar to that offered by my employer’s standard PPO. The primary difference is that there is a higher deductible (duh!) with the high deductible version.

In our case, we switched from a $20 co-pay system with no deductible for office visits and a $900 deductible for lab tests, etc. to a plan with no co-pay and a $3k annual (family) deductible. Thus, we were facing the prospect of paying the first $3k out of pocket. In other words, we pay 100% if the “Usual & Customary Rate” (UCR, which is lower than “list” price) until we reach our deductible.

But once we reach our deductible, we actually come out ahead. The reason for this is that we then transition to a co-insurance rate of 10% of UCR which is almost always cheaper than the $20 copay. The story is similar for prescription coverage… 10% of the allowable rate is almost always cheaper then the $15/$30 copay (depending on which drug we need).

The annual out-of-pocket maximum for our HDHP is $6k vs. $3k for the old school PPO, but… That would require $33k in medical costs before we hit it — $3k for the deductible plus 10% of $30k for the other $3k. Barring an absolute disaster, this is fairly unlikely.

Aside from the above, the plans are largely equivalent. They both cover the same types of care, they cover wellness services (checkups, mammograms, etc.) at 100%, and so on.

After last years premium increase, we’re coming out about ahead by about $370/month (for our family plan), or a total of a little over $4k/year. So yes, we’re risking a bit on the upside in terms of an extra $3k out-of-pocket in case of a catastrophe, but we have a guaranteed savings of $4k/year (which outweighs the higher deductible) on the premiums.

On top of all else, we’re also able to sock away over $6k/year in a tax-advantaged HSA. To me, this is a no-brainer. I do, however, realize that not all HDHPs are as attractive as ours, so you’ll have to run the numbers for your own situation.

Being Too Frugal Can End Up Costing You Money

Written by Hank Coleman - 9 Comments

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I recently came across a coworker who was burning the midnight oil. I thought that I was the only one who had to work late that night. When I asked him what he was doing, he told me that he did not have an internet connection at home, so he was using our work internet after hours.

Setting aside the ethical implications to this scenario, I decided to delve deeper into his life and frugality. Come to find out, he does without a lot of things to cut costs — cable television, internet, phone service, and he even drives across town for cheaper gas.

There’s difference between being frugal and simply being cheap. Which side of the line is he on?

Believe it or not, you can take frugality too far, to the point of being miserly, unethical, antisocial, etc. While frugality is perhaps more socially acceptable than in the recent past, it still has its limits.

Aside from the social implications, being overly-frugal can wind up costing you money, too. Let me give you a few examples of how frugality may hurt your wallet.

Ditching cable actually kills my budget

I love having 200 cable television channels at home on my TV. I enjoy having seven different channels from providers like CNN, MTV, and others that cover the exact same things. But I will let you in on a little secret. Having 200 channels on my television actually saves me money too.

For me, it is totally worth the money I spend on having so many channels. It keeps me at home on the couch instead of out on the town looking for something to do and spending money. This isn’t true of everyone, but I know that I personally get bored and distracted easily.

I would quickly find myself inside the movie theater every weekend or buying DVDs each week if I didn’t have a lot of TV channels to choose from at home. The cost of those activities would quickly outpace the savings of not having a large cable television packages if I am not careful.

You miss out by not having internet

Do you need an internet connection at home? No, but in today’s digital age, it makes life more efficient and enjoyable. It also makes it easier to forego having 200 cable TV channels if you disagree with point #1, above. An internet connection opens up a world of possibilities with streaming content from Netflix, Hulu, Amazon, and YouTube.

While most of the premium sources charge a monthly fee, that cost pales in comparison with the cost of a premium cable or satellite packages. The primary downside is limited access to live sporting events.

Driving around wasting your savings

Have you ever driven past a gas station with a higher price at the pump in hopes of saving money on gas? Many of us get sticker shock when the price of gasoline starts to creep up in the summer, but you shouldn’t drive too far to find your next tank of gas.

You can do a simple cost-benefit analysis and determine the breakeven point to make it worth driving further down the road. At some point, you’ll find yourself eating away at any potential savings — not to mention wasting your valuable time. Eventually, the search itself becomes uneconomical, and you should just pay the few extra pennies for the higher priced gasoline.

Wasting your frugal savings

Another way that being too frugal can wind up costing you money is what you do with the savings. What is the end result that you are shooting for by saving so much money through your daily spending decisions? Are you investing that money? Are you saving the money for another financial goal like paying for a home with cash? These are all great endeavors if that is actually what you use the money for.

There is, however, a range that your frugality will enable lifestyle creep in other areas. Or maybe you’ll deprive yourself so much in one area that you’ll rebel and overspend in other areas.

Is it possible to be too frugal? I personally think that there’s a point where frugality becomes counterproductive and can wind up costing you money in the long run.

Are there ways that you can spend your free time enjoying life without spending a dime? Of course there are. But there are also times when knowing ourselves, how we behave, and knowing when to say enough is enough can actually save us money even though it involves spending a bit of money.

Have you ever taken frugality too far?

Check Fraud: Use a Shredder — and Hope Everyone Else Does, Too!

Written by Nickel - 4 Comments

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I’ve suggested in the past that you should think twice before writing a check to a complete stranger. After all, your checks contain both your account number and your banks routing number — exactly what someone would need to help themselves to your money.

This is especially troubling given the ease with which checks can be printed, as well as the fact that bank accounts don’t typically have the same level of fraud protection as credit cards do.

Well, guess what? Now that more banks are accepting remote deposits using photos of checks, you have reason to worry even if the recipient isn’t a crook. Think about it… They receive the check, shoot a photo for the deposit, and then what? Rip it up and throw it in the trash?

As evidenced by a recent story out of California, tearing checks up — or even shredding them — isn’t particularly effective when it comes to preventing fraud. According to detectives in Santa Clarita, a couple managed to steal a total of $16k from 20 victims by dumpster diving at a local self-storage facility.

The couple apparently managed to piece together hundreds of “partially shredded” checks. Once they had the account and routing numbers from these checks, they were able to print and use counterfeit checks that were drawn on the victims accounts. Yikes!

I’m not sure about you, but I run everything like this through a cross-cut shredder that produces tiny particles, pretty much ensuring that nobody will be able to piece things back together. But what about the people that you write checks to? How sure are you that they’re doing something similar vs. just ripping them up (or using a strip shredder)?

As if you needed more things to worry about…

Source: CBS Los Angeles via The Consumerist

HSA Contribution Limits for 2013

Written by Nickel - 14 Comments

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It’s never too early to look ahead to next year. With that in mind, I wanted to highlight the 2013 HSA contribution limits. As many of you know, we’ve been using our health savings account as an additional retirement investment vehicle. That is, we’ve been contributing to it and saving up the documentation related to our medical expenses, but not withdrawing the funds.

The only drawback has been that my employer’s HSA custodian has horrible investment options, so I’ve been waiting for the money to reach a critical mass before transferring it to another custodian for investing. The good news is that my employer is switching custodians on July 1, so hopefully the investment options will be better (they can’t be worse!) and I won’t have to deal with transferring it myself.

Anyway… Back to the issue of contribution limits. In 2012, individuals can contribute $3,100 and families can contribute $6,250. In 2013, those limits will increase to $3,250 and $6,450 — so individuals will be able to stash an extra $150 and families will be able to stash an extra $200.

As a reminder, you can only contribute to an HSA if you have a high-deductible health plan. The current definition of “high deductible” (which will remain unchanged in 2013) is $1,200 for an individual and $2,400 for a family.

I can’t speak for anyone else, but we’ve come out way ahead by switching to an HDHP (plus HSA) from a more traditional PPO plan. What about you? Do you have an HDHP? If so, are you happy with it vs. the alternatives?

Hat tip to The Finance Buff for digging up the limits.

How to Close an Ally CD Early

Written by Nickel - 6 Comments

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I’ve talked a lot in the past about using long-term CDs to improve your short-term savings yields. In particular, I’ve talked about using five year CDs from Ally thanks to their low early withdrawal penalty.

Until now, however, much of that strategy was theoretical. Yes, I had bought the five year CDs to hold some of our short-term cash, but I hadn’t actually tried to break any of them early — until today.

The time has come to re-deploy some of the cash that was sitting in those CDs, so I contacted Ally via their online chat interface. For the record, you can close accounts via chat or on the phone, but not via e-mail.

After exchanging pleasantries, I explained what I wanted to do. The rep then asked for the account numbers, explained that I would be penalized 60 days worth of interest, and then stated the following:

We are experiencing a larger than expected delay in processing these types of requests. The request will be completed in 5-7 business days. I apologize for the delay, and we are working as quickly as possible to complete the request.

I’m not sure why that is, but I suspect it might be due to recent news about Ally’s troubled mortgage unit, Residential Capital. The latest word is that they’re preparing to package up ResCap and sell it off, which would help them pay off the emergency loans they took as part of the financial bailout.

Regardless, our money is FDIC insured so I’m not particularly worried. I did, however, ask if it was possible to expedite the request and was told that she would “escalate” it, but that it could still wind up taking 5-7 business days.

The delay doesn’t really affect us in this case, but you may want to allow some additional lead time if you anticipate needing your funds by a specific date.

Update: I just checked and was pleased to discover that my request has already been processed. What could have taken a week wound up taking just a few hours.

Seven Ways to Make Big Bucks at Your Garage Sale

Written by Ed Avis - 5 Comments

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As the weather grows warmer, many people start thinking about unloading those assorted, needless items they’ve accumulated over the last year by holding a garage sale. How many wicker baskets and bud vases does one family need, after all?

Most garage sales fail to produce the windfall the proprietors are seeking however, because they just wing the stuff out there in the lawn and hope for the best. Beat the odds by implementing some of these tips. Do things right and your garage sale will be the shopping destination of the day!

1. Planning pays off

No, don’t try to have a garage sale tomorrow if you just thought of it today! You’ll do much better if you think about your garage sale months in advance. That way you can start setting aside likely sale items — doing that is a lot easier than rummaging through the house the day before the sale, and you’ll be much more likely to have good, saleable items.

This raises another point: Don’t sell stuff that really belongs in the garbage can. Flat basketballs, clothing with holes, broken small appliances, etc. will not sell, and having them in your sale will sully the good stuff that you do have.

2. Band together

A neighborhood or church rummage sale attracts a lot more attention than a solo garage sale. If you can advertise a ten-family sale, for example, many more buyers will make the trip. Don’t worry about competition — everyone will have enough unique stuff that you won’t be losing sales to your neighbors. The big group sale allows you to spread the cost of advertising, too.

3. Location matters

You want people to see your sale, so set it up for maximum visibility from the street. Put good, interesting stuff up front to attract attention. If you’re doing a neighborhood sale, consider asking for permission to close the street. This may seem counterproductive, but you’ll find that buyers love the festival atmosphere of a big sale on a closed street with no auto traffic (obviously this only works if there’s enough parking on the cross streets).

4. Timing matters

Saturday is the day, and one day is usually enough. You’ll be sick of the sale by the end of the first day, and most buyers will assume the good stuff is gone if you try to stretch into a second day. Skip the holiday weekends, unless you live in a resort town that attracts lots of tourists on holidays. Start early in the morning — definitely by 8 a.m. — because serious shoppers like to roam the sales before the crowds arrive, and they’re usually prepared to buy.

5. Price it right

Everyone expects a deal at a garage sale, so put yourself in your buyers’ shoes when you’re pricing. No one cares that you paid $1,000 for that PC five years ago — it’s only worth a few bucks today, so price it that way. Obviously buyers will want to haggle — that’s part of the fun! — but that doesn’t mean you need to give your stuff away.

One strategy is to put up a sign that says everything is priced as marked (no haggling) from 8 a.m. to noon, but that offers will be entertained (or prices will be cut in half) later in the day. That way if someone really wants something, she’ll pay full price before noon rather than risk losing it altogether.

One more pricing tip: Put prices on everything. It makes it much easier on the buyer, and some people simply don’t want to get into conversations with sellers (especially if there’s a potential language barrier). If you have lots of similar items, such as books or CDs, you don’t need to price each one, but at least put a sign that says, “All Books $1″ or something.

6. Promote, promote, promote

The more people know about your sale, the more people will show up. If you can afford it, run a small ad in your local newspaper, and be sure to name a few of the choice items in the ad. Definitely take advantage of free advertising such as Craigslist and Mom Mail (or the like).

Signage is essential, too — put up lots of big, bold signs with clear directions to your sale location. Your kids can help make the signs, but make sure the results are readable! To test your signs drive past each one and imagine that you don’t know where you’re going — will the sign tell you what you need to know?

7. Refreshments make shoppers happy

You’ll be amazed how many people will cheerfully pay 50 cents for a cold drink but will haggle over the 50-cent price tag on that $25 Monopoly game still in its cellophane wrapper! Homemade cookies, lemonade, and soft drinks sell well and will keep your shoppers refreshed (meaning they may hang around longer and buy more).

You’re probably not going to get rich at your garage sale, but these tips should help make your sale worthwhile. And don’t overlook the non-financial benefits of a successful sale — you might meet some interesting people, and you’ll surely clear some of that clutter out of your basement!

What’s the Lowest Possible Credit Score?

Written by Nickel - 6 Comments

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Dave Ramsey is famous for claiming that he has a credit score of zero, by which he means he avoids credit all together. But is it actually possible to have a credit score of zero?

According to FICO spokesman Barry Paperno, the answer is “no.” FICO credit scores range from 300-850, so the lowest possible score is actually 300.

To get that low, however, you’d have to do virtually everything wrong, and have no positive credit history whatsoever. As a quick example, Main Street highlighted a guy who had accumulated nearly $300k in debt due to a string of bad investments, experienced a foreclosure, gone on a debt management plan, and ultimately filed bankruptcy.

Guess what? His credit score never even got into the 300s. Rather, it bottomed out at 471. Of course, once you get down near 600 you’re pretty much screwed when it comes to securing credit, but still… It’s actually pretty hard to completely destroy your credit score.

As I’ve mentioned before, your credit score is based on five main factors, including your payment history, amounts owed relative to your available credit, length of your credit history, number of accounts, and types of credit used. In order to achieve a lowly 300, you’d have to bottom out in all five categories at once.

Thus, according Paperno, you’d have to be a new customer (so no history) and then do something like open a ton of new accounts (just one type), max them out in rapid succession, file bankruptcy, and then immediately apply for more accounts (of the same type). But you had better act fast, because having a credit history (even a negative one) is viewed as being at least slightly positive.

Interestingly, while you can’t actually reach zero (or even 300, for all practical purposes), you can fail to qualify for a credit score. More specifically, FICO requires that you’ve had (and used) an account within the past six months in order to assign a score.

$250 Signup Bonus from Citi ThankYou Preferred

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It’s time for another bonus offer from Citi… This time it’s 25,000 bonus points from the Citi ThankYou Preferred card — enough for $250 in store gift cards through the ThankYou network. Here’s the deal…

Simply apply for the card, get approved, and spend $2,000 within the first four months to get the bonus. There’s no annual fee, and you’ll also receive 1 point per dollar spent on all purchases going forward.

So… The bonus structure isn’t nearly as good as something like the Citi Forward card, which offers 5% cash back (technically, 5 points per dollar spent) for purchases at bookstores (including Amazon!), record stores, restaurants, movie theaters, and video stores. But that bonus is pretty nice.

If you’re interested…