Saving Money in Retirement

Once retired you now try to find ways to lower your daily living expenses. After all the typical $1,200 Social Security check won’t meet the needs and wants we all have.

Social Security is a safety net. It was never meant to be your only source of income in retirement. The problem is that many people saved too little during their working years to have a significant retirement savings.

That brings us to finding ways to reduce our cost of living. Even if you own your home and have no mortgage payment, living on Social Security alone will not provide a comfortable living arrangement.

I have considered the options. I know of only two. Neither is appealing but both are doable.

Obtain a Reverse Mortgage. As long as you maintain your home, pay the property taxes, and fire insurance you can receive a monthly income as the outstanding mortgage grows. The house must be sold once you and your spouse have died. The difference between the mortgage and the house’s value will go to your heirs. The mortgage company has no claim against your heirs if the house sells for less than the outstanding mortgage. Reverse mortgages are expensive but will enable you to live in your home for the rest of your life.
Sell your house and move to a smaller city or town where home prices are low and live off the income you obtain from that big house in the city. The down side is that small towns may be far away from the places you know and love.

The 8 Least Expensive Places To Live in the U.S. according to Wall Street Cheat Sheet suggests some possibilities. They are all small towns that are not located on interstate highways. My guess is Red-Necks prevail.

The AARP list Retire to a Good Life for Less suggests “10 low-cost cities where you can live in comfort no matter how big (or small) your savings account” is an unrealistic view of the real world. Your savings do matter no matter where you live.

Brownsville, Texas

I went one step further. I researched using Google for the BLS cost of living data for 34 “selected urban areas.” The list includes small town I have never heard of and are very remote. Then downloading the results and
sorting for the Composite Index. Listing the lowest cost as number 1. The results are as follows.

The town with the lowest composite cost of living is Harlingen, Texas. Population 65,679. Nearest city over 100,000 is Brownsville, Texas. Brownsville has the third lowest in cost of living. Its estimated median household income in 2011: $31,850 (it was $24,468 in 2000). The population has grown by 29% since 2000. The growth was not brought on by seniors. Median age is less than 30. The city is on the border with Mexico. Harlingen is 26.2 miles north. UTB is the University of Texas Brownsville and should indicate there is more to the city than low income population. Low winter temperatures are rarely if ever below 40º F.

Indianapolis, Indiana is number 7 lowest in cost of living. With population of over 800,000 people it can offer a variety of opportunities and things to do.

Covington, Kentucky is across the Ohio River from Cincinnati and is number 9.

None of these locations match my Mediterranean climate in Los Angeles. A high cost location (31 highest out of 34). I grew up here. My family and friends are here. Those things are more important to me.

10 Common Spending Regrets

This information was posted on the AARP newsletter but the regrets are applicable to everyone.

Time-shares

The times share industry, known for its seductive sales pitch of owning a property and swapping for others for a few weeks a year. Maintenance fees turn those properties into financial nightmares. Worse is that selling a time share is nearly impossible to sell.

First Generation Technology

New consumer electronics devises tend to be difficult to use and are expensive. By the third or fourth version the prices have dropped and the gadget works easily.

“As Seen on TV” Products

From kitchen knives that will cut through steel bars to other miracle products many fall short of their promised performance. Of course they are offered at an “unbelievable low price.” Try getting your money back.

Elaborate Weddings

The average American wedding now costs $28,000. My daughter is in for a big disappointment. With half of all wedding ending in divorce is it any wonder that there are big regrets.

Extended Warranties

Device failures usually occur in the first year of use. Most products come with warranties of a year or more. Consumers Reports advises that the only benefit is to the seller. AARP says these warranties are a great deal for the party selling them.

Trendy Fashions

Buying quality apparel and classic designs will save money in the long run.

Get Rich Schemes

From buying homes in foreclosure to “collectibles” if it seems too good to be true it probably is. These ideas are making the hawkers rich.

Gym Membership/Exercise Equipment

It is estimated that gym memberships go unused after the first two or three visits. Exercise equipment advertised on television looks easy to use but most of us lose interest after just few weeks.

Pet Toys and Novelties

Animals may be cute but the care is an ongoing responsibility. Novelty toys sold in malls are fascinating for an hour or two.

We now have two “cute” dogs that now require walking, feeding, grooming, and medical care.

Prepaid Funeral Plans

These plans are costly and do not deliver as promised.

My mother told me everything was pre-paid for her funeral. When she died I had no proof of the pre-paid plan. The cemetery did acknowledge the plots had been purchased but that most people do not understand the plans. The casket cost an additional $6,500. Flowers were not part of the pre-paid plan.

Social Security is a Promise that will be Hard to Keep

Chained CPI is only the beginning of many other factors that will limit future payout.

Here is an unpleasant fact about Social Security. The system was designed in the 1930s. Life expectancy at birth in 1930 was indeed only 58 for men and 62 for women, and the retirement age was 65. Reported in USA Today, Social Security’s original retirement age of 65 was set in 1935 when life expectancy was 63. Today, life expectancy is 77 — and, for those who live to 65, life expectancy is 83. The system used to benefit financially from people who paid Social Security taxes but died before collecting any benefits.

When Social Security was implemented almost 54% of men could expect to live to age 65 if they survived to age 21, and those who attained age 65 could expect to collect Social Security benefits for almost 13 years (and the numbers are even higher for women). Men attaining 65 in 1990 can expect to live for 15.3 years compared to 12.7 years for men attaining 65 back in 1940. This is data supplied by the Social Security Administration.

Some of the data is murky and can be interpreted to support your particular views.

I entered all of my Social Security contributions for my entire working years. I then calculated their future value in an Excel spreadsheet. The calculation included the employer contributions. I compounded the interest at 5% (Future Value Calculator for Single Payment-the annual contribution). The results were enough money contributed to last 13 years. But that calculation was made the year after I retired. Since then my monthly SS income has increased. As the increases continue my contributions may be consumed in ten years.

With growing numbers of people living into their 80s and 90s where will the money come from to pay their SS checks? My guess is it will come from the general revenue of the United States. That is the reason that chained CPI is inevitable as is a later retirement age.

I Don’t Shop at Wal-Mart

Not only do I not shop at Wal-Mart, I do not have my oil changed at Jiffy Lube. Companies like Wal-Mart do bring low cost goods to America and the world but they also treat their vendors and their employees like dirt. As to Jiffy Lube, I prefer the attention of a capable mechanic. I will never forget my one time at a quick lube franchise. I had to have my car towed to another garage.

I am willing to pay a little more for the competent workers that are employed by the independent stores and garages that really give me the kind of services I want.

Yes, I shop at Costco. The reason is that they pay their employees so well that the employee turnover is low. My next door neighbor, a Costco employee, bought his home at the bottom of the housing collapse but still paid $333,000. His wife has a part time at home business. The pay at Costco can’t be too bad.

Meanwhile the working poor are employed by the big and very successful national chains. Those chains depend on low wage workers. The companies are Wal-Mart, Target, Pizza Hut, McDonald’s, etc. etc. The top 50 executives at each of those companies were paid an average of $9.4 Million a year. The typical worker at those companies has an adjusted gross income of $13,900 a year.

Focusing on Wal-Mart, it’s subsidized by the taxpayers of America. It has the most workers on public assistance. In 2007, the company shifted from regular shifts to flexible shifts, a change labor activists said was designed to force full-time workers to downgrade their status to part-time, so they would not qualify for health insurance or other benefits. The result is that hundreds of thousands of Wal-Mart employees rely on state benefits or Medicaid. Most of the company’s warehouses are contracted out to temp agencies, so even if a warehouse loader works full-time in a Wal-Mart warehouse for years, he gets no benefits. Wal-Mart has also spent at least $1 billion since 2005 settling lawsuits over unpaid wages or illegal working conditions. One study estimated that Wal-Mart workers cost taxpayers more than $1 Billion every year.

Source for part of this article is The Week magazine.

Credit Cards Can Be Better Than Cash

I bought a new bed using a credit card. I could have written a check for the full amount but the bed store offered a one year no interest payment plan. Why not? I thought. So the bed was to be delivered three days later.

Oh, there is one thing I neglected to tell you. The old bed had a foam topper that was purchased separately and has been on top for about seven or eight years. My beautiful wife said it’s not the topper that is sagging it’s the bed. OK, I agreed without challenging her wisdom. However, the next day, after I had ordered the new bed, she decides to remove the topper and check the mattress. “Look at this” she says, “the mattress without the topper seems quite comfortable.” I lay down on the bed and surprise. It feels identical to the new bed. I called and cancelled the bed order! Did I yell at my wife? No! Was I happy the bed was bought using a credit card? Yes!

Thus you have learned one of the benefits of credit card purchases. If you have a problem with a product you’ve purchased – it’s damaged or defective, or is never delivered you have extra legal protection if you bought the item with a credit card. Federal law gives consumers the right to withhold payment on credit card purchases in certain situations.

Try to resolve the dispute directly with the seller. If you call the seller or visit in person and don’t get a resolution, send a letter so that the issue is documented. In the meantime, don’t pay the amount that is in dispute, the California Department of Consumer Affairs says.

If the problem remains unresolved, call your credit card company and tell it you want to withhold payment for the disputed transaction. Follow up with a letter to the card company, and send a copy to the seller. This will “demonstrate to the seller that you intend to follow through with your complaint, and that will increase the chance that the seller will resolve the problem voluntarily,” the consumer agency said.

The credit card company will contact the seller and try to resolve the dispute. While the item is under investigation, your card issuer may not report you as “delinquent” for withholding payment, provided that you follow the steps above. But the card company can describe the amount as “disputed.” “Since the dispute probably will end up on your credit record, the right to withhold should never be used frivolously,” the consumer agency said.

Your right to withhold payments does not apply if the transaction was for less than $50, or if it took place more than 100 miles from your home and in a state other than your own. But those restrictions are waived if the credit card was issued by the seller – a department store credit card, for example.

You can withhold payment only if you use your card as a credit card. Using it as a debit card is like paying cash.

Calculated Risk

When the Los Angeles Times prints an article about a blogger that is not associated with the paper that is news. Appearing on today’s front page of the business section it was an eye catcher. Bill McBride predicted the housing crash in 2008 and more recently the bottom of the housing market in 2012. The Times article is here. I have added Calculated Risk blog to the listing at the right.

Some Investments are Appropriate

Why are you relying in savings account interest? Some banks are paying .05% APY on certificates of deposit. I saw an ad this morning trumpeting 0.9% APY. That is an unacceptable rate of return.

As we start the new year we are all looking at our savings and the earnings those savings provided. Commentaries on financial networks like CNBC and in the financial sections of newspapers all say that most of us have put our money in low interest earning savings accounts at banks. The reason is obvious. We fear losing those hard gained savings.

Businessweek December 24-Janauary 6 edition cover story Titled “Get Rich Slow” points out that at today’s bank interest rates it would take 1,387 years to double your money. Yes, the Federal Reserve is trying to encourage you to invest elsewhere. Honestly there are many investments that pay more than FDIC insured savings accounts. Some are just as safe as a savings account. My favorite is Ginnie Mae Bonds that are “providing a guaranty backed by the full faith and credit of the United States”. These bonds currently pay an interest rate of 2.68%. They have earned higher interest rates in past years. According to Morningstar, if you had invested $10,000 in January 2003 and had all interest re-invested in GNMA bonds, the current value would be $16,398.

There are other somewhat more risky investments but those risks are minimal. Consider Procter and Gamble the world’s largest consumer goods company, whose products like Tide detergent and Gillette razors are in 98 percent of U.S. households. Other products of theirs are Crest Toothpaste, Pantene Shampoo, Duracell, and Prilosec OTC. That is not the complete list that encompasses at least 32 items. The share price has varied over the decade but it has been a reliable dividend payer that now yields 3.19%. As one lady told me, “I do not care what the share price is as long as I receive my dividends”. She lives in an expensive independent living facility and draws her income to pay the bill from the dividends.

http://finance.yahoo.com/echarts?s=%5Egspc#symbol=^gspc;range=3m;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

The S&P 500 was at 1257.60 on January 1, 2012. Today the value is 1502.96. That is a 19.5% increase in value. There is no guarantee this growth will continue. Is this a bubble? Perhaps!

Can you afford to be a non-participant? If the market drops 10% just sell and you just might have more money than you do today.

Top 25 U.S. Cities by Household Income

The following data was extracted from a MarketWatch news item and modified to indicate city population. Detroit at the bottom of the list was no surprise but Philadelphia and Memphis coming in at 23rd and 24th place is a surprise. The vlaue of this information is the indicator of where you don’t want to live. You might not be able to live in San Francisco or San Jose but living nearby will provide the benefits that come with a wealthier community such as hopitals, doctors, arts, and entertainment.

I personally know there are lower cost housing opportunities in San Jose as well as Los Angeles.

	CITY	INCOME	2011 Estimated Population
	CITY	(IN $)	2011 Estimated Population
1	San Jose	76,593	967,487
2	San Francisco	69,894	812,826
3	District of Columbia	63,124	617,996
4	Seattle	61,037	620,778
5	San Diego	60, 797	1,326,179
6	Charlotte	50, 177	751,087
7	Austin	49,987	820,611
8	New York City	49,461	8,244,910
9	Boston	49,081	625,087
10	Fort Worth	47,399	758,738
11	Denver	47,371	619,968
12	Los Angeles	46,148	3,819,702
13	Jacksonville	44,802	827,908
14	Phoenix	43,960	1,469,471
15	Chicago	43,628	2,707,120
16	Houston	42,877	2,145,146
17	San Antonio	42,613	1,359,758
18	El Paso	40,702	665,568
19	Dallas	40,585	1,223,229
20	Columbus	40,463	797,434
21	Indianapolis	39,015	827,609
22	Baltimore	38,721	619,493
23	Memphis	34,960	652,050
24	Philadelphia	34,207	1,536,471
25	Detroit	25,193	706,585
Source: Census Bureau

The Tech impact has Just Begun

When my son had his car stolen, my daughter called to say she learned about it on his Facebook page.

No one doubts that technology has impacted our way of life. Computers, television have morphed into computers, cell phones have become smart phones, tablet computers are replacing lap top computers, and music is now downloaded rather than played on CDs or records (what are records?).

Despite all the new stuff, electronic retail has seen a continuous downward trend over the last few years. First it was Circuit City that once was the largest chain of electronic stores in the nation and now Best Buy seems to be following with the closing of 50 stores by the end of this year. Six (revised to 7)in California, six in Illinois, and the balance in Minnesota (revised to 17 states and Puerto Rico).

This really is the impact of technology. Borders Books is gone and Barnes and Noble is barely hanging on. All these businesses are impacted by the internet. It’s the place I made two purchases this month from Amazon. One was a new camera (tech product) and the other was sugar bowl (that is a blow to all retail). Banking? On line.

What is the message? Retail will never be the same.

What about jobs? Many of us will be working from home.

Betty White may be correct when she said, “Facebook is a big waste of time.” Just don’t tell the millions of people who use it as a primary means of communication.

Senior Discounts

Just an FYI on some discounts available to some folks over 55:

Keep this list. Send a copy to your Senior friends. As I was waiting in line behind an older gentleman at Wendy’s recently, I heard him ask for his senior discount.
The girl at the register apologized and charged him less. When I asked the man what the discount was, he told me that seniors over 55 gets 10% off everything on the menu, every day.
Being that age myself, I figured I might as well ask for the discount too. As I waited for my turn, I thought about the consequences of doing so.

If the employee asked me for I.D., it could be embarrassing having to show my license. But if she didn’t ask for proof, I would get depressed that I really did look “old” and that I didn’t need to prove it.

Since I always like to save money, I boldly asked for the discount, and sadly she just rang up the discount (even though I am convinced I don’t look a day over 54).

Anyway, this incident prompted me to do some research, and I came across a list of restaurants, supermarkets, department stores, travel deals and other types of offers giving various discounts with different age requirements.

I was actually surprised to see how many there are and how some of them start at the young age of 50.

This list may not only be useful for you, your friends and family.Hmmmm, Dunkin Donuts gives free coffee to people over 55. If you’re paying for a cup every day, you might want to start getting it for free.

Restaurants
Applebee’s: 15% off with Golden Apple Card (60+)

Arby’s: 10% off (55+)

Ben & Jerry’s: 10% off (60+)

Bennigan’s: discount varies by location

Bob’s Big Boy: discount varies by location (60+)

Boston Market: 10% off (65+)

Burger King: 10% off (60+)

Captain D’s Seafood: discount varies on location (62+)

Chick-Fil-A: 10% off or free small drink or coffee (55+)

Chili’s: 10% off (55+)

CiCi’s Pizza: 10% off (60+)

Culver’s: 10% off (60+)

Denny’s: 10% off, 20% off for AARP members (55+)

Dunkin’ Donuts: 10% off or free coffee (55+)

Einstein’s Bagels: 10% off baker’s dozen of bagels (60+)

Fuddrucker’s: 10% off any senior platter (55+)

Gatti’s Pizza: 10% off (60+)

Golden Corral: 10% off (60+)

Hardee’s: $0.33 beverages everyday (65+)

IHOP: 10% off (55+)

Jack in the Box: up to 20% off (55+)

KFC: free small drink with any meal (55+)

Krispy Kreme: 10% off (50+)

Long John Silver’s: various discounts at participating locations (55+)

McDonald’s: discounts on coffee everyday (55+)

Mrs. Fields: 10% off at participating locations (60+)

Shoney’s: 10% off Sonic: 10% off or free beverage (60+)

Steak ‘n Shake: 10% off every Monday & Tuesday (50+)

Subway: 10% off (60+)

Sweet Tomatoes: 10% off (62+)

Taco Bell: 5% off; free beverages for seniors (65+)

TCBY: 10% off (55+)

Tea Room Cafe: 10% off (50+)

Village Inn: 10% off (60+)

Waffle House: 10% off every Monday (60+)

Wendy’s: 10% off (55+)

White Castle: 10% off (62+)

Retail And Apparel

Banana Republic: 10% off (50+)

Bealls: 20% off first Tuesday of each month (50+)

Belk’s: 15% off first Tuesday of every month (55+)

Big Lots: 10% off

Bon-Ton Department Stores: 15% off on senior discount days (55+)

C.J. Banks: 10% off every Wednesday (60+)

Clarks: 10% off (62+)

Dress Barn: 10% off (55+)

Goodwill: 10% off one day a week (date varies by location)

Hallmark: 10% off one day a week (date varies by location)

Kmart: 20% off (50+) Kohl�s: 15% off (60+)

Modell’s Sporting Goods: 10% off

Rite Aid: 10% off on Tuesdays & 10% off prescriptions

Ross Stores: 10% off every Tuesday (55+)

The Salvation Army Thrift Stores: up to 50% off (55+)

Stein Mart: 20% off red dot/clearance items first Monday of every month (55+)

Grocery

Albertson’s: 10% off first Wednesday of each month (55+)

American Discount Stores: 10% off every Monday (50+)

Compare Foods Supermarket: 10% off every Wednesday (60+)

DeCicco Family Markets: 5% off every Wednesday (60+)

Food Lion: 6% off every Monday (60+)

Fry’s Supermarket: free Fr’s VIP Club Membership & 10% off every Monday (55+)

Great Valu Food Store: 5% off every Tuesday (60+)

Gristedes Supermarket: 10% off every Tuesday (60+)

Harris Teeter: 5% off every Tuesday (60+)

Hy-Vee: 5% off one day a week (date varies by location)

Kroger: 10% off (date varies by location)

Morton Williams Supermarket: 5% off every Tuesday (60+)

The Plant Shed: 10% off every Tuesday (50+)

Publix: 5% off every Wednesday (55+)

Rogers Marketplace: 5% off every Thursday (60+)

Uncle Guiseppe’s Marketplace: 5% off (62+)

Travel

Alaska Airlines: 10% off (65+)

Alamo: up to 25% off for AARP members

American Airlines: various discounts for 65 and up (call before booking for discount) Amtrak: 15% off (62+)

Avis: up to 25% off for AARP members

Best Western: 10% off (55+)

Budget Rental Cars: 10% off; up to 20% off for AARP members (50+)

Cambria Suites: 20%-30% off (60+)

Clarion: 20%-30% off (60+)

Comfort Inn: 20%-30% off (60+)

Comfort Suites: 20%-30% off (60+)

Continental Airlines: no initiation fee for Continental Presidents Club & special fares for select destinations

Dollar Rent-A-Car: 10% off (50+)

Econo Lodge: 20%-30% off (60+)

Enterprise Rent-A-Car: 5% off for AARP members

Greyhound: 5% off (62+)

Hampton Inns & Suites: 10% off when booked 72 hours in advance

Hertz: up to 25% off for AARP members

Holiday Inn: 10%-30% off depending on location (62+)

Hyatt Hotels: 25%-50% off (62+)

InterContinental Hotels Group: various discounts at all hotels (65+)

Mainstay Suites: 10% off with Mature Traveler’s Discount (50+); 20%-30% off (60+)

Marriott Hotels: 15% off (62+) Motel 6: 10% off (60+)

Myrtle Beach Resort: 10% off (55+)

National Rent-A-Car: up to 30% off for AARP members

Quality Inn: 20%-30% off (60+)

Rodeway Inn: 20%-30% off (60+)

Sleep Inn: 20%-30% off (60+)

Southwest Airlines: various discounts for ages 65 and up (call before booking for discount)

Trailways Transportation System: various discounts for ages 50 and up

United Airlines: various discounts for ages 65 and up (call before booking for discount)

U.S. Airways: various discounts for ages 65 and up (call before booking for discount)

Activities And Entertainment

AMC Theaters: up to 30% off (55+)

Bally Total Fitness: up to $100 off memberships (62+)

Busch Gardens Tampa: $3 off one-day tickets (50+)

Carmike Cinemas: 35% off (65+)

Cinemark/Century Theaters: up to 35% off

U.S. National Parks: $10 lifetime pass; 50% off additional services including camping (62+)

Regal Cinemas: 30% off

Ripley’s Believe it or Not: @ off one-day ticket (55+)

SeaWorld Orlando: $3 off one-day tickets (50+)

Cell Phone Discounts

AT&T: Special Senior Nation 200 Plan $29.99/month (65+)

Jitterbug: $10/month cell phone service (50+)

Verizon Wireless: Verizon Nationwide 65 Plus Plan $29.99/month (65+).

Miscellaneous

Great Clips: $3 off hair cuts (60+) Super Cuts: $2 off haircuts (60+)