Preparing for the Worst

How do you prepare to leave your home (quickly), when you don't know whether it will be there when you return? It's the terrible dilemma you have when you face the possibility of evacuation because of a natural disaster.

Beautiful Granite Mountain is on fire, as well as thousands of acres of Prescott National Forest that surround it. Fifty foot flames are scuttling across boulders and cliffs, consuming the Ponderosa Pines and Junipers, and making waste of the chaparral. The rugged green landscape is blackened. It's sickening. And the winds of destruction are literally blowing in our direction.

Photo by: Michael Chow/The Republic

Our attention to the firefight is rapt. We can see DC-10 tankers spreading fire retardant slurry, while helicopters buzz around dropping water. Spotter planes lead the way. Firefighters on the ground are working around the clock and, against the wind and apparent odds, so far their efforts have kept nearby homes safe. Nevertheless, our community five miles northeast has been put on alert for possible evacuation.

Did we have an emergency plan? No... But we quickly put one together. We might have to leave the house on fairly short notice, taking only what we can pack into our Subaru. We approached the awful choices to be made by breaking things into categories:

NECESSITIES
.  Purse/wallets.
.  Cell phones/charger.
.  Netbook/charger.
.  Small backpack of clothing, and one sturdy pair of shoes. (Dammit, I'm taking those cute and impractical new jeans from Chicos that I haven't even had a chance to wear.)
.  Prescription medications.
.  Eyeglasses/Contact lenses.
.  Basic toiletries.

IMPORTANT PAPERS
.  Birth and Marriage certificates.
.  Checkbooks.
.  Receipts for household furniture and goods (in case we have to file an insurance claim).
.  Lease for Chicago condo.
.  PC tower with hard drive. (Important files have been backed up on a separate device.)

VALUABLES

.  Cash.

.  Jewelry

.  Art. (We could only choose a few things that would fit in the car. A lot of beautiful pieces could be lost.)

BELONGINGS OF EMOTIONAL VALUE

.  Photographs.

.  Beezum's ashes.

From our front yard - Day 1

I went through the house and took photos of furniture, art, and other belongings. Everything we can take is already packed and staged for departure. If we get the dreaded word, all we need to do is load the car and go. In the meantime, we are praying for the strength and safety of the firefighters.  

Once Crossed

I’m a nice person. Friendly, helpful, caring – I have those attributes. Once crossed, however, the personality my mother nicknamed “Pepper Pot” takes over and all bets are off.

We are making plans to enhance our outdoor space at home with an expanded patio, a fire feature, and a spa. Talking Rock has certain design restrictions having to do with square footage and height of any improvements, to which we are adhering. Having a spa on our lot on the golf course is subject to approval by Harvard Investments, the developer of our community. At their request it’s been designed so that the portable spa will be in a sunken area with added landscaping to obscure it from view from the golf course. It will have a locking cover that meets industry safety standards.

Spa will be obscured by landscaping on the east (left) edge
of the back of the house, away from the "bad " neighbors.

To bolster our case for developer sign off, we were encouraged to obtain written approval of our plan from our two neighbors. Our good neighbors and friends to the east have already provided a letter. Heck, they may spend as much time on our patio and in our hot tub as we will – and they are welcome. The neighbors to the west; well, that’s another story.

Our bad neighbors (who come here rarely for brief visits) are objecting to our patio expansion on the grounds that it will impinge on their privacy.  To my amazement, they are also objecting to our spa, which they won’t even be able to see from their back patio. They think it’s “inappropriate”. It has been made clear that they feel there is no room for compromise.

Although neighbor approval wasn’t a requirement, now that we’ve asked and gotten a negative response we have an issue with Harvard. OK, neighbors.

Now I am challenged to make a case that overrides our neighbors concerns. The time has come to dust off my corporate executive hat, gather data, apply irrefutable logic, and go toe-to-toe to fight for what we want.

Here’s the plan:

> Complete the detailed design that shows property lines and distance from the neighbors’ homes.

> Take photos showing the sight lines from and to the neighbors, showing that their view is unaffected.

> Provide documentation on the decibel levels of the spa when the jets are in operation, and when it is in standby mode.

> Measure the distance from the neighbors patio to the spa area and calculate the decibel levels of the spa dissipated over that distance.

> Use a sound meter to measure current ambient noise levels in our backyards.

> Compare converted decibel levels to measured common ambient noise. Here that includes birds chirping, wind blowing, casual conversation, and golf carts driving by.

> Put together a presentation with all the data and obtain approval.

Game on.

Sincerely,

Pepper Pot

Politics Threaten Well-Planned Personal Security

You've all heard about the "Fiscal Cliff" and the related political scramble toward the end of 2012. If nothing is done, January 1 will usher in many financially-onerous effects on the public. Some changes will affect businesses, but do not be mistaken about the very real impact on you and me.

Temporary payroll tax cuts will expire, causing worker's paychecks to be reduced by 2%. Shifts in alternative minimum tax will affect millions of taxpayers. The tax cuts from 2001-2003 will be rescinded. Many government programs (including Defense, Medicare, and Education) will be in line for deep cuts. If these changes occur, the reaction will likely spark another recession.

Possible alternatives that are being bandied about are very concerning. There has been a lot of talk about higher taxes for "the rich", or closing tax loopholes. But who decides who are "the rich"?

The really frightening stuff I'm hearing discussed are possibilities such as:

1. Taxation of existing wealth (as opposed to income). Never mind that we already paid taxes on what we have, which came from work income. This is double-taxation.
2. Elimination (or reduction) of homeowner mortgage deductions. How many more people will lose their homes if they don't have this deduction?
3. Social Security ineligibility for individuals with more than a certain amount of net worth. This is not an entitlement. This is our money that we earned that the government promised would be paid back to as retirement income. We counted on that.
4. Dividend income for investors could become taxable, further discouraging investments and economic growth. Given that companies already pay tax on their profits, this would be another form of double-taxation.

There is a very real possibility that our elected government officials will be threatening the long term plans of millions of citizens who have worked hard to earn what they have.

If you aren't following the news on this, I strongly suggest you stay tuned in. I'm fearful that some of our country's basic principles are being threatened. These are the types of threats that spark actions generated by fear and uncertainty. Companies will stop hiring and eliminate positions - again, and unemployment will rise at the same time unemployment benefits will have to be cut. People will take their money out of investments to hoard cash and precious metals. What other adverse reactions will there be when people feel their well-being and way of life is under attack?

The Power of Friendships

In spite of all the careful planning we did for our after work lives, I never really considered one of the most important requirements for happiness…the potential for new friendships.  Ron and I are each other’s best friends, but there are other people that are important in our lives.  Many of them are far-flung geographically, and we don’t get to see them much.  We interact via telephone and internet, and see them when we can.

There are studies that show that friendships rank right up there with good health and finances as the factors most likely to boost happiness among retirees.  Friends become an extension of the support system that often is anchored by family.

When we bought our home in this community in Prescott, little did we know what a big part of our happiness would be provided by the wonderful friendships we have made.  Our friends “come out to play” with us on the golf course, hiking trail, and during events at Talking Rock Club.  They provide sympathetic ears, laughs, entertainment, and ideas for new activities.  These generous people have opened their homes and invited us in for dinners, parties, informal gatherings, and holidays.  We, in turn, have opened our home to them.  This is all what makes our neighborhood a true community, and what fosters the development of meaningful relationships.

Fortunately, we blindly stumbled into the best living situation we can imagine.  Our friends have introduced unexpected companionship, caring, fun and love into the fabric of our lives in colorful heaps.  They have banned the possibility of boredom and added a new richness.  We gladly share this phase of our lives with them all.

Please don’t overlook the important goal of enhancing your social life in a meaningful way after retirement.  It needs to be a consideration in your planning.  I hope you will be as lucky as we have.

XOXO 

Time to Smell the Roses

Many years of work, planning, and saving have led us to be in a place where we can settle and enjoy life to its fullest.  It’s taking a little time to realize that we have arrived at a long-term destination.  For so long, we focused intently on the next steps - leaving our corporate jobs, moving to Chicago, and then finding a home the Southwest.  Oddly, now that we have achieved our goals, it’s a little disorienting.

You know that feeling you get after a long road trip, when even after you get to your destination and get out of the car, it seems as though you are still moving?  I feel a bit like that right now. 

The current plan is to live in our community in Prescott for as long as we are able.  We love the area and our home and friends, and have plenty to see and do.  Other than enjoying all that, we don’t really know what’s next.  That’s mildly disconcerting for someone like me, who is a planner.

Eventually we’ll need to have discussions about how to prepare for a point in life where we need assistance.  As we and the huge population of Boomer compatriots age, there will likely be more and more options for appealing situations for our sunset years.  I know we have to figure that out; but not right now.

Right now, we will smell the roses, nurture our health, take care of each other, laugh with friends, breathe deeply of the high desert air, explore our interests, connect with others, and stay active.  We’ll know when it’s time to start planning again.

Without a Net

In my transition from Illinois to Arizona, I have lost my health insurance.  The insurance I had in Illinois after my COBRA expired was a high risk pool sponsored by the state.  Having been declined for individual health insurance, I was eligible to apply for this safety net provided to full-time residents of Illinois.  My coverage was through Blue Cross Blue Shield, and we paid about $560 a month for it.  For Ron’s individual policy, we paid another $325 per month.  Each of us had a $2500 annual deductable.  Do a little math and you can guess that health care has been a substantial percentage of our expenses in retirement. 

Thirty-five states have high risk pools – Arizona is not one of those.  Now full-time residents of Arizona, I just sent in the cancellation notice for my Illinois insurance.  I applied for individual coverage in Arizona, and have been declined.  So now what?

The Obama administration’s Patient Protection and Affordable Care Act, AKA “Obamacare”, will be my safety net.  Although a very imperfect bill (yes, I read the whole dang thing), it will provide the option I need to secure health insurance in this long gap I am in before being eligible for Medicare.  Obamacare requires states without high risk pools to provide them to people who prove that they cannot otherwise obtain health insurance.

But…in order to be eligible for Arizona’s high risk pool, I have to be uninsured for six months.  This is a condition of entry into the plan that, frankly, I do not understand.  I prepared as well as I could for this period, by seeing my doctor and having a check-up, making sure my prescriptions are current, and having a colonoscopy.  All I need to do now is make it through six months without a major incident.  I am very scared that my situation has put me and Ron at great financial risk.

I’m writing about this for several reasons.  (1) If you have group health insurance through an employer – appreciate it.  You cannot be denied coverage, and most employers pay fifty percent or more of your actual health care costs.  (2) Your health is precious.  Any health issues become part of your history and until Obamacare is fully implemented in 2014, could result in you not being able to obtain insurance.  Finally, (3) You must consider and plan for your health insurance needs in retirement.  There are many resources available online that will clarify the situation and explain your options.

If the federal health care law is ruled as unconstitutional by the Supreme Court, I may be without my safety net for much longer than six months.  It doesn’t seem right that I can’t obtain health insurance, even though I can afford to pay for it.  Health care reform outside of Obamacare probably wouldn’t come soon enough for me.

Wish me good health!

Seven Years Ago?

Seven years ago, we launched the first chapter of our retirement dream by buying a condo in Chicago.  It was such an exciting step!  I remember our first night here after the closing.  We had two folding chairs, a picnic table and a bottle of champagne.  Sitting in the front room, we talked about how much we would enjoy Chicago and all it has to offer.  We slept on an inflatable mattress on the floor and felt like a couple of kids in their first apartment.

In 2005 we were still working in Memphis.  So for two years we rented the condo to a nice young couple from San Diego.  When they bought their own place and moved on, we decided to start furnishing the condo for our own use - vacations and long weekends.

Then Hilton was sold to The Blackstone Group in 2007 and we planned our early escape for Spring of 2008.  We sold our home in Memphis and, less than two weeks after our last day at work, Chicago became home.  The plan was always to stay here for from three to five years, and then move to somewhere in the Southwest.

Lord, I don't know how seven years passed so fast!  A chapter that was developed from a whim became reality.  And this enchanting chapter is almost over.  We are packing our belongings and readying ourselves for our new life in Prescott, Arizona. 

We have a few more weeks in Chicago, and hope to mix a little fun in with the tasks at hand.  But soon this beautiful city by the lake will become a place to visit instead of home.  We are renting our condo to someone we hope loves living here as much as we have.

I cannot express the satisfaction we have enjoyed from successfully following our hearts.  We dreamed, saved, and planned, and were fortunate to navigate the bumps in the road along the way.  The speed with which the years unwind is breathtaking.  Please take advantage of each and every day. 

Life is good.

What - Me Worry?

Yep. Life is good; incredibly good for me these days. I am thankful for all the blessings.  But... I have to admit that I still worry.

My chronic worry list:

• I hope our happiness isn’t disrupted by illness or injury.

• The stock market volatility has a direct effect on our retirement finances, and the wild fluctuations are disturbing.

• Our siblings that have personal and financial issues.

• I want my aging mother to enjoy the rest of her years in comfort and surrounded by love.

• If we can’t sell the condo in Chicago next spring, we may have to rent it.

• Keeping my Type 2 Diabetes at bay.

• How I’m going to find health insurance in Arizona.

It’s a pretty short list, but all important stuff.  Some things we can prepare for, but we don't have plans for everything and I haven’t figured out how not to worry.  I hope that meditation and prayer can help me lighten the load.

Managing a Financial Windfall

When substantial, unanticipated money comes your way it can create a once-in-a-lifetime opportunity for you to re-chart the path of your life. Depending on the amount and on your age there are a number of good choices possible, and a few pitfalls you should avoid.

When I was 27 years old and living from paycheck to paycheck, I inherited some money from my Aunt Katee. It wasn’t a huge sum, but it was enough to change my life for the better. I paid off my credit cards and car loan, put a down payment on a townhouse, and bought some furniture. Admittedly, I also splurged a little by going on a cruise with a girlfriend (my first non-family-centric vacation ever). In hindsight, I feel good about all of my decisions. What I feel best about is that I know exactly where the money went – I didn’t just piss it away little by little on frivolous purchases.

Looking back, I would give this advice to young adults who come into a financial windfall:

PAY OFF TOXIC DEBT - NOW
First, pay off any credit cards, or high interest loans like car loans. Resolve not to accrue any more toxic debt if it can be avoided. Put your credit cards away somewhere safe, and use them sparingly and wisely. Cancel department store cards and cut them up.

WRITE DOWN YOUR LIFE GOALS
Spend some time thinking about what you want out of life. Money can’t buy love or happiness, but it can help you attain other goals. Do you want to own a home, start a business, live abroad, share your life with someone, and/or have a family? Be sure decisions you make with your money support your life goals. Understand that your goals may change over time. This is fine; but keep thinking and talking about them.

CREATE A BUDGET
Do you know where your money goes today? Get a handle on it, before you start spending your newly-acquired funds. Determine whether you want or need to revise your budget going forward.

TAKE TIME TO MAKE DECISIONS
You may get plenty of unsolicited advice (and requests) from family and friends. Don’t make major decisions too quickly. This is your money and your life at stake. The money can sit in the bank for a while you think it over and get advice.

INVEST IN YOUR EDUCATION
Nothing will enhance your quality of life long-term like a good education. If you don’t already have your college degree – invest some money toward that goal. There is nothing that can replace having a positive college experience, or that credential on your resume. Aside from what you learn, you will meet smart people who will become influential friends for life, and part of your supportive network. Do not miss this opportunity.

PROTECT YOURSELF
Be sure you are properly insured. You need health insurance, comprehensive automobile and property insurance (including liability coverage). If you’ve been relying on your parents for coverage, it’s time to make the leap to independence. Open an Individual Retirement Account (IRA). You may think it’s too early to plan for retirement, but it’s not.

RETAIN SOME CASH

No matter what you decide to do, you will want to retain a portion of your windfall in liquid cash reserves. Unexpected things happen, and sometimes you need immediate cash that is not tied up in investments.

INVEST WISELY

You will need some advice if you have money to invest. There are a confusing variety of options available. Ask an experienced, trusted friend or relative to recommend a financial advisor.

INDULGE YOURSELF A LITTLE

It’s OK to give yourself a little treat in celebration, but it should be something memorable and lasting – not a budget-busting trip to the mall. Set an amount aside for your planned indulgence and stick with it. Your long-term goals are more important.

A windfall can have a life-changing impact if properly managed. This is your money and your life at stake. Make good decisions and reap a lifetime of rewards.

3 Years into Retirement

I realized the other day that we had passed our 3 year anniversary of retirement from Hilton. It’s amazing how quickly the time has passed, and how much we have done. Time to look briefly look back and share some thoughts.

Immediately after our last day at work, it felt like a huge load had been lifted from our shoulders. It was a very hectic time, with the Memphis house already sold and our preparations to vacate it and move to Chicago (just 2 weeks after our last workday). But we had already achieved a new sense of peace and calm.

As new Chicago residents, we settled into an urban lifestyle in downsized living space – from a 3200 sq ft home to a 1500 sq ft condo (+ a 500 sq ft Man Cave in the basement). Our one remaining car was used infrequently, as we walked everywhere we could, or used public transportation for more distant jaunts. We started losing weight gained over time from stress and being sedentary. Working out is part of our routine, and golf is a new passion.

Of course, just as we began to enjoy our life of leisure, disaster struck the stock market. Our plan was conservative and rock solid, but the recession shook the foundation we had laid. We saw our net worth (temporarily) plummet. Fortunately, we had some cash and some guaranteed income from deferred compensation and an annuity we had purchased at the urging of our financial advisor. We got through the recession OK, and are now back on plan. It was a bit scary for a while.

The other unexpected development was finding our next home in Prescott, Arizona last year. We hadn’t planned to buy until 2012 or 2013, but… Talking Rock Ranch is the perfect community for us, and we love the ranch cottage we found there, and are enjoying new friendships with our neighbors. Due to the real estate disaster in Arizona, we bought our beautiful home from a bank, at a ridiculous discount. We hope to make our full time transition to Arizona next spring. (Anyone in the market for a condo in Chicago?)

We’ve learned a few things as retirement newbies, and had some surprises:

• Our long-tended corporate identities were easily shed. They were unceremoniously left on the floor like discarded snake skins.

• As well as you plan, some bumps in the road will catch you by surprise. Build as much flexibility into your plans as possible.
• After planning for many years, the transition to execution of the plan (living off your savings and investments) is a scary phase and requires a leap of faith.

• Your health is your most precious asset. In order to enjoy retirement, you must be fit and able. It takes a lot of energy to keep up with our retired friends.

Retiring early is the best thing we could ever have done. We enjoy every day, and are looking forward to what the future holds.

Loss and the Gift of Life

It’s great to have plans. I am a strong advocate for all kinds of planning, including financial/budgeting, pre-purchased tickets for sports and entertainment events, advance reservations for travel, a well-annotated schedule/calendar, and a simple to-do list. As you know from reading my prior blog entries, I am a big believer in achieving lifestyle dreams via retirement planning. Now here comes (as I like to call it) “THE BIG BUT”.

Having plans does not always protect you from a turn of events or unexpected misfortune. We can’t live our lives anticipating disaster, but sometimes we find ourselves having to face it and figure out how to move through it. Our plans may have to be modified on the fly.

We all face losses during our lives. The circle of life assures that people we love will depart this plane of existence. We could be forced to deal with the loss of a job or a home. Our health will be threatened when we face injury or serious illness. Relationships sometimes fail, leaving a hole in our psyche. Burglars may steal our belongings. Mean and greedy people take our innocence. Losses big and small test our resilience.

Living life requires a balance of planning and joyous abandon. Love your family and friends vociferously and generously. This year it may be prudent to put off buying that new car you desire, but next year you might go on that European cruise that’s been a dream for so long. We can’t PLAN so relentlessly that we never DO. Don’t put off living, because none of us know how long we will have this gift of life.

Over the past few weeks, two long-time friends passed away from cancer. Someone close to me has lost a home. Financial woes threaten the livelihood of another. It takes courage to navigate life and flexibility to forge new paths. Count your blessings and, as Plato wrote, “Be kind, for everyone you meet is fighting a hard battle.”

Runaway Boomer is 2

This Runaway Boomer posting today is my 104th. You know what that means – a 2 year milestone. I have managed to write once a week, every week for two years. Somehow it has become important to me to consistently meet my self-imposed Thursday morning deadline.

In the beginning, at the request of friends, I wrote a number of posts about the steps we used to plan for our early retirement. Then I expressed more about what our life has been like after leaving our corporate jobs, including enjoying our homes in Chicago and Prescott, travel, and our newfound love of golf. The biggest surprises for me have been a few odd posts that have sort of written themselves – like my (bad) poetry. There were words and phrases in my head that wouldn’t be ignored, and just had to come out on paper. One poem I swear I composed in my sleep – I just had to get up and write it down before it was forgotten.

Friends; I sincerely thank all of you who have read my blog and reached out to me. Your comments and encouragement inspire me to act on my desire to write, and continue to “spill my guts”. Some have told me they are living vicariously through my experiences. I hope you are actually dreaming and making your own plans for personal freedom. The first big step toward living your dream is being able to visualize it. I wish that for you all.

Peace.

What "Moves" Me

I’ve read several stories about people relocating in retirement to their dream location – only to move back “home” within a year or two. What some find is that starting over in a new town is challenging. They miss their friends and their comfortable routines…favorite restaurants, stores they recognize, the place they built over time in the familiar community.

Many of us have dreams about where we would live if it weren’t for the constraints of jobs, family, or money. Dreams are great; in fact I believe they are important to creating a happy life. But introspection and planning are important too. And we should always leave a little room for serendipity.

I’m one of those odd birds who like change. I grew up in Maryland and went to college and started my career in the Chicago area. Over the years, Hilton moved me to Dallas (where Ron and I met), to Las Vegas, and then to Memphis. When we retired in 2008, we moved to Chicago. In the spring of 2010 we bought a house in Prescott, AZ. One of our friends recently referred to us as “rolling stones”. We’ve loved the adventures moving has brought to our lives. In each location, we reveled in exploring, meeting people, establishing our routines, and making a place to live into a home.

When we have moved in the past, the most difficult changes to face were dismantling our home, and leaving friends behind. That’s when you feel keenly what is really important. But the reality is that we have confidence that we can make a home wherever we choose. Our families are spread around the country, and so are our friends. Reunions are sweet, special events.

What moves me these days is the continued joy we get in becoming intimate with our adopted city of Chicago, the awe of exploring the natural wonders that the Prescott area has to offer, and interacting with all of the people close to us.

It was particularly moving and joyful to ring in the New Year at Talking Rock Ranch with our friends in Prescott. What a pleasure to look around the room and see all the happy faces, to accept greetings, hugs and kisses, and to wriggle around the dance floor in a celebration of life. Hello 2011! I think YOU ROCK!

Cash Flow Considerations

We had our quarterly call with our financial advisor this week, and the main topic of discussion was cash flow planning.  Obviously, the stock market has had its issues the last two years, so our earnings from investments have not been as good as hoped.  Some of our future retirement income will come from my Hilton pension and Social Security – but we are too young to draw from either of those yet.  Our immediately available cash is running low, and we need a strategy for replenishment.

This is an interesting planning challenge. Where will your retirement income come from, and will the source change over time? Since we stopped working before the normal retirement age, our income sources will definitely change at several stages and age points. Some sources will run dry, and others will kick in.

For the first two and a half years, we have used cash for our living expenses. Ron had the foresight not to tie up all our cash in long-term investments. Until now, any profit from investments has been reinvested and absolutely no principle has been converted to cash. Our financial advisor’s goal is for us not to touch principle until we are in our 70’s. For our needs in 2011, we are going to take some earnings from our tax-free municipal bond fund, and we’ll suspend reinvesting profit in that fund for now (starting in January).

One thing we discussed with our advisor was the optimum age for us to start claiming my Hilton pension and our Social Security. The earlier you start, the lower your monthly payout. But the longer you wait, the greater the risk that you won’t live long enough to collect what you paid into the system all those working years! Guessing your own life expectancy (based on your personal health, your lifestyle, and family history) is a weird exercise, but necessary for planning purposes.

There are tax implications to decisions about investing and retirement income. If you are not a scholar of the tax code, consider consulting with a tax planning professional. In some cases, the wrong decision can have big impact on your tax liability (e.g. cashing in an IRA before you are 59 and ½). You will also want to keep track of what changes politicians are considering, as they could adversely affect the health of your retirement fund. When/if the rules change, you may need to make adjustments in your money management plan.

Are you working on your retirement strategy? Planning for your retirement involves a lot more than building up your savings account. Lay the groundwork now with some solid analysis and decision-making to support your needs at all of the later stages of your life.

Long Term Outlook

(Please be aware that the following information is part professional opinion of our financial advisor, and part decisions based on our personal financial situation. In no way should this be considered expert advice on which to base your own financial decisions.)

We just had a quarterly call with our financial advisor (I’ll refer to him as J.S.). As always, we look at our current situation, the performance of our investments, our future needs, and the outlook of the economy. I have to say that this session wasn’t as upbeat as some we have had, although we still have confidence in our plan.

Many indicators have bounced around in 2010, but J.S. anticipates that we may have a little positive “pop” at the end of the year. Expected tax increases (or the lapsing of the Bush tax break) will likely cause tax-free municipal bonds to become more popular. Investing in municipal bonds carries some risk – municipalities could conceivably default on their bonds. But the yield from our municipal bond investments is running at about 6%, compared to about 1% for safer U.S. Treasury Bonds. It’s a calculated risk.

One possibility is that the U.S. economy is in a prolonged “sideways” situation that could cause the market to be flat for from 5 to 10 years. J.S. compared the stall in the U.S. economy to what happened to Japan’s economy after their boom years in the 70’s and 80’s. We are about 10 years behind (remember our boom in the 80’s and 90’s?). There is still money to be made, if investments are targeted into growth areas. The silver lining is that this climate is keeping inflation rates low (between 1-2%, when we projected 3-3.5% in our model). We have to hope we don’t slip into a deflationary period, resulting in a double-dip recession, which would be bad for the economy.

When we retired, we rolled over our 401K’s into an annuity, back when their guaranteed return rates were really good. ING doesn’t even offer the plan we have any more, and it’s producing well for us. We have to thank J.S. for that investment. We can’t tap into that fund until I am at least 59 and ½ (about 5 years from now).

After buying the house in Prescott, we will be dual home owners for from one and a half to two years, with increased expenses. We’ve asked J.S. to help us look at our cash flow (income) needs between 2011 and when Social Security kicks in. We sent him our Social Security Statements and the payout info from my Hilton Pension. He’s hoping to find a way to keep our investment principle intact until we are in our 70’s. (As an aside, read your Social Security Statement. This is in black and white, “In 2016 we will begin paying more in benefits than we collect in taxes. Without changes, by 2037 the Social Security Trust Fund will be exhausted and there will be enough money to pay only about 76 cents for each dollar of scheduled benefits.” Depending on your age, you may need to consider this looming issue in your financial plans.)

It’s still really important to plan for your financial future, and we believe it helps if you have a knowledgeable and trusted financial advisor. Ours has come up with some ideas and plans that we might not have unearthed ourselves.

What have you done on your plan lately?

Project Management Drill

Now that we’ve gone and purchased another home, we have a lot of planning and re-planning to do. Our original retirement blueprint had us selling the condo and buying a new home in 2013. Now we are going to own 2 homes for about 2 years, so we have substantially jostled the financial apple cart. It’s all manageable – just a matter of timing and adjusting cash flow – but our decision created some work for Ron and our financial advisor.

My head is spinning with the logistics of setting up a new household without dismantling our current one. But it’s not unlike what we did when we purchased the condo while still owning the home in Memphis. After we closed in Chicago, we “camped out” here for a week. We slept on an air mattress, used paper plates and plastic utensils, and had a folding table and chairs. It was almost like setting up house for the first time after college, except this time we had money! Much of the furniture we had in Memphis wouldn’t work for Chicago, so we bought a lot of new things to establish our smaller, urban home.

The Prescott situation is different in some ways. We’ll want to use quite a few of our Chicago belongings in Arizona. In my mind, I’m already shopping and decorating, and trying to figure out what our “camping out” period in Prescott will entail over the coming months. Here are some of the things clanging around noisily in my head:

• We’ll need a new sofa, because the one in Chicago is too small for the great room in Prescott. Besides, we need something to sit on when we’re there.
• Although we’ll sleep on an air mattress at first, we need to shop for a bed for the master bedroom. Our current master bedroom furniture will eventually be the guest room suite.
• A few essentials need to be shipped ahead of us, including the air mattress and bedding.
• I’m making shopping lists for things like towels, dishes, utensils, glasses, cleaning materials, etc.
• Some clothes will travel with us and stay in Prescott, streamlining packing for future trips.
• I must call and put the utilities in our names.
• We need cell phones that work there (AT&T doesn’t have coverage on the fringes of Prescott).
• Our car (we only have one) will relocate to Prescott, to eliminate the expense of parking in Chicago. Now we need a plan for getting from PHX Sky Harbor Airport to Prescott when we visit…

It goes on and on. I am equipped with a brand new spiral-bound notebook, a fresh yellow highlighter, and project management skills. Who needs Microsoft Project?!

Outline Next Chapter: Check

We just signed a contract on a house in Prescott, Arizona! This is a big first step in our plan to spend the next chapter of our lives in the high desert of the western U.S. We found this home during our March visit, fell in love with it and the community, and have been working on it since. Last night we got word that our contract offer had been accepted. We’ll close on May 12.

But wait; we’ll still be full time residents of Chicago for about two years. That will give us time to do what we want to do in the city, but now we can be snowbirds and prepare the house for future full time occupancy.

Prescott is 100 miles north (and slightly west) of Phoenix. It’s an hour from Flagstaff or Sedona, about two hours from the Grand Canyon, and three and a half from Las Vegas. There are 40,000+ residents.  It’s high desert, so there are four seasons, although the extremes are much milder than in Phoenix or Chicago. Our "Ranch Cottage" is in a western-style planned community called Talking Rock Ranch (so named for the Indian petroglyphs on the grounds). Talking Rock features a club house with a restaurant and fitness center, a pool, hiking trails, and a fantastic golf course. The back of our house faces the second tee, and mountains in the distance. If you’re interested, there is more info here: http://www.talkingrockranch.com/.

We couldn’t be more excited! And now, a few photos... (1) Front of cottage, (2) Kitchen from living room, (3) Back of cottage from golf course, and (4) Clubhouse and mountains.

Day of (Budget) Reckoning

With the start of 2010, we tackled the task of analyzing our 2009 expenses. I think we were both a little concerned about how well we had stayed within our budget, since we weren’t disciplined enough to track expenses month by month. I’m sure we will address this monthly from now on, because it took Ron several days to work on the whole year at once. Some electronic records are unspecific, and as time goes by, the memory fades. But Ron was tenacious, digging through all the details a month at a time, categorizing expenses into our pre-defined categories.

Before I tell you about the results, I should explain that for the purpose of modeling and analysis, we actually have four budgets with different levels of discretionary spending. Our Extravagant budget allows a generous level of discretionary spending, especially in the Entertainment and Travel categories. On the other extreme of the scale, the Low budget cuts discretionary expenses to the bare minimum. The Low budget is about 40% below Extravagant. In between, are High and Average budgets. These variations allow us to employ the appropriate annual budget based on economic conditions and/or other external factors.

We closed 2009 with our expenses about 3% under the High budget. We are very satisfied with this result, because we admit that we lived large last year while acclimating to retired life. Our expectation was that we would be closer to the Extravagant level. At the expense category level, we had just a few anomalies. Our Food expenses were slightly above budget, because we cooked at home more (better for our diet and keeping our Dining expenses well within budget). Housing ran above budget due to the cost of refinancing our mortgage last year, and monthly parking jumped from $180 to $225. (Ongoing, our mortgage payment drops $200 per month.) Transportation expenses were much lower than budgeted, as we replaced most auto usage with public transportation. Utilities came in about 50% under budget, probably because we had a really mild summer and we hardly had to use air conditioning at all. I am proud that I stayed well within my Clothing budget. The truth is that I am now happy to live in t-shirts or sweaters and jeans 90% of the time.

FYI, the big Mediterranean cruise was covered under our Capital budget – not included in expenses.

This year, we’ll do our analysis monthly, to give us a chance to make budget and/or spending adjustments throughout the year. It really gives us confidence in our retirement plans to have this data and analysis to validate our long term financials.

Now Do It

There is an interesting challenge in the process of planning for retirement. At some point, you make the transition to retirement and it becomes time to shift your focus from building your plan to executing it! After so many years of planning and saving, suddenly it’s time to do what we prepared for and start spending our savings and retirement income according to plan. I know this seems obvious, but it’s not as easy as it sounds. We found this to be a surprisingly difficult change to make.

The transition period, from working life to retired life, is a time of tumultuous change. You close one chapter of your life and move into unfamiliar territory. Euphoria can be interrupted by occasional panic. Remember, you have a carefully crafted plan. You know what you want and have the means to enjoy life. Now do it.

Shortly after we retired in May of 2008, the financial crisis hit. The bottom dropped out of the real estate market, the stock market plummeted, and unemployment rose. Oops, we already were executing our plan and couldn’t turn back. Fortunately, we successfully sold our home, cashed the severance checks, and moved on. The situation required a few adjustments, but the fundamental plan was not affected.

A little bit of a leap of faith is required. Trust your plan. Let me give you an example. We budgeted for a celebratory retirement kickoff trip - the vacation of a lifetime. The financial climate caused us to postpone making specific plans for over a year. We wondered whether it would be injudicious to spend cash on luxury travel during these uncertain times. Finally, the lure of heavily discounted travel deals convinced us to make reservations for flights, hotels, and a cruise. Why? Life can be uncertain in so many ways. Today, it’s financial concerns. Tomorrow, it could be health problems. Next year it could be family issues. But right now, we have the money, we crave the experience, and it shouldn’t wait any longer. We’re doing it.

There are things I’ve always wanted to do for which I couldn’t (or didn’t) make the time. Between my career, maintenance of a house and yard, and family obligations, I found little time for my own leisure. I wanted to paint, make jewelry, write, enjoy my friends, exercise, and just have fun! The excuses I had for not doing those things has disappeared.

I’m taking my own advice, “Now Do It”. Just this week, I designed and made a bracelet, spent productive hours exercising in the Man Cave, wrote several blogs, and am looking forward to meeting new friends for dinner Friday night. I’ve moved on from planning to doing, and it feels great.

Expect the Unexpected

No matter how comprehensive a plan you have and how hard you have tried to anticipate life’s twists and turn, unexpected events will undoubtedly create some unwanted excitement from time to time. Don’t panic. Your retirement plan is meant to be modified as necessary along the way. If you build in a little bit of a buffer, hopefully fate won’t deal a blow that knocks you entirely off course.

Even if you have factored inflation into your budget – some expenses may be affected by more than the Consumer Price Index. Our condominium assessment has increased 26% over the past 18 months. In addition, we have had 4 special assessments levied – totaling several thousand dollars. Parking in our neighboring city school lot has increased 25% during the same period. During our search for individual health care, we have had to raise our budget to obtain the coverage we need. Fortunately, some other expenses are coming in lower than budgeted (i.e. transportation, clothes, and dry cleaning). And we were able to drive down our condo and auto insurance substantially with some active comparison shopping. Keep looking at your actual expenses and make whatever adjustments and decisions need to be made to keep you on track.

Other outside influences will inevitably come to bear on your life. You might have grown children that ask for financial assistance, or parents that need more support than expected. Your ability to respond the same way you did when you had a full time job could be constrained. Where you threw money at trouble in the past, you may now need to be more creative about how to help the ones you love. You should have more time – even if you have less money. Time can often be much more valuable.

To minimize your exposure to unpleasant surprises, be sure that you understand the specific attributes of the locale in which you plan to retire. How high are property and sales taxes? Is there a state-subsidized health plan for which you would be eligible? Does your city or state have budget problems that will filter down to you as a resident? What services or special programs are available to seniors? Is there convenient and affordable public transportation? Your decision about where to retire could be influenced by these factors or others.

Finally, good health is precious and sometimes tenuous. Invest in taking care of your body. We only get one vessel in which to travel through this life. If you abuse it, it will show wear and tear, and require expensive maintenance, additives, and parts replacement. Put down that sugar-laden can of soda, drink a big glass of water, and take a walk around the block. Get plenty of sleep and be kind, but stern, with yourself. I’m taking my own advice now – but I wish I had done better fifteen years ago.

You don’t need a crystal ball to plan effectively. But do think beyond the day-to-day and expect the unexpected.