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Creating A Recession Hardened Retirement: You Know Another Will Come

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We love to run our numbers through Monte Carlo retirement calculators because nothing causes a retirement bummer like money trouble. Who doesn’t like the feeling of using historical investment cycles to validate our retirement plans? But another historically repeating economic cycle is often forgotten, especially when things are looking so good. It’s the dreaded “R” word- Recession. Chances are that we will have the displeasure of going through some recessionary periods during our retirement. They come in different flavors and can strain both our portfolio and well-being regardless of what the calculator results said. It’s a common retiree fear. That’s why I have thought lately about what it takes to have a recession hardened retirement. I believe it’s impossible to be totally recession-proof because anything can happen. But hardening our retirement to resist a recession’s damaging effects to our overall retirement into the future is worthy of looking at.     

Creating A Recession Hardened Retirement: You Know Another Will Come

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What We Can Do For A Recession Hardened Retirement

There were plenty of lessons learned after the Great Recession that is officially listed as lasting 1.5 years from December 2007 to June 2009. All I can say about that is the Great Recession’s official end was nowhere near the breakeven point for our portfolios, the job market, or anything else.

A quick look at Dow Jones Industrial numbers shows it at 13264.82 on December 1, 2007 before going into an extended free-fall and didn’t get close to that number again until December 1, 2012 at 13101.14.

The S&P 500 in December 2007 was 1468.36 and didn’t approach that number again until January 2013 with 1426.18.

Stock Market recovery took 5 years before reaching breakeven. That’s 3.5 years after the recession’s official end of June 2009.

List of recent history’s recessions and their official lengths:

By looking at our history of other recessions we also get a quick glance at recession frequency. I’m sure if we took a deep dive into investment loss to recovery, it took much longer to reach portfolio breakeven than the recorded official recession timeframes.

  • Roosevelt Recession 13 months: (May 1937 – June 1938)
  • Union Recession 9 months: (February 1945 – October 1945)
  • Post-War Recession 11 months: (November 1948 – October 1949)
  • Post-Korean War Recession 10 months: (July 1953 – May 1954)
  • Eisenhower Recession 8 months: (August 1957 – April 1958)
  • Rolling Adjustment Recession 10 months: (April 1960 – February 1961)
  • Nixon Recession 11 months: (December 1969 – November 1970)
  • Oil Crisis Recession 16 months: (November 1973 – March 1975)
  • Energy Crisis Recession 6 months: (January 1980 – July 1980)
  • Iran/Energy Crisis Recession 16 months: (July 1981 – November 1982)
  • Gulf War Recession 8 months: (July 1990 – March 1991)
  • 9/11 – Dotcom Recession 8 months: (March 2001 – November 2001)

These lessons play a part in a recession hardening retirement strategy.

Lesson #1- Investments can fall for a long time and take even longer to recover. When it comes to retirement, portfolio recovery is what really matters to retirees.

Lesson #2- Stay invested no matter how bad things look, and by March 2009 of the Great Recession it looked really bad. Markets do eventually recover and those who fought the urge to run eventually ended up whole.

Lesson #3- When income and portfolios get slammed, debt still needs to be paid. Thinking you can sell leveraged assets during a recession to cover your keister is near impossible when nobody is buying anything that isn’t extremely discounted.

Lesson #4- Investment diversification reduces risk but won’t eliminate risk. Every asset class – stocks, bonds, housing and commodities all took massive hits. But not all at the same severity.

Lesson #5- Experts really don’t know everything. Most dropped the ball in calling the Great Recession. Recessions seem to come from some financially linked dirty corner that isn’t regarded as being economically dangerous until it’s too late.

Recession Hardened Retirement- defense wins championships

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Preparing For The Best WHEN The Worst Happens

Defense Wins Championships

Everyone loves to score. Having investments gain in value gets all the attention and makes us cheer. But a recession can also score big numbers against us if we don’t have a good defense. Concentrating some of our resources on defense may lower what we score during good offensive runs, but it prevents the opposition, in this case a recession, from out scoring us. The goal is to win.

The Need For Cash

Having a portfolio full of cash isn’t going to earn enough to keep up with inflation. But having enough cash to get through a recession and spare us from selling too many stocks or bonds at a big loss is a good defensive move. If Social Security and other guaranteed income like a pension or annuity pays all or most essential retirement living expenses, then less cash is needed for a recession hardened retirement. For retired people like myself with several years to go before Social Security, the portfolio carries the entire load. Having enough cash to play portfolio defense is a hardening move and is also an important element of a retirement bucket strategy.

How much cash to hold depends on your portfolio size, the amount of your retirement budget that depends on the portfolio, your age, and your risk tolerance guided investment allocations. You do not want to over play your cash defense. You still have to score points by investing to win the long game. I recently increased my portfolio cash holdings for various reasons. I took it to an amount that still allowed overall portfolio performance to meet my retirement funding needs. As it turns out, it also recession hardened my retirement portfolio. Always run your numbers through a good retirement calculator. Adjust your cash holdings for the right balance of defense and offence to meet your long-term and recession hardening strategy.  

The Need For Investment Diversification

While stocks score all the points when they have opportunities to score, not all stocks are the same nor move in the same lockstep. Broad diversification in stock asset classes across different industry sectors reduces risk. Bonds also play a huge role for portfolio diversification. Not only for their fixed income (although usually unable to outpace inflation), but they offer lower volatility than stocks. Bonds were still hit during the Great Recession but not as severely as stocks. According to the Allegiant: Minimizing Portfolio Losses: Lessons of Diversification July 2017 study, diversified stock and bond portfolios recovered faster after the Great Recession than an all stock portfolio. Since having a diversified portfolio should recover faster it reduces the amount of portfolio defensive cash needed to wait out post recession portfolio recovery in our recession hardened retirement plan.

Great Recession Diversified Portfolio Recovery Details

Stocks/Bonds Maximum Loss Time to Breakeven
20/80 9% 22 months
40/60 23% 25 months
60/40 35% 37 months
80/20 46% 42 months
100% Stock 55% 59 months
Stick To Your Investment Strategy and Stay Invested

One of the biggest investment risks we face during a recession is behavioral risk. Everyone behaves differently in a crisis. A recessionary financial free-fall certainly triggers crisis behavior. Trust in your plan and stick with it. Don’t allow your emotions about current events dump it. Selling low is a sure way to feel the pain of a recession for years to come.

Whatever your plan’s stocks/bonds/cash asset allocation was set for, make sure to rebalance on a regular basis. During the Great Recession, stock vs bond allocations required rebalancing. This not only maintained our plan’s allocation positions but we benefited for the long run by moving our higher flying bond assets into the depressed price stock market.

Avoid Debt and That Other Debt, Service Contracts

In a booming economy when everything looks so good it’s easy, even for retirees, to take on easy money. Taking a defensive mindset thinks first that borrowing money that looks affordable now may not be if a recession hits. Debt limits our budgeting options and can be difficult to clear. It isn’t just the standard new car loans or charging a vacation that should be avoided. But also those 2 year interest free home window replacement, kitchen update, or flooring deals you want to go with.

There’s also those internet, cellular, and cable/satellite TV contracts that will still be binding if a recession hits. It’s ok to grab these deals, but only if you have the cash reserves to clear them or could have paid cash for whatever it is you feel you need in the first place. It’s easier on our portfolio and our mental state to get through a recession when all we have to concentrate on is our day-to-day living costs instead of paying debts from yesterday.

Create A Rescission Hardened Retirement Plan during the Good Times

The time to rebalance to get the diversification and cash allocation to fulfill our recession hardened retirement plan is before the feces hits the fan. Experts won’t tell you with any advance when a recession is coming. Take profits and make your portfolio rebalance before you need to. Once the experts admit we are headed into, or already in a recession it will probably be too late.

Stacking An Offensive Bench

Anything can happen and recessions are seldom the same. Since their severity can be anything from mild to “OMG” the worst in history, having some additional offensive plays is something to consider. If our defense begins to struggle against a recession onslaught we can do things to add a little more scoring power to our offence.

Additional Income Streams

Picking up extra income through a retirement job should be on the table. As we learned in the Great Recession, when companies were dumping employees left and right, finding a job was difficult. It took great time and effort. It’s important to maintain our professional network and connections. I landed my encore career during the Great Recession’s recovery through LinkedIn. Staying in contact and active within our professional/social circle can be a huge advantage. We should also gain and maintain payable skills we wish to use. Another option is starting a side hustle working for ourselves. Starting a small business or contracting is another way to make and offensive move, from Lyft/Uber to handy-person services. Passive income can also come from renting out a room in our home.

Make Adjustments To Our Cost Of Living

Most retirees I know have already cut waste from their lifestyle. However, there is always places to scale back to reduce our living costs to better match our recessionary income needs. Choosing to make temporary budget cuts to our hobbies and other perks of retirement should be on our offensive bench. We can always add them back in once a recession and financial recovery is complete.

 

Everything here are things retirees should consider doing regardless if there’s a recession threat or not. In using a recession as a way to visualize and test for the worst economic situation that will happen during our retirements, we can see how our retirement plan holds up. It’s all about creating a retirement plan that we can be confident will last as long as we do.

Pension Eligible And Still Working? Maybe You Shouldn’t

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If you’re fortunate enough to be working somewhere that offers or offered pension benefits then congratulations are in order. Very few in today’s world have that level of retirement benefit anymore. But once you are pension eligible, is staying on the job to work longer instead of retiring the best way to go? Many times the answer is NO.

Pension Eligible And Still Working? Maybe You Shouldn’t

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Things To Consider Once Becoming Pension Eligible

Whether you have a defined contribution plan or a defined benefit plan, it will represent a big part of your retirement funding. Those who have enough in pension and retirement savings to retire usually do retire. But if you don’t and have decided to stay working, wouldn’t you want to maximize your pension benefit and future retirement funding?

Post Pension Eligibility Growth

You may be surprised at how little your pension benefit grows going forward. Once you’ve reached your pension eligibility milestone and get the big bounce, the additional years of service may offer very little if any growth. The first step is checking with your company’s pension administrator or HR benefits representative to find out what your pension estimate is. Then find out how much it increases if you stay on the job.

For instance, where I worked, you were fully pension eligible with 30 years of service regardless of your age. If that happened before reaching age 55, then your pension would grow 3% a year until age 55. But after that it was based only on salary increases and your highest consecutive 5 year salary averages. It took big raises to move that needle.

Frozen And Going Nowhere Fast

For many, this little retirement benefit investigation starts right away with bad news. You’re reminded that your pension was frozen by your employer. Meaning that it won’t grow at all or may grow far-far less than their pre-freeze pension rules over the time we stay. That pension benefit then becomes negatively affected by inflation before we even collect a single penny.

 

Got Retirement Benefits? Don’t let them sit, let them rip!

Once we reach pension eligibility, whether it is frozen or not, decide if the rate of growth is too little to make it worth staying. The pension benefit growth rate is nothing we have control over. Why not pull it out and put our retirement benefit to work for us? Maybe pulling your cookies out of their cookie jar and rolling them into your own IRA cookie jar to control investment direction or beginning your pension annuity payment now is the better retirement strategy. Don’t underestimate the power of working and collecting a pension check to invest or a lump sum to rollover to supercharge your retirement savings. If you are going to work anyway, this strategy of changing the scenery is all about giving yourself the chance to grow your retirement portfolio.

 

Why Are You Still Working There Instead Of Taking Your Pension And Running?

Need To Work Longer

There are many reasons why someone who has a pension benefit needs to work longer. From simply wanting to still work to needing more time to meet retirement financial targets. But nothing says you have to stay at your same job and company to meet your goals. This is a great time to pursue opportunities in the same industry with a different company or go in a new direction and do something completely different. The best time to find a great job is when you have one. Consider looking and applying for outside opportunities while on your job. See what’s available, choose the perfect position, and understand your options. Then once hired, announce your retirement and apply for your pension and other retirement benefits.

Love What You Do

Perhaps you stay because you love what you are doing. Do you think that you would love doing it just as much somewhere else? Especially when knowing that you have taken control of your locked up pension and have the chance to better grow your retirement portfolio?

Coworker Friends

Is a big reason you are there due to friends you have on the job? Nothing says you can’t stay in contact. In fact, your being at a different company will add a whole new dimension to your conversations. Taking your pension and running will also allow you to easily expand your social circle and professional network.

Comfortable

It can be very comfortable working a job you know from end to end. But be honest with yourself. Do you sometimes feel like you are stagnate? Starting a new job will be exciting and carry a bunch of optimism about your future. True, it will also bring some discomfort from temporary stress until you learn the ropes. The key word here is temporary. A little stress early on and before you know it your comfort will return. Start thinking about the possibility of personal growth through a new job.

Lucky Are The Few With Retirement Health Insurance Benefits

If you have retirement health benefits, you are open to look for a lot more opportunities since health care won’t be a target factor. If the position offers employee health insurance benefits, you can explain that you have coverage. Then try to negotiate your salary up because you won’t need theirs. Being able to accept any position whether they have health insurance benefits or not is a huge advantage. Obviously if you don’t have retirement health benefits, limit your opportunity search to companies that offer employee health coverage. If starting your own business, expanding an existing side hustle, or choosing an opportunity without benefits, check for all available health insurance options. Consider the cost of health care in your decision.

Pension Eligible – Should you stay or should you go?

There’s nothing wrong with being pension eligible and still working for your same company. But maybe you should really consider taking your retirement strategy to the next level by retiring and moving on. This strategy isn’t theory. I was in a pension plan that kept changing the rules, converted many employees from a defined benefit to a defined contribution plan, denied others completely, and then finally froze it. I retired a young 51 and have enjoyed and benefited from my retirement gigs and a short but sweet encore career. While I was doing that, I used what pension cookies were left to me to grow in my cookie jar and executed a strategy to increase my net worth.

If you are pension eligible where you work, take a step back from the same-old same-old and see if you could be doing something better for your eventual retirement. Then do some research and check available opportunities. If you need it, even if for nothing more than a confidence boost, consult with a CFP for some financial advice. Even if you decide to stay after doing all of that, then you will at least have the knowledge about your pension going forward. That way you can proactively close any discovered pension growth deficiency by setting aside additional savings on your end.

Unusual Ways To Increase Your Savings Before Retirement

Funding Retirement

Planning for retirement will involve a lot of hard work. It is essential that you make sure you have as much money as possible in your account when you stop working for a living. While there are lots of commonly talked about retirement and saving schemes that you can use, some people like to think outside of the box, and so there are some unusual ideas on this page that you might want to consider. Take a moment to read the information below and see if you can use any of it to your advantage. Hopefully, these suggestions will help some readers to get more cash in their accounts and raise their quality of life after retirement.

Unusual Ways To Increase Your Savings Before Retirement

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Sell your collectibles

 

Lots of people spend their entire lives collecting original toys, and other items they claim will increase in value. If you made the right moves during your working life, there is a chance that you might have lots of collectibles you could sell before retirement to raise some extra cash. That could give you extra money or help to clear your debts. Sure, that strategy means you’ll have to part with the items you’ve spent years buying. However, you almost certainly justified those purchases by claiming they were investments. So, now is the best time to work out the value of all those items and place them in niche auctions to ensure you get the best prices possible.

You may be surprised about what you have that is considered collectible. Many high quality used items from your past may have a bigger resale value than you think. Some quick online research may surprise you. I found in my closet my old and forgotten 1986 Air Jordan sneakers that I used to play basketball that I had stored in their original box. I discovered there was a collector market for them and eBay bidding returned a tidy $1084. Look around, you never know what you may have.

 

Seek any compensation

 

There are various limits on how much time you have to seek compensation following an accident or injury. Take the time to think back to your working life during the last decade. Did you have to take time off work or end up in the hospital due to the negligence of your employers? If so, now is the best time to meet with this lawyer or other industry experts to determine whether or not you still have a case. In most instances, it doesn’t matter if you still work for the company or not. The legal professionals you consult will hear your story and let you know if they can assist.

If you have experienced loss due to another’s negligence, then don’t allow some overall sense of loyalty or disdain of taking legal action hinder your right to be compensated. I know that I “took it for the team” on a couple of occasions during my long career. I quietly toed the company line without compensation and now have to  live with those injuries from long ago.

 

Unusual Ways To Increase Your Savings Before Retirement

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Research your family history

 

Many people start researching their family history when they retire. However, you need to do that for financial reasons, and this section will explain the ins and outs. There are thousands of people in the US entitled to benefit from their deceased relative’s estates. However, most of those folks never make claims in court for the money because they are unaware it exists. Maybe you discover you had a wealthy uncle who didn’t have any children? That could mean there is money in the pot for which you are entitled if you state your claim in court. Many times, a simple search for State’s unclaimed property will result in finding family names, both living and passed. It’s not a guaranteed strategy for boosting your finances, but it’s worth considering.

 

You have come to the end of this post, and so you should now have some unusual ideas for increasing your savings before retirement. Any additional funds to your life’s retirement savings will add tremendously to your retirement. Take a moment to think about each of the suggestions on this page, and then push ahead with the one that gives you the best chance of success. If nothing else, use these less common ideas to spur your own thoughts of unusual ways to increase your savings before retirement. Nobody wants to struggle for cash when they stop working, and so there is no time to delay!

Not The Retirement Job! Staying Unemployed Once You’ve Left Work For Good

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All our working lives, we move towards retirement like it’s the holy grail. We may get stuck in the rat race for the best part of our lives, but one day, we stand to see our days doing what we want. Ahh, to not have to get up in the mornings. How blissful would that be?

Of course, it’s no secret that retirement days are forever getting further away for many people. Now, the majority of us have no choice but to keep working past retirement. Even those of us who do make it often face the prospect of a retirement job. There’s nothing wrong with this path if you take it because you want to. Many retired people choose to rejoin the world of work. An easy position in a quiet shop could, after all, be the ideal way to get out of the house for a little socializing and adding to one’s coffers. Others, myself included, used retirement as a means to explore new career ambitions. After all, retirement should be defined as the absence of needing to work, not the absence of working.

This only becomes an abomination and retirement failure if you’re forced into a retirement job you really don’t want to do because of money worries. You didn’t work all your life, just to go back into a job you hate in your seventies. Just because our savings and investments take a dump in a bad market, we experienced a loss of benefits, or took some other financial hit causing financial distress, we shouldn’t jump at any crappy job as the only answer. Which is why it’s worth considering these alternatives if it looks like a job is approaching your retirement horizon and you have absolutely no interest in re-joining the rat race.

Retirement Funding Is Short- Oh No, Not The Retirement Job!

Can you reduce your expenses?

First, ask yourself whether you can reduce your expenses. Many of us enter retirement thinking we can keep up the same standards. But, that’s not usually financially viable, especially over the long-term. After all, you’re now operating on finite finances. That car which costs a fortune no longer fits into that. Neither does overspending on all kinds of other things. This isn’t to say you should put yourself on the bread line. But, letting go of some luxuries could make your life more financially comfortable.

Consider things like reducing or dropping your expensive cable or satellite TV service and wireless phone plan. Those 2 items alone can represent hundreds of dollars a month. Shop your insurance plans for better rates. Insurance companies are always making rate changes but seldom tell their existing customers of money-saving options. There are many cost cutting opportunities to explore to lower your lifestyle costs. Thus, you could do away with the need for a retirement job altogether. Even where we live should not be off the table. Downsizing and relocating should be looked at. Reducing your retirement lifestyle costs is the first place to look when money becomes tight and you don’t want to return to the grind.

Is there an easier way to make money?

If you hate the idea of going back to a working environment, why not consider new ways to make money? There are passive income options which stand to earn more than a part-time job could. Investing some of your retirement fund in a rental property could stand to earn you a lot each month if done right. If you are a homeowner, you could rent your home out either fully or partially. Consider moving to a lower cost location and rent out your home or take advantage of your space by taking on a roommate or using a short-term lodging service like Airbnb to bring in extra cash.

 

Equally, many retired individuals turn to investment to make some extra money. When our portfolios can’t deliver gains, interest, and dividends fast enough, there are other ways to make money in the market. If you’re unfamiliar with trading, but enjoy a good wager now and then, you could look at something like spread betting. This is a form of trading using principles stolen from the sports betting world. To make it work for you, all you would need to do is bring forward your betting knowledge and ask yourself, where can you spread bet?. Or, if you have the confidence to stick it out playing in the stocks and shares market, you could make your money that way.

Do your research, get educated, don’t overestimate your skills, and be smart!

This isn’t for everyone. It takes a certain skill set and having a risk-taking personality to pull it off. Anything that involves making a spread bet or day trading may have the potential for high reward but also comes with higher risks than you may be willing to take or should take. You are working with your life’s savings so don’t put all of your eggs into this basket.

Could you work for yourself?

We may think of entrepreneurs as young go-getters, but individuals over 50 are actually dominating the startup market. You could always opt to do the same. After all, a home based and/or internet based business can be started with minimal upfront cash. What’s more, a successful startup could keep earning for you, even if you decide to take a back seat down the line. If a startup isn’t in your cards, you can consider jumping into the gig economy. As a freelancer you choose when and where you work. While working for yourself does have the downside of still being work, at least you won’t have to answer to a boss anymore.

 

If after considering all the alternatives you still find your answer is returning to paid work to fix your retirement funding shortfall, then choose your retirement job the right way. Figure out what your payable skills are and find something you have interest in doing. Not everyone considers working in retirement as being a good retirement. But having a job doing something you want to do or enjoy doing isn’t a bad retirement either. With some cost cutting and earning a little extra each month you may find that you can return to your retired unemployed bliss sooner rather than later.

Automate Your Home To Retire Early: Does It Work?

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What if you could retire today? Imagine taking that luxury cruise with your family and beginning your golden years ahead well in time, so that you are still in the age bracket where you can remember all about it the next morning too! With smart home automation, all that is very much possible. The amount of money you save with each appliance will let you add more speedily to your 401k account.

And this way you will be able to reach your financial goals set for the retirement way sooner than you had otherwise planned. Improving your lifestyle while saving a good portion of your monthly earnings do seem too good to be true. But the following incredible facts show you exactly how to attain this too-good-to-be-true reality.

Home Automation for Early Retirement: How?!

Running a home does not come cheap. Adding each individual and their specific housing requirements along with the occasional guests, even daily home expense can run a huge tab in the case of a big family. And the families that are growing have their expenses multiply manifolds over the years.

The various ways in which home automation can control the expenditure in a way that gets us to our retirement savings goal pronto are as follows:

Drastic Insurance Rebates

The thing that insurers hate paying the most are those hefty insurance claims. So it only makes sense that they are now offering to slash the premium payment prices by almost a quarter for those with smart home automation technology in place.

According to the CB Insights database, the insurers know quite well that home with smart automation systems are less likely to run into the trouble. The nature of this calamity can be theft, fire damage, flooding issues and various other relevant scenarios. This means that in the long run there will be less claim filings due to these various unfortunate events which will help them save a ton.

This is one good reason to install those futuristic home automation systems in our homes right away. And if we already have them installed at our place like any other sane person then we need to inform our home insurance agency at the earliest to get the available rebate.

Save Electricity, Save Money

High energy bills are the fourth biggest cause of heart attack in case of an average human nowadays. Now, this might not be totally true. But, you can’t say that those towering energy bills don’t make you consider fleeing the country at first.

With the AC, lights and other energy-heavy appliances running round the clock, sometimes by mistake, it is hard to catch a break on them. And that is why it makes all the more sense to get those energy efficient smart home systems that slash our bill prices by at least 50%.

They are an essential upgrade and investment that is not a luxury anymore. If we want to keep up with the changing pace of time and save a good deal on our energy bills then smart home automation is the ultimate answer.

Save Both Money and Water

There is no life without water. Not just the sustenance but even the normal pace of life requires a continuous water supply. By wasting it, we are making survival difficult for our future generations and also doing more damage to our already terrifying water bill margin.

home automation

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In the kitchen, bath and outdoors; everyday we require a lot of water to perform the daily functions up to our satisfaction. According to a recent study done by the EPA, one-third of our total water consumption is outdoors. And out of that almost half of everyday intake gets wasted.

This is a huge number considering how it adds up to form that steep figure at the end of the month. Smart sprinkler system, touchless faucets and the smart shower heads are there to help us conserve water without demanding for any huge sacrifices when it comes to our normal lifestyle.

Smart Thermostats for Better Returns

The closest that humans have ever come to God in terms of their dexterity is with the smart programmable thermostats. They are perfect beyond the scope of human comprehension! And can be used to regulate the temperature of the entire home to make it just right.

The smart thermostats save energy and hence a lot of our hard earned money in the process too. Also, they offer the facility of being controlled from anywhere, anytime. And best of all, they sense our requirements by studying our usage pattern over time.

According to ‘A Secure Life’, 39% of the total energy consumption within a home goes directly towards the heating and cooling processes. The smart thermostats can bring down the heating cost by 12% and the cooling cost by a total of 15% of the original value. A total of 23% of the total energy can be saved annually on the heating and cooling functions combined with the help of smart thermostats.

Smart Haiku Fans

AC might be what we need when it is scorching hot outside. But they alone are not enough to have that breezy atmosphere within our living rooms. For that, we need to get a fan too that is able to keep the air ventilation within our rooms just right.

Haiku fans are the smart luxury fans that work perfectly on their own and even better with the smart thermostats. They can improve the efficiency of the HVAC system of our homes tremendously. You can also use them to maintain a steady well-ventilated state within your rooms.

Another great thing about these fans is that they can sense the temperature of the room and work smartly to bring it up to the preset desired levels. The Haiku fans help in mixing the air at different temperatures present within the room and bring the temperature at each point within that place to the same optimum level.

Conclusion

The smart home technology can help us cut back on our cost of living while upgrading it at the same time. This will help us in reaching our financial goals of the week, day, months and even years in a swifter manner. The retirement in our golden years can shift up a few decades and we can finally start living it up like we always dreamed we would in our golden years!

Savings and smart home technology go hand in hand. Do you live in a smart home? If yes, then when are you going for that retirement world tour? Tell us all about it in the comment section below.

Also, if you know a friend who is obsessed about retiring early and saving pennies, do let them know about this article. They would really appreciate you for doing so!

 

This attention grabbing and thought-provoking article was contributed to Leisure Freak by Pallavi Pandey
Author Bio

A part time contributor at http://bestsmarthometrends.com/, Pallavi Pandey has been making dull topics a page-turner since 2012. She has written extensively about finance, technology, and software in her freelance writing career until now.

Her Bachelor’s Degree in Computer Science helps her in comprehending the most complex of topics quite easily. Her core expertise lies in creating engrossing content that puts across the point in the desired format without boring you to death!

Retiring With An FSA Healthcare Account? Leverage The FSA Loophole BEFORE You Retire!

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If you are going to finally ditch the rat race and will be retiring with an FSA at your job, then you have some things to get right before your retirement date. Failing to do so means losing everything in your FSA account. Do it right and not only can you use up all you have contributed but even more than you have paid into it for the year.

An FSA (Flexible Spending Account) is a fairly common employment healthcare benefit that many companies offer their employees. Most people are familiar with the FSA “use it or lose it” rules that apply to your account at the end of every year. It is why some employees decide not to participate in this nifty tax-free health benefit. But if you have an FSA now and are planning to retire this year, or haven’t used an FSA but do plan on retiring after the first of next year, then you may want to keep reading. You can leverage your FSA to the fullest in the year you retire and even get more money for qualified FSA medical costs than you paid into your FSA.

Retiring With An FSA Healthcare Account? Leverage The FSA Loophole BEFORE You Retire!Image Source

Don’t Lose Money When Retiring With An FSA. Be Smart And Leverage It To The Max

How The FSA Works

You set aside money through your employer pre-tax. It’s to be used on qualified medical expenses that your health insurance doesn’t cover. Employer benefit enrollment activity usually heats up in October thru November. That is when you commit to wanting an FSA and how much money up to the federal FSA limits you want to commit to it for the next year. For 2020 that limit amount is $2750 (update–For 2023 that limit amount is $3050). The employer then takes an equal amount out of each of your paychecks throughout the year. For example, if you decided to contribute $2750 to your FSA for the year, then having a biweekly paycheck schedule means $105.76 will be deducted before taxes from each check.

You are allowed to spend FSA funds in advance of your contributed money, right up to your committed FSA contribution amount for that year. For example, if in March you incur FSA qualified medical expenses for $2000 but only have 3 months ($635) of payroll FSA contributions so far, you can still use your FSA funds to pay the full $2000.

This FSA money is normally only good to use until the end of year (small extension may apply) and any unused money reverts back to the employer. That’s the “use it or lose it” part of the FSA. However, the FSA is handcuffed to your employment. When you retire you are quitting your job and the FSA ends on your last day, not the end of the year. Any unused funds in your FSA reverts back to your employer on the day you skip out the door for the last time. So don’t do that!  Get smart and plan ahead.

Retiring With An FSA And Spending More Than You Contributed- The FSA Loophole

Retiring right means you probably have an idea of when you want to retire. This is an advantage because it gives you time to strategize your medical treatments and other FSA qualified spending before your magical date. The way the FSA loophole works in your favor is that even though you may retire before the end of year, you can spend up to your yearly committed FSA amount in advance and not have to pay back the amounts spent above what you have contributed. The earlier in the year you retire the more you can benefit. (Update 2022: In rare cases, FSA plan documents specify that any remaining contributions can be taken from your last paycheck when you leave your job. Check with your employer regarding their FSA rules)

For example, retire in June and spend up to your committed full year FSA amount before you leave. By June you have only contributed half of your yearly FSA commitment but you can spend the entire year’s amount. Meaning you just doubled your money. The rules that allow your employer to keep any unspent FSA funds every year also means your employer has to eat any departing employee’s FSA deficit when they retire.

Don’t feel bad that you are stiffing your employer. A lot of employees don’t manage their FSA funds very well and lose their remaining balance. Unused FSA funds total in the hundreds of millions of dollars each year. Your company will be using these kinds of yearly forfeited funds that they get to keep to cover your taking advantage of the FSA loophole. Believe me, no company executive will get their bonus trimmed because of this.   

Pre-retirement FSA Spending Strategy

Take advantage of the time you have before your retirement date. It is best to start this long before announcing your retirement. There are lots of ways to use your full FSA funds. Even if you are healthy and without pending health issues to take care of. Basically, all the things you might try to spend your FSA money on before the end-of-year deadline qualifies for this FSA pre-retirement strategic health spending.

  • Get up to date on your medical checkups. There are always things in wellness checkups that will cause costs that insurance doesn’t cover.
  • Get your eyes checked or at least get those new glasses and/or contact lenses you will be needing. Get as many as you think you might need.
  • Go to the dentist. We all know how much implants, crowns and bridges cost. Dental Insurance usually just takes the sting out of the bill. Non-cosmetic dental work is covered under FSA. Now would be the time to take care of all dental issues that you have put off.
  • Back problems? Fasciitis or Tendinitis? If you want to visit a Chiropractor to help heal your back, now would be the time to try it. Acupuncture is also something that may help hard to heal issues. Qualified medical issues are covered under FSA, a prescription or letter of medical necessity may be required.
  • Orthotics are a qualified medical expense. It never hurts to get another set of inserts. Think about your upcoming time on your feet doing retirement activities.
  • Replace, update, or expand your first aid kit. An adventurer level first aid kit can be expensive but worth every penny in an emergency situation. Most anything you would normally store in your medicine cabinet can be bought with your FSA funds. Stock up on bandages, a good thermometer, blood pressure monitor, heating pads, etc.  

Remember, anything that qualifies for FSA spending while an employee before the end-of-year deadline will qualify for your pre-retirement FSA spending strategy. Choose merchants that can process your FSA card. One online merchant to look at is the FSA Store.

If you are retiring with an FSA, then plan ahead and leverage it to your utmost advantage.

Don’t leave anything on the table. In fact, take it to the limit. Depending on your planned retirement date, double or triple your money. If you haven’t been using your employer’s offered FSA health benefit thus far and will be retiring after the next enrollment period, consider starting an FSA and set yourself up before you retire.

Retiring or not, always check for all qualifying FSA expenses that you may need. Utilize your FSA funds before your “use it or lose it” deadline. Whether that is end-of-year or your last and happiest day on the job.

Update 11/5/20: For those retiring and signing up for their employer Cobra insurance coverage. Your FSA may also be extended past your employment date with Cobra. Do your research to see if this will apply to you.

My Retirement Spending Problem, How I Beat It

Early Retirement Lifestyle, Funding Retirement, Non-financial Aspects of retirement, Retirement Shock, , ,

Simply put, I had a retirement spending problem. I planned and saved for years so I could retire to the life I fantasized about. There were years of researching everything I could find about early retirement and personal finance, yet I still fought a retirement spending demon. It didn’t happen on day-one of retirement. Everything went exactly as planned. I ditched the rat race and celebrated sensibly for a few weeks while I settled in. But then my retirement spending troubles began. I had a big problem all right, I was psychologically attached to my retirement funds and it messed with my head.

We spend a huge chunk of our life saving for retirement and then, BAMO! We get hit with the reality that we have no idea how to mentally handle spending our hard-earned savings. I believe it was the hardest part of my retirement transition.

Retirement Spending Problem

Coming to Grips With Retirement Spending

The numbers were all there. I knew exactly what my lifestyle budget was and how much I would need to fund it. The portfolio was set up to make those funds available and yet I was miserable with concern, anxiety, and a lot of other emotions. All of which wasn’t in my very detailed early retirement plans.

What was in my retirement plan was using what was considered an acceptable safe withdrawal rate. That is always part of our retirement funding calculations. The fear of overspending in retirement and exhausting the portfolio before you leave the planet is well deserved. That’s why we de-risk our portfolios with diversified investments and make contingency plans for rotten economic scenarios.

As for my planned early retirement lifestyle, I had tossed aside any desires for extravagant spending decades earlier and embraced frugal living to get me to where I was. I had already created the perfect lifestyle. But even with everything planned for, I couldn’t shake the retirement spending nag. Going from retirement saver to retired spender was a mind warp!

I Reacted and Succumbed to the Spending Nag

I started to restrict everything I had planned on doing in my retirement that had a cost to it. My mind rationalized it as financially necessary and I didn’t think much more about it except for one problem, I still had memory of what I wanted in my retirement. It didn’t take long before I started to hate how this spending nag turned my retirement into a cheapskate lifestyle. I was always smart frugal, not cheap like this. What I was doing wasn’t anywhere close to the early retirement dream I worked so hard for.

I started to think about elderly relatives who lived through the great depression and how decades later they lived a miserly life even though they had a good amount of money stashed away. All of a sudden it all made sense to me. What I was experiencing was a different flavor of the same psychology. Only then was I able to self-assess my irrational retirement spending problem and turn it around.

Shifting The Way I Visualized My Retirement Spending

Let Go

Letting go of our title and work identity is a common subject talked about for retirement preparation. When I retired in late 2009 I don’t recall ever seeing anything about letting go of being a money saver. If I did I must have ignored it as a non-issue. Believe me, we do have to let go of being a saver. Even in months when my gains, dividends, and interest outpaced my withdrawals, I still could feel the spending nag of knowing those gains didn’t get reinvested like in the past.

Instead of letting this nag continue to rule me I decided to treat it the same way I did shedding my work identity. I recognized it as normal and part of my transition from worker bee to retired freedom seeker. I made a goal to stop letting this mental attachment to saving and growing my portfolio dictate my actions. Instead of letting it control me I now would control it. I made the mental decision to turn my unholy attachment to my saver mentality into something I needed to work through and let go of it.

Retirement Money’s Purpose

One of the things I had to remind myself about is that my portfolio was specifically created for one single purpose. It’s only purpose was to fund my retirement so let it. It wasn’t created to sit locked up and unused or worshipped like I was Gollum and his precious ring.   

Drop Emotion, Stick-To And Believe The Facts  

The numbers were sound and there was no logical need to restrict my planned retirement. They were double and triple checked using all kinds of scenarios to leave no logical doubt. There was no reason to have the retirement spending problem that I had. I simply recognized I needed to control my emotions and stick to the plan. Do that and everything would be fine.

Giving Time To Adjust

It took many years of smart frugal living and saving a big chunk of my income to get to where I was. It stands to reason that it would take time to adjust my mindset. I had years of conditioning my brain to successfully create a lifestyle I loved and pull off early retirement. No matter how much I planned what I wanted to do in my retirement and how I would fund it, it will take time to adjust my brain to this new way of living.

It Worked!!

It took a few months to fully relax into my retirement spending plan and I was cognizant of the nag for over a year as it occasionally surfaced. I look back now and I’m grateful that I took positive steps to recognize and counter the saver mentality that was over-controlling me. I know people who never escape it and live an unnecessarily restricted retirement.

Breaking free starts with having a smart budget that includes what we want to do in our retirement. A budget that then matches up to a sound withdrawal strategy. Then believing in the numbers, letting go of our saver’s mentality, and letting our retirement portfolio serve its purpose. Most of all, give ourselves time to settle into the new way of living and allow the numbers and planning to prove once and for all to our brain that everything is working exactly as it should.

Our spending discipline that gets us to early retirement won’t just disappear. If the worst should happen then we will logically do what’s financially necessary. In the meantime, purposely spend on the things that matter in retirement just as planned for.

How to Achieve Debt-Free Retirement

Financial Independence, Managing Debt, Student Debt,

It’s never too early to think about planning for retirement, but before you start maxing out your retirement fund, you may find that it’s in your best interest to tackle debts first. After all, high-interest debts can cost you over the years. If you don’t address them early on, they could cancel out a surprisingly high percentage of your retirement savings. Find out how to get a handle on your debt and work your way toward debt-free retirement.

Get a Handle on Credit Card Debt

How to Achieve Debt-Free RetirementImage via Flickr by ccPixs.com

Many debt management experts recommend using what’s known as the debt snowball method to get a handle on what you owe. The idea behind this method involves addressing your smallest debt first and gradually checking each one off your list until you’ve paid them all.

In many cases, paying off your credit card debt will get the ball rolling. Rather than merely paying the minimum payment each month, write a check for as much as you can afford. Use your preferred budgeting tool to calculate how much you can spare, cut monthly costs where you can, and watch your credit card slowly melt away as a result of your hard work.

Leave Your Auto Loans in the Dust

Just because you have a five-year car loan doesn’t mean you have to carry it for the next 60 months. To pay down your auto loan quickly, assess your options. Find out if you can pay your loan off early without penalty, and then make a plan to do so.

Making more frequent payments and contributing your whole paycheck during extra pay periods can both help you take a chunk out of a large auto loan. If early repayment isn’t an option, consider refinancing your auto loan instead. Your local credit union or bank may offer a lower interest rate or more attractive repayment terms.

Deal With Student Loans

If you’re convinced that you’ll be paying off your student loans for the next several decades, don’t give up so quickly. After all, unlike credit card payments and auto loans, student loans offer more creative repayment options.

Look into student loan consolidation options to turn multiple smaller loans into one larger debt. Choose a consolidation option that includes a lower overall interest rate and a monthly payment that you can afford to amplify your savings. Remember that most student loan servicers allow you to prepay as much as you like, so you may be able to tackle your student loan debt faster than you’d anticipated.

Should you refinance your student loan? Check Student loans refinancing calculator

Pay Off Your Mortgage

If you have a home loan, there’s good chance that this is by far your largest debt. While you should always make your monthly payments, save any rapid mortgage repayment strategies until you’ve taken care of your other debts. Changing to a biweekly payment plan, making extra payments toward your principal, and refinancing your mortgage are all smart ways to put this debt behind you.

 

Getting a handle on your debts takes time and commitment, but it’s a strategy that’s bound to pay off in the long run. Use these tips to pay off your debts before investing more than any employer match in tax-advantaged retirement accounts and make your retirement planning count.

How Much Cash Is In Your Portfolio? Why I Increased Retirement Cash Holdings

Bucket Strategy, Funding Retirement, Investment Strategy, Protect Assets, Risk Tolerance, Saving Money,

I decided I wanted to cash in a few chips and take some of my profits off of the table. I sold off investments and increased retirement cash holdings in my portfolio. Not just a little bit either. I’m on my way to 20% of my portfolio being cash. My decision had nothing to do with in-depth analysis of the yield curve or stock price to earnings (PE) ratios. Nor inflation threats or claims a lack of available workers may drag down this country’s latest economic growth predictions. Not to mention the possible negative economical impact of trade wars. Nope, it’s simply because of the convergence of my age, life expectancy, and the numbers to cover my nut with less on the table. It’s personal.

Increased Retirement Cash Holdings

Increasing Retirement Cash Holdings – What’s the Right Portfolio Percentage?

We all know we have to accept investment risk if we want decent returns. You have to play to win. Nobody can exactly predict or time the market. Major drops happen when they happen. That means we have to stay in through thick and thin.

Investment history suggests that over the long-term the balance of risk vs returns is generally favorable to the investor. Especially when we are practicing dollar cost average investing through both good and bad markets. But that all turns more into a gamble as the investor’s age vs longevity ratio tightens and we are no longer feeding the portfolio with earned income but instead depending on the portfolio to fund our retirement lifestyle. Market recovery time becomes more critical. A 5 year recovery period is a bigger percentage of your remaining life when you’re 60 than when you’re 45.

Portfolio Rebalance and Re-Running the Numbers

When I retired at the age of 51 I kept a small amount of my net worth in cash. I have different expectations now that I will hit the age of 60 later this year and can almost see my Social Security full retirement age ahead of me. I know how fast my years in early retirement have flown by thus far and will soon no longer be considered an early retiree.

For the most part I use the 110 minus age declining equity glidepath approach to rebalancing my portfolio. Subtract your age from 110 and that is the equity portfolio percentage to consider having. Logically that leaves the rest to bonds and cash. I use 110 instead of 100 for my declining equity glidepath rebalance calculation because Social Security will eventually play a role in the non-equity side of retirement funding. The calculation doesn’t explain how much cash is appropriate in the non equity side of the portfolio. Opinions seem to always be critical of holding too much cash. As far as I am concerned, when you have experienced a good run and have enough, it’s time to set aside some of your winnings.

I settled on 4 years retirement funding in cash plus a $25K emergency fund. My retirement withdrawal strategy uses a bucket approach and the cash is in my IRA’s bucket #1 and a savings account. My portfolio allocation looks like this:

  • 18.5% Cash/Cash Investments
  • 29.5% Bonds Fixed Income
  • 48% Equities
  • 4% Alternatives

To determine how much cash I wanted I simply understood my overall goals.

  1. Not have to worry or sell equities during a rotten market.
  2. Have my portfolio last as long as I do.

Increased Retirement Cash Holdings looks good

I then ran the numbers through the retirement calculator-FireCalc. I used 35 years of funding, 45% equity investment position, social security provided estimate amount, bumped up my yearly spending amount by $10K to counter higher cash holdings with its lower returns, and let her rip. The results looked great!

Full Proof? Hardly

Cash doesn’t offer anything in earning interest today and I have no idea how hard inflation will hit. Will interest earnings climb enough to offset inflation? Who knows. I also don’t know what will happen with social security, the markets, or the price of tweets in the White House. However, I am comfortable with this level of cash holdings even going to 20%. This is a decent time to take profits and I will continue rebalancing as long as the market continues to climb. I feel that the FireCalc calculation padding I used in my income numbers and longevity (I seriously doubt I will live to 95) that my odds look really good. Aside from all the financial considerations there is also the mental benefits to my increased cash move.  

High Retirement Cash Holdings – Cowardly or Courageous?

I do have a healthy fear of another market crash and multi-year recovery. There have been enough of them in my years of investing to know there will be more. I am making some optimistic assumptions when there are plenty of unknowns going forward. But what’s new there, there’s always unknowns when it comes to investing and retirement. I do count on adjusting things as needed.

I don’t see pulling a higher amount of cash to the side as either cowardly or courageous. This is simply wanting to hedge my bets and have options. I can cease selling any assets or taking IRA withdrawals in a down market and take advantage of opportunities to buy investments when they arise.

 

As far as I can see, taking profits after a historically long running Bull Market to have higher retirement cash holdings provides both downside protection and upside opportunity. At least in my personal situation. What is the perfect percentage of cash holdings to have in one’s retirement portfolio? How much cash is in your portfolio?

Common Money-Saving Beliefs That Are Slightly Off

Financial Independence, Financially Free, Saving Money,

There is a lot of advice about how to be financially responsible and improve your financial future. Much of that advice is delivered with broad strokes as absolutes. However, some money-saving beliefs overlook the fact that there are no absolutes. Missing that may end up hurting you in your savings goals and quest for financial betterment. The broad stroke money advice isn’t wrong, it’s just incomplete. It’s also easier to believe and maneuver through time-tested money rules that are black and white. The gray area money rules takes a bit more discipline. As with any gray area it takes awareness and a more strategic approach to stay on the right financial track.

 

Money-Saving Beliefs That Need Clarification

Avoid Debt At All Cost

While it is true that debt can kill financial goals it is actually a necessary evil. Responsible debt practices will help you save more money. The trick is to use debt to your advantage and never succumb to it’s easy access allure. Smart debt use is harder to explain so debt avoidance is preached and solidly part of our money-saving beliefs. Here is why smart debt is important to us.

The Importance of Having a Good Credit Score

Everyone knows having a bad credit score due to poor payment practices and having too much debt is bad news. It will cost you, but so will having no credit score. You have to borrow and establish good payment habits to create a decent credit score that will save you money. Not only for securing a lower interest rate for any needed debt but it’s important for many other things that touch our lives.

  • Insurance –  Auto insurance and property insurance companies generally offer lower rates to clients with a good credit score.
  • Rent – Having a bad or nonexistent credit score may result in having to pay a higher deposit amount or being rejected.
  • Jobs – Many employers run security checks for new and existing employees. Part of the check may include credit scores.
  • Rewards – Many credit cards now offer rewards in cash or travel points to use their credit cards. Having debt discipline can actually pay you to responsibly use a debt instrument to buy what you need to buy anyway. In the absence of any other debt, using a credit card and paying the balance off every month will help your credit score.
Debt Associated To Income Producing Assets

Debt can be used effectively to generate income. I’m not talking about borrowing a bunch of money to make risky investments like bitcoin. Think something far more traditional.

  • Rental Property – Debt leveraged by income producing rental properties is an effective money producing strategy for real estate savvy investors.
  • Business Loans – Many profitable businesses can responsibly utilize debt to grow their business.

Always Shop For The Lowest Price

Looking for deals to save money on anything we need to buy is sound advice. But it shouldn’t be the only factor used in our purchases. Quality must also be considered for our purchase.

  • Online Purchases – Everyone enjoys a good online deal. But the posted price is only one part of the equation. There may be shipping costs and even if there isn’t with the purchase there can be shipping costs on returns for a defective, non-fitting, or misrepresented products.
  • Reliability – Paying a bit more for quality saves money in the long run. Costs to repair or replace cheap priced cheaply made items can add up. Always include some product quality research before buying.

Don’t Rent, Buy A Home

It is easily the first money lesson I was taught. Renting is paying to increase someone else’s net worth so buy your own home. Home ownership has always been touted as the main path to the middle class. Although this financial advice is true, this money-saving belief is not absolute. There are situations where buying your home may not be in your financial best interest.

There are many benefits to owning your own home. Bought right, you have an appreciating asset and a hedge on inflation. Rent is always going up. However, there are many considerations that must come with this money-saving belief.

Here are some of the home ownership money-saving pitfalls to be aware of:
  • Buying More Home Than You Really Need – Just because the mortgage company says you can afford it doesn’t mean it will be smart debt use. A larger home can be sold later to downsize but while you live in it you pay higher utilities, higher property taxes, and have a lot more to maintain.
  • Overlooking Mandatory Additional Costs – It’s easy to do a rent vs buy cost analysis on a property based on sales price and your likely loan interest rate. However, don’t forget to also include any HOA fees. These can be already high and/or climb even higher over time. In some extreme cases they may surpass your mortgage payment amount. Aside from HOA fees also consider insurance costs. With all the wildfires, storm damage from wind or hail, and flooding of late, insurance rates may be very high depending on where you buy your home. These are things often missed in rent vs buy calculations.
  • Maintenance – Every property will require maintenance and needs to be budgeted for. If you have to hire most or all of that maintenance out then that is another high cost that must be considered.
  • Mobility/Staying Put – In normal real estate markets, people who don’t stay in one place  for at least 5 years may at best end up breaking-even when it comes time to move. Real estate sales cost and a less than stellar real estate appreciating market can cost you much. If your relocation is job related and your home doesn’t sell quickly you can be left making payments on an unused and empty home. Real estate doesn’t always go up. There will be cycles as with any investment. Reasons for depressed real estate gains is not only tied to economic trends but also location specific dynamics.
Should The Money-Saving Belief  Be Considered a Yes, Maybe, or No?

These are just a few common money-saving beliefs that are slightly off if they are not fully clarified. Any broad stroke advice is a starting point. It is the money rule that easily gets our attention. Then as with anything, we need to slow down and look at all the variables. We have to research the money-saving advice and then wisely use it. A lot of money-saving beliefs are more a “maybe” than an “always” situation.