It's one thing to plan a Great Second Life, but how will you be able to pay for it?

Some have saved since their first paper route or grocery bagging, and with later 401ks and savings they are richer than all their grandparents ever were combined, yet they're certain they'll be flat-out destitute within years on their own. Others are as poor as peccary boars but are certain they'll work it all out.

Most of us are somewhere in between. We are rightly apprehensive about the future, are bombarded by ads shrieking about the coming decades of penury, wonder if we should rent a room in a nursing home or poor house while they're still available, and don't want to burden our kids (who are having a tough enough time just making it themselves). We'll be sharing information to those of us in this in-between.

A bit of a disclaimer. If you need tax or investment advice, go to a professional. We will share what we think is sensible, proven, and useful, and we'll provide sources and/or links when we think you will benefit from that. (But we won't fill these pages about stock options, investment schemes, and tales of economic derring-do. For that you must read elsewhere.)

Finally, Gordon will include new financial stuff as he finds it in the newsletter; some of those items will then rest for a while in this section.

A directory will help us keep track of what this section contains:

Part 2 of Super Second Life Planning

The role finances play in Super Second Life planning...


What did I say in my BOOK about money and a Super Second Life?

Here's Chapter 7, written in the last days of 1999.


Financial Thoughts for
Super Second Lifers

26-step checklist from a senior's perspective. 



Super Second Life Newsletter



3-1-06: Why businesses should hire older people.


It might be an uphill fight convincing a 30-something boss that it’s not only cost-effective to hire a 50- or 60-plus worker, it helps diminish grievous societal ills, like keeping the elderly off the street (or golf course or beauty parlor) and out of trouble.


While AARP is hardly disinterested, its recent study by the consulting firm Towers Perrin (reported by Andrea Coombes in the Sunday Wall Street Journal on 1/29/06) provides solid reasons that expanding the hiring pool upward can be good businessif the firm can find anybody that age who wants to work for them. (Here is the full study.)


Let’s confront the main objection first: elders cost more for medical services. That’s true. Those 60-64 (including dependents) annually average $7,622 in medical claims, from hospital bills and prescription charges, compared to $4,130 for workers 40-44 and $3,206 for workers 30-34. But that can be quickly offset because older workers are more highly motivated, less likely to leave their jobs, and they bring a healthy form of hard-earned innovation. Even the old claim that they are less likely to learn new tricks hardly makes sense in an era when in-office and plant technology has been daily fare for all employees for decades.


Concerning motivation, Towers Perrin surveyed 35,000 workers at large companies to see which group was “highly motivated,” meaning they were extremely likely to be able to satisfy customers, affect product quality, and control business costs.” Not only did those 55+ outscore those 18-29 by 78.4 to 71.2 (average is 74.8), they actually rose in score as they got older.


Why is that important to employers? Firms with motivated workers are likelier to exceed their industry-average revenue growth over a one-year period, which in turn kept the cost of goods sold below average for the industry. And because of their higher motivation, older workers are less likely to leave their jobs, which reduces turnover expenses. “The incremental cost of health care can be more than offset by the benefit of avoiding turnover,” says Roselyn Feinsod, co-author of the study. 


Innovation, often held to be the gift of the young, actually comes in two main forms of creativity, according to David Galenson, economics professor at the University of Chicago in his book Old Masters and Young Geniuses: The Two Life Cycles of Artistic Creativity. “Some great innovators are young, some are old,” he says. The young tend to be iconoclastic; the older get better as they age since they are collecting information. Some companies may be “looking for these young conceptual guys to make big leaps forward,” according to Galenson, but if they need a business plan, for example, they might need people “who’ve been around the block. Companies, by and large, need both kinds of people.”


If you’re mounting a personal campaign to get that special job, read the study and share it with the reluctant hirer. And do like you tell your grandkid: show up for the job interview on time!  




3-1-06: Save money on an flight, courtesy of the airlines?


An airline will actually lower your faretheir idea and initiative? The same people who cram you into 6” seats and decided you don’t need to eat while in atmospheric captivity or your bags when you arrive?


According to an article by Kelly K. Spors in The Sunday Wall Street Journal, some airlines are quietly giving travelers a refund if the price drops after they bought tickets. They want to reward customers who bought directly from them, says David Downing, travel editor for, rather than from airline consolidators and search engines like or


Also, if you find a better deal on your same booked flights, call the airline and ask if they will give you a voucher or cash refund for the price differenceeven if you have a non-refundable ticket. (It must be a published fare, though, and forget it if it’s part of a package deal.)


That’s one reason to keep checking your booked flights until departure day. Another is to reaffirm that the flight hasn’t been changed. While most will notify you by email of changes, Tom Parsons, chief executive of, says that with aggressive spam filters there’s no guarantee you will see the time changes in your inbox.


1-1-06: Six months of emergency cash? Not likely.
Fat chance most of us are going to have an extra six months of living expenses sitting around to hide in some
conservative emergency investments in our taxable account while we’re trying to pay the mortgage, get the kids
through college, keep our parents fed and out of harm’s way, and still save a bit for our “retirement.”
(Remember, self-tithe 10% of each month’s earnings and you’ll always be sitting pretty: the Burgett rule.)
Worse yet, a bundle of emergency cash earning a miserable 1.2% for 30 years.
I like Jonathan Clements thinking in his “Getting Going” column in the Wall Street Journal Sunday edition of
11/13/05, which addressed this very topic.
He scoffs at the suggestion, and says “Get real.” Sal Miceli; a retired financial planner in Littleton, Colorado,
agrees: “The reality is, people don’t have the money.”
Clements instead offers four suggestions:
* First, think of your emergency money and retirement nest egg as one big pot of money.
* Second, build up the savings in your taxable account, using this money to buy tax-efficient stock funds such as
money-tracking index funds and tax-managed funds.
* Third, allocate at least part of you 401(k) plan or individual retirement account to bonds.
* Fourth, set up a home-equity line of credit. (He likes this least but says while you’ll likely never need it, it is an
extra layer of protection. And if you must tap the line, you should be able to deduct the mortgage interest on your
tax return.)
The idea is to leave your stocks alone, unless your emergency occurs when they are flying high. But selling them
in a brutal bear market makes no cents.  And the bonds will soon enough become long-term capital gains,
taxable at a maximum of 15% now, about what you’d pay to liquidate your stock-fund holdings, and a lot better
than toying with the 40% in taxes and penalties if you convert retirement accounts. (Ask your accountant or
advisor whether it is better to put these bonds in the retirement accounts so you can realize tax-deferred
Drawbacks? A few, says Clements. Some will use it as a reason not to save. The home-equity line of credit
can’t be used like a piggy-bank. And you must still plan wisely for coming costs, like a new car or a roof. Those
aren’t emergencies.
Nor is vacation to Bali. (Well, maybe once.)


11-1-05: Retirement money jitters?

My cure is infallible: just live your life again (you can start at 20) and self-tithe 10% of everything you earn. Let the compounding interest on that money put you in the financial pink, whatever the fate of Social Security, your retirement plan, your 401k, or any other program. (Incidentally, many money managers recommend the same 10% rate. What do we Americans save now? Last month it was 0.1% of disposable income, according to the Commerce Department’s Bureau of Economic Analysis.)

You can’t live again? (Shame on you. Your mother was right: clean underwear and a clean tongue.) Then start that self-tithing right now to let your current money live better and longer, and tell you kids to do what you didn’t. The benefit of that? You won’t have to worry about their economic well-being--and they may well end up being rich enough to take care of you!

It really is that easy--and that difficult, when barely scraping by makes that saving a true act of faith juggling. Every thing I read in the financial field when I wrote (and recently rewrote) How to Plan a Great Second Life: What Are You Going to Do With Your Extra 30 Years? led to the same point, that if we would simply exercise that discipline from our first earning days to our last, and put that savings into a variety of secure, compounding instruments, we would all be financially independent and assured a comfortable old age.

Is it important now? When Delphi seems to be going under and may well pull GM into the pit with it, there is legitimate reason for shaking knees. Which makes it all the more imperative that the process and need be emphatically shared with the younger members of your family, and that the difficulty of the discipline be likewise acknowledged. Two friends of mine take it a step farther: they refuse to will money to their children. One rewards them for saving with trips or bonds; the other matches their 10% with 3%.

(There is an excellent, detailed article in yesterday’s (10/31/05) Time Magazine called “The Great Retirement Ripoff.” It dwells on quickly diminishing benefits.)

Did I self-tithe? Of course not. I was too dumb and undisciplined, and I’d never received my own newsletter. So I am consigned to writing free missives for penance!
9-1-05: How to save at the ATM.

If you use the ATM outside your own bank, or anywhere but it’s your bank’s machine, it’s already free. But when you try some other machine, watch out.

A common fee for the convenience is $1.50 twice, by that machine and from your own bank! Do that twice a week and you’ve thrown away $312 a year.

How to avoid the sting, according to Kelly A. Spors from the Wall Street Journal?

* Just plan better and take out a bit more every time you visit your own ATM or cash in at the bank.

* Get cash back when you make debit-card purchases. Also use signature-based debit purchases instead of entering a personal-identification number, since that often incurs lower fees.

* Find no-fee ATMs, like Washington Mutual's, or small bank and credit union networks that accept each other’s ATMS gratis.

9-1-05: You will have more money to spend as you get older. Really.

What common sense shows, that we spend less as we age, has finally been given factual legs, thanks to financial planner Ty Bernicke’s curiosity and close perusal of the U.S. Bureau of Labor Statistics’ Consumer Expenditure Survey, as reported by Kelly Greene in the Wall Street Journal’s “Encore” section in July, 2005.

“As people’s age increases, their spending decreases in every single category, with the exception of health care,” he says, “(and that) is increasing at a much slower pace than everything else is decreasing, so there’s an overall decrease in spending.”

Proof? In 2002 (the latest year reported), average annual spending fell 27% to $32,243 for the 65- to 74-year-old group from $44,330 for people ages 55 to 64. It then fell still more to $23,759 for the 75-plus age group.

Could it be that these oldsters lived through (or were affected by) the Depression? Nope. Adjusted for inflation, the differences for spending in a comparable age span were insignificant. “You can’t blame the differences on the generations,” says Bernicke.

Or could it be that they spent less because they were broke? Hardly. According to the U.S. Census data, the median net worth for households increased with age at every one of five income levels. (And median worth went up even excluding home equity.)

Bernicke’s advice based on this revelation? Spend more up-front. “If I have somebody who’s retiring or close to retiring, it will maybe give them the ability to take that extra vacation early or leave that job now that’s giving them a heart attack.”

Where might his observations not apply? To those with extra-long, extra-active retirements, where spending will surely exceed the average retiree’s.

This is very much in line with the financial observations I shared in How to Plan a Great Second Life: What Are You Going to Do With Your Extra 30 Years? Things aren’t nearly as dire as others would like us to think (mostly so they can handle our money).

But don’t show this to your kids or they’ll stop saving right now and spend it before it starts earning compound interest! My rule-of-thumb there for anybody younger than about 55 is to self-tithe. Put 10% away from the first paycheck and later financial distress simply won’t be in the picture.

7-1-05: More great new resources…

Four places I thought you’d like to know about, thanks to Glenn Ruffenach and The Wall Street Journal Sunday on June 26 (2005):

* Still a lot of misunderstandings about living wills and a health-care power of attorney, especially after the Terry Schiavo case, so you might want to look at “10 Legal Myths About Advance Medical Directives” at

* When ya gotta go, ya gotta go. It’s even worse if you have an overactive bladder (which affects one in six adults 40+) or prostate irregularities (no women need apply) and you’re in the big city, as I just discovered in Manhattan. Arthur Frommer, himself no summer chicken, to the rescue: a 76-page booklet with a guide to restrooms in four national parks and 19 cities. Either call (877) 786-7465 or visit

* Fifty-plus and interested in taking a job now, working in retirement, or helping improve the quality of life in your community? A recent survey found 58% of the respondents said yes. Then why not look at "The Boomer’s Guide to Good Work: An Introduction to Jobs That Make a Difference" at

* Long distance caregiving with the person receiving care an hour or more away (that’s more than 5,000,000 of us) can be a real problem when you’re trying to find community services and arrange transportation and meals. So you might check a 20-page report prepared by MetLife Inc. and the National Alliance for Caregiving at (203) 221-6580 or

* Finally, want to evaluate assisted living institutions and hospitals? Two booklets should help: (1) “A Guide to Choosing an Assisted Living Residence,” eight pages to help appraise and compare facilities, is at, and (2) “Hospital Compare” is a new computer Web site that provides information about the quality of care at local hospitals. See


5-1-05: 10% off your liability and collision car insurance?

In most states it’s as easy as taking a state-approved defensive-driving course and sending the certificate to your agent. That’s $100 a year on a $1000 policy. But check first: will your company honor it? What is the discount percent for your state? And what’s the minimum age to qualify?

Courses often last 5-6 hours, cost less than $40, and are often offered at community colleges by AARP, AAA, or individual providers. A few are even given online, “but make sure the program is approved by your state,” warns Kelly K. Spors in the Wall Street Journal Sunday edition of the Santa Maria Times on March 20.

The course covers observation skills, road rules, and hazardous driving conditions though no actual driving is done. Sometimes you must take a refresher course and/or keep a clean driving record to maintain the discount. And if you’re lucky (and careless), some states are letting drivers with traffic violations or speeding tickets get points taken off their record for completing the program.

5-1-05: One solution to the Social Security nightmare.

While I have strong personal views (on almost everything, some absolutely without foundation, others so obviously correct I fear for the dissidents’ sanity), I have tried to stay relatively neutral, politically, in this newsletter. So it is with a pinch of trepidation that I offer one solution that I read in the San Jose Mercury News a few weeks back about how to provide health coverage to everyone without bankrupting America—or you (or me).

Since the article and its 10-point proposal takes up many digital inches, let me send you to to read it, if you wish. If you think it makes sense, show it to friends, paste it to your front door, or copy and rush it to your kin or senators and representatives. If not, do nothing. Just don’t dialog with me about it, please: my benefits (like yours) would be protected (see point 8) and I’m busy writing a book (see #10 below)! If you find something evil, wacky, subversive, or fiendish in it, either admonish the authors or email your observations (length is no issue here) to George Washington.

3-1-05: Free credit line reports? Probably not free!

It’s true that under the Fair and Accurate Credit Transaction Act you are entitled to one free credit report a year, but most of the “free” reports offered have strings, some expensive strings, buried in the small print.

Where can you get the official no-strings version? According to the Wall Street Journal Sunday section of 2/20/2005, it is hiding at It’s available right now if you live in the West, from March 1 in the Midwest, and the whole nation after Sept. 1. (You can also call [877] 322-8228 and have the report mailed to you.)

According to the article writer Andrew Blackman, if you check Google you will get 16 million matches, a blizzard of ads, and won’t find the official site until page five, among many other sites with confusingly similar names. Most will send a free report as long as you sign up for a credit-monitoring service for $10 a month or $80 a year. That can usually be canceled without charge within 30 days so the report is free, but why the hassle? (It’s also hard to tell who owns or operates some of the look-alike sites, making it risky to give them confidential information.)

It’s a good idea to keep track of what your credit reports says, to eliminate errors and rectify misunderstandings. It’s a better idea to get it straight from the FACT Act-mandated site, with its clearly stated privacy policy and information about security.

3-1-05: You don’t need a million in the bank to live like a millionaire forever.

I like Paul B. Farrell’s “Incredible Millionaires Retirement Formula” in the 1/30/2005 Wall Street Journal Sunday section appearing in my local Santa Maria Times.

He says you don’t need a zillion or even a million dollars in some account to live like a millionaire forever, despite what the asset managers tell you. They’d like that, of course, because they live by siphoning fees off the top, leaving you what’s left. But you must see it from the other side: if you had a million in the bank at 5%, you’d get $50,000 annually to meet your expenses, which may well be enough. (AARP says most live on less and yet are happy with their lives.)

Instead of an asset-based formula, you need a reliable monthly cash flow. $50,000 divided by 12 is $4,166, say $4,200. With that coming in every month you can be rich and retire like a millionaire. The best news: you needn’t inherit a noodle empire, be a CEO, or sell dope to get there. Steady jobs, wise savings, and a pinch of savvy will do it.

According to Farrell, these will get you there with bucks to spare.

* Starting at age 30, max out your IRA and 401k with as little as $150 a month. Compounding does the rest. A guaranteed millionaire. (I suggest that one simply self-tithe 10% of their gross income to get to the same point.)

* Or say that you and your spouse receive a total of $2,500 monthly from Social Security, plus another $1,500 from pensions. Add a pinch of savings and you’re doing better than a fat cat.

* You’re not turning to stone the day you quit working. Join the 70% that get a small second job doing what they really like. That brings in additional spending money or means you spend less of the long-term kitty. You’ll also stay healthier and saner a lot longer.

* Oh yes, there’s your house. Stay away from home-equity loans, get the mortgage paid off, and either live there free, move to a smaller place in a cheaper area, or even use it for reverse-mortgaging (as a last resort).

I like his formula because it’s pretty much the same thing I say in How to Plan a Great Second Life: Why not life fully every day of your extra 30 years? You must take a no-nonsense look at all of your assets, what you have added later, and calculate what’s missing to have a steady income flow. (Remember, you’ll likely only need about 70% later of what you need in pre-retirement income, assuming you can get your young sprigs out on their own.) Check the calculation sheets and the process in my book, if you’re in doubt. And while you’re there, look at the “dream list” stuff too. The most important thing about a second life isn’t the money (particularly if you’re prudent now), it’s creating a life plan that makes waking up every morning both a miracle and a delight!

1/1/05: The IRS is finally watching your IRA withdrawals!

Until now, whether you made your required withdrawals from your IRA after you reached 70½ was a matter of honesty, “a case of self-policing more than anything else,” according to Stephen P. Vitale, senior V.P. at J.B. Hanauer, a New Jersey financial services firm.

No longer. There was no mechanism to check before. Now, the holders of your IRAs must report each spring to the IRS whether you are required to make a withdrawal from your account during the calendar year. At the same time they are to send you a reminder that a withdrawal is required.

Why? So your favorite Uncle can start collecting those tax dollars hiding in your accounts!

A few tips, according to The Wall Street Journal in an article last week by Glenn Ruffenbach:

· Check to calculate the amount you should withdraw.

· If you’ve been negligent, start taking those withdrawals this year.

· While the IRS has been lenient about excusing penalties before, that’s over—penalties that are 50% on the amount that should have been withdrawn!

· It gets complex when your IRAs are many and scattered. The solution: consolidation them all into a single account. You’ll save fees, have one set of investment decisions, and have the money in one place only for your beneficiaries.
5/1/04: Let your fingers do the flying!

Not only gas prices are soaring this spring/summer, many more airline customers will be too, at bargain rates on the many discount airlines (or the older lines forced to compete). But how do we find those rates now that travel agents are fewer and charging more? Hie thee to thy computer, says Laura Bly in the April 30 U.S.A. Today.

She says to start by getting a benchmark rate. First see some 6,000 city pairs in the contiguous U.S. at; alas, the data is a year old and the new discounters may not be there. Two other choices: one that doesn’t includes taxes,, or a more limited source from Worldspan,

Then let another search engine dig in for the precise date and rate. One site lets you check Expedia, Orbitz, and Travelocity at the same time with same-screen results: It also helps you learn the ropes as well as see other travelers’ winning bids on discounter’s Priceline and Hotwire. Consider using as well.

By July two new search engines will be in best user-friendly form to do many of the above functions too: check and

All this takes some time but can save many hundreds of dollars, multiplied by the number of people flying. Also, airports are now slightly faster getting us through the body checks but don’t forget that on most of the flights you’d better eat first or carry a sack lunch.

5/1/04: So you want to make money and you also want to get in print!

In earlier SSL Newsletters I wrote at some length about writing and selling general and travel articles. Those processes haven’t changed. (See here for an index of the past issues.)

On these pages let me quickly explain niche publishing, and then send you off to a page of links of additional resources should you decide to pursue the most promising and profitable area of publishing, where you test everything first before you write a word, and if the tests are positive, the risks all but disappear.

First, how do I know this works? Because I wrote the book on the topic, Publishing to Niche Markets, I lecture about it nationwide, and have done it successfully for almost 20 years, as have many hundreds more who attended my presentations or used the book. Enough about me.

Let me give you an overview and why it’s a great field for second lifers, then I’ll lead you to an article that shows in detail how it functions.

Most people think of publishing as Doubleday, writing a best seller, earning royalties, guesting on TV shows, and triumphantly signing book copies in bookstores. For about one percent of the authors, that’s it. Yet some of that touches most writers: they do “sell” a manuscript to a big house, wait 18 months for it to emerge in book form, earn 10% of the list price (paid twice a year), and they keep their day job to eat!

But computers have added a new publishing dimension: micro-targeting. Before, books were cold or hot set and were printed in runs of many thousands, so only the broadest topics were printed. Publishers waited in line for about six weeks for the books to go through the presses. The process was slow, the book plain, and the chances of ever meeting an author or publisher about as likely as meeting Babe Ruth or Man Mountain Dean.

Now, every one of us can write a book on a computer, put the contents into printable shape on the same machine, e-mail it to a printer, and have anywhere from one to thousands of books in print ready to ship in days. We can even print one copy P.O.D. (print-on-demand) in just a few minutes. The P.O.D. may cost $6 or so; a 256-page 6” x 9” book with a four-color cover and black-and-white photos may cost $2.75 each if we print 1,500 or 2,000 copies.

So the problem isn’t really writing and producing a book, as long as we hire a one-job proofreader/editor, use book printers, and follow the guidelines of books like Dan Poynter’s Self-Publishing Manual. It’s getting somebody to buy it!

That’s where conventional big-house publishing is weak. Sure, they sell millions of copies of celebrity books, but the ordinary how-to is poorly marketed, usually to libraries and bookstores, where it flounders on the shelf with 100,000 other issues. That’s not to demean standard publishers. It’s to say that it is a hard path for outsiders to take successfully if they need the income to live.

Niche publishing is different. It starts with a reverse but logical premise: the book exists to meet a need of a clearly identifiable audience that is big enough, affluent enough, and easy enough to find (on an affordable mailing list) to be able to be tested before the book is ever written.

For example, Publishing to Niche Markets isn’t, oddly, a niche book because it is for anybody who wants to do what it says. Tall, short, old, kids, anybody. So it must be sold the usual way: bookstore and to libraries. It may gross $35,000 over ten years, with about 25% of that profit.

But Standard Operating Procedures for All Dentists is a book that is never sold in bookstores or found in libraries (except dental libraries). It is sold 80% by mail and 18% by dental word-of-mouth, has grossed a million dollars in six years, with about half of that profit. I know because I publish them both. The latter is for dentists, it meets a huge need extremely well, dentists are found on a dozen reliable mailing lists, and the book was tested for about $300 before a word was written.

To see precisely how niche publishing is done, and how the test is made, please link to an article I just had in print printed called “Niche Publishing is the Path of the Future for Small and Self-Publishers.” At the end, it also leads you to other easy-to-follow resources. (Also, look here for further information about related workshops.)

Finally, why is this a great field for second lifers? Because by our age we usually know something specific that others will pay to read. Hardly a worker in any field doesn’t have hard-earned knowledge that others coming into or up in the field wouldn’t beg to know. “State-of-the-art” books in every field are needed; they are how-to at every step. Nor is the field limited to vocational topics. A book on senior skiing. How to combine bird watching, camping, and backlands hiking. Crafts, how to find collectibles, a “where-are-they” book for the old Brooklyn Dodger fans, six backland trails from Plunk, Idaho. The trick is to define knowledge for mail-reachable audiences through mailing lists. Then follow up the book with related products, like reports, booklets, seminars, speeches, and/or cassettes and CDs or DVDs.

This is hottest field in publishing because it’s low-risk, easy to test, quick to enter, and should leave the publisher with no unsold books. Bingo.

[For additional information about finances and money, see]

3/1//04: Pay-as-you-surf Internet access

Remember when the Internet started and you paid by the minute, plus every time you dialed up? It drove the user crazy, if not poor. Then the services started charging a flat rate—and many of them were free…

The old days return—as free services disappear!

Today we can buy an AOL starter kit with 500 minutes for $14.95. Then the minutes can be updated by credit card at AOL’s website.  Or buy 1,200 minutes prepaid from Sprint for $20. Of course, you need a computer and a phone line. All will tell you the status of your unused minutes, and most (the vendors also include AT&T, Budget Dialup, and MaGlobe) have a grace period before deleting accounts so e-mail won’t be lost.

Why might this interest us? (1) It’s great for traveling, if you can find the access number where you are visiting, (2) It saves money if you rarely use the Internet, or (3) It is a backup if you use broadband a lot but can’t find a Wi-Fi (wireless Internet) connection.

If you don’t have credit? You can buy prepaid AOL cards at Wal-Mart, Office Depot, and Western Union stores; Sprint cards at CVS, and AT&T cards at Walgreens and Eckerd.

The biggest drawback? Dial-up connections are slow.

A flash in the pan? Hardly. It earned $50 million in 2003 and will double in 2005.

1/1/04: Don’t forget reverse mortgaging

I’ve written about this before, and I discuss it in How to Plan a Great Second Life (as well as at the money website page), but I’m seeing more positive comments about the process as it becomes more popular and matures. (Financial Freedom, the nation’s largest lender of reverse mortgages, saw the number of loans jump 80% the first six months of 2003.)

In short, it allows you to earn tax-free income by tapping the equity in your home. And the loan needn’t be repaid until you move from the home, sell it, or die. As the name says, it’s the reverse of a regular mortgage, where you borrow a specific amount and pay it back monthly. Here, the lender makes payments to you based on the equity you’ve accumulated in the house. How much might you receive? If you’re 63 and your home is worth $200,000? $617. If 70, $730. If the home is worth $300,000, at 63, $844, 70, $997.

Three things factor into your payment: the homeowner’s age (you must be 62), the value of the home, and the current interest rate. And you can get the reverse mortgage three ways (or a combination): a single lump sum, a credit line, or a monthly cash advance.

There are three times, however, when you don’t want to consider this route: if you’re planning to sell the home soon, if you want to give it to your kids, and if you can’t afford to maintain the home itself, the property taxes, or the insurance.

I bring it up again only because in my recent second life talks I saw too much financial fear from folks who were equity rich and income poor. They would have suffered far less stress had they known this income source existed.

Here’s where I’d go for more specifics:

* National Reverse Mortgage Lenders Association  or call (866) 264-4466 for a clear, free booklet


11/1/03: If you run completely out of money…

A particularly good article called “Heading for Broke” in the October issue senior resource e-zine made many good points worth sharing.

“No one grows up and dreams of being broke in retirement. In fact most of us go through life aware that there must be some magic amount of money needed before retirement not to be "broke" in our later years. Toward that end, perhaps a few plan to be broke—but only on the day they die.

“Unfortunately, many people do not plan properly to avoid being "broke" with years of life yet to live—or don't plan to get side-swiped by a crisis that jeopardizes their ability to supplement social security and pension with income from savings and investments.

“If you are a senior without sufficient funds to cover costs to repair your home, or the child of a senior who is unable to pay for medical necessities, there are some IRS/Medicaid regulations to note. Medicaid is a federal program, administered by each state per their legislation, to help those who cannot cover the gap between the cost of healthcare and what Medicare covers.

“For a senior to be eligible for Medicaid they need to run out of money and demonstrate they have been supporting themselves.

“If a relative provides the funds for the repair of their home or writes a monthly supplemental check, it may be hard to prove the steady, legal independence of the senior's household. They may also need to demonstrate to the IRS that any financial aid received from relatives was within the legal guidelines of the IRS' gift limits.

“Anyone receiving government checks, (social security, Medicaid, government pensions) needs to be able to demonstrate a clear paper trail. The need for this demonstration may arise when one spouse needs long term care in a nursing home or Alzheimer's home the cost of which could bankrupt the well spouse living at home. The ill spouse may qualify for Medicaid without causing the well spouse to spend down all investments, (like) sell(ing) their home and car. This separate clear paper trail is best done with separate checking accounts—even for long-time spouses. With most banks offering free checking for those over 55, this is not a financial hardship to accomplish.

“It's important to have a clear trail of what assets were liquidated, how they were liquidated and how spent to benefit the senior, not a caregiver or other person.

“If children or others received some of the funds, a paper trail should show gifts or transfers and that they were within the non-taxable guidelines established by the IRS.

“In 2000 more than 35,000 caregivers needed to revise their tax returns due to bookkeeping errors. If you are the caregiver spouse, or child or grandchild providing care, it is wise to consult with an Elder Law attorney or financial advisor who knows the law before you are deep into caregiving and helping with financial support. Mistakes can be costly to estates and everyday living.”

(Two other items in the October issue are also particularly interesting: about flu shots and long-term health insurance.)

9/1/03: Life insurance in our dotage?

Probably not. Only 4% of those 65+ bought life insurance in 2001 (usually for estate-planning purposes), but there’s been a recent spurt in, of all things, term insurance among older buyers. Why? Since investment assets have shrunk in the bear market, they are making sure their spouse is covered in case they die first.

At the same time, rates have fallen 5-20% for seniors as longer life spans and medical advances have hit the actuarial charts. Age limits have also risen for term insurance. This reflects the fact that those 70+ will double in 2035, to 57 million. The insurers are also easing up in three categories where age was a detriment: (1) family medical history, where just reaching 70 means that family diseases are not longer likely to affect the insured; (2) high blood pressure, a slight increase is expected and won’t affect life span, and (3) weight, a few extra pounds are associated with longevity.

9/1/03: Don’t call your home insurer!

That is, unless you’re actually going to file a claim, you know it is covered, and the loss is substantial. Why? Just calling to ask a question is likely to get reported as an inquiry of unpaid loss (particularly if you mention an amount), and two or three calls or claims are as likely to get you dropped the next time you apply for renewal—or at least get your premiums doubled or tripled, according to Kelly K. Spors in “When It Does Hurt to Ask” in the August 10, 2003 Wall Street Journal. This includes State Farm and all California calls.

Unfair? Sure, but there’s not much you can do about it other than check your Comprehensive Loss Underwriting Exchange report (see Reports are free if you live in Colorado, Georgia, Maryland, Massachusetts, New Jersey, and Vermont. For most others, it costs $9.) Anything in the report can be disputed and the recording firm has 30 days to settle it.

Five quick guidelines to avoid the trap: (1) Know the specifics and deductibles in your policy, (2) Avoid preliminary calls unless you plan to file a claim and know that the damage will be covered, (3) If you must call, don’t mention actual damage or any amount of money, (4) If in doubt, ask a professional repairman first to get an estimate, and (5) Report only major damage, avoiding many small claims.

7/1/03: That pesky Medicare Supplemental Insurance.

It finally happened. Lemming-like, I visited my Social Security office since I just turned 65. It was quick (20 minutes), pleasant, and the booklet and inserts I received were easy to understand. The agent convinced me that Medicare A and B made huge sense, particularly in my case. (She was young, perky, and I suspect thought I was about 20 years overdue.)

That left a potential hole called Medigap, the difference between what A and B covers (more than I expected) and what I must supplement (as little as possible).

Since I will drop my regular Blue Cross and AARP supplement, the monthly savings will be significant. So my thinking is to pick carefully between the firms and try to guesstimate the kinds of health horrors likely to befall me and cover just those.

Every state has a Health Care and Counseling and Advocacy Program. (Call 1-800-MEDICARE for details.) Ours in California is called HICAP. It's free and set up simply to explain the insurance choices to fill the Medigap. Which Bill Pate did for me. The biggest surprise was that among the 30 companies in California (a few for closed clientele, like Lutherans, Mennonites, and physicians) all the policies provide exactly the same coverage, although the rates vary considerably. Thus you must call them to get comparable rates for the 10 different kinds of coverage.

It sounds complex but an excellent book, Choosing a Medigap Policy (again, contact 1-800-MEDICARE) explains the 10 kinds of policies, what each covers, and what is left to you. (If you are truly destitute, there are plenty of additional support programs outlined in the booklet as well.)

The conclusion, for me? I will pay the $59 a month toward Medicare B, subtracted from my monthly Social Security check that is electronically deposited in my bank account. Since I must be accepted without health pre-conditions in the first six months, I will get in a Medigap policy now before I surrender my present policies. I'm looking most seriously at Plans C and F, which should average out to about $120 a month until my post-life harp policy floats in. (But I'm also considering an alternative, the Blue Cross Senior Smart Choice, and will know more when the paperwork arrives next week.) I can change my mind annually at my birthday and switch to policies of equal or lesser coverage, so that's another reason for getting a bit more than I may need now while I'm working. If I limit my coverage too much at the outset, I may not be accepted by an insurer if I need more later.

Still uncovered, drugs (except in the Smart Choice program). I'm hoping Congress will help out there, more for others than myself right now.

And long-term insurance. May take my chances, and if destitution grabs me, surrender my old clothes and let Medicaid take over. But that's for a later day. Now I'm eager to wisely fill my Medigap.

I'd love to hear your Medigap decisions, and will share them (if that's okay) in the next issue. (200 words maximum?)

5/1/03: Ten estate-planning ideas.

The question is, “What will happen to our possessions when we’re gone?” Even though we may not be leaving an inheritance, hoping to use that last dime for the last moment, there’s still going “things” to distribute. We can direct them to those we love, save everybody a lot of confusion, and keep unspent dimes out of Uncle Sam’s pocket by following some prudent steps. Here are
ten of them, suggested by Don Phinney or EdwardJones.

(1) Assemble our estate-planning team. Usually an attorney, a tax professional, and an investment broker. Pick those we fully trust; ask lots of questions.

(2) Determine our objectives. Figure out first what we want to leave others, to whom, and how secure we want to leave them. Our team can suggest objectives and models.

(3) Create a list of our assets. We need an organized way to list our inventory: the lawyer or broker probably has a model document to match our needs.

(4) Minimize administrative details. To reduce the mountain of paperwork, consolidate our assets and keep a detailed inventory. Our survivors will bless us.

(5) Draft a will. Even in we don’t have much to leave, figure out who gets what. This is critical if we have minor kids because we can designate a guardian. Otherwise the state will make all the decisions.

(6) Reduce our probate estate. Since it takes nine to 24 months for the state to carry out the provisions of our will, and costs 2-5% of the value of the estate, we should get as much out of the probate area as possible. Already excluded are insurance policies or jointly owned assets. Our tax person will be most helpful here, although we’ll likely not be able to avoid probate entirely.

(7) Determine our taxable estate. Since the tax is calculated on the fair market value of all our assets less any deductions, we should ask our team to help lower our estate tax bill.

(8) Take advantage of estate-tax exemptions. Right now we can transfer up to $1 million in assets; in coming years that may increase to $3.5 million. Still, it makes sense to ask our team how to maximize our exemptions to reduce or eliminate estate taxes.

(9) Plan for the worst. At some point we may become our own worst enemy, becoming anything from baffled to utterly deranged. Not good states from which to manage others’ inheritance. So we should set up a durable power of attorney so someone we trust to manage things for us if that becomes necessary. plus a health care directive, or proxy, to make health care decisions.

(10) Protect our assets with insurance. Lest we want to turn the tables and force our kids to use their assets to pay for our medical expenses, some kind of long-term insurance probably makes sense.

When should we do this? Why not now? Most people simply put it off and off until they are bed-ridden or dead. It’s not fair for those who have to close the last chapter of our life if we don’t do our part by putting our affairs in final form. Think of it as giving them a loving hand by doing it now.

Have I done it? Only some of it. When will I finish the rest? Within the next month. I’m convinced.

3/1/03: Reverse mortgages up 74% in one year!

In the money section of How to Create Your Own Super Second Life: What Are You Going to Do With Your Extra 30 Years? (out of print; the second edition should be out in June) I spoke at some length about reverse mortgages as a way to use your home for funds to help finance the rest of your life.

I’ve read a half-dozen articles in the past few months about the rush to reverse mortgage, but the clearest was an article in Time on Feb. 17 (p. 99) called “The Backwards Loan: Here’s why ‘reverse’ mortgages are the rage—and how they can hurt you.” It explains the three ways that those 62 and over can use the collateral on their home to give them a monthly payment as long as they or their spouse live (an annuity), a lump sum, or a line of credit. The example used is of a 77-year-old Chicago couple with a home worth $250,000 (qualifying for a $175,600 reverse mortgage) receiving a net $1,069 a month. They continue to live in their home, of course.

Time reminds the lenders that there are sizeable fees, like any mortgage, though they are easily overlooked because they aren’t paid up front: an origination fee, mortgage insurance, finance charges, and servicing fees—a whopping $15,100 in the example above.

There may be a simpler, faster, and less expensive alternative: sell your home and move, particularly if the kids don’t want it. In fact, just to get the reverse mortgage you must attend a two- or three-hour free financial counseling session where they will ask the same question. If there’s no reason to hold on to the old homestead, prices are up now. Find a smaller, easier-to-tend home, perhaps in a lower-cost area.

But if you decide to get the reverse mortgage, one insured by the FHA is the best deal. Shop around. If you want higher loan limits, non-FHA mortgages are available from Fannie May (the Homekeeper Loan, up to $322,000). The question is: why or how badly do you want to keep the house where you presently reside?

7/1/02: Upgrade your home before selling it?

It’s warm, home values are high, borrowing costs are less, and you’re in mind to sell the mansion and resettle in a bungalow (or two). What’s worth the expense?

<Remodeling Magazine’s> “2001 Cost vs. Value Report” to the rescue. Here are six major projects, their typical cost, and payback to a home sold the year after completion of the project: two-story addition, $67,743, 83%; bathroom remodel, $9,786, 80%; kitchen overhaul, $38,769, 80%; deck addition, $5,865, 75%; basement refinishing, $39,658, 69%, and sunroom addition, $27,081, 60%. (Check

But don’t over-improve. “Rarely does a home seller recoup a big outlay of cash made to boost the marketability of a house,” says Bradley Inman, founder of Internet realty company HomeGain. He suggests dealing with major shortcomings of a house in negotiations rather than to fix them.

But small upgrades can have a big payback at sale time. A $470 yard clean-up and landscaping job can be expected to add about four times that sum to the eventual sales price.  Big returns also come from painting, floor repairs, and carpet replacement.

5/1/02: More about reverse mortgages

When I wrote my Super Second Life book three years ago the idea of reverse mortgages was still relatively new and viewed with considerable skepticism by the public, although it held high promise particularly for seniors mortgage-free but penny poor.

Much of that skepticism is disappearing, although if you are thinking of taking this step it is still best done after consulting with a financial advisor who can consider every alternative.

I particularly like the view shared by Fran Huddleston, from Wells Fargo Home Mortgage (, in the March issue of ( Let me pluck some key items from that issue, and send you to it or Fran for more details.

“A Reverse Mortgage is a special type of mortgage that enables you, as an older homeowner (62+), to tap the equity you have in your home. The value of your home and your age determine the amount of equity you can receive. You have the flexibility to address your particular financial needs whether it is a lump sum to pay an unexpected debt, update or make repairs to your home, or receive regular monthly payments to supplement your monthly income. You may remain in your home for life. Unlike traditional home equity loans, no monthly payments or repayment of the Reverse Mortgage is required until you no longer occupy the home as your principal residence. Once you vacate the home, the lender will declare the mortgage due and payable.

“With a Reverse Mortgage your home is not sold, you retain title, income received is tax-free, there is no income qualifying, and you do not make a monthly mortgage payment. It does not affect your monthly income from Social Security. A Reverse Mortgage is endorsed by AARP and is FHA insured. It is a ‘non-recourse’ loan: the amount you owe can never exceed the net selling price of your home.

“If you owe a small amount on your mortgage or have your home paid in full, you may want to look into a Reverse Mortgage to be able to use some of that equity. In January the National Reverse Mortgage Lenders Association (NRMLA) announced that the U.S. Department of Housing and Urban Development  (HUD) raised loan limits for federally insured reverse mortgages by 9%.

“The higher loan limits apply to Home Equity Conversion Mortgages (HECMs), insured by the Federal Housing Administration (FHA). They are the most popular of the reverse mortgages.  Although HECM loan limits vary by geographic area, the highest loan limits (applicable generally to metropolitan areas) rose to $261,609 from the previous $239,250. The lowest loan ceiling, generally applying to rural and non-metropolitan areas, rose to $144,336 from $132,000.

"The increase in the HECM loan limits, combined with today's lower interest rates, provides seniors with a powerful tool for addressing their retirement needs," said Peter Bell, president of NRMLA. These higher limits will enable seniors to make their homes work even harder for them in the future by allowing them to obtain larger reverse mortgages than before."

“Borrowers can choose to receive reverse mortgage funds as a lump sum, monthly income (for up to life), line of credit, or as a combination. No mortgage payments are due during the life of the loan which extends until the borrower sells the home or permanently moves out. Borrowers may use the funds for any purpose  (such as home repairs and improvements, medical costs, in-home care, education, and supplemental retirement income).

The Guide to Reverse Mortgages, a free booklet, answers frequently asked questions, provides detailed information on the loan origination process, and includes a Code of Conduct for lenders. It is obtainable by calling NRMLA at (866) 264-4466 (toll-free) or by visiting their website at For more information, you can also contact and click on Reverse Mortgages.

5/1/02: Another loan to junior?

Can giving our teens an allowance, plus an occasional buck to get them out of our hair, open the door to life of parental dole? And how do you say no when it means they’ll be sleeping in their car—or yours?

Jonathan Pond, host of “Making the Most of Your Money 2002” on PBS and author of “When Your Kids Come Borrowing” in New Choices (March 2002), makes several points that at least help put the request into perspective.

We all know that loaning money to a relative is the quick path to unhappiness. They not only pay us last, but they resent dong it! Why would it be any different with our kids?

“Will giving the money as a loan wreck your relationship?” Pond asks. As long as the payments come on time, love reigns. But when they don’t, loaners come calling, and there’s the rub: you’ve got to collect from your kids. Will they see the loan as a sword over their head? Will they stop taking your phone calls? Will they quit visiting? Will they set fire to the Small Claims Court?

And “If the loan is not repaid, will you want to take a tax deduction?” Good luck getting that one past the IRS. A loan to your kids looks too much like a gift unless you take the strictest care to act more like a bank than a parent. That means a legal note signed by both parties, regular interest payments, a specific date for repayment of the principal, interest rates equivalent to what a lending institution would charge, and collateral. Again, the tough part is trying to get paid if the dates aren’t met.

“A lot of people aren’t eager to do this, if only to preserve family harmony. Imagine the fallout if you attempted to repossess a relative’s car or foreclose on their home,” says Pond.

Pond’s conclusion is straightforward: “If you can afford to help a child or other family member who has legitimate financial needs, think of the money as a gift. If your relative has trouble repaying, forgive the debt before it impairs your relationship. After all, what’s more important, your relationship with your money or your relationship with your family?”

A few of my second cousins would lose in that equation.

5/1/02: An IRA and 401(k) catch-up for those 50+

Those 50+ can take advantage of an IRA catch-up provision. Beginning in 2002 we can contribute $500 more annually into our IRA than the "regular" new limit of $2,000.  By 2006 the "regular" limit will be $3,000, but those 50+ may contribute an additional $1,000 annually.

Have a 401(k)?  Those of us over 50 can contribute $1,000 more in 2002 than those under 50, and $2,000 more in 2003.  The amount will increase annually until in 2006 when we can contribute an additional $5,000!  The "regular" limit will rise to $15,000 by 2006, meaning that if we are still 50 or older we can contribute $20,000 in 2006.

The moral: Don’t save up our pennies. Put them in IRAs or 401(k)s.

3/1/02: Stop stolen credit card thieves in their tracks

We’ve all heard the horror stories: somebody purloins your credit cards, flies to Bali, orders 30 cases of cognac, and starts a fat weekly per diem… In the meantime, the card company drives us crazy, while our credit plummets.

We all know that we should contact the credit card companies the moment we detect the theft, which assumes that we have the card numbers and their toll free phone numbers written down and accessible. But we should do two more things too.

One, file a police report immediately in the jurisdiction where it was stolen, which shows our diligence and may even start an investigation.

Less known but as important is to call the three national credit card organizations (and Social Security) immediately to place a fraud alert on our name and number. That stops the card use on the spot. Here are those numbers: Equifax (800) 525-6285, Experience (formerly TRW) (888) 397-3742, Trans Union (800) 680-7289, and the Social Security Administration fraud line (800) 269-0271. (Thanks to B. Rieken, an attorney, for this information.)

1/1/02: Where to find starter guides for retirement financial planning.

Who best to ask for information about financial retirement than the author of The Washington Post’s “Retirement Journal” column and author of How to Retire Happy (McGraw-Hill, 2001), the experienced financial journalist, Stan Hinden ( Add to that an item I read on 12/30/01 from "The Motley Fool" and the AARP.

In an article in the Forum for Investor Advice, Stan points to four sites for key starter information: Social Security info at and Medicare materials at Both have many booklets plus direct information to download. The AARP site ( offers lots of general information about retirement and links to “aging” organizations; my book also has the latter.

The Forum just published a new brochure, “The Scorecard: How to Find a Financial Advisor Who’s Right for You,” including questions to ask in initial interviews and a “scorecard” to evaluate our comfort level with advisor candidates. See

Surprises when Stan retired? “I was so busy…that I did not take time to think ahead to retirement—other than saving in my company 402(k) plan. I wish now I had been better prepared.” (If Stan didn’t plan ahead, is there hope for the rest of us?)

Stan’s book lists 12 important decisions to make. Which are the most important of the 12? (1) when to take our Social Security payments, (2) how to take our pensions payments, (3) whether to buy long-term care insurance, and (4) how to invest our retirement savings. “You should think of these matters well in advance of retirement,” says Stan.

Other thoughts from Hinden that we might benefit from…

* The most unpleasant surprise was the amount of paperwork required for retirement-related decisions and bookkeeping. The most pleasant? The new sense of freedom and free time.

* “(I sold investments unwisely during the Gulf War. The lesson?) If you have an investment that is correct for you, stay with it for the long-term. When markets tumble, don’t panic. And most of all, don’t try to time the market, or outguess (it). Stay the course.”

* Regarding long-term care insurance, try to find an advisor who specializes in LTC insurance. The State Health Insurance Program has counselors in many communities across the country. Their phone numbers are listed in the back of the booklet, “Medicare and You 2000,” which was sent to most Medicare recipients.” The list is also available at the Medicare website. More information about LTC insurance two paragraphs ahead…

* Final thoughts? “Save as much as you can. Retirement may seem like it is far off—but it is not. And sooner than you expect, you will need that nest egg. Also think carefully about what you would like to do in retirement—it can last many years—so that you can prepare financially and intellectually for that activity or endeavor.”

As I was putting this newsletter to bed, I stumbled on some additional sources in “The Motely Fool’s” explanation of the conclusions to a new study by the AARP (American Association of Retired Persons) called “The Costs of Long-Term Care: Public Perceptions vs. Reality.” The perceptions, in a nutshell, were that most people over 45 grossly underestimated the costs of long-term care.

Lest we fall into that uninformed category, here are some of the costs:

* The national average cost of nursing home care is $4,654 monthly.
* The estimated median cost of care in an assisted-living facility is from $2,000 to $2,500 monthly.
* The average Medicare reimbursement is $109 for a skilled nurse visit and $64 for a home visit by an aide.

The report also said that about 30% of those surveyed said they had insurance that covers long-term care, but only about 6% of Americans in fact purchased such insurance, “meaning folks may be confusing long-term care insurance with other types of coverage, such as disability insurance or Medicare.”

For more information about long-term care insurance and financing a dream retirement, here are additional sources:,,,, and

I think I’ll just follow the old cowboy model and die with my boots on. (Except that most of them did so at about 35 or 40.)

11/15: When will you run out of money?

Want to fill in a couple of items on a chart and be able to know the exact month you will run out of money? A long-time friend, Jerry Hogsett (, has created a spreadsheet (that I’ll gladly email you) that makes that possible.

You need four variables. First figure out your NET WORTH at time of retirement: investments, savings, 401Ks, other pensions, property equity, … Then figure out how much you want to draw out each month (MONTHLY DRAW). This will be taken from the net worth, while the principal stays invested. Calculate the EARNED INTEREST from that investment. Finally, factor INFLATION into the mix so the amount your draw will increase each month to offset higher costs.

Jerry’s spreadsheet starts on 1/1/2000. Simply adjust the years when your retirement will begin. He calculated NET WORTH at $1,000,000; the MONTHLY DRAW at $5,000, the EARNED INTEREST at 8%, and the INFLATION at 3%. Starting 1/1/00, you could continue to draw the $5,000 a month (plus inflation) until May in 2035. (A similar entry of $500,000, $3,500 a month draw, 7% interest, and 3% inflation will find you running out of cash in 16 years.)

This doesn’t account for other income that you will receive in addition to the draw, like Social Security or Aunt Tilly’s blessed inheritance. All it tells you is when the draw ends from your investments.

How do you use the spreadsheet? First, you need Microsoft Excel. Then get the email attachment from us (details in a second), save it to a file, open Excel, open up that file in Excel, then highlight the four basic input factors you wish to change at the top: Initial Principal, Initial Draw, Investment Earnings Rate, and the Inflation Rate. Magically, the spreadsheet will adjust the figures to reveal the doom date, plus the amounts you will have at each month in between.

Since I can’t post this at the website and have the calculations work (or if I can, I can’t figure out how), if you’d like this spreadsheet, just get back to us at and write “retire.xsl.” in the subject line. We will send the file as an email download.

Another tool to give us a knowledgeable handle on what we have available to create the kind of second life we want—and what we can do now to make that life even better. Special thanks to Jerry (and his blushing bride Suzanne).

10/15: War bonds in your investment portfolio?

Since September 11 the question has come up with some regularity, “Why don’t we create a War Bond to finance our current situation?”

Bob Brinker, a national radio investment adviser, offers an excellent response: “We already have a first-rate savings bond, the Series I, that has precisely the same effect, of loaning our federal government money that can be used to finance these activities.

My purpose in this newsletter isn’t to suggest investments but I thought this advice was at least worth checking out, so I went to and compared the I Series to the EE/E, HH/H, and earlier series, and I can see why even as conservative a commentator as Brinker would find it appealing. I particularly liked the comments at the website regarding it as an excellent savings tool for retirement.

A few details. Series I bonds are bought at face value and their earnings are calculated on both a fixed rate for 30 years and an inflation rate that changes every six months. (November 1 is the next change date.) Interest is compounded semiannually, is exempt from state and local income taxes, and the earnings can be deferred for up to 30 years (and may be tax free if used to pay for education costs). The current earnings rate is 5.92% (and was as high as 6.53% in May-October 2000).

You may wish to share this information with the younger members of your family, as I’ll do with my daughters. If $1,000 is invested at 6% and another $100 a month is added for 25 years, assuming the federal tax rate at 28%, the investment would be worth $61,790 (after federal taxes) or $73,764 (if the earnings are tax-free if used to pay education costs).

Mind you, stocks and other instruments might be a better long-range investment, but there’s hardly one that is safer.

Speaking of War Bonds, my earliest memory is of my father dressing up like Charlie Chaplain to entertain at a company War Bond rally. Dad was a timid, quiet fellow but he had the strut and cane dance down perfect. The rallies, our little Victory Garden (where rhubarb grew uninvited), gas rations, collecting tin cans and tin foil, blinds for blackouts, saving used cooking grease to use in bullet packing (we were told), and signs “Loose Lips Sink Ships” (a baffling thought even if we had ships to sink in Illinois), all were an earlier bonding to defeat a then more visible enemy.

7/1: Part 2 (of 6)—Planning our own Super Second Life: MONEY

For most, financial fears far outweigh all other future concerns, including health. (Worse than being racked in pain in a nursing home is being racked in pain while living in a dumpster! Both, incidentally, about as likely as our supping on unicorn soup.)

So what we must do first is take a financial inventory, see where we are right now, where we will be when we switch out of full employment (with those e’er-diminishing company-paid perks), and where we will be at, say, five-year intervals until at least as long as our longest-living family member—in-laws don’t count. (Nor do outlaws, who are mostly dead by 50.)

Our goal is straightforward: enjoy a full, fun, meaningful life with a minimum of financial or health worries, doing what we planned (with serendipity an occasional, welcome guest), delaying and placating debility until our last, painless months.

Does that require 40 billion dollars, as the financial planners hint? (“Only 40? Better up that a tad for inflation and certain plague.”) No. And you may have 60-75% of all you’ll need already. But you can’t leave it to chance. And they are right: the more you’ve packed away since your roaring youth, compounding while you slept, the easier your task now.

I’m about to send you to the website for Part Two, which is Chapter 7, “Money and Your Super Second Life,” in my book How to Create Your Own Super Second Life: What Are You Going to Do With Your Extra 30 Years?

The entire chapter is there, from the “Getting Ready for Your Super Second Life” section of that book. It is blissfully short. Switch to, which will also allow you to download, copy, and use all of the related charts and graphs.

Here are a few highlights from that chapter:

(1) The conventional “saving up for our old age” doesn’t make much sense.
(2) Nor does leaving much or anything in a will.
(3) It’s vitally important that we know what we’re saving our money for.
(4) Unless we’re unlucky, we all get a Second Life, whether we’re rich or broke. Money can give us more options.
(5) We need a general worksheet, one for income, another for expenses, and a fourth for net worth—all provided at the website for you to fill in.
(6) Discussed are the basics, emergencies, and when we want to stop working full-time.
(7) The 26 action guidelines form a checklist, and 13 financial or investment sources lead you to experts, if needed.

(To review already published parts of this “Super Second Life Planning” series, see Eventually all six sections will appear there. In addition to Part 2 above, they are: Part 1: Outline and Overview, Part 3: Health, Part 4: A Dream List, Part 5: Prioritizing and Timing Our Dreams, and Part 6: Super Second Life Action Plan!
7/1: A great, quick way to check your benefit eligibility.

In a June NBC “Today Show,” in the “Forever Young” series, a spokesman for the National Council on the Aging mentioned two items that may play a key financial role in our future Second Life planning. It could be even more important for our parents.

First, he listed ten services that many seniors are eligible to receive but don’t know much about. They are Medicaid, supplemental security income, food stamps, prescription assistance, property tax relief, veteran benefits, health insurance counseling, employment services, home energy services, and group or home delivered meals.

Second, he provided a dandy website ( that tells for which of more than 1,000 different benefit programs listed we might qualify. The user-friendly site takes about 10 minutes to complete, can be done by any person for him or herself (or for anybody else), and is totally confidential (no name, address, phone number, or Social Security data). I tried it twice, once for me now with actual facts, the second time for an older, retired 65-year-old with my same income and assets. I qualified for two things now: Social Security (which I knew) and the Golden Age Passport (which I have). But I was a candidate for 14 programs two years later, if retired. Vital information to factor into the financial planning part of your Super Second Life—start now, then simply guesstimate every five years to see what might become accessible at key points in the future.

6/1: (According to U.S. News and World Report on 6/4/01), the 55-64-year-old group grew 15% in the past decade. Senior discounts may start disappearing. Keep your hand on your wallet—to marketers, we’re the gilded cow.

6/1: Book Report: You’re Fifty—Now What? by Charles S. Schwab

While the second half of the book’s title is, predictably, “Investing for the Second Half of Your Life,” the book is much more than the usual half-scare, chart-and-tremble financial tome reminding us that a reserve of many millions will still be far too little…

Schwab the person pops through on almost every page. A decent man who seems to have a solid grasp of where the average person is. He shows in straightforward fashion how we can reduce the “bag lady”/”street bum” terror out of living longer, paying more, and probably saving less.  The expected conservative financier with admonitions to save is there, of course, but this book is a solid, useful read and resource.

One surprise is Schwab’s advice to keep at least 50% of our second-life earnings in stocks, rather than the usual “swap stocks for bonds” recipe. He also tells us that “90% of (our) long-term investment return variability is determined by asset allocation (and) less than 10% of (our) return is determined by (our) choice of individual investments.” And that the difference between a regular coffee and a specialty coffee drunk five times a week (if invested for 20 years at 10%) is  $27,028—when we could use it most! Consider how much richer we’d be if we just drank tap water.

See all book reports here!


Gordon Burgett

(800) 563-1454