Author Archives: Grumpus

About Grumpus

Personal Finance Blogger, Father, Husband, Student, Hobby Horticulturalist, and Retired U.S. Military

The Pension Series (Part 15): The Pension Benefit Guarantee Corporation (PBGC)

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Rushin’ Headlong

PBGC

Wrong type of rushin’

It’s time to take on the somewhat controversial topic of the PBGC. I touched upon it already in several previous posts. In fact, I mentioned it as early as Part 1 of the Pension Series, and as recently as Post 14. Yet, I never tackled it head-on; so it feels like I’m overdue for an article on the PBGC specifically. I was half-hoping someone in my Facebook Group had experience with it because primary sources are always best when researching a topic. However, given the typical conditions attached to the PBGC’s intervention in a pension fund, it’s better that no one has.

Now, for those of you who are thinking, “PBGC? WTF is the PBGC?”, I hear you. I departed from my typical pattern with this post. Normally I warm up my audience with a nice long intro that culminates in an explanation of the topic at hand. However, I dispensed with the niceties this time. With that said, it’s probably best if I at least explain what the PBGC is for anyone who doesn’t know or doesn’t remember. Continue reading →

The Pension Series (Part 14): Pension Risk Transfer

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The Prodigal Series Returns

Welcome back to the Pension Series everyone! I hope you didn’t interpret my several month hiatus (from the series) as a lack of interest in the intersection between pensions and Financial Independence (FI). If you did, then let me assure you that I remain committed to the topic. In fact, my Facebook Group members can attest that I typically post one or two articles a week to prompt discussion on the topic of pensions and FI. That said, I must admit after the rush to write and publish parts 11 through 13 of the Pension Series, it took me a while to find more content that met my standards. At this point in the series, I look for topics that I haven’t already addressed; that help my readers navigate the Golden Albatross decision; and/or enable planning for FI using a pension.

The Search Is Over

Luckily, I recently found a few more topics which deserve examination. Several of the latest topics stem from articles I posted in my Facebook Group. In fact, it wasn’t until I posted an article about FedEx transferring a large portion of its pension fund to Met Life in my Facebook Group, that I realized the topic of pension risk transfer deserved an entire article itself.

In the past few months I’ve noted several stories from both the U.S. and U.K. about companies transferring some or all of their pension funds to insurance companies. The FedEx story started a conversation in my Facebook Group about winners and losers in risk transfer scenarios where a pension fund transfers obligations to an insurance company. Between the company who owns the pension fund, the insurance company, and the plan participants; most of the respondents from my group seemed to think the plan participants (i.e. current and future pensioners) lost. I must admit that I agreed.

Continue reading →

Debate Club Round 2: Risk, Rationality, and Efficiency

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Welcome Back Debate Fans!

Are you ready for Grumpus to grumble about the concept of investing the Emergency Fund (EF) in equities?

Or should I say “GGGGGRRRRUUUUMMMMBBBLLLLEEE” in my best sport’s announcer’s voice?

A Quick Recap

I’m back with another round of Debate Club. I hope everyone enjoyed round one. Just to re-cap, ChooseFI episode 66 prompted this series of articles in response to the idea of investing an EF. In episode 66, and the follow-up episode 66R, Brad and Jonathan (the hosts) enthusiastically endorsed Big Ern’s (the guest’s) idea that the traditional EF, invested in some sort of cash or cash-equivalent account, was a bad move. Instead, all three agreed it made more sense that a person invest their EF in equities.

In response, I argued in my first article of this series that Episode 66 lacked nuance and suffered from a mistaken definition of the EF. In other words, Ern, Jonathan, and Brad set up a strawman argument and easily knocked it down. By the end of the first article, I created what I felt was a level playing field on which to engage in a debate about the merits and drawbacks of their argument. Thus, I moved on to the second article. Continue reading →

The Death Binder!

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I am ready to meet my Maker. Whether my Maker is prepared for the great ordeal of meeting me is another matter. — Winston Churchill

Death Binder

Death and Binders

I did something different this week for work. I deployed to a foreign country for a military exercise. I’m writing this post from that country as a matter of fact. It’s the first time since my Afghanistan tour in 2013 that I’ve deployed abroad with all my gear. It’s also the first time since my financial awakening that I’ve deployed. Granted, I traveled multiple times on official orders since Afghanistan and was also stationed overseas for multiple years. However, except for our Permanent Change of Station (PCS) move from Europe to Hawaii, I consider my travel comparable to business trips. There’s something different about packing up all your combat gear that sharpens the mind. As a result, while not a tour to a combat zone, I used this military exercise as an excuse to build my “Death Binder”.

Just for the record, Mrs. Grumpus hates the term, Death Binder. In fact, she won’t let me call it the Death Binder in the house. Instead, we call it the “Financial Binder” or “Financial Folder”. However, I call it the Death Binder when she’s not around. I do that partly because of my love of heavy metal. There’s something about the term Death Binder that makes me want to throw the devil sign up in the air and bang my head while shouting “DEATH BINDER” in my loudest metal voice.

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Four Golden Albatross Financial Lessons

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A Message to Future You

financial lessons

Four Golden Albatrosses take flight

If you’re reading my articles in chronological order, either in real time or at some undetermined time in the future, you’ll know that my two preceding articles were counter-points to other people’s financial ideas. As much fun as I had writing articles that used macroeconomics to argue against other people’s theories; doing so courts a certain amount of negativity. Granted, the counter-points needed to be made, and I believe I kept the articles congenial, lighthearted, and fact-based. However, at the end of the day, I still argued against someone’s work as opposed to building my own. As a result, I hit the pause button on the Risk Series this week, in order to focus on a more positive message.

Ironically, despite my online negativity I’ve actually been doing some positive stuff in the real world — which just might be the understatement of a lifetime in regards to the internet. Over the past three weeks, I counseled three different military members and/or their spouses on financial issues. Two of those counseling sessions took place face-to-face; while the third took place via email. All of them proved a great experience … for me at least. I learn a lot about myself and other people every time I counsel someone. Whereas I felt like a reluctant financial voyeur during my first counseling session; I actually enjoy them now. Continue reading →

The Golden Albatross Vs. Risk (Part 2): Emergency Fund Debate Club, Round 1

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Debate Club

Pop quiz. What’s the first rule of Debate Club?

Surprisingly, it’s not “do not TALK about DEBATE CLUB!”.

It turns out the first rule of Debate Club is “read all your preparatory material”. Or at least that’s what I presume it is. I based that presumption on memories of my high-school Debate Club friends who spent their free-study hours furiously highlighting reams of printed journal articles they’d found on microfiche in the school library. Yes, I realize I’m dating myself with the microfiche reference.

I know what you’re thinking, and I agree — the Fight Club reference sounds way cooler. Then again, what do I know? I spent the majority of my time in high school cutting weight for the real fight club (the wrestling team). Which, by the way, no one ever talked about … probably because no one ever attended high school wrestling matches (other than parents). While my choice of extracurricular activities may have prepared me well for the lonely life of a blogger with three devoted readers, it probably didn’t prepare me well for a debate on investing the Emergency Fund (EF) against some of the heavy hitters in the Financial Independence (FI) community. Continue reading →

The Golden Albatross vs. Risk (Part 1)

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Doubting Grumpus

I spent a recent weekend and a good part of the following week “engaging” in the main ChooseFI Facebook group on the topic of whether or not it’s a good idea to invest your Emergency Fund (EF). This debate was prompted by ChooseFI Episodes 66 and 66R in which the “Invest Your Emergency Fund” thesis was broached, examined, and positively endorsed by the hosts and their guest. Just to be clear, I argued (congenially, of course) that in general terms, it was a doubtful thesis. More importantly, though, I pointed out (along with several other people) that the framework for the debate was poorly constructed. This was primarily due to a lack of defined terms.

risk

Fund?

For the record, I’m a big fan of the ChooseFI Podcast, and not only because they interviewed me. The hosts, Brad and Jonathan, typically dole out challenging but sound Financial Independence (FI) advice. Although they stooped low to interview me, their guests are also typically top notch. In fact, their guest for the “Invest Your Emergency Fund” episode was Big Ern McCracken. Ern runs the Early Retirement Now blog — of which I’m also a big fan. Ern’s not only a valued member of my Golden Albatross FB group, but we even collaborated on an article for my website. Continue reading →

The Golden Albatross Financial Philosophy

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The Request

Golden Albatross

Professor X enjoying his lunch break.

A few months ago a military member from a mid-career service school approached me through my blog with a request. He’s an instructor, so let’s call him Professor X. One of Professor X’s topics is personal finance as it relates to effective management of one’s career. He’d read my blog and believed several of my articles were appropriate material for his students. As a result, he asked me to speak via video to his class. After we exchanged a few emails on proposed topics, legal conflicts of interest, and technical hurdles; I agreed to appear in uniform as a military member, smart in the ways of finance, but without mention of my blog.

With this scheduled event now only a few days away, I thought it prudent to script my remarks. I also thought it would be worth turning those remarks into a blog post. Since Professor X’s request forced me to distill numerous blog posts into one coherent speech about my financial philosophy, I figured some of my readers might find it useful. As a result, this post doesn’t cover any new territory. It simply synthesizes a lot of what I’ve written previously in one place. Who knows? If I ever write a book, this article might form a good basis for the first chapter.

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Why I Trust My Plan … For Now

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Procrastination Pays Off

Plan

Failure to properly plan …

I’ve had a draft version of this article sitting in my inbox for some time. It never gelled, so I left it alone. However, a blogging friend and mentor of mine, Doug Nordman, recently published an excellent article at his blog The Military Guide entitled “Don’t Buy A Home When You Leave Active Duty“. The article challenged several of my planning assumptions and acted as a catalyst to complete this post.

I consider challenges to my retirement plan a good thing. They force me to re-examine and update it as I gain more knowledge, and as facts on the ground change. As such, this article isn’t so much a riposte to Doug’s article, as it is an acknowledgment of it. It’s a confirmation that Doug’s article contained great points which forced me to re-examine my planning assumptions, but despite the challenge, my plan still passes scrutiny. It’s a healthy, Bayesian inference exercise that everyone should conduct with their plan routinely. Continue reading →

The Golden Albatross vs. The Insurance Industry (Part 2): Annuity Valuation Case Study

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Insurance Annuity Valuation Question

Annuity Valuation

What me worry?

A reader, whom I’ll call Lady J, recently asked me if I could value her future insurance annuity scenarios vs. her current cash-out value. She wanted an annuity valuation done in the same manner as the Pension Lump Sum Case Study I wrote for the Pension Series. The question intrigued me. My initial reaction was, yes, I could. Since a Defined Benefit Pension (DBP) is just another phrase for an annuity; I didn’t think it would prove too hard if she could provide the appropriate details. I told Lady J as much, and she promptly supplied me with details I needed.

Surprisingly, the annuity valuation proved both easier and harder than I initially thought. Easier in the sense that based on the numbers provided by Lady J, my Master Pension Value Calculator spit out an answer to her question in no time. Harder in the sense that once I reviewed the terms of her annuity policy, and the facts surrounding her initial investment, it forced me to ponder numerous “what if’s”. Thus, consider this article in two parts. First, I walk through the facts surrounding Lady J’s situation and the process of annuity valuation. Second, I address a few different issues, both good and bad, I noticed with this annuity. Continue reading →