Let me level with you up front: I don’t have a lot of experience with insurance products — especially the type that mirror investments. Prior to my experience related in the below story; the only other time I dealt with insurance investments was successfully extracting Mrs. Grumpus from one of the two products she invested in as a young worker in her home country. Up to now, I really hadn’t given them a lot of thought. As a result, I never held strong opinions about them in either direction. Maybe the most I ever felt was lucky for not getting involved with them — which I suppose is better than the regret I routinely express from other investment choices!
Of course, I’m not completely unaware of the arguments for and against such products. I hear them routinely denounced on several podcasts I listen to. Jill Schlesinger from “Jill on Money” is probably the most vocal, but certainly not the only one. The costs associated with such insurance “investment” products are often what draws the most negativity. Insurance sales people who push insurance products as a panacea to all money problems, is another issue that stirs emotion the wrong way.
This article is a follow-up on the lump sum case study I conducted for the ChooseFI listener, Tess, in Part 11 of the Pension Series. If you missed it, that case study also aired as Episode 58R on the ChooseFI Podcast. I mentally debated if I should make this Part 11a considering the links between the two articles. However, given this article’s length, and the alternate pension lump sum analysis method it outlines, I decided it warrants its own part in the series.
I’ll warn you now, this article is another deep dive into the world of pension lump sum offers. It won’t be my last either. Pension lump sum analysis is a rabbit hole. As I pointed out in my previous article, there’s no one correct method. A lot depends on what the pensioner values and the questions they are trying to answer. Proper analysis is also based on the strings attached to either the lump sum or the annuities.
Hello? Can anyone up there hear me? I got stuck down here analyzing my pension lump sum!
Fortunately, as a result of my appearance on ChooseFI 58R, several people reached out to discuss methods of calculating pension value and conducting lump sum analysis. We are currently in the process of compiling a spreadsheet with many of those methods baked in. It’s not quite ready though. So, for now, you have to put up with another wordy pension lump sum analysis from yours truly. Forewarned is forearmed. Continue reading →
Part of the side effects from my PTS means the wrong damn song, movie, book, or thought can be problematic from time to time. This happened recently. While I was typing an article about pensions and streaming some music, a sad song played over my headphones. That’s not always an issue, except I’d never heard this song before, so I didn’t know to skip it. The song’s subject related to one of the causes of my PTS. As a result, I scrambled for the volume control before tears erupted uncontrollably. Alas, I was too slow. As a result, I spent the next few hours trying to control the flood of emotions that washed over me.
Unlike my previous articles on my mental health and job struggles, this article isn’t about anger. It’s about sadness. In true Grumpus Maximus form though, the article is still relevant to the topics of personal finance, careers, and the Golden Albatross. Yet, much like my Worth vs. “Worth It” article, this story is raw and personal. Even more so than my previous article in fact. If that isn’t your thing, I completely understand and don’t hold it against you. Click away now.
For those who choose to stay, consider yourself warned… Continue reading →
This is an updated version to my article originally posted 04 October 2017. This version includes a substantive correction. The previous version of the article failed to accurately describe all the calculations required when comparing a pension with an inflation-linked Cost of Living Adjustment (COLA) to life insurance. I noticed my omission today and reworked the affected paragraphs. I also took the opportunity to clean up some grammar. You will see substantive changes noted in red text. I believe the changes make the comparisons between life insurance and survivorship more competitive.
The incomplete calculations I described in the previous version of my article appeared weighted towards survivorship. That was not my intent. Since the intent of the article changed, and I believe in full disclosure with my readers; I felt this mistake warranted a revision with new publish date.
This is a first for me in the blogging sphere, although in the military we routinely strive for this level of transparency when an official report, memorandum, or instruction contains a major mistake. The primary purpose for issuing a correction is to prevent anyone from acting on erroneous information. It’s also important that the historical record reflect accurate information. I’ve decided to hold myself to the same standard on this blog.
As a result, I advise anyone who read and used the methods described in the previous version of this article to read this update and adjust your calculations accordingly. While I apologize for the inconvenience, and always strive for 100% accuracy in my articles; I would remind everyone I’m not a professional. Nor am I considering your case specifically. No matter how comfortable you are with your retirement numbers and plan; it’s always best to run your them by a professional like a fee-only Certified Financial Planner who adheres to the fiduciary standard. Again my apologies.
KJH, we honor the fallen in the Grumpus Maximus family.
Death Sucks
In late Summer 2003, a member of my unit and one of its seasoned mentors was killed in the early days of the Insurgency in Iraq. We were both part of a tight-knit group of young officers that worked and played hard. While I would not have called him a close friend, many in our group did, and I often sought advice and guidance from him. His death was a blow to everyone in our group and the unit as a whole. Nothing was the same after it. Most of us were not prepared mentally and we all took it personally. Each of us dealt with his death in our own way, and I am sad to say it splintered the group in ways I never could’ve foreseen. Continue reading →
Like what I did there with the title? I created what’s called click bait. Most of the time my titles are boring, other times they are obscure. This time though I created an “action” title to capture readers’ interest in the Gap Number Method, because it gained some recent publicity. That’s about as creative as I get, adding the word “action” in all caps to a title.
How’s that for action? Mrs. Grumpus hiking in Kauai
Yes, I know. You’re wondering how, with only two readers who aren’t related to me, did I gain any publicity? Well, it turns out I have a face built for radio — or podcasting as the case may be. Not so sure about the voice though.
In any case, on a recent (and so far my only) podcast interview on ChooseFI, the hosts asked me to explain my concept of the Gap Number. For those of you who need a refresher on the Gap Number, you can find the post where I coined the term here. In general, the Gap Number is the difference between your fixed income in retirement and your expenses. Expressed mathematically it looks like: Continue reading →
As a result of the problems identified in my previous article with Mint.com’s annual “Net Savings Over Time” report, I decided to nerd out on money tracking again. Apologies to those of you who don’t enjoy these articles as much as some of my others. However, much like Darrow Kirkpatrick did with retirement calculators, I believe it’s important to understand the pluses and minuses associated with popular money tracking software. This is especially crucial considering the importance I place on tracking money, to begin with.
I spent several days prior to writing this article improving the fidelity of my data in my Mint.com account. I also rebuilt my entire 2017 financial year in Quicken. Doing so allowed me to total my net savings for the year in Quicken and verify if I made any mistakes with my Mint calculations.
The now infamous Net Income Over Time report display
To refresh everyone’s memory, when I initially ran Grumpus Familias’s net savings for 2017 through Mint as part of my annual end of year fiscal review, it reported we saved $70.5K. However, I didn’t trust that number due to my inability to verify whether or not Mint accounted for our annual Roth IRA transfer. The program, as far I could tell, didn’t allow for that determination. After spending a few days double checking entries, modifying several transaction labels, and re-displaying reports; Mint now shows an annual net savings of $69.5K. Obviously, I had approximately $1K of transactions mislabeled in my previous report. However, I still cannot verify exactly how Mint determines expenses and income for this report. As a result, I don’t trust this number any more than the previous one. Continue reading →
In case you can’t tell from my title, this article is a follow-on to my previous two “Tracking Your Money” posts. In the first article, I reviewed my historical use of various software applications to track my money over the past 20 years or so. In the second, my brother (Grumpus Brotherus the Younger) reviewed the software application called You Need A Budget (YNAB).
If you did not read the first post in this series, you probably should. I don’t just say that because my brother’s post sucked (it did), and I think mine is much better (it was), or I want the extra site traffic (I do). No, I say that because I actually made a few worthwhile points in the post … if I do say so myself. However, if you’re unwilling or unable to go to the post, let me provide you a re-cap. Continue reading →
In Part 9 of the Pension Series a reader’s question prompted me to research the interplay between the U.S. Federal tax code and pensions. My reader, Mr. Yankee, wanted to know what options existed to minimize Federal taxes when pension payments started for him and his wife, Mrs. Doodle. I found a few specific instances to defray some Federal tax, but nothing major. Turns out Mr. Yankee already knew the most powerful tax options available to him. What did Mr. Yankee know? He knew that in the U.S., geography mattered when it came to taxes — specifically at the State level.
For my one non-related international reader, it may seem strange, but in the U.S. we tax income more than once. We typically tax it at the Federal and the State level, and sometimes even at the local level. Furthermore, pension payments typically count as income no matter the source. As I chronicled in Part 9 of the Pension Series, everyone who receives a pension is (typically) subjected to Federal tax. However, not every State in the Union taxes income. Nor does every State tax pension payments as income. Continue reading →
***This is an updated article. See Post Script at the bottom***
Today’s topic comes from one of my Facebook group followers. I recently solicited my Golden Albatross group on subjects to research and write about, and Mr. Yankee responded with the following question:
Has there been discussion of how to shelter your pension benefits from federal tax? When I retire I expect to receive about $60,000 a year from my pension I’d hate to give a large portion of it back to the government.
I told Mr. Yankee I would look into it since I’d yet to conduct an in-depth analysis of pensions and taxes. It’s a bit premature considering the fact that U.S. tax law is undergoing its first major overhaul since the 1980s. Currently, the House and the Senate are working on reconciling their two different bills into one in order to approve and send to the President for signature. However, my research only shows one proposal in the House bill with the potential to impact this conversation in any meaningful way, and I believe I can address it appropriately. If something radical happens in the reconciliation process, I will simply update this article when the dust settles. Continue reading →
Am I only one I know, waging my wars behind my face and above my throat?
— Twenty-One Pilots, Migraine
How Was Your Week?
Last Friday wasn’t the best day for me mentally. I don’t know if the stress of a few hectic work weeks which included a lot of travel finally caught up, or if I missed my meds the night before. Maybe it was both. Maybe it was something else entirely. Either way, I didn’t feel the most stable. I think it was fairly apparent to several of my co-workers as I lost my cool (just a wee bit) during a meeting. For a moment, it felt like the bureaucracy was going to grind my bones to grist before I could escape. As a result, several hours after the meeting the weight of the Golden Albatross still felt insurmountable. Never a good feeling.
It got me this week.
As one of my Facebook readers once wrote, “Some days you slay the dragon, some days the dragon slays you.” Friday the dragon slew me, and it caught me off guard. It’s been a while since I’ve experienced a day like it. In fact, it might be the first day in over a year that I’ve lost my cool in a work environment. Home is a different matter, and the typical battlefield where I struggle to keep these sort of emotions in check (which of course is worse, and a different story altogether). Losing it at work, on the other hand, is an anomaly. As a result, I wasn’t ready to handle it. Continue reading →
