by Joe Hearn | Apr 30, 2013 | Hobbies, Learning Challenge, Lifestyle Design
Speed Reading Update
The most recent skill I’ve been working to add to my “Lifestyle Résumé” is speed reading. Last month I tested my reading and comprehension and then studied ways to improve both. Over the last several weeks, I took what I learned and put it into practice as I worked through my reading list.
In addition to things like newspapers and magazines, I read five books this past month. They are:
- The Art of Non-Conformity by Chris Guillebeau
- Boomerang by Michael Lewis
- Wool by Hugh Howey
- Do the Work by Steven Pressfield
- The Book Thief by Markus Zusak
I timed myself using Toggl so I could see if my speed per page was gradually improving and then re-tested my speed and comprehension at Reading Soft. When I started the challenge, my speed was 213 words per minute with 82 percent comprehension. When I re-tested, my speed had improved to 378 words per minute and my comprehension held steady at 80 percent. I didn’t quite hit my goal of doubling my speed, but all in all I was pleased with the outcome. It was a fairly easy skill to acquire and it will make a big impact in my daily life going forward.
What’s next?
As most of you know, my wife and I are trying to get our daughter to all 50 states before she graduates from high school (only 33 to go!). States like Montana and Wyoming are known for their National Parks and beautiful outdoors and it seems that the best way to see them is by hiking, exploring and camping under the big night sky.
There’s only one problem. I have no camping skills. Rather than see our vacation turn into a scene straight out of Lord of the Flies, I signed up for a six week backpacking and camping basics class at the Outdoor Venture Center at the University of Nebraska at Omaha. The course covers things like how to pack and dress, how to cook in the backcountry, using a map and compass, backcountry first aid, trip planning and leave no trace camping.
I’ll update you once I finish the class. In the meantime, is there anything that you’ve been wanting to learn how to do? Why wait? There are tons of benefits to being a lifelong learner and teaching yourself a new skill is easier than ever in our modern world of videos, apps, books and online courses. Feel free to follow along with one of my challenges or do something totally on your own. Either way, by being intentional about learning you’ll end up with more things to do and more people to do them with.
Have a great week!
Joe
by Joe Hearn | Apr 26, 2013 | Retirement
The markets have done great lately, but there will inevitably come a time when fear returns and indexes drop. After all, that is the nature of markets.
While we can’t control the ups and downs, we can control things like how much we’re saving, how our assets are allocated and how much debt we have. Focus on those things and you’ll be less likely to stress about swings in the market. You’ll be able to keep calm and retire on.
Just for fun I had my designer put together a little reminder for you (hat tip to the famous “Keep Calm” poster from World War II). You can download it here: Keep Calm Poster
Have a great weekend!
~ Joe
by Joe Hearn | Apr 24, 2013 | Debt, Income, Retirement
“When can I retire?” I get that question a lot. If you’re curious about the answer, look no further than your retirement budget. The more money you want to spend during retirement, the more you’ll need to save before you get there and the longer you’ll likely need to work. It stands to reason then, that you can probably retire sooner if you can figure out a way to spend less during your golden years. What are some ways to downsize your expenses without downsizing your dreams for retirement?
Think Big
It has almost become dogma over the last decade that financial security comes by giving up things like your daily latte. That advice can certainly help you sock away a few extra dollars over the years, but if you’re getting close to retirement and find yourself tens (or hundreds) of thousands of dollar short of your goal, drinking Folgers instead of Starbucks isn’t going to solve your problem. It’s just not a big enough line item in your budget. If you want to make a big impact, you need to focus on big expenses.
According to a recently released report by the Social Security Administration, the two biggest expenses for most retirees are housing (35 percent) and transportation (14 percent). Said another way, almost half of your retirement budget will go to pay for the roof over your head and the vehicles in your garage. Let’s look at an imaginary couple to see how cuts in those areas can make a big difference.
John and Linda would like to retire next year. They decide to hire an adviser to look over their plan and, much to their dismay, the adviser tells them that they need to save another $300,000 to adequately fund their retirement. At the rate they are saving that would mean delaying retirement for another 10 years. Instead, they look at their retirement budget for ways to cut back.
With the kids gone, they have more space than they need, so they sell the house for $250,000, move into a $150,000 condo and pocket the extra $100,000. With carpooling and soccer games a thing of the past, they trade in their SUVs on two smaller cars (net gain $20,000) and even kick around the idea of sharing a car once neither of them is working. The smaller house and more fuel-efficient cars also means that they’ll be spending about $500 less each month ($6,000 per year) on taxes, utilities, gas and maintenance. Assuming a 4 percent withdrawal rate, that $6,000 annual savings means that they can get by with $150,000 less in their nest egg.
The total benefit, then, from cutting back in just those two areas was $270,000 (or 67,500 lattes). Not bad. They still have $30,000 to go, but at the rate they’re saving they should be able to set that aside and still retire next year as planned.
[Note: To consider ways to trim your own budget, you can download a free retirement budget worksheet at www.intentionalretirement.com/budget.]
Retire Debt
Another way to increase retirement security and perhaps even retire sooner than expected is to eliminate debt. It used to be common for people to enter retirement with little or no debt. Unfortunately, that is no longer the case. According to a recent study by the Employee Benefits Research Institute, 65 percent of American families with a head of household age 65-74 had debt. The age group with one of the biggest spikes in debt was 75 and older.
Not surprisingly, debt makes it harder to fund your retirement. It cuts into your cash flow and increases the risk that you will run out of money. Again, let’s assume that you can draw 4 percent per year from your assets during retirement. That means that for every $1,000 in annual income that you want during retirement, you’ll need $25,000 in savings.
Look at your current budget. How much do you spend each year on debt payments (e.g. mortgage, car, credit cards)? Multiply that number by 25. How much is it? $250,000? $500,000? More? That’s how much you’ll need to save in order to service that same amount of debt in retirement. As you can see, retiring will be much easier if you retire your debt first.
So as you plan, don’t think of retirement as a particular age or work status. Think of it as the time in your life when you can afford to pay your bills through means other than your job (e.g. personal savings, pension, Social Security).
When you look at it that way, it becomes clear that you can reach your retirement goals from two different directions. “Save more for retirement” is certainly one way, but “spend less in retirement” can be just as effective.
~ Joe
Note: I first published this article in the Omaha World Herald.
by Joe Hearn | Apr 11, 2013 | Social Security
[Note: As most of you know, I’m a financial adviser. I use a program called Social Security Timing to help clients determine the best Social Security strategy for their situation. I’ll run that report for free for the first 20 of my readers (that’s you!) who request it. Certain conditions apply, so just email me if you’re interested (joe@intentionalretirement.com).]
Social Security is a major source of income for many retirees. How major? The average retiree gets about 40 percent of their income from Social Security. For older retirees, that percentage surpasses 50 percent. It stands to reason then that we should all want to maximize our Social Security benefits. Here’s how.
Wait
You can choose to claim your benefits early, on time or late. “On time” is also known as your full retirement age and it varies depending on when you were born. If you were born after 1960, your full retirement age is 67. If you were born between 1943 and 1954, your full retirement age is 66. Full retirement increases by 2 months per year for those born between 1955 and 1959 (e.g. 1957 = 66 and 6 months).
If you claim early, your benefits will be reduced by 5/9 of 1 percent per month for the first 36 months and 5/12 of 1 percent for anything over 36 months. For example, a person born in 1950 who claims at 62 instead of 66 will see his or her benefits permanently reduced by 25 percent.
If you claim late, your benefits will increase by 8 percent per year for each year you wait (for those born after 1943). So if you want to maximize your Social Security, it’s usually best to wait to claim until on or after your full retirement age. One instance where it might make more sense to claim early would be if you are in poor health and don’t expect to live very long.
Don’t work
If you’re still working and haven’t reached your full retirement age yet, you should think twice before claiming benefits. That’s because your Social Security check will be reduced by $1 for every $2 you earn above $15,120 (for 2013). In the year you reach full retirement age, the penalty is reduced to $1 for every $3 above $40,080.
Unlike the penalty for claiming early, the work penalty is not permanent. It goes away once you reach full retirement age and your benefits will be increased to compensate you for the prior reduction. But that doesn’t really help you if you claim early thinking you’re going to supplement your paycheck, only to have those benefits withheld because you make too much money.
Coordinate with your spouse
When claiming, both you and your spouse have a variety options. Add to that the fact that you are typically entitled to either the benefits you earned yourself or an amount equal to roughly half of your spouse’s benefit and the complexity multiplies quickly. If you can coordinate your claiming strategies, you can greatly increase your lifetime benefits. I have seen couples increase their lifetime benefits by $100,000 or more simply by having a well thought out, coordinated strategy.
Don’t forget your Ex
If you’re divorced and haven’t remarried, you may be entitled to claim benefits based on your ex-spouse’s record. The primary stipulations are that a) you were married for more than 10 years, b) you haven’t remarried and c) you’re older than 62.
So there are a few ideas for maximizing your benefits. Don’t forget to touch base if you want me to run the Social Security Timing report showing you the best strategy for your situation.
~ Joe
by Joe Hearn | Apr 1, 2013 | Lifestyle Design, Pursuits
Have you ever looked back on pictures of a younger you and said something like, “Where did the time go?” Why does time often feel so fleeting? More importantly, is there anything we can do to slow it down? How can we keep life from feeling like such a vapor? I’ve been spending some time thinking about that lately. So far I’ve come up with three things.
Don’t procrastinate—Think back to school. Did you ever wait to study for a test or write a paper until the night before it was due? Whenever I did that, I got the sense that it had snuck up on me. When I first got the assignment, it felt like I had plenty of time. No need to rush. Other things were more urgent. And then all of a sudden “plenty of time” turned into “now or never.” What happened?
When you procrastinate, the passage of time becomes a nagging reminder that there is much left undone; that most of your dreams are still on the drawing board. When your time gets short and your To-do list stays long, the time flies by.
When you actually DO stuff, however, your To-do list is shrinking right along with your remaining time. You don’t get that same feeling of rushed panic (at least not to the same degree). Yes the time went by, but you used it wisely. If you spend your life saying “Someday,” I suspect you will reach the end with an overwhelming sense that it went by too fast. Don’t wait for someday. Someday is here.
Break routine—I’ve mentioned before that we have a goal of getting out daughter to all 50 states before she graduates from high school. A few weeks ago we went to St. Louis, Missouri (otherwise known as state #17).
It wasn’t a major trip, but we had a fun time. We found several great restaurants, visited the Arch, went to the City Museum (probably the coolest “museum” in the United States) and had a fun time hanging out as a family.
Had we stayed home and done the same old thing that we do every weekend, I would have forgotten about it by Monday. But we did something different. Something out of the ordinary. And because of that, all three of us will likely never forget that weekend. We’ll always have those shared memories, stories and photographs.
To keep time from flying by, break up your routine. If you go through life doing the same thing, day in and day out, there won’t be much to remember. It will seem like the same day lived over and over. Life will seem so short because it won’t be packed with memories. But if you make sure to periodically do interesting and out of the ordinary things, your life will seem long and full. As I have said before, focus on milestones instead of maintenance.
Do less—At first, doing less might seem like a counterintuitive way to have a fuller life, but stick with me for a second. If you pack your schedule with too much, you don’t have time to savor life. It’s the difference between enjoying a nice meal with friends and competing in a hot dog eating contest. In one you have a chance to enjoy the food and engage in interesting conversation. In the other you’re trying to shove in as much as you can as fast as you can. You might end up eating more in the hot dog eating contest, but you will also end up enjoying it less. Unfortunately, many of us (e.g. me) live our lives like it’s a hot dog eating contest. We’re trying to shove in as much as possible. There’s a fine line between living a full life and cramming so much stuff in that you feel rushed and can’t enjoy it. Beware of the busy virus. Simplify.
Have a great week. Make it interesting!
~ Joe
