I just finished reading Zen and the Art of Motorcycle Maintenance. It’s a bestselling classic, but I must confess that I wasn’t a huge fan. It did have a few great nuggets that made me think, however, and today I’d like to share a short passage from the book that could have a profound impact on how you approach retirement. Consider it Zen and the Art of Retirement.
In the passage, the main character is talking about the problem of value rigidity, which refers to our tendency to cling to certain preconceived ideas of what’s important and what’s not, even when events or circumstances change. To make matters worse, we sometimes put a high value on things that we shouldn’t and then stubbornly cling to our error. Here’s the text followed by a few takeaways for your life and retirement.
“All kinds of examples from cycle maintenance could be given, but the most striking example of value rigidity I can think of is the old South Indian Monkey Trap, which depends on value rigidity for its effectiveness. The trap consists of a hollowed-out coconut chained to a stake. The coconut has some rice inside which can be grabbed through a small hole. The hole is big enough so that the monkey’s hand can go in, but too small for his fist with rice in it to come out. The monkey reaches in and is suddenly trapped…by nothing more than his own value rigidity. He can’t revalue the rice. He cannot see that freedom without rice is more valuable than capture with it. The villagers are coming to get him and take him away. They’re coming closer — closer! — now! What general advice…not specific advice…but what general advice would you give the poor monkey in circumstances like this?
Well, I think you might say exactly what I’ve been saying about value rigidity, with perhaps a little extra urgency. There is a fact this monkey should know: if he opens his hand he’s free. But how is he going to discover this fact? By removing the value rigidity that rates rice above freedom. How is he going to do that? Well, he should somehow try to slow down deliberately and go over ground that he has been over before and see if things he thought were important really were important and, well, stop yanking and just stare at the coconut for a while. Before long he should get a nibble from a little fact wondering if he is interested in it. He should try to understand this fact not so much in terms of his big problem as for its own sake. That problem may not be as big as he thinks it is. That fact may not be as small as he thinks it is either. That’s about all the general information you can give him.”
Here are three important takeaways from this story:
Sometimes, especially during times of change or major life transitions (e.g. retirement), we need to revalue things so that we can realign our actions and beliefs with our new life. Said another way, the types of things that are important to us in the new life stage are likely different from the things that were important to us during the previous life stage. We need to decide what those new things are and elevate them to their proper position. If we don’t, we’ll cling to things that used to be important to us (e.g. work, certain relationships, houses, how we spend our free time, hometowns, etc.) and our tight grip on those keeps us stuck in the monkey trap, unable to pursue our new plans.
Sometimes holding the tangible thing can cause you to lose the intangible. There’s nothing wrong with having nice things, but everything we own takes some of our time and some of our money. If we focus too much on the tangible (houses, cars, gadgets, etc.), that leaves little time and money left over for the intangible (travel, experiences, hobbies, relationships, pursuits, etc.).
Sometimes we don’t understand how much we value the intangibles until we lose them. I was reading a study recently that listed out the types of things that were important to retirees. Number 1 was financial security (no surprise there). Number 2 was health. In the story above, the monkey got the rice, but it cost him his freedom. I don’t know about you, but I’ve definitely made sacrifices to my health as I pursued wealth (a.k.a. career). I’m sure you have too. We work hard. We’re busy. No time for a healthy lunch. No time to exercise. No time to get enough sleep. We take our health for granted. In our own way, we’re grabbing for the rice, but if we’re not careful it could cost us a major intangible like our health, and consequently our freedom to pursue many of our retirement plans. We may take it for granted now, but it will be sorely missed when it’s gone.
How can we avoid monkey traps?
What that question is really asking is this: How can we tell if we’re hanging on to something trivial at the expense of something important? How can we tell the genuine from the counterfeit? To answer that, let’s look at an example from the Secret Service. In addition to protecting the President, the Secret Service is in charge of protecting against counterfeit currency. When they’re training new agents to recognize counterfeits, they don’t sit them down in a room with a bunch of counterfeit bills and point out the flaws.
Instead they sit them down in a room with currency experts and pristine examples of genuine bills. They go through every detail. Why it’s there. What it represents. How it deters counterfeiters. How difficult it is to reproduce. How to look for it. They learn what the ink looks like. They learn what the paper feels like. They learn what the bill smells like.
By studying what makes a bill genuine, a funny thing happens. Without ever studying the counterfeits, agents can spot them from a mile away because they know what the genuine bills look like. We can do something similar. If we sit down and decide what’s genuinely important to us—what we value above all else—then when imposter opportunities come along, we will be able to recognize them for what they are. Then rather than shoving our hand inside and grabbing for the rice, we’ll keep right on walking because we have a clear idea of what we really want out of life and we’re taking those plans very seriously. If we can all do that, then we’ll be well on our way to an intentional, meaningful retirement.
When I was in college, I wanted to take a photography class as an elective. Unfortunately, I was required to take “Fundamentals of Drawing” as a prerequisite. I can’t draw to save my life, but I gave it a shot, assuming that the teacher would grade according to the “finance student who wants to take the photography class” curve.
On the first day of class the professor said, “I know many of you are here because you need this class to take the photography class. I am not an easy grader. If your drawings are bad, you will fail the class.” And that’s the story of how I ended up not taking a photography class in college.
Thankfully, we live in a completely different world today. Most of the rules, roadblocks and gatekeepers are gone and you can learn just about anything you want online, often for free.
Want an example? Just a few weeks ago I learned how to tile a floor watching a 5-minute YouTube video. Then I tiled my floor. It turned out great. I learned how to adjust my sprinkler heads the same way. Ditto with how to play new songs on my guitar.
YouTube is great, but sometimes you want a more formal learning process so you can take a deeper dive into a subject. For that, I’ve been experimenting with three companies that provide thousands of interesting online courses.
What it is.Coursera is an online education website started by a former Stanford professor. The company has agreements with more than 120 top universities (e.g. Princeton, Yale and Stanford) to make their most popular and interesting courses available free of charge to anyone who wants to take them.
How it works. Courses are a combination of videos, assignments and tests and usually take four to six weeks to complete. You study at your own pace and can go back to review material if needed or pause the lecture if you want to look something up, do further research or cook dinner.
What it costs. The courses are free for anyone who wants to take them, but you can pay a nominal fee (usually between $50 and $95) if you want to receive a course certificate that you can show a potential employer or list on your resume.
Types of classes. Imagine a college course catalog and that’s what the list of Coursera courses looks like. Want to take a nutrition class from Johns Hopkins? Check. How about a music class from the Berklee College of Music? Check. Computer programming at Stanford? Law at the University of London? The history of Beatles music at the University of Rochester? Check, check and check.
What it is. CreativeLive was founded by the super talented Chase Jarvis. If you’ve ever seen an ad or commercial for Nike, Apple, RedBull or Starbucks, chances are you’ve seen Jarvis’ photography and video work. The idea behind the company is to bring together some of the top creative minds in the world and do live classes in their areas of expertise.
How it works. Browse the list of upcoming classes and sign up for whatever sounds interesting. The live classes are often free, but if you miss the class or want to browse the catalog of hundreds of past classes, you can take those for a small fee.
What it costs. Again, the live classes are often free, but if you sign up for a past class from the catalog, they usually cost anywhere from $29 to $99 (some are more) depending on how in depth the class is.
Types of classes. There are classes in areas like photography, videography, design, music, money, travel and life. For example, I recently took a class on travel hacking (taking great trips for less money) taught by a guy who just finished visiting every country in the world. I’m also signed up to take an upcoming class on travel photography in July. Those are just a few examples, but there are hundreds of others to choose from.
What it is. Like the others we’ve discussed so far, Udemy is an online learning platform. Rather than providing just college courses (like Coursera) or focusing on a narrow range of topics (like CreativeLive), Udemy offers a broad range of skill building classes in a ton of different areas.
How it works: Sign up by creating a user name and log in and then start browsing courses to take. And if you have a particular area of expertise, Udemy makes it easy for you to create your own course and sell it on their platform.
What it costs: Some classes are free, but most cost between $29 and $99.
Types of classes: There are more than 30,000 courses in areas like business and entrepreneurship, academics, the arts, health and fitness, language, music, and technology.
One of our core beliefs here at Intentional Retirement is that curiosity and a willingness to learn will often result in an interesting and rewarding retirement. The resources discussed above make that easier than ever.
Congress just passed a law that made some changes to Medicare so I wanted to give you a quick summary of those changes and how they might affect your retirement plans.
Doctor Pay. The law repeals the physicians payment cut that had many doctors seriously considering whether they should stop accepting Medicare patients altogether. The law also institutes annual payment increases to doctors for certain Medicare services. This is good for Medicare patients because it will increase the likelihood that they will continue to have access to their doctor of choice.
Health Care Quality. The law also instituted new quality measures for doctors and hospitals which reward them for providing high quality care. This is obviously another plus for those on Medicare.
Identity Theft. If you’re currently on Medicare, you probably raised an eyebrow when you first got your Medicare card and saw your Social Security number printed on it. This obviously opens the door to identity theft if your card is lost or stolen. The new law stipulates that all new cards must come without Social Security numbers printed on them by April 16, 2019 and existing cards must be reissued within four years after that.
Means Testing. As the financial difficulties of Medicare and Social Security become more acute, one of the first “fixes” that Congress will likely reach for will be some form of means testing. This is already starting to happen in Medicare. For example, the law increases the amount that high-income beneficiaries will pay for Part B (doctor’s insurance) and Part D (prescription drug coverage).
To understand how premiums will increase, we need to understand how the premiums are calculated. Basically, the government calculates an overall premium based on the cost of the program and then they pay part of that premium and individuals pay the other part. Your income level will determine how much of the premium you will be required to pay.
Most people currently pay a premium of $104.90 per month for Medicare Part B, which equates to about 25% of the premium cost. High earners, however, pay an Income Related Monthly Adjustment Amount (IRMAA). The higher your income, the more you pay. This has been the case for many years now, but the new law reduces the income limits, thereby subjecting many more people to higher premiums.
Here’s what people are paying currently:
Less than $85,000
$85,001 to $107,000
$107,001 to $160,000
$160,001 to $214,000
More than $214,000
And here is how the income limits will adjust:
Less than $85,000
$85,001 to $107,000
$107,001 to $133,500
$133,501 to $160,000
More than $160,000
Notice that many more people fall into the “high income” category and will thus be responsible for a larger percentage of the premiums. It’s difficult to put a specific dollar value on these increases, because we don’t yet know what the premium costs will be in 2018, but here are two things we do know: 1) the premiums will be higher than they are now, and 2) those with higher incomes will be required to pay a larger percentage of the premium. I have seen some estimates that a person in Tier 4 or 5 might pay around $3,500 more per year ($7,000 per couple) than they would if they were in Tier 1 or 2.
Are there ways to avoid these increases? Yes! The increases won’t happen until 2018, but they will be based on your Modified Adjusted Gross Income in 2016 and beyond. Those who are retired (or close to it), should keep that in mind. Your adjusted gross income is made up of things like wages, taxable interest, dividends and distributions from IRAs. During retirement, you can control several of those things. When deciding which accounts to pull from first, how much to pull from your IRAs or whether or not to work part time, consider how those decisions will affect your income and whether or not that income is enough to bump you up into a higher Medicare bracket. If so, it might be wise to forgo part-time work or delay distributions from IRAs until the following tax year.
I know Medicare discussions can be a little dry, so I’ll leave you with a fun photo from over on our Facebook Page:
Have a great day!
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