The Swirling Retirement Mists Of Castine

IMG_4548One of the places we visited on our recent trip to Maine was Castine, a pretty little seaside town on the Blue Hill peninsula that is home to the terrific Castine Inn.  During a stop at a local tavern, we heard an interesting tale from a local.

He reported that some years ago a magazine identified Castine as the best retirement community option in Maine — scenic, affordable, friendly.  Locals were happy, and retirees responded to the article by visiting, deciding that the article was onto something, and buying up the houses in the community.  Over time, the influx of retirees affected the Castine community in a number of ways.

The increased demand made housing prices rise.  It was good for the sellers, but it also meant that houses were priced out of the range of workers who would otherwise live in the community.  Because the retirees didn’t have children, school enrollments fell and schools struggled to survive.  And, because many of the retirees were “snowbirds” who love Maine during summers, where temperatures typically stay below the 80s and 90s, but don’t want to endure the tough Maine winters, Castine became a kind of part-time community that shrank greatly during the fall and winter months — which made it difficult for local businesses, like grocery stores, restaurants, and bars, to survive on a year-round basis.

IMG_4537The local said that if it weren’t for the student body and teachers of the Maine Maritime Academy, a school that trains students to serve as engineers and in other capacities aboard ships — and which takes students out on training missions on the State of Maine, the formidable ship pictured above and anchored in Castine’s harbor area, side by side with the school tugboat — Castine might not be able to survive.

For Castine, good publicity about its advantages as a retirement community apparently turned out to be a double-edged sword.  When we left Castine, the fog still shrouded the harbor and the mists swirled around the State of Maine.  It seems to mirror the hazy uncertainty that one local sees about his community’s future.

Targeting The Savers

The Obama Administration’s budget is due this week.  According to reports, one of the President’s proposals will be to limit how much Americans can keep in IRAs and tax-preferred retirement accounts.

The proposal is being sold as a way to generate revenue — $9 billion over a decade — but also to achieve greater “fairness” in the tax code.  One of those faceless, nameless “senior administration officials” who are always quoted in these articles says that those pesky wealthy Americans can “accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.”  Under the proposal, a taxpayer’s tax-preferred retirement account could not finance more than $205,000 per year of retirement, or about $3 million this year.

Interesting, isn’t it?  The government allows tax-preferred accounts to encourage taxpayers to save for retirement, and the programs actually work.  For decades millions of Americans have been patiently putting money away and investing it, hoping to have a pleasant retirement after years of hard work.  Now an unelected bureaucrat has presumed to decide what constitutes “reasonable levels of retirement saving.”  And while $3 million is more than most of us have in our accounts, let’s not kid ourselves:  once the government concludes it can decide what a “reasonable” retirement looks like, no one’s savings are safe.  With the government’s insatiable appetite for revenue, what’s to keep them from deciding that, say, $50,000 per year of retirement is all you really need?

I’m all for getting our federal budget in balance, and although $9 billion isn’t a lot, I think every little bit helps.  But this proposal seems terribly ill-advised.  It targets people who have sacrificed and saved and are trying to plan for the future — in effect punishing qualities that we should be encouraging.  It’s as if, in the tale of the ant and the grasshopper, the government decided it wasn’t fair for the hard-working ant to keep the fruits of his labor and required him to share equally with that indolent, fun-loving grasshopper.  The problem is that, after a while, the ants are going to get the message and take up the fiddle, too.


The Pope’s Decision

Pope Benedict XVI announced today that he is resigning the papacy, effective February 28.  He’s the first Pope in centuries to resign.

Benedict, who is 85, said he was resigning because he felt his strength had deteriorated.  He believes that leading the Catholic Church requires strength of mind and body and concluded that his failing condition was leaving him unable to adequately perform his duties.

I’m not a Catholic, and I therefore can’t speak knowledgeably about whether Pope Benedict has been a good Pope, a bad Pope, or something in between.  However, I can applaud the Pope’s resignation decision as an all-too-rare example of selflessness and self-awareness by a powerful individual who could easily have served in his office until his death.  How many Popes have been unable to let go of the trappings of office and the adulation that accompanies it?  How many have been unwilling to acknowledge their declining physical and mental abilities?  How many have been content to let their responsibilities drift as their individual capacities have diminished?

I wish more significant public figures — be they Popes, or Senators, or sports stars, or others — were willing to engage in objective self-evaluation and step aside upon concluding that they were no longer up to the job.  Perhaps Benedict’s surprising decision will cause other people in important public jobs to consider whether they, too, should make room for a more active, energetic replacement.

Moving On

Friday was Kish’s final day in her position as assistant to the headmaster of the Columbus Academy.

In her last weeks on the job she was hugged by many, feted by her friends, and featured in a blurb and photo appearing on page 3 of the June 2012 edition of Academy Life.  At a recent end-of-the-year event, many people came up to talk to us about how much she will be missed.  It was obvious that their comments were heartfelt and sincere — and not just because of the peanut M&Ms mentioned in the article linked above.  It embarrasses her to have anyone compliment her about her work, but there’s no question that she was great at her job, and that her shoes will be hard for her successor to fill.

Kish and I are at the age where many of our friends and relatives have been transitioning. Now she is the one who gets to move on to a new chapter.  It’s not retirement, it’s a new phase — and at the outset I’m hoping she’ll do lots of reading and relaxing and enjoy some richly deserved leisure time.

Retirement Riches Untold

I didn’t win the Mega Millions lottery payout, which means that a key assumption in my retirement planning will need to be changed.  Why not simply presume that, at some point, you are going to get a huge windfall?  It makes retirement planning a heck of a lot easier.  (And it’s about as realistic as assuming that Social Security will be able to make monthly payments at current levels indefinitely to millions of long-lived Baby Boomer soon-to-be retirees.  But I digress.)

With the removal of the Mega Millions payout assumption, I need to look elsewhere for the wealth that will fund the fabulous, active retirement that is every American’s true birthright.  Recently, in doing some spring cleaning, I think I found my answer — in our travels, we’ve accumulated an impressive collection of foreign money.  Why, I have one piece of paper currency alone, with a picture of Ho Chi Minh on the front, with a face value of 20,000 dong.  20,000 dong!  If the exchange rate is even remotely favorable, that one bill alone should fund a year’s worth of Early Bird Specials at whatever restaurant caters to senior citizens at our ultimate retirement destination.

That’s not all, either.  I’ve got a 1 yuan bill with Mao’s picture on it, as well as Chinese coins.  Another bill reads 5 Wu Jiao and has a nice picture of two women wearing some traditional tribal costumes on it.  It’s probably Chinese currency, too.  China’s economy is doing great, so that hoard will be like an investment that will keep on growing.  I’ve got Euros, and Canadian change, and coins with holes through the middle and Asian writing on them.  Surely, all of those will be worth something, and will help to avoid times of want in my golden years.

As I go through the money, I found one game token that has “no cash value” stamped on it.  Oddly, it looks just like the other coins — made of metal, about the same weight and heft, minted with a picture on one side and numbers on the other.  I suppose you could conceivably confuse American currency with such worthless bits of metal or paper.  Fortunately, our money has the full faith and credit of the U.S. government behind it.  Thank goodness!

Trying To Think Positive Thoughts About The Stock Market

It’s hard not to be depressed about the anvil drops on the stock market.  Many of us have lost about 10 percent of our intended retirement nest eggs in the space of only a few days.  However, my grandmother said every cloud has a silver lining, and I always have tried to follow my grandmother’s wise advice.  So, here is my attempt to come up with some positive thoughts about the recent performance of the stock market:

*  It’s knocked the stories about the Ohio State football program off the front page

*  I’ve been told that gray hairs make me look distinguished

*  I probably won’t like eating dinner at 4:30 p.m. until I’m in my 80s, anyway

*  Hey, maybe now people won’t think I’m “wealthy” and want to increase my taxes!

Retirement Fund Haiku

The stock market — and the 401(k) plans of millions of Americans — really took a beating today.  Anytime the market plummets more than 500 points and loses almost five percent of its value in a single day, it is just not a good day.

Why did the market drop like a drunken sailor after his last mug of grog?  Who knows?  The zig zags of the market are beyond the ken of mortal investors.  Perhaps the Wall Street wizards have come to recognize what most of us have realized for a long time — the economy sucks wind like an overweight sprinter, and its not getting whipped into shape by the expensive “cures” emanating from Washington, D.C.

There’s not much we can do about it, except compose another bit of stock market haiku to commemorate our vanishing paper profits:

Economy blows

Retirement just a dream

And summer’s too hot

401(k) Follies

Many of us have tried to save and plan for retirement.  We’ve read the books about how investing in mutual funds is one of the best ways to maximize your return and grow your nest egg over the long term.  We’ve followed that advice, and many of us have stayed the course, through up years and down, trusting in the historical fact that the stock market will produce long-term gains that outstrip every other investment vehicle.

As I sit here tonight, amazed that President Obama and congressional leaders have taken us to the brink of apparent default, I wonder:  If the debt ceiling is not increased, if the United States defaults, and if ratings agencies downgrade the investment value of United States government securities — with the likely negative ripple effect of those developments throughout the economy — does anyone doubt that the stock market will plunge and our carefully considered long-term investments are going to take a huge, unnecessary hit?  And if that inevitable hit occurs, how long will it take for our retirement funds to recover from it — if ever?

I think the dumb brinksmanship we are seeing from every one of our political leaders right now is infuriating, but I cannot imagine how angered I would feel if I were on the eve of retirement and saw those leaders taking absurd risks with the value of my hard-earned, soon-to-be-needed retirement nest egg.  It’s one thing to believe that our elected representatives are unconcerned about the average schmoe, it’s quite another to see that they are gambling with your money and your future solely to further their partisan political positions.

Farewell To The Beemer

Cars, like people, deserve a proper retirement send-off.  Today we bid adieu to Kish’s little blue BMW station wagon.

We’ve had the blue Beemer for nine years and put on more than 100,000 miles.  The car has patiently endured paint splashes, clipped side-view mirrors, fender benders, coffee spills, and lots of dog hair.  It has borne us to and from faraway places, lugging loads of happy people, dozing dogs, suitcases, paintings, and stray furnishings.  It has delivered reasonably good mileage.  And it has continued to serve for years after it was paid off, requiring only periodic maintenance in order to provide the essential of reliable daily transportation. It has become a kind of member of the family.

But to every thing there is a season, and for the little blue Beemer the season of change came when the alternator gave up the ghost on I-77 and had to be replaced.  The worm of doubt about its continuing reliability was introduced, and with that its hour of career change inevitably drew nearer.  So today we trade it in for a new Acura mini-SUV, but we thank the BMW for its years of faithful service and wish it the best in its future endeavors.

And now, we’d like to present it with this plaque and a gift certificate to Jiffy Lube.

Uncle Mack Hangs Up His Spurs

Yesterday I got an e-mail from William Mack Webner — known to me as Uncle Mack — announcing that he is officially retired from the practice of law.  His decision to retire marks the end of more than 40 years of practicing as one of the premier intellectual property lawyers in the country.

Mack Webner (right) at a 2008 conference

It has been a distinguished career, indeed.  Through his representation of the Elvis Presley estate, entertainers, and a wide variety of different commercial entities, Uncle Mack has played a significant role in the development of the law on licensing and marketing of personalities and protecting and enforcing trademarks and other forms of intellectual property.  As the American economy has grown to focus more and more on the value of concepts, brands, and ideas, intellectual property law has grown and adapted to respond to those developments.  Uncle Mack has been one of the agents of change.  He also has been very involved with his alma mater, the University of Akron, with various professional organizations, and with various community groups.  You might say that, through these different activities, people have seen him “in triple focus.”

Because of these other interests, Uncle Mack is not one of those people who have let their work define them, so that when they retire they feel lost and uncomfortable without a job to tether them.  I know he wants to work on his golf game (what retiree doesn’t?) and he and Aunt Corinne still have a lot of exploring to do in Savannah, Georgia and its environs.  He’ll keep reading, and thinking.  I expect that I will get book recommendations from him, as I always have; he was an enthusiastic proponent of Zen and the Art of Motorcycle Maintenance and Watership Down, among many others.  Uncle Mack no doubt also will continue to be as open to trying new things as he always has been — whether it is experimenting with woodworking or finally writing that novel that he and I used to talk about when Kish and I lived in Washington, D.C. in the 1980s.  You would expect nothing less from a man who made his career dealing in the world of ideas.

When A House Is More Than Just A Home

Yesterday’s data on the sales of existing homes in July — such sales were down 27 percent from June, to the lowest level in 15 years — are another troubling sign that the economy is not recovering.  Realtors say that sellers are being stubborn about prices, and buyers are reluctant to buy now because they think prices will go lower.  If the realtors are correct (and when has a realtor ever been wrong about a house?) then you would expect house prices to go lower as sellers finally recognize reality.  At that point, buyers might start buying.

It is not hard to understand the seller’s viewpoint.  Behind every unsold home and every stubborn seller lies a story.  For many Americans, at some point their house stopped being just a home and became an investment and a crucial part of their retirement planning.  They saw house prices relentlessly increase and figured that they could stretch on their own homes and mortgages.  After all, what’s the risk?  If you can always count on houses to appreciate, then you can always get your money back, right? And if you were ultra-conservative in your home purchase and financing, you would just miss out on the big payday when your house was sold.

With the bursting of the housing bubble, those people now have to face the hard reality that their houses are not going to contribute the tens of thousands of dollars to their retirement nest eggs that was anticipated.  No wonder it is taking sellers a while to accept that tough message, with all of its implications for how much longer they must continue to work and what their reduced retirement expectations must be!

Hard Times And Hardship Withdrawals

CNN has a story about hardship withdrawals from 401(k) plans reaching the highest level in 10 years during the second quarter of 2010.  Fidelity Investments, which manages $844 billion in retirement funds, disclosed that, as of the second quarter, 2.2% of 401(k) participants had made hardship withdrawals over the past 12 months.

I’m not sure how many inferences you can draw from a rise in hardship withdrawals, but the increase clearly is not good news.  Anyone who takes a hardship withdrawal is not simply raiding their retirement fund and thereby decreasing their retirement security.  Hardship withdrawals also come an an enormous price — by some accounts, up to  40 percent of the amount withdrawn — because federal and state taxes are levied on the amount and a 10 percent penalty is imposed as well.  If you assume that people tend to behave rationally when it comes to their finances, then you have to conclude that anyone who would take a hardship withdrawal from their 401(k) plan must be desperate and have no other options.

One of the individuals quoted in the article linked above noted that 2.2% is a relatively small percentage and that the vast majority of 401(k) participants therefore are not taking hardship withdrawals.  That is of course true, but it also is likely true that people who have 401(k) plans with sufficient funds to be the subject of hardship withdrawals are the most prudent, careful savers.  (Although it is not clear how many people have saved for retirement, recent surveys indicate that 27 percent of Americans have saved less than $1,000 and less than half of Americans have more than $25,000 saved to fund their retirement years.  If you have less than $1,000, you probably aren’t going to take a hardship withdrawal because, even if you withdrew your entire fund, the amount left for you to use after taxes and penalties would be negligible.)

If even the most careful savers are so desperate that they need to take hardship withdrawals, rather than reducing their annual contributions or taking a loan from their saved amount, it indicates that times are tough, indeed.

A Cold, Icy Hand

The Congressional Budget Office is forecasting that the Social Security system will pay out in benefits more than it takes in this year, and the chief actuary of the Social Security Administration seemingly agrees.  The threshold will be crossed much earlier than expected because the current economic recession caused receipts from payroll taxes to decline — due to the high unemployment in the country — while the payouts have increased due to some people taking retirement earlier than was planned.  The imbalance is a matter of some immediate concern, although the chief actuary states that the system has a considerable balance.

The demographics of the Social Security system are inexorable, however.  The reality is that Americans are living longer and longer and therefore are receiving Social Security payments for longer periods than before.  In addition, the forthcoming retirements of millions of Baby Boomers — who all at once will stop contributing and starting receiving — will place an enormous strain on the system.  As a result of these factors, we will have fewer and fewer workers supporting payments to more and more retirees.

For those of us who are at the tail end of the Baby Boom, or younger, news about the solvency of the Social Security system is of the keenest interest.  We’ve faithfully paid into the system for decades, and lately we’ve come to wonder whether we will ever see benefits from those contributions when our retirement date arrives.  We pray that Social Security will be a reliable part of our retirement income planning — and when we read that the system is paying out more than it takes in already, years earlier than was anticipated, it is like a cold, icy hand clutching the heart.