Seasonal, Part-Time, and Call-In Work

Since retiring in my forties this past October, I've been considering options for working as needed or when desired, either to augment income or because of interest. I'd also like to be prepared for the possibility of a decline in the stock market, which is providing the majority of our retirement income. Finally, I'd like to get some experience in areas that may help me in a future dream job. Here's a summary of options I will pursue further and those that I will drop.

POSSIBILITIES

Seasonal financial services work. Banks and tax preparation services hire part time people help during season peaks, either due to demand or vacation. Given my interest in personal finance, these may be interesting jobs to do on periodic basis.

Professional temp work in my field of expertise. There are several organizations that specialize in temp project work for my profession. While I'm not a doctor, I know of retired physicians who do occasional work for hospitals a few months a year. I have signed up with an professional temp organization that may allow me to do something similar in my field.

NOT LIKELY

Seasonal retail work. In my ranking of things I like to do, shopping ranks pretty low on the list. I don't think I would even remotely enjoy working to help people shop. I'd probably want to ask them "Do you really need this?" :-)

Volunteer work. As I have written before, I had done significant amounts of volunteer work in my twenties and thirties, including being president of three different organizations. I feel that I have done more than my fair share of community service:-) I will limit volunteer work to occasional help for my three year old's activities.

General temp work. I don't have any interest is doing office or technical work placed through agencies such as Manpower or Kelly Services. It seems to me that one can make more money by applying directly to companies for specific temporary work.

Fast food service. I'd only do this type of work if I was considering becoming a franchise owner. In that case, I would want to have a better understanding of the business, day to day operations, and the environment. The probability of us buying a fast food franchise is very, very low.

I also have a few other criteria that I would like to meet, including: short commute, flexible schedule, and possibility to help people. At this point, I am pursuing both options that I shared in the Possibilities section. As always, I have purposely not shared specific details to maintain anonymity. However, in the future, I will provide an update as to whether these options meet my expectations.

For more on New Beginnings, check back every Sunday for the next segment.

Photo Credit: morgueFile.com, Dawn M. Turner

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Job Satisfaction, Annuities and Hard Work

Ben Stein is one of the columnists on Yahoo Finance! that I read periodically. Recently, he wrote a piece called Arm Yourself for Job Fulfillment and Retirement Bliss. In the article, Mr. Stein shares his perspective on concepts of true job satisfaction, financial security via annuities, and how wealth building requires hard work. While I agree with his points of view on job satisfaction and hard work, I am not comfortable with with purchasing a lifetime annuity. Here are my thoughts in these areas:

Job Satisfaction. Mr Stein writes that real job satisfaction results from meaningful and challenging work, where people genuinely respect, value and support each other. I can attest that my best projects have been ones where these criteria were met, both ways. On the other hand, my most challenging assignments were those where these criteria were not met either one or both ways.

If I should ever start a company, I would hope to make these characteristics the basis of longer term business partners and business colleagues.

Hard work. Mr. Stein acknowledges that building and keeping of wealth requires hard work. I fully agree since I have not found an easy path to riches. For me, it is been one of hard work, discipline and some sacrifice. I am always skeptical of people who promote or are looking for "easy" ways to get rich.

Lifetime annuities. Mr. Stein recommends that using a lifetime annuity to guarantee income late in life, especially if one can no longer manage one's affairs. While I recognize the simplicity of this approach, I think it ignores the risk of a losing the money due to potential mismanagement by a financial institution. The recent subprime debacle has shown me that even apparently strong companies can make financial mistakes that can put their company out of business. In fact, the one lifetime annuity for which I will be eligible in the future, Social Security, seems to be constantly at risk of going away.

I much prefer to count on my own trusted resources or advisors to manage my retirement funds. In addition, I may consider selling my house as source of income late in retirement.

Overall, I think Mr. Stein was on target for two topics. For the lifetime annuities, I would want a much better guarantee before considering putting my money with a single insurance or financial company.

For more on Reflections and Musings, check back every Saturday for a new segment.

This is not financial advice. Please consult a professional advisor.

Our Journey To Financial Freedom #10 - When Preparation Met Opportunity

In early October, 2007, I announced that I had retired in my forties. As promised, I am writing a Friday series on "How We Did It," of which this is segment #10. ( #1 is about our childhood , #2 is about education, #3 is about working, #4 is about lifestyle , #5 is about goals, #6 is about staying on track, #7 is about the role of luck, #8 is about my personal finance mind tricks and #9 is about the professionals we consulted.) This segment is about how preparation enabled us to take advantage of the opportunities which created the possibility of early retirement.

I wish I could write that I had planned meticulously to retire in our forties and executed the plan with excellence to make it happen. I am not that good :-) The reality is we were tracking pretty well against retirement in my fifties. However, because we were solidly in the upper percentiles of readiness, a couple things going in our favor enable us to consider and then take the retirement much earlier.

PREPARATION

Here are some of key elements that were tracking well for us:

1. Savings outside of retirement accounts. As a result of good financial management, we have been able to save about 20% of salary income. While part was put into retirement accounts, we also put money into taxable account which can be used before we are eligible to withdraw funds from tax deferred accounts. Also, I have been taking bonuses as deferred income, which is expected to paid in the first 10 years of our retirement.



2. Creation of satisfactory quality of life. My spouse has been the COO (Chief Operating Officer) for our family since she quit her job when we transferred overseas. In the role, she manages the entire household, covering daily needs, maintenance and repair. For the past 4 years, my spouse has created a comfortable lifestyle while maintaining constant living expenses, even after arrival of our daughter.
   
   For reference, my spouse is exceptional at making sure routine maintenance (e.g. home, yard, car) is scheduled, essential needs (e.g. good health, nutritious cooking, clothing) are met and a high enjoyment of life (e.g. family vacations, entertainment) is maintained. Doing so often incurs a higher cost upfront, and I think avoids unexpected costs in the future which result from neglect. In addition, she has managed to increase the amount and quality of services while keeping costs the same.



3. Simulation to build confidence. For the past four years, we have been experimenting with the amount of spending needed for an acceptable lifestyle on a long term basis. Through trial and error, we have identified a "sweet spot" and have been able to come within +/- 10% of a spending target on a monthly basis for two years. Thus, we are pretty sure of the amount of money we will need during retirement, including saving for our daughter's college education.

OPPORTUNITY

Here were a couple events that happened in our favor:

1. A stock market recovery. At the end of the tech crash in 2002, I was starting to think it would be tough to retire in my fifties. My company retirement account had was still down about 33% and my taxable investments were down about 10%. In addition, interest income was only about 10-20% of pre-2000 years. Retirement didn't appear to be a near term option.
   
   However, the stock market has recovered, with the Dow hitting new highs. Similarly, my company's stock has recovered and achieved new highs. In addition, interest rates have risen to historically reasonable levels around 4-5%.



2. Lowered retirement age. While our normal retirement age is 55 or older, occasionally the option to retire earlier with all benefits is offered. This option can become full retirement if one has access non-retirement income until 59 1/2. Otherwise, people either decline and stay or take the option and find a new job.

Because of our preparation, we were able to give full consideration to early retirement when the opportunity presented itself. To be clear, there was and is still some risk, as the stock market is currently very volatile and could decline. If the market does fall precipitously, I may be among those retirees that need to go back to work :-(

Here's the series:

1. Our Childhood Preparation
2. The Value Of Higher Education
3. Making The Most Of My Job
4. Lifestyle and Spending Choices
5. Setting Goals, Developing Plans and Tracking Process
6. Staying The Course
7. How Luck Played A Role
8. My Personal Finance Mind Tricks
9. The Professionals We Used
10. When Preparation Met Opportunity

For more on Reaping the Rewards , check back every Friday for a new segment.

Photo Credit: morgueFile.com, JJM

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

When Parents Can Be Claimed Dependents On A Tax Return

In the past year, my mother was admitted to a nursing home, and needed her children to handle all of her affairs. However, our mother is not a dependent for tax filing purposes. Whether a parent can be claimed as a dependent on one's tax return depends on two criteria.

1. A child (or children) must provide over 50% of the support for the parent


2. The parent must have less than $3,300 of gross non-tax exempt income.

It can be challenging to meet both criteria for the reasons below.

As I understand it, if a parent owns a home, they will typically be considered as providing over 50% of their own support, and be disqualified from being a dependent. However, if they live in a rented house that is separate from their child or in a nursing home, it is possible to have over 50% of support provided by their child.

Also, since gross income includes wage, pensions, dividends, capital gains, traditional IRA distributions and interest, it may challenging to keep it below $3,300. Only income exempt from federal income taxes, e.g. municipal bonds and some Social Security payments, can be excluded from the calculation. For Social Security, payments are not counted in gross income until the other taxable income is over $25,000 (single) or $32,000 (married filing jointly).

My mother's situation does not meet either criteria. She still financially supports herself, owns a home and has taxable income over $3,300. Thus, she cannot be claimed as dependent by anybody.

For more on Crossing Generations , check back every Thursday for a new segment.

This is not financial or tax advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Links To Carnivals from December 2 - 4, 2007

Here are links to select Carnivals from December 2 - 4, 2007:

The Personal Development Carnival

The Carnival of Personal Finance #129

Investors Blog Network (IBN) Festival #18

Tax Carnival #25

65th Festival of Stocks

Festival of Frugality #102

37th Carnival of Money Stories

Please give the hosts recognition for their hard work by checking out their Carnivals.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Protecting Our Savings Against A Recession

Economists have correctly predicted nine of the last five recessions. -- Paul Samuelson, economist

Since we depend on investment income, the possibility of a recession has me a bit concerned. I've been seeing more articles on the chances of a recession and how to invest for an expected recession. Examples of articles include: Protecting Your Nest Egg in a Recession and Use ETFs to hedge your bets.

The problem is that no one really knows when a recession is coming and how long it will last. So recession proofing one's savings too early or for too long can be costly in terms of lost returns. My personal preference is to set aside part of my savings to protect against a recession, and still stay in the market.

Here are some of the approaches I like:

1. Reallocate a higher percentage to investments that can do well in a recession. I will stay in equities but allocate a higher percentage in CDs, bonds and cash. For example, I may go from 35% cash, CDs and bonds to 45-50%. That way I will still participate in appreciation of the stock market, should a recession be delayed. I still remember the story of a colleague's friend who went 100% cash in 1985 and was still in cash in late 1999. He missed the crash of 1987 but also missed the significant gains of the stock market through 1999.
   
   For the equity portion, I will skew more towards the large cap growth stocks, which tend to do better in the later stages of a bull market. I have also slightly increased the proportion invested in foreign stocks.



2. Keep funds that are needed for the next 3 years in cash or cash equivalents. I will keep near term needs such as our living expenses in cash, laddered CDs or laddered bonds. That way we can get the money we need without taking losses in the stock market, if there is a recession. If we had children in college, we would also use this strategy for college tuition.



3. Set aside a small portion of funds to short individual stocks. When a recession does happen, I will use a small percentage (about 1-3%) of our savings to short individual stocks, using a system developed by a colleague. Also, I have invested in a bear fund, called the Prudent Bear (BEARX), which shorts individual stocks and goes long on gold stocks. This fund had done relatively well, even when the market is rising.

Here are some approaches I will probably not use:

1. Insure my portfolio against losses with put options. Buying index puts or individual stock puts can be very expensive if done frequently. And since options are very time sensitive, it is critical to be good at timing the market, which I have not been very good at doing regularly.



2. Hedging my portfolio with funds or ETFs that short indices. I think going against the market is a bad bet for the long term, and it can be a bad bet for the short term. In today's volatile market, a single piece of good news can cause an index to move up significantly in a day, making a short position a losing one. As I noted above, I prefer shorting individual stocks or a fund that shorts individual stocks.

The only good news about a recession is that the U.S. economy usually recovers and gets stronger. At this time, I still think it is a good bet that the U.S. stock market will be higher 10 years from now.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

How A Digital Camera Helps Me Save Money And Time

This year I found a great use for a digital camera that saves money and time - providing visual records for my do-it-yourself projects.

In July, we discovered a small amount of water leaking from under the toilet. I was pretty sure the problem was a deteriorating wax seal, which I had experience with repairing in our previous house many years ago. With repair instructions in hand, I took off the toilet and the old wax seal. The flange had rusted and wasn't functional any longer, causing the seal to be insufficient. Unfortunately, I had not seen the type of flange before, since our previous house was 70 years older.

I knew I could describe the problem to the plumbing expert at the Lowe's. However, I realized that a picture would be much more effective. So I took several pictures of the problem and took my digital camera with me to Lowe's. Upon looking at the pictures, the plumbing associate immediately said, " I know exactly what you need ...." The solution worked, and we saved a minimum of $135 for a service call to fix it.

In a second situation, I used the digital camera in a different way to save time when doing a memory upgrade for our desktop computer. In order to access the memory slot, I needed to disconnect all the wires from the printer, monitor, keyboard, mouse and speakers. Normally, I mark each connection since I don't want to take time to figure out where each wire attaches. This time, I took a digital picture of the back of the desktop unit, which served the same purpose as marking each wire. The memory installation went well and I saved a lot of time (and frustration:-).

In these examples, our digital camera provide an immediate accurate visual recording of some important facts and information. For each case, the result was superior to using my usual methods of memory or documenting on paper.

For more on Ideas You Can Use , check back every Tuesday for a new segment.

Photo Credit: morgueFile.com, Paul Anderson

This is not financial or repair advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

12/3/07 Stock Purchase Update - Benefited From the Rebound

In my 11/26/07 stock purchase update, I wrote about how the 10/15/07 updated buy list of Potash (POT), Southern Copper (PCU), and CNH Global (CNH) was performing. In that article the portfolio was showing the effects of the market correction, but was still up $1577.90 for a 14.8% return, down from previous week's high of $2073.90 for a 19.5% return. On 11/27/07, I purchased 50 shares of BHP Billiton (BHP) at $71.54. As of 11/30/07, the portfolio achieved a new high of $3,041 for a 21.4% gain. The new purchases of PCU, CNH and BHP are now up $616.40 for a 5.8% return. Here's the current status of the portfolio:

	My Wealth Builder 10/15/07 Buy List
Stock [purchase date]	Shares	Purchase Price	Current Price 11/30/07
Potash (POT) [6/7/07]	50	$71.59	$119.89
Southern Copper(PCU) [11/13/07]	40	$108.24	$110.65
CNH Global NV (CNH) [11/13/07]	50	$55.22	$61.33
BHP Billiton (BHP) [11/27/07]	50	71.54	$75.83

The market activity continues to be concerning, with either narrow breadth or a high number of new lows. I believe that the probability of a recession in 2008 is relatively high. However, the Fed interest rate cuts lead me to believe the bull market will last through summer, 2008, although it may be choppy. At this time, I plan only to invest a limited amount in the buy selections.

For more on Strategies and Plans , check back every Monday for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

Another Blow To the U.S. Economy - Expected Delays For Tax Refunds

How many blows can the U.S. economy take before a full fledged recession occurs? First gasoline prices skyrocketed, followed by a housing bust, then a credit crisis, followed by liquidity issues that caused staggering losses at financial institutions, and recent declining earnings reports have not been received well by the stock market. To date, however, the U.S. economy has been pretty resilient.

The work on freezing some interest rates on subprime loans appears to be helping. While retail sales have been weak, it has not been a complete disaster yet. So consumer spending is still providing some support. However, it looks like a new issue with tax refunds may further weaken consumer spending and credit. In an article I read in Yahoo! Finance titled Millions of Tax Refunds Could Be Delayed , Jim Abrams writes that the inability of Congress to pass the tax bill could move the start of the tax filing season to as late as mid-February, delaying up to 31.8 million refunds for a total of $86.9 billion.

Since many tax filers count on their refunds to cover necessary expenses, it seems to me that a delay would be still another factor that pushes the economy closer towards recession.

For more on New Beginnings, check back every Sunday for a new segment.

Photo Credit: morgueFile.com, Ronnie Bergeron

This is not financial or tax advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

More Than 40% Pay Zero Federal Income Tax

If you're reading this article, I am guessing you are probably in the 60% that do pay federal income taxes. Of note, most of the non-payers are not wealthy people using tax loopholes. The majority are lower income taxpayers who are single and use the Single or Head of Household (i.e. single with a dependent child) filing statuses. Also, some of the non-payers get a refund that is actually greater than the amount of their federal withholding, due to Earned Income Tax Credit (EITC) which is an anti-poverty tool that is implemented through the Tax Code.

When I first heard this statistic, I was surprised at the magnitude of the percentage. However, one only needs to check a few sources such as the Tax Foundation or the Heartland Institute to confirm the numbers. It is worth noting that these people still pay taxes, even if they don't pay federal income tax. Non-payers of federal income tax still contribute to payroll taxes (social security and medicare), sales tax, and excise taxes.

While I realized that the majority of federal income taxes was paid by a minority of taxpayers (e.g in 2004 10% of taxpayers paid 68.2% of the federal income tax), I didn't realize that such a large proportion (i.e. over 40%) paid no federal income taxes at all. Somehow, that doesn't feel right. I don't believe a tax system that allows 40% to opt out is sustainable, especially if that segment requires signficant services from the government. To me, this would similar to 40% of a company doing no work and the other 60% carrying the load so that the company can make money. I don't believe such a disparity in contribution can work for very long.

With the upcoming Presidential elections, I will be very interested in how federal income tax code issues are addressed. Based on my limited exposure to the candidates so far, I expect I won't be very impressed with any of the proposals. It would be great if I were pleasantly surprised in the next few months :-)

For more on Reflections and Musings, check back every Saturday for a new segment.

Photo Credit: IRS.gov

This is not financial or tax advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC