Posted on Friday, 23rd September 2011 by

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Saving Grace (Ways to Save)

I often mention just how important it is to retire with minimum debt and that means paying off your mortgage and credit cards. I’m not the only one that preaches being debt free in retirement. Money Magazine featured an article titled “Live Well On Less” in their October 2011 issue where successful retirees present six ways to save and SAVE BIG. With the market volatility, shrinking savings and THRIFT accounts, it makes even more sense today to be prepared and save anyway you can for and in retirement. If you aren’t able to pay off your mortgage consider refinancing. I refinanced my mortgage numerous times during my career to cut costs and save thousands in interest expenses. On average 25% of a homeowner’s total spending is used to pay their mortgage payments. Today more older Americans now have mortgage or home-equity loans and considerably higher credit card debt than they did just a decade ago.

Mortgage interest rates are at their lowest level in decades and if you can save 1% or more by refinancing you can potentially save tens of thousands in interest costs over the life of the loan. I used the online Bank Rate loan calculator to determine the refinancing savings for a $100,000 loan.

Your monthly principal and interest payment for a 30 year loan at 5.5% would be $567.79. By refinancing for 30 years at a 3.85% rate your monthly payment would decrease to $468.81 for a savings of $98.98, that’s just under $1200 a year that you can use for other purposes. If you refinance this same amount for 15 years at 3.25%, your monthly payment would increase by only $134.21 per month and you would pay off your mortgage in half the time. Divide the figures by 2 for a $50,000 loan or if twice the amount multiply by 2 to determine your payment and savings. There is a HUGE savings in total interest payments. The total interest payments on the original $100,000 thirty year loan at 5.5% would be $104,403. If you refinanced for 15 years at 3.35% you total interest payment would be $26,480, $78,000 less than the 30 year lone total interest! You could have purchased several cars over the life of this loan with your interest savings alone.

One of the six strategies mentioned in the Money article included working part-time. Certainly there are many options to consider. Our Retiree Jobs Center was recently updated and we added more job listings and opportunities for you to consider.  A work centered life is what we are accustomed to throughout our career and many retirees find part-time work rewarding and it helps them stay involved and active. Volunteer work provides the same benefits and for those who don’t need the income you also have the satisfaction of serving others in your community, church, or organization.

Fear of the Unknown

Turn on your TV or radio, read your local newspaper or national magazine today, and you encounter the negative sentiment now being showered on all things government, including our benefits. This sentiment is driven by the financial crisis at hand and the out-of-balance budget with government now borrowing 42 cents of every dollar they spend! Add unemployment, the housing and international banking crisis to the mix and there is no wonder why there is so much talk about the need to be fiscally responsible. All Americans are concerned. We understand the basic problems and know that things have to change and in some cases dramatically. Change is a constant in all of our lives and it’s the fear of the unknown and how these changes will impact our family’s health and well being now and down that road that concerns us most.

Knowledge and understanding can help to alleviate or at least moderate our fears until actual change comes our way. One of the best ways to stay informed about pending federal benefit changes is to join NARFE, the National Active and Retired Federal Employees association. Their informative monthly magazine focuses on federal employee benefits and retirement issues and their “Protect America’s Heartbeat” campaign fights against unfair attacks on federal workers and annuitants. NARFE sheds light on the many proposed benefit and retirement changes now being considered. Here is a short list of proposed changes:

  • Workers to pay more for their FERS defined-benefit annuity (from .8% to 5.8% of salary)
  • New employees would not receive a defined-benefit (FERS) annuity
  • Higher health insurance premiums (paying a larger share of the total cost)
  • COLAs to go down through weighted adjustment calculations
  • Future retirees would receive an annuity based on the average high-five years of salary
  • Pay freezes

None of the above changes have been implemented to date. Stay tuned for updates.

Keys to a Long Life

The oldest man in the world, Walter Breuning, died this year at the age of 111 and his life story is compelling and fits into this column nicely. He was born in 1896! Can you imagine a world without TVs, cars, air conditioning, planes and all of the technology that we have surrounding us today? His wife of 37 years died in 1957 and he retired from the railroad in 1967 with 50 years of service! He continued to work until the age of 99 and was the manager and secretary for his local Shriners chapter. He claimed five simple truths for his longevity:

1.     Embrace Change, even when the change slaps you in the face. He accepted all change as inevitable and therefore good.

2.     Eat only two meals each day. He claimed that is all anyone needs.

3.     Work as long and hard as you possibly can. He felt that the money would help you through the tough spots.

4.     Help others. His contention was to the day he died “The more you do for others, the better shape you’re in.”

5.     Accept death. It’s going to happen regardless and he was not afraid to die. He said “You’re born to die.”

Life is a journey and we have to accept it for what it is and live life to the fullest while we are able. Time passes us by at an alarming rate and unfortunately we don’t realize it until we are well along in our own personal journey. My wife’s aunt passed away at 92 twenty five years ago and the day she died I was in her room. She woke briefly and was completely alert and aware of her surroundings. She turned to me and said “Dennis I can’t believe it’s over, the years passed by like the snap of my fingers.” She closed her eyes and never awoke.

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The information provided may not cover all aspect of unique or special circumstances, federal regulations, and financial information is subject to change. To ensure the accuracy of this information, contact your benefits coordinator and ask them to review your official personnel file and circumstances concerning this issue. Retirees can contact the OPM retirement center. Our articles are not intended nor should they be considered investment advice. Our reply is time sensitive. Over time, various dynamic economic factors relied upon as a basis for this article may change.

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