Questions About Retirement Planning, Entertaining Children, Frugal Gift Cards, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Changing account fees
2. General advice for approaching retirement
3. Early retirement buyout
4. Health insurance options in retirement
5. Earning more money in retirement
6. Professional clothing advice follow-up
7. Reading philosophy
8. Long lasting item gift card
9. Notetaking strategies for online classes?
10. Entertaining children of friends cheaply
11. Convention frugality
12. Work travel without reimbursement

It’s funny how time passes by you. At the start of the summer, it feels like this giant block of time in front of you, like there are endless weeks and adventures coming up.

Then, it all flows by so quickly and you find yourself preparing for the fall while scarcely realizing where the summer has even gone.

Here are some questions!

Q1: Changing account fees

I read your article in which you compared Wealthfront and Betterment for your 401k rollover. I saw that you went with Betterment because of the reduction in fees to .15 for accounts holding over $100,000. I just noticed on Betterment’s website that they no longer offer that reduced fee. It appears that their fee is now .25 for accounts over $100,000. You might want to roll over to Wealthfront as your account would be slightly lower than .25 because of the friend referral system.
– Charles

Part of the challenge of writing about accounts as they currently exist is that the rates are changing constantly. An article lauding one account might be outdated in a week when that company drops that rate and another company bolsters their rate. It happens time and time again.

That’s why it makes far more sense for people to figure out the principles behind it rather than just following instructions on what account to use. An article might tout Betterment, for example, but what’s actually important is the reasoning for choosing Betterment. That way, when you decide to sign up for an account, you know how to compare them yourself.

Bedrock principles are the key part of personal finance. You’re far better off going to the various options and comparing them (and knowing how to compare them) than just following someone’s suggestion. This is a perfect example as to why.

Next, we’re going to hear from Dennis, who has a long story to tell, followed by several questions.

Q2: General advice for approaching retirement

I was raised in a family that was very money conscious and a savers mentality. At age, 23 when I started my teaching job, I read the book Millionaire Next Door which provided great motivation. My wife is definitely more on the spender’s side. Currently, I am 49 and my wife is 50. We just celebrated our 20th anniversary. Over the years, I have learned to lighten up and my wife has learned to tighten up to balance each other out.

When we got married, we lived in an apartment, my wife had $5,000 in credit card debt, and we had about $1500 in savings. Within 2 years we had the credit card debt paid, money saved for a down payment on a home, and about $7500 in savings. Both of us are teachers and our annual income at the time was around $70,000. We both had already started our 403b annuity plans before we were married. Long story short, 20 years later, our annual teaching salary is around $170,000 (both of us are still teachers) (not counting rent income) with a net worth of $1.1 million. We do have a trust and will in place.

Currently we have the following:
– $110,000 in Roth IRA
– $60,000 in a 457 plan
– $200,000 in our 403b annuity
– $60,000 in a brokerage account. ($40,000 was gifted to us and we invested $20,000 for each child and has matured for college expenses.)
– $50,000 in a Money market account for emergencies.
– $130,000 in large cap stocks (making an additional $2500 a year in dividends)
– $7500 we keep in our rental account for expenses.
– 2 rental homes in my home town in another state from an inheritance. One home is worth $30,000 and the other is about $70,000 in value. Both are mortgage free.
– The 1st home we purchased 2 years after marriage is also mortgage free and being rented as well. It is worth approximately $225,000.
– Our current home is worth about $400,000 with a mortgage of $190,000 remaining. Payment is $1350 a month.
– We receive $400, $675, and $1165 ($2240 total) per month when all is good. My sister is my property manager in the other state (yes, I pay her accordingly) and I do have a property manager locally due to our busy work and kid schedule.
– I have $1800 remaining on my car loan and within the last year we purchased a new car for my wife and owe $32,000. We do buy new, but keep the cars long after they are paid off. We still have my wife’s first car a 2001 4runner with 188,000 miles.
– We DO NOT have any credit card debt and pay our cards off monthly.
– Our credit score is consistently in the 825 range.

All told, $610,000 (cash, IRA, etc.) $725,00 in home values for $1,335,000 minus $224,000 puts our net worth around $1.1 million. I do not count the money that will be available from our teacher pensions when we retire because I do not feel as if this is money we could access until after retirement.

At the end of next year, I can take early retirement pension from teaching. I will have taught 27 years, but accrued 29.6 years in our pension. At 30 years, we max out and can’t receive any higher percentage. If I choose to “buyout” .4 tenths of a year for $11,000 dollars or I can work two more years and still get early retirement without paying for the .4 tenths. My estimated salary in retirement would be $63,000 (75% of original salary for life with cola increases starting the 4th year) and my wife would continue to be approximately $85,000. The plan is to take the full 75% of pension salary, but if I die my wife would receive $0 and vice versa if my wife retired and dies. Our reasoning for taking the full 75% is we have 3 life insurance policies ($150,000 term expiring around age 62, $375,000 term expiring around age 67, and 1 million term life expiring around age 72) as well as the other person is guaranteed a pension for our teaching service not counting the other assets mentioned.

Only my close friends have any idea of our financial success. We do take family vacations every year, eat at restaurants, etc. In other words we do enjoy life without being “cheap”. I like frugal. While we have nice “things”, we try to spend our money on “experiences” we will always remember.

I do have a financial advisor who assist with questions, Roth, 457, 403b and brokerage account. He has recently been assigned to us after our previous advisor left for another company. I really liked the previous advisor and the new advisor appears to be solid and trustworthy. In his opinion, we are in a very good situation. Yes, I am aware of the higher fees associated with the 403b and 457.

My current financial goals would be to pay off our current home in the next 15 years or less, help our kids with college, and continue to make sound financial decisions.

Overall, I think we have done an excellent job on teacher’s salaries. As my mom used to say it isn’t how much money you make, it is what you make of your money. I could explain more, but here are my questions:

1. As stated, I am always willing to learn and assess my financial situation. Given the information, how would you assess our financial situation and do you have any recommendations to consider?
– Dennis

Obviously, Dennis is offering a lot of specifics here. I have edited a few specifics in order to avoid Dennis’s identity from being discovered, but nothing that will materially change my response to his questions.

I think that you and your wife are in great financial shape, especially given that this was built on the back of teacher’s salaries. I don’t have any strong suggestions, other than some of the issues you touch on in the next few questions.

Here’s Dennis’s second question:

Q3: Early retirement buyout

Regarding the $11,000 to retire at the end of next year or work an additional year, what do you think I should consider? Anything I may not have thought about?
– Dennis

I think you’ve considered things well. My tendency would be to encourage you to work until your pension is fully funded, without paying in to cover that last fraction of a year.

By simply working for another year, you effectively get to keep that $11,000. That’s effectively a “bonus” for that additional year of work. It’s a pretty lucrative final year, in other words.

Once you and your wife both have fully funded pensions, then retirement probably makes sense, as that pension seems very nice from what you describe.

Here’s Dennis’s third question:

Q4: Health insurance options in retirement

Can you provide me with health insurance options that I may not be thinking about either now or 4 years from now when we both retire from teaching?
– Dennis

This is a hard question to answer because, as you’ve witnessed in the last few weeks/months/years, health care in America is changing rapidly. It is really hard to project what options will be available even a year down the road, let alone longer than that.

I assume that Medicare is probably a safe program, as I don’t think any politician sees it as viable to extensively cut it. I would consider that to be a fall back option.

Another thing I would do is talk to your human resources department for your school district and directly ask what their health insurance plan covers for retired teachers. Can they continue to participate? What are the options available? You may also want to consult with your union, should you have one. However, they may not have perfect answers, either.

I think that catastrophic health insurance in some form will be available to you, particularly when you reach Medicare age, but the specifics are really, really unclear right now.

Here’s Dennis’s fourth and final question:

Q5: Earning more money in retirement

I have considered the loss of salary if I (and my wife in 4 years) should retire. But, I also think the opportunity to make more money is a more optimistic outlook. Thoughts?
– Dennis

Have you spent some time seriously thinking about what you might do when you retire? If you retire in four years, that puts the two of you in your mid-fifties. What will you do at that point?

Are you going to get a different job? If so, is it a job that will be more fulfilling to the both of you than teaching? If you intend to work but can’t think of anything you’d strongly prefer to teaching, why not continue to teach until you want to do other things?

My feeling is this: if you intend to use part of your retirement years to earn more money, make sure that the money you’re going to earn is going to be more than what you would earn from continuing to teach versus “retiring” from teaching and receiving the pension and working elsewhere.

More than anything, I think your question is a personal call to really think about what exactly you want to do when you retire. You seem to want to “retire” in four years, yet you don’t have a clear vision of what you will do when you retire. Start fleshing out that vision. If you walk away from teaching at age 54 or so, what will you do with your days at that point? If you’re struggling to find an answer, then I wouldn’t retire yet. You don’t want to retire unless you’re stepping into something equally meaningful for you.

Good luck! I think your top concern is really figuring out what retirement means for you. I think your financial state is pretty good.

Q6: Professional clothing advice follow-up

Regarding “Upgrading your wardrobe to ‘professional’“, I think we don’t have enough information from the question asker to definitively answer her question. Professional/appropriate attire for women seems to be a bit more murky than for men.

There are a few things that could be wrong with her wardrobe:
1) Too trendy/casual
2) Too risque
3) Not risque enough
4) Doesn’t fit appropriately
5) Too worn or rumpled

I think all of these things can be remedied on a Target budget.

1) Too trendy/casual: Some business places are a bit more conservative in what they consider appropriate, especially for a customer facing role such as a receptionist. If this is the case, they may be asking you to wear button downs and slacks or a slightly above to slightly below knee-length skirt (or a dress…dresses are super easy!). Bodies are all different, and my arms either don’t fit a button down shirt or my bust and waist swim in it, so if the classic button down doesn’t work, look for a poly blend blouse. They might also expect covered shoulders so cardigans make a good staple.

They may look at trendier styles (as opposed to business staples) as “weekend clothing.” The key here is to avoid jersey knits, and stick to traditional silhouettes. If this is the scenario, jeans probably fall in the no-go territory. They might be acceptable for backroom positions, but not customer facing, or they might have a limited set of styles they find acceptable, and without a mentor in a similar role you might struggle to find the right pair.

You’re looking to strike a balance between form fitting and boxy. Stick to solids and a very limited number of classic prints (stripes, checks, houndstooth, not paisley or florals). Avoid clothes that need dry cleaning and look for fabrics that don’t need ironing. An extra caveat if you have pets that shed: heathered solids hide the pet fun that creeps back on you after you’ve lint rolled very well.

2) Too risque: I mentioned a little bit above, but some offices have obnoxious expectations from professional women’s clothing. They might expect covered shoulders and close toed shoes. Do you think your pants or skirt could be too tight for your management? How about your blouse cut too low? Is perhaps an item or two of clothing too see through? While I think these kinds of dress codes are sexist in nature, that doesn’t deny that they still exist in many places.

3) Not risque enough: Unfortunately, certain female roles for certain employers expect a certain amount of “showing off your form” and receptionist could fall into this category. If you’re already dressed very professionally but do so in a conservative manner, are they trying to push you towards being eye candy for the customers that walk in? I’m hoping if this is the case and you weren’t expecting it you circulate your resume and get something else quickly.

4) Doesn’t fit appropriately: Do your clothes fit looser or baggier than the average person in your company? Perhaps they’re seeing poor fit in your clothing and calling it “unprofessional.”

If you’re experiencing weight change, perhaps you could do some thrift store shopping for nice pieces, and then sell them to a consignment store as you move to the next size. Clothing rental companies are great in a weigh change scenario, but it might be a bit beyond your budget. You could always circle around the different companies and take advantage of their intro pricing and cancel after the intro period ends to supplement your wardrobe until you reach a more steady weight.

5) Too worn or rumpled: I have a feeling this isn’t the problem OP is dealing with, but if your wardrobe has been around a while, take a look at your favorite and most worn items with a fresh eye. Do they come out of the dryer and need the iron taken to them? Are the elbows starting to look worn (this is my biggest offender). Are the knees of your slacks getting baggy because the elastic’s worn out? Are any hems frayed? Some people have a keen eye for this and others don’t see it until it’s explicitly shown to them.

Unless one of these scenarios stands out blatantly to the OP, I would suggest they have a follow up with one of her managers to discuss exactly what the expectations are and where she’s missing the mark. As an intern I was talked to about professional attire once. I followed up on it later and it boiled down to one dress that my stepmom had bought me for work had a see-through skirt that I couldn’t notice looking in the mirror. I remedied the situation by wearing a slip with that dress going forward.
– Irene

This is brilliant advice, far better than what I could articulate. Thank you, Irene.

I think the most valuable point of all comes in the last paragraph. If you are told that your wardrobe is unprofessional and can’t quickly identify why, ask for help. Get some indications of what the problems are, then act on those specific problems.

Never, ever be cautious about asking for help or for advice. I find that the biggest mistake people often make is to avoid doing so out of pride. Don’t. You’re not an expert at everything. Let others help you and you’ll be better off.

Q7: Reading philosophy

I took your earlier suggestion and tried reading Meditations by Marcus Aurelius but I found it really hard to read. What do you suggest that’s maybe easier to read?
– Geoff

Many original writings in philosophy can be hard to read. You generally have to take them slowly and process what is being said one bite at a time. I almost always have a notebook open when I read philosophy and I read it very slowly, taking notes and trying to explain what they’re saying in a way that’s clear to me. I look up things I don’t understand and I don’t feel bad if I spent an hour processing one paragraph or even one sentence.

Having said that, such an approach isn’t necessarily something that everyone will enjoy. I suspect that Geoff is looking for an introduction to stoicism – which is what Meditations really is – that is written for a modern reader. I have three suggestions.

A Guide to the Good Life: The Ancient Art of Stoic Joy by William Irvine is probably the best single book I’ve read for applying stoicism to modern life. Irvine focuses on the sense of chronic dissatisfaction with modern life that many of us feel and really lays out how to deal with it using the teachings of stoicism.

The Daily Stoic: 366 Meditations on Wisdom, Perseverance, and the Art of Living by Ryan Holliday and Stephen Hanselman uses much the same approach as the above book, but instead parcels it out as something of a daily devotional. Each page in the book features a quote from a stoic work along with a few paragraphs on how it applies to modern life. This is a great “bedside table” book for stoicism.

Stoicism and the Art of Happiness – Ancient Tips For Modern Challenges by Donald Robertson is probably the easiest of the three to read, but I also don’t feel it goes as in depth as the other two listed here. I’d suggest browsing the first two options first and if you find them overwhelming, try this one. It’s a very gentle introduction to stoicism, one that works wonderfully as a “first read” when it comes to learning about stoicism, but you’ll probably want to read additional books to follow this one.

Q8: Long lasting item gift card

Let’s say I wanted to buy someone a long lasting item but I don’t know exactly what to get them. What store should I buy them a gift card from?
– Andrew

Honestly, the best answer is Amazon. They have the widest selection and easiest availability of a wide assortment of buy it for life items.

If you want to get specific, though, you could just get an online gift card from retailers that really focus on high quality durable goods. Sites like Darn Tough Socks, Patagonia, Land’s End – basically, any store that has a legitimate full lifetime warranty on their product usually makes a good product that will last for a long time. Here’s a list of manufacturers with lifetime warranties.

Speaking as someone who really likes long-lasting items, you’d thrill me with gift certificates to Duluth Trading (casual clothing) or REI (outdoor gear) or any of the above mentioned places.

Q9: Notetaking strategies for online classes?

Do you have any recommendations for how to take good notes for an online class? I’m taking some classes on my own time for self-learning so I am invested in actually learning the material and not just getting a grade. Suggestions on how to do this optimally? I know you do this as a hobby so I want to know what works for you.
– Benjamin

When I take an online class, I watch or listen to the lectures while taking notes in a physical notebook. I pause the lecture whenever I need to catch up with something.

What I generally do is write down the key points as well as any facts I want to retain in my head. I usually have a second pen in a different color which I use to write down any questions that come up during the lecture, whether it’s just seeking clarity on a point or something I want to think about further.

Doing this usually doubles the time it takes to get through a lecture – I can get through a 30 minute audio or video file in about an hour. I then usually spend another hour going through and answering all of the questions, usually by starting a new section in my notebook, moving each question forward, and then writing down the answer to it.

It takes time, but I take online classes to actually learn things and absorb them into my thinking, and that’s the best way to do this. I use this approach when reading long essays or other such material, too. My “reading speed” for such things is a snail’s pace, but when I’m done, I really do feel like I thoroughly understand it.

Q10: Entertaining children of friends cheaply

My husband and I (childless) recently bought a four bedroom home. We intend to have children in the next 1-2 years and are already trying so this house was bought with children in mind in the future.

My best friend and her husband are coming to visit and stay with us for three nights over Labor Day weekend. They have a sixth grader, a third grader, and a preschooler. I have been told that they play well together and that they’ll be bringing some things to entertain themselves but I want to know what I can do to make our home more fun for them without spending a ton of money.

Ideas?
– Angie

The first thing I’d do is I’d ask your friend what her children’s hobbies are. What do those kids enjoy doing? Simply knowing their ages isn’t really enough here.

For example, if you wanted to make my kids feel welcome, having a sketchbook and some colored pencils would make my daughter love you dearly, but my two sons would just shrug their shoulders. If you want to make my oldest son thrilled, have a used soccer ball available and directions to the nearest soccer field (or a good sized backyard), and perhaps a good young adult book or two. For my youngest son, a box of used action figures would be the ticket to making him have a blast. You could find all of those things for $5-10 at (a) the dollar store, (b) a used sporting goods store or used bookstore, and (c) a secondhand toy store.

Kids of the age you describe have really developed their own personalities, so you should simply ask their mom (your friend) what they’re into and then simply find items related to those interests.

Q11: Convention frugality

My wife and I went to the National Homeberwer Convention in Minneapolis in June. We thought it would be fun to go there for a couple of days. Our idea was that we would just meet people who like home brewing and try lots of samples, but the main part of the convention was the Homebrew Expo which was just like going to a local brew supply store except 1000x bigger. We ended up spending way too much money.

Any strategies on avoiding spending so much money at a convention? Setting a budget seems smart. We want to go back next year but not spend so much.
– Terry

I almost attended this convention this year, but it ended up overlapping our family vacation too closely. Anyway, I believe this is the expo you speak of and, yes, anyone who enjoys home brewing would be tempted to spend money there.

You’re right that the first strategy is to simply have a budget. Plan out in advance how much you’re going to spend there, no matter what, and stick to it. The way I typically do this at conventions is to take a certain amount of cash with me and then never have my credit card leave my pocket, no matter what. I only spend the cash. I use this strategy in the dealer hall at Gencon. I usually put aside some of my hobby budget during each month of the late spring and summer to spend there, then I withdraw that amount in cash to spend at Gencon. If I bring any home, I just put it back in my hobby budget.

Another strategy – and something I do a lot at such conventions – is to just take pictures of stuff that’s really cool, or pick up promotional materials for it. This often sates my need to feel like I’m “taking action” on this cool thing without actually buying it. Then, I find that my desire to buy that cool thing fades over time unless it’s something truly exceptional. I can then budget for it later.

I’m probably going to go to the next National Homebrewers Conference that’s held in the Midwest. Next year is in Portland, which probably isn’t a realistic trip for me, but if it’s ever in Minneapolis or Chicago or Kansas City or Saint Louis in the next few years, I’ll probably be there! I love going to conventions and conferences related to my hobbies.

Q12: Work travel without reimbursement

My employer is opening a new branch in another city about two hours away. He is expecting several of us to spend time working there but he is not reimbursing us for any sort of travel expenses. He says we can commute if we want. Can he do this? Can I contact a lawyer?
– Jenna

Unless it specifies in your contract that travel must be reimbursed, he can most definitely do that.

There are some problems with your employer doing this, though. First, he’s going to irritate a lot of his best employees. He’s probably sending much of his best staff to the new location to help train people and this policy is not going to make them happy. Second, it’s not saving him as much as he thinks because he can essentially write off the reimbursement of your expenses.

I personally feel as though this is a practice that’s highly disrespectful of valuable employees. It’s likely that there are other forms of poor treatment either going on now or going on in the future if this is how you are valued. Keep that in mind when making employment decisions going forward. An employer who treats you unfairly and then sees that it will be accepted will likely do so again.

It’s worth noting that you may be able to deduct the expenses incurred from this travel on your taxes. Keep careful documentation of all of this.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

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