April 18, 2014
Dear Everyone:
Greetings upon the 108th Anniversary of the
Great San
Francisco Shake-and-Bake, the only fire ever to register 8.3 on the
Richter Scale.
Meanwhile…
Last Monday was Payday for me.
You may be thinking, If you don’t have a Job, how do you get a Paycheck?
When I started working full-time, 39 years, 11 months, 11 days ago, the
Company offered a Pension Plan, of course.
This was to encourage employees to stay with the Company
long-term. The longer you
worked, naturally, the more money you would receive in
Retirement.
There was also something called
The Stock Plan.
The idea was that if you “owned” stock in the Company, you would
have an incentive to see to it that the Company prospered, as would you.
This was also one of those long-term programs.
You had to work for the Company for five years before you could
qualify to join The Stock Plan.
It became a Rite of Passage, like getting one of those precious Tie Pins
after five years. So, when
the time came, I happily joined The Stock Plan, whereupon 2% of my pay
was automatically deducted and invested in the Company.
Another incentive was that the Company matched each dollar
contributed with one of their own, thus making the long-term savings
equal to 4%.
Sometimes, when things were going especially well, the Company would
increase the “matching funds” to more than dollar-for-dollar.
This had something to do with reducing the Company’s
tax burden,
but who am I to quibble at getting more money?
Over the years, things changed.
The Stock Plan became the
401(k) Plan.
Ironically, the 401(k) change in the tax code happened right
around the time that I joined The Stock Plan, but we didn’t really hear
about it for years.
In time, you didn’t have to put all your money into Company Stock.
There were other choices.
And you didn’t have to wait five whole years.
New employees could join as soon as the ink dried on their
employment forms.
(To which we “old-timers” said:
“Humpf!!! When I was
your age, I had to slog through twenty-foot snow drifts in 90-degree
heat just to get to work… and so on…
You kids have it so easy these days!”)
And then there was the co-worker, and friend, who called each year
(until that new-fangled email came along) during the “open enrollment”
period, to give me her “annual lecture” to increase my contribution to
the 401(k)/Stock Plan by whatever percentage my salary had gone up as a
result of the annual raise.
Over time, my contribution increased to 6% (or 12% including matching
funds), with 2% going into Company Stock and the rest going into a mix
of other investments. So,
when the Texas energy company,
Enron,
publically imploded, taking most
of its employees’ savings with it, I could honestly tell “Jeannie” that
my “portfolio” was “diversified”.
Then, a few years ago, the Company suddenly realized “Hey!
We can hire a twenty-something off the streets in a
Third World
Country for a lot less than you’re costing us; here’s a year’s salary,
now shut up and go away.” I took
the money and ran. Right to
the bank, so to speak.
As for that Pension Plan, there was a basic gamble involved:
Around $3500 per month for the rest of my life (pre-tax, of
course), or a bit over a half-million dollars in a lump-sum.
The question: Would I
live long enough for the monthly stipend to “outlive” the lump-sum?
I think not. I took
the lump-sum and rolled it over into the 401(k), which was looking very
healthy by this time.
(I also had my reservations about how long that “for life” would last,
based on some other companies that had abruptly decreased the amount in
their pension plans. To wit:
United Airlines, which had just hired a former Company executive
as their new CEO, cut their pensions by 30% as part of a “restructure”
and wasn’t that a nasty surprise to get in the mail one day.)
Last January I contacted the investment company that manages the
401(k)/Stock Plan and started the arrangements to begin withdrawing a
monthly amount, based on a “rule-of-thumb” of about 4% per year.
At that rate, the money should last over a quarter-century.
Also, the investment company graciously offered to “withhold” my
taxes for me, so I don’t have to keep yet another savings account to
make sure I have enough funds on hand, not to mention those quarterly
tax bills. And the proceeds
are directly deposited into my current checking account.
Bottom line: I’m getting
“paid” on the 14th of each month a little more than I was
making when I was receiving an actual paycheck.
And, since I have a long-established history of living beneath my
means, it’s looking like a very comfortable retirement, indeed.
Party Time!
Love, as always,
Pete
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