“When Can I Retire?” When Your QSR is Greater Than “1”

should_i_stay_or_take_earlyretirement.jpeg.size.xxlarge.letterboxWhen I was thirty, my goal was to retire at fifty, and even though I am now over fifty and financially secure, I am not sure if I ever want to retire completely.  At thirty, work was merely a means to an end; it provided food for our table, clothed my kids, and put a roof over my family.  However, something happened along the way; I discovered that my work has purpose.  I enjoy what I do, and I enjoy the people I do it with.  I consider myself blessed to make a living talking every day to people I like.

However, I understand others are not so lucky.  Many folks feel trapped in jobs that prevent them from doing the things that really make them come alive.  Instead of playing with their grandkids, volunteering at the food bank, or traveling the world, they are slaving away at a job whose only joy is a much-needed paycheck.  Every month clients ask me: “When can I retire?”  My answer is nearly always the same: “It depends on your QSR.”

QSR stands for “Quit Slaving Ratio.”  QSR is a simple formula that helps you determine when you can quit working for a paycheck.  In order to safely retire, you want your QSR to be higher than one.  To figure out your QSR, take the monthly income you expect in retirement (Social Security, pension, rental income, investment income, etc.), and divide it by your anticipated retirement monthly expenses.  The formula looks something like this:

INCOME ÷ EXPENSES = QUIT SLAVING RATIO

Let’s look at two different couples considering early retirement.  Our first couple’s desired lifestyle will cost $7200 per month in retirement.  This will allow them to  take a couple of international  trips per year, visit children, buy gifts for grandchildren, give generously to their church, and attend monthly music concerts put on by their local orchestra and chorale.  Assuming this couple expects a small pension from Boeing of $600/mo, a Social Security income of $1400/mo, a Spouse’s Social Security of $920/mo, own a rental home that nets $850/mo, and they currently own an investment portfolio worth  $900,000 that will produce $3000/mo (  ($900,000 X 4%) ÷ 12mo =$3000/mo), then this couple’s expected income in retirement is $6770.00/mo; therefore, their QSR looks like this:

$6700/mo INCOME ÷$7200/mo EXPENSES = .9403

Because this couple’s QSR is less than one, I would not recommend they retire just yet.  Unless they either increase their monthly income by $500 (e.g., part-time work) or reduce their monthly expenses (e.g., take only one international trip per year) by the same amount, their retirement years will include the anxiety that always comes from spending more money than is received.  Let’s take a look at another example.

Our second couple worked hard to get their mortgage paid off a few years earlier, and they decided to drop their health insurance at $1100/mo, and instead enrolled in a health care sharing ministry for $360/mo.  Both like to hike and camp, and play cards with friends and family.  In this case, this couple will need $4800/mo to fund their anticipated retirement.  Assuming this couple expects  the wife to receive a $2200/mo teacher’s pension, a Social Security income of $1290/mo for the wife and $1160/mo for the husband, and both have Roth IRA’s of $150,000 that will produce $1000/mo (($300,000 X 4%) ÷ 12mo = $1000/mo), this couple’s expected income in retirement is $5650/mo; therefore, their QSR looks like this:

$5650/mo INCOME ÷$4800/mo EXPENSES= 1.18

Our second couple’s QSR is higher than one, and I would tell them they could quit work today if it was preventing them from doing the things they would rather be doing instead.  Even though our second couple had less income than our first, their QSR was still greater than one, so there is no need for them to be a slave to anyone.

I have many clients who continue to work well into their 60’s and 70’s because they enjoy working, but I think nearly everyone wishes to have the ability to stop doing things they do not enjoy or feel called to do.  By first determining our QSR’s and then working towards getting them above one, we can ensure our retirement years will be filled with activities that are fulfilling, enjoyable, and productive.

If you need help determining your QSR, give our office a call to set up an appointment.   Together, we can help you “quit slaving” as soon as possible.

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Is it Love, or Hate, that Lives Here?

Whitefish City Council Meeting

Whitefish City Council Meeting

I recently read the Whitefish Pilot’s story, “Whitefish rallies for ‘no hate’ ordinance.“According to the story, 100 people, led by a group known as “Love Lives Here,” packed into Whitefish’s small town city council chambers demanding our local government pass an ordinance prohibiting Richard Spencer and the National Policy Institute (NPI)  he represents from  doing business or having offices in Whitefish.  It appears Richard Spencer  and NPI hold views many believe promote hate.  Because I  never heard of NPI, and the Whitefish Pilot  didn’t mention any specific acts of hatred perpetrated by them, I spent some time perusing  primary source material  I found on the internet in the hopes of learning more about them.  In my incomplete research I discovered this group to be no more or less troubling than the plethora of other culture-centric organizations that flourish in America. But for the sake of discussion, let’s assume the worst of Richard Spencer and the NPI and suggest they are looking to create a separatist white society. Is it against the law to hold or express such views? Supreme Court Justice Sonia Sotomayor was once a member of the National Council of La Raza, and the man who married President and Mrs. Obama preaches black liberation theologywould we respond to news of them moving to Whitefish with fear and loathing?

I am troubled by the intensity of Love Lives Here’s actions.  In fact, I might even say I am alarmed and unsettled by it. The mob rule reaction to Richard Spencer’s mere existence in Whitefish reminds me of the old Frankenstein movies where the townspeople gathered with pitchforks and torches to round up and kill Frankenstein  without due process. This is not a healthy community response. I am ashamed of the behavior of learned men and women who know better, but seemed to have forgotten we are a community ruled by law, not outrage.frankenstein-mob

We have a moral dilemma on our hands. On the one hand, we have a fellow citizen who has broken no law or harmed anyone; however, he holds a worldview a majority of us find offensive. On the other hand, we are a citizenry who theoretically respects the rights of others to freely express opinions-so long as they don’t harm others.

When faced with moral dilemmas, it is often helpful to look into our moralist tool bag for assistance.  When I reach in mine, I find  Immanuel Kant’s  Categorical Imperative:

“Act only according to that maxim by which you can at the same time will that it should be a universal law.”

By using Kant’s Categorical Imperative, we can universalize the actions of Love Lives Here to see if they are morally acceptable.  Do we want to use the authority of municipal government to prevent others (like Susan Cahill, the abortion practitioner,  or the Flathead Area Secular Humanist Association, which attempts to shut down Christmas concerts and remove the Jesus Statue from Whitefish) from residing and earning a living in our community?  If it is appropriate to demand city council action to prevent Richard Spencer from living and working here because we find his worldview offensive, then it should be appropriate to use municipal government to ostracize ANYONE the majority finds offensive. When I use Kant’s Categorical Imperative and universalize Love Lives Here’s behavior, I find the medicine more distasteful than the ailment.

My understanding of tolerance is we are to allow others to hold and express ideas and opinions, even when a majority of citizens dislike them. This means we can disagree with our neighbor if he is a Republican, argue with our Kiwanis buddies over the danger and necessities of labor unions, or even get in heated discussions with our church friends over the topic of traditional marriage.  But, at the end of the day, we are to allow others to coexist with us even when they hold  diverse and opposing views. Under no circumstances are we to  prevent  citizens who do no harm to our bodies or property  from living and working in our community.

We don’t have to like what Richard Spencer believes, but he is  an American citizen created in the image of God.  His civil rights are every bit as valid as those who proudly belong to Love Lives Here. Rather than shun Richard Spencer, we would do well to debate him, to probe his intellect, and attempt to find the genesis and authority of his positions. From what was reported of both parties in the recent article, Richard Spencer appeared to present himself more thoughtfully, and his positions more articulately, than the aroused  horde attempting to run him out of town.

In  Alexis de Tocqueville’s  Democracy In America, Volume I, Chapter 15,  Tocqueville speaks of the irony of America’s free speech tradition:

        In America the majority raises formidable barriers around the liberty of opinion; within these barriers an author may write what he pleases, but woe to him if he goes beyond them. Not that he is in danger of an auto-da-fe, but he is exposed to continued obloquy and persecution. His political career is closed forever, since he has offended the only authority that is able to open it. Every sort of compensation, even that of celebrity, is refused to him. Before making public his opinions he thought he had sympathizers; now it seems to him that he has none any more since he has revealed himself to everyone; then those who blame him criticize loudly and those who think as he does keep quiet and move away without courage. He yields at length, overcome by the daily effort which he has to make, and subsides into silence, as if he felt remorse for having spoken the truth.”

Tocqueville observes that although the law protects every American’s right to freely express themselves, woe to the citizen who attempts to present a minority viewpoint.  While the Constitution may guard the citizen from persecution, the presenter of an idea outside a community’s preference should keep his silence lest he suffer the condemnation of his neighbors, the abandonment by his customers, and the disparagement of his good name.   As a resident of Whitefish, I am ashamed that Tocqueville’s observation of America, as presented by Love Lives Here and its supporters at the Whitefish City Council meeting, was accurate.mlk

I encourage the membership of Love Lives Here and  those who support them, as well as our city council members who seemed to have lost themselves in the moment,  to reflect on Martin Luther King’s six steps of nonviolent social change. We would do well to gather our facts before picking up our pitchforks and torches. Prior to engaging, we should go through a process of self purification to ensure our own hatred, prejudices, and biases don’t filter into our direct actions. Finally,  we should always strive for reconciliation as our final outcome.

Although I don’t question their intentions, Love Lives Here and those supporting their efforts to ostracize Richard Spencer handled this situation incorrectly. In Whitefish we don’t condemn first and ask questions later. We are a better community than this. By treating Richard Spencer and his organization with the same rights all citizens enjoy, we can ensure spectators from outside of Whitefish will know that love, not hate, lives here.

Are You Young, Married, and in Debt? Read This…

WealthMasters MilestonesIf you’re like many young married couples today,  you probably have debts such as student loans, credit cards, and a car loan.  In 2014, the average Millennial has about $23,000 in debts, and when two young people get married, their household debt statistically doubles.  This indebtedness among young married couples can cause problems.  During the courting phase, nobody thinks about paying off credit cards or student loans, but it is not long after the honeymoon that the bills start hitting the mailbox.

As unromantic as debt can be, a mutually agreed upon financial plan can actually help young married couples grow closer together.  Strong bonds are often formed by shared adversity, and getting out of debt certainly counts as adversity. With the right decisions and disciplined teamwork, you can achieve financial independence.  No, it won’t happen tomorrow, but in my 21 years of helping young married couples get out of debt and on to the path of financial security, couples routinely tell me they got out of debt faster than they initially hoped when they had a plan to do so.  By committing to one another to develop a plan and stick to it, there is no reason why any couple can’t have a financially comfortable life together.

My wife Linda and I created the WealthMasters Milestones years ago to provide a roadmap to financial security.  For the young couple starting their marriage in debt, the first milestone is to save $1000 in an emergency fund.  There are lots of creative ways to come up with quick cash.  You can hold a yard sale and sell everything that is not nailed to the floor, deliver pizzas or wait tables at night, or volunteer for overtime at work.  Ask your pastor if you can babysit at your church and tithe out of what you make.  Do whatever is necessary to come up with $1000 as quickly as possible.  Put this money in a bank or credit union, and commit to not touching it except for bona fide emergencies.  When Linda and I were working hard to get out of debt, we would say we wouldn’t touch the emergency fund unless eviction or imminent death were involved.  If you experience a situation that requires using the emergency fund, replace it as quickly as possible.

While you are getting your $1000 saved for bona fide emergencies, use our Expenses and Budgeting Worksheet to determine your income and expenses.  Figure out how much you are making, giving away, spending, and saving every month.  Determine where you can save and apply the savings to one of your loans, preferably the loan with the highest interest rate.  When we first got married, Linda and I agreed we would both work, and we would live on whatever I made, but we would use whatever she made to pay off debts. This strategy worked like a champ, and we paid off more than $20,000 in less than two years.  Consider living in the cheapest house or apartment that is still safe or even selling your car(s) if the auto loan(s) are killing you.  Linda and I got by on one car for nearly two years while I started my investment practice.  It wasn’t fun or convenient, but owning one car was cheaper than owning two.  With the extra money saved by living beneath your means, you will find yourself paying off loans faster than you thought possible.

Once your consumer debts are paid off, congratulations!  You no longer have negative net worth.  You can now apply the money that used to go towards paying off debts towards saving 3-6 months of expenses in your emergency fund; and once that is completed, you should reassess and see if you can quit that night job and move out of that basement apartment with the grumpy landlord.

The key for young married couples succeeding at getting out of debt is a positive mental attitude.  Rather than lament how tough getting out of debt is, I recommend turning the process into an adventure: start a blog,  make videos of your most extreme money saving decisions and paste them on Facebook, make jokes about being poor, and hang out with other young couples who are as fun and committed to getting out of debt as you are.  If you keep it light, support one another, and persevere, you will strengthen your relationship, and twenty years from now you will realize that your life is pretty awesome because of the wise money choices you made when you first got married.

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Be Aware of New IRS Cost of Living adjustments

irs-logo.jpegIf you’re a small business owner or are a high income earner, or if you put large sums of money into your 401(k) or 403(b) plans, the IRS has just made changes you need to know about, so take note.  For qualified retirement plans, the IRA has made cost of living adjustments relating to limits on compensation, limits on contributions and benefits, 401(k) and 403(b) deferral limits, “highly compensated” and “key” employees, Sep thresholds, and taxable wage bases.  The changes take effect for 2015 and beyond.

For 401(k) and 403(b) retirement accounts, the amount of money you can contribute annually is increasing from $17,500 to $18,000.  That means more of your income can be deferred for later in life, potentially reducing your taxable income right now.  Also, if you’re trying to make catch-up deferrals and are 50 or older, the limit for those has been raised from $5,500 annually to $6,000.

There’s new limits on compensation, too.  the maximum compensation that can be counted for retirement plans for each plan year increases $5,000, to $265,000.  It previously was $260,000.  For Social Security purposes, the taxable wage base increased 1.28% to $118,500, up from $117,000

If you have a defined contribution plan, the maximum limit on contributions is increased from $52,000 annually to $53,000.  However, the maximum annual benefit that can be accrued under a defined benefit plan remains steady at $210,000.  And if you have a SEP (simplified employee pension), the compensation minimum for which compensation is mandated has increased to $600, up from $550.

Finally, if you’re a “highly compensated” or “key” employee, the new threshold for those distinctions will be changing as well.  It’s going up to $120,000 from it’s previous mark at $115,000.

So have your eyes glazed over yet?  Not to worry.  If you have questions or concerns about your retirements accounts, we’re here to help.  give us a call, send us an email, or make an appointment for a meeting if you would like to discuss your retirement accounts and strategies.

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My Year Without Obamacare

obamacare-logoLinda and I dropped our conventional health insurance one year ago during Obamacare’s first enrollment period, and the world did not come to an end.  We opted instead to join Samaritan Ministries, a Health Care Sharing Ministry (HCSM).  As a financial advisor, I have been familiar with HCSMs for quite some time, and I have wanted to participate in one for years; however, Linda was very skeptical about attempting something so unconventional, so I didn’t press the issue.  Last year, with the cost of our health insurance premium and deductible both jumping nearly 20%, Linda softened her resistance and we made the jump to an HCSM.  We are extremely happy that we did.

The first pleasant surprise we experienced was how easy it was to enroll.  We just went online, downloaded Samaritan Ministries’ simple, 4-page application, filled it out, and popped it in the mail along with our $180.00 application fee.  Within a couple of weeks we were enrolled.  This is in sharp contrast to the experience most of our friends had last year trying to enroll via the government’s health exchange.  Many were unable to enroll in Obamacare for several weeks due to the system being down during the enrollment period.

Once we were enrolled, we found ourselves appreciating our monthly newsletters.  The way our HCSM works is every month a newsletter is mailed out to each participant directing them to send a check for their planned giving to a specific individual or family.  In our case, because we were new participants, we were directed to send our first three monthly payments to Samaritan Ministries directly; however by the fourth month our newsletter directed us to send our monthly “gift” to some participant throughout the United States.  We sent our checks to families in states such as Texas, South Carolina, Wisconsin, and Illinois, along with get well cards.  We found it rather encouraging knowing our checks were going to actual people to pay for particular needs (i.e., childbirth, knee surgery, removal of an ovarian cyst, removal of colon polyps).  By knowing the names and needs of the individuals to whom we were sending gifts, it was easier to pray for them.

In our HCSM, when participants have medical expenses, they contact Samaritan Ministries and request their needs be published in the newsletter so the rest of us can send them money.  There are some needs (like dental care, or medical conditions that existed 12 months or less before participation in Samaritan Ministries) that are not covered by the program; however, many “non-sharable” needs are still published in the monthly newsletter, and participants are invited to give above their assigned responsibility to such needs.  Linda and I, like many other participants, budget a certain amount every month to help someone who has a non-sharable need.  This summer we actually had a family we knew in our hometown with a non-sharable need published in our monthly newsletter, and we were able to send them a gift above our monthly responsibility to help them offset their dental expenses.

One of the limitations of a HCSM is it is possible for the needs of participants to exhaust the amount of gifts that participants are obligated to share.  While this rarely occurs, it happened early this summer. As a result, some families needing assistance received a reduced prorated amount of gifts smaller than they were expecting.  I am sure this was an emotional roller coaster for those affected, but due to the generosity of countless participants who were able to give more than their obligated monthly gift, most needs were completely covered by the next month’s giving.  The collection of extra gifts was so successful that our monthly giving obligations for the last two months were reduced due to the amount of gifts received being greater than the needs of our participants.  In the 21 years I participated in conventional health insurance, I NEVER had a premium reduction because more money was collected by the insurance company than was needed by the policyholders!

What I am learning about HCSMs is they are a kind of cult, like the Marine Corps or iPhone owners.  Participants are zealots about the concept of sharing medical needs in covenant with each other, as opposed to entering into a contractual relationship with a faceless insurance company.  While saving money was an initial consideration for us joining an HCSM, we also appreciated we were not funding abortion or lifestyles with which we disagreed.  We like the idea that many of the participants participating in HCSMs tend to be more health conscience than those who use conventional insurance, and that our values and those of other participants are very similar.  Being in an HCSM is more like belonging to a fraternal organization than buying health insurance.

While I am sure there are examples of people who have been disappointed by their participation in an HCSM, in 15 years I have never met anyone who quit one because they were dissatisfied.  On the contrary, I hear from people daily complaining about their health insurance (e.g., premiums becoming unaffordable,  insurance won’t pay for a needed procedure, can’t use out of network doctors, reimbursement is difficult, forms are complicated, etc.).  The only people I have witnessed leaving an HCSM are those who had someone else paying their premiums (employer or government).

There are many attractive features of HCSMs.  First of all is the cost.  HCSM monthly sharing requirements are oftentimes considerably less expensive than conventional insurance premiums, particularly for the self-employed, larger families or older individuals.  Secondly, the paperwork and bureaucracy of HCSMs are a fraction of those associated with conventional health insurance: no double-talk, reams of applications or defective government websites.  One of the laments I hear from my clients about health insurance is their policies don’t pay for procedures their doctors recommend.  This is not an issue with HCSM’s.  If your doctor says you need it (and the procedure doesn’t present a moral issue), your procedure is covered.  HCSMs believe decisions about medical choices are best left to doctors and their patients.  And finally, most HCSM participants appreciate the personal touch of sending not only money, but prayers and encouragement to those who are suffering from medical challenges.

There are six HCSMs in existence today:

1) Samaritan Ministries- http://samaritanministries.org/

2) Christian Health Ministries- http://www.chministries.org/

3) Christian Care Medishare- http://mychristiancare.org/medi-share/

4) Liberty HealthShare- http://www.libertyhealthshare.org/

5) MCS Medical Cost Sharing**- http://www.medicalcostsharing.com/

6) Altrua Health Share*- http://altruahealthshare.org/

*Added since blog’s original publication.

promo_img3For Linda, the major obstacle for enrolling in a HCSM was fear of the unknown.  Because it sounded too good to be true, she was rather nervous about severing our relationship with the health insurance company that continually frustrated us.  After our first year in Samaritan Ministries, she is now lamenting we waited so long.

HCSMs are not for everyone, but I suspect they meet the needs of more Americans than are currently enrolled.  If you are as frustrated with your health insurance options as we were last year, I encourage you to research the HSCMs we have posted above.  Participants are exempt from the Obamacare penalty, so participants need not worry they will be fined for not having health insurance.  Over this last year we have been pleased with our decision to avoid Obamacare and enroll in Samaritan Ministries instead.  As word gets out HCSMs are attractive alternatives to conventional health insurance, particularly those folks who are self employed, older, have large families, or fail to qualify for taxpayer subsidies, I suspect more Americans will make the same switch we did.

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