With the New Year upon us, I've been reflecting on my life in retirement. Before retirement I worked for almost 30 years in education in positions ranging from classroom teacher to program specialist, and culminating for the final 15 years as school principal. On a daily basis there were problems to solve, challenges to face, and goals to meet. My life was fast-paced and intense but I loved my work.

On a personal level, preparing for retirement was an important goal and a challenge I undertook with enthusiasm. Although I once thought I'd retire at 55, I worked until I was 58, still ahead of many who have to work to age 66 or beyond. Planning for eventual retirement took a fair amount of time but setting goals helped keep my eyes on the prize... retirement.

Thanks to long-term planning, we retired with enough resources and income to fund a comfortable standard of living. But in some ways, I miss the challenges that made the days go by quickly and that gave me great satisfaction. So in retirement, I've had to find new challenges and create new goals.

Fast forward to January, 2013... I've been retired for 4 1/2 years. How is it going? In many ways retirement is everything I thought it would be and more. I enjoy mostly stress-free days and manage to keep busy. From spring to fall, gardening keeps me busy. I've joined a gardening club and have a membership at the Botanical Garden that gives me access to classes, events, and volunteer opportunities. We continue to volunteer with a national organization that provides disaster relief to individuals and families.

Dh and I have joined local bird-watching groups and he has taken several short trips out of state for birding festivals. Although I'm always "invited" to go, I prefer to stay home and enjoy some alone time. Bird watching has been a great hobby for dh to get into and he has given several presentations to various groups. An added bonus: it gets him out of the house and gives him a hobby he can do anywhere in the world.

And we travel a lot. Our 121 days of travel in 2012 took us to new and old places around the world: Cayman Islands, Belize, Curacao, Aruba, Mexico, Guatemala, Honduras, and Puerto Rico. We explored more of the USA with trips to Wyoming, Montana, South Dakota, Arizona, California, Florida, Oregon, Utah, and Nevada. Most of our travel was great fun, except for a 2 week cruise where hundreds of passengers contracted the norovirus. Let’s just say we are putting cruising on hold until we’re (much) older. Add visits to family and bird watching trips for dh, and we were out and about over 5 months total. Whew!

On the financial front... how did we do in 2012?
Life continues to be simpler and less complicated, especially financially. We sold our house in CA in 2011 so now we just have one home to maintain. In 2012 we sold one of our rentals to DS and his wife, so we also have one less investment property to deal with. Two rentals were refinanced, a smart money move resulting in a good cash flow.

Our income is fixed (defined benefit pensions) and direct deposited to the bank, and most bills are on auto-pay. A property manager handles the three remaining rentals. I track our expenses in four basic categories. "Living" is all expenses excluding travel, giving, or saving (i.e., medical, property taxes, food, entertainment, clothes, auto, etc.).

Our net worth grew 8%, excluding real estate. This figure represents the average growth of taxable accounts, tax-deferred accounts (to be tapped at 70 ½), and stocks/mutual funds. The 8% includes a stock portfolio that grew by 24%, mostly due to Apple's strong performance in 2012, so this skews the totals a bit.

We spent our 2012 net income as follows:
~ Living 30%
~ Giving 15%
~ Savings 32%
~ Travel 23%


And that's the recap of 2012 in the life of a very happy retiree. Although I rarely blog anymore, I continue to enjoy visiting SA and keeping up with the lives of my online friends.

The following picture is from our trip to Mt. Rushmore. As much as we travel around the world, the USA is IMHO the greatest country in the world.

Happy New Year everyone!

Well, the truth is it feels like a raise. Today I signed the papers for refinancing two rentals that are my sole and separate property. I have been thinking about it for several years but dragged my feet, mainly because I didn't want to deal with B of A (the current lender), and home values had dropped dramatically. But values are finally creeping up again.

I remembered the name of the loan broker I used when I bought the houses. He used to be with Countrywide (now B of A) but is now w/ a small mortgage company. He was able to get a rate of 3.625% locked in with no points. This is an excellent rate for investment property. I also decided to have impounds because it makes life easier for me. I will no longer have to deal with tax bills or annual insurance premiums... only HOA fees.

It will take about 15 months to recover the closing costs but after that I will have about $447 a month net, after paying for property management and reserving funds for HOA fees to be paid twice a year. Wish I'd done it sooner, especially since I've had a negative cash flow of ~$65 a month.

The cash flow will come in handy... we are expecting out first grandchild (a boy) early next year and I will want to start a college savings account. It's never too early!

Yikes! Has it really been 3 months since I last posted? I am alive and well living happily ever after in retirement. 2012 is the first year we've had only one house to deal with, so our life has gotten simpler (and cheaper). It was a good financial move to sell the CA condo last fall. A question that sometimes comes up from family and friends who work: What do you do all day? Well, we manage to keep busy, and at times busier than when we worked.

My volunteer time with the American Red Cross has been a rewarding experience so far. In between travel, I am on-call as a member of the Disaster Assessment Team. Dh is also a volunteer and sometimes goes with me on calls. In the last month I've had 7 calls, all of them in response to house fires in my city and some neighboring cities. I'm getting to know other volunteers and making new friends, another benefit of belonging to this group.

More and more, we're adapting to the colder climate and enjoying spending more time in this beautiful part of the country. But now when the weather gets TOO cold, since we can no longer escape to CA, we plan getaway trips to warmer areas. We're still not ready to be snowbirds in one particular place so we've been migrating all over the globe. January and February took us to Florida and Caribbean for about a month, an experience that was mostly good.

Our trip included a two-week cruise on the Crown Princess, the ship that made the news because over 500 passengers and crew got sick with norovirus. We thought we'd escaped the epidemic but dh and I both got sick the day we disembarked. We were sick enough to visit the ER and we spent the good part of a week recuperating at our timeshare condo. So the last week was not so good, but the other weeks were wonderful. We've taken many cruises and this was the first bad experience, so we're taking a break from cruising for a while but not for good.

The weather at home has been nice enough that I've worked in the garden a few days. I won't plant my annuals until mid-May, but the perennials are starting to sprout and in need of thinning and pruning. We're having the exterior of our house painted and it will happen this week if the weather cooperates. It's been a fairly mild winter but with some strange weather. One day it's in the 70s... the next day it may snow. If the painting doesn't happen this week, it will have to wait until mid-May when we return from our next trip.

Next week we'll leave for Guatemala, where we'll spend about a month. We'll start with a ten-day

Caravan.com tour that begins in Guatemala City but we are going a few days in advance. We think Caravan's prices are reasonable and we enjoyed the Costa Rica tour we took with them last year. After the tour we'll be in Antigua with friends and end with a week at a hotel/resort, also in Antigua. We will visit the schools where we used to train our SJSU student teachers and spend time with students we are sponsoring. We have planned a side trip to the Mayan ruins in Copan, Honduras, during the latter part of the trip.

The only thing I can share related to saving money is I got a very good deal on our tickets to Guatemala. We are flying first class for about $100 less than the price of an economy class ticket. I did it by using award miles combined with purchased miles to complete the transaction. Also, we are staying at a lovely resort in Antigua for only $159 a week by booking it through our timeshare exchange program.

I do have one financial goal for 2012 that supports my philosophy of giving. This year I would like to make my contributions through a donor-advised charitable fund. So far, I am leaning toward the Schwab Charitable Fund. My plan is to use appreciated stock to establish the fund and use future contributions to support my non-profits of choice. I want to proceed in the most-cost effective and tax-friendly manner. A charitable fund seems simpler than establishing a foundation that involves lots of paperwork and requires management.

Well, I haven't been blogging much because our financial life is really pretty boring these days. I guess it's better than having drama related to money (or lack of). The years of focused planning and saving have paid off in terms of providing a comfortable and secure retirement, and for that I am grateful. We planned for the future and now we are living it. Life is good.

Happy Easter to all! I took this picture of lilies at our hotel last time we were in Guatemala.

Yesterday dh and I were discussing how quickly 2011 flew by. After all, we are retired... shouldn't life seem a little slower? So where did the year go? And how are we doing financially... where did our money go?

January - Our "National Geographic Experience"
We started the year on an Amazon River cruise where we spent 4 weeks visiting everything from remote villages to the industrial city of Manaus. Our trip back to the USA took us to Devil's Island and several Caribbean countries. It was amazing and we learned so much about the flora, fauna, people and cultures of the Amazon Basin!

February - Family Time
Spring in Idaho was quiet and restful. We took a road trip to our condo in Silicon Valley, stopping to see family in Oregon along the way.

March - Time for Family and Friends
Went to Newport and Gleneden on the Oregon Coast for a week with dh to enjoy bird watching and the ocean. Later I took a "girls only" trip to Las Vegas to celebrate a friend's 70th birthday. Dh and I ended the month with a week in Cabo San Lucas for our niece's renewal of vows.

April - From NYC to the Rain Forest
The first week was spent with my sister from CA in NYC visiting my grandnephew (her grandson). Later that month, we were in El Salvador to see family for a week, followed by 10 days in Costa Rica on a

Caravan.com tour, one of the best travel bargains around.

May - R & R
Had thyroid surgery... prognosis is good despite some unexpected news. Appreciated being home to rest and recuperate, and my daughters and dh were wonderful during this time. Prepared my garden for planting.

June - Home Sweet Home in ID
The garden is starting to bloom, I volunteered for the Red Cross, and took a four-day trip with dh to beautiful Yellowstone. We decided to sell CA condo... we just don't use it enough to justify expense of keeping it.

July - Cutting Ties to CA
The best part was that my sister and BIL from CA came to visit us in ID for a week of fun. We got an offer on the condo... drove back to CA. It was wonderful to spend time with CA family, including dh's family reunion in Soledad. Cleared out CA condo in expectation of closing escrow in August. Rented a storage locker in ID and hired movers to help us with items we are keeping.

August - Summer in the City of Trees
So happy with our beautiful flower garden in ID... annuals and perennials galore! Volunteered some more and enjoyed a relaxing summer in this beautiful city of trees (that is the meaning of Boise), biking on the greenbelt, and going to the fair, museums, parks and the zoo.

September - European Adventure Begins
We FINALLY closed escrow on our CA condo! Left on September 25 to celebrate with newly retired friends in for Barcelona, Spain, the gateway for our next adventure.

October - Wow... what a month!
We were in Europe most of October, exploring 8 different countries... an amazing experience. The best part: four days with my favorite cousin and his delightful family in Switzerland. Did some volunteer work for the Red Cross when we returned to ID.

November - So Much to be Thankful For
My DSS came home from Iraq, safe and sound after one year working as a medic with his National Guard unit in a particularly dangerous area. Thanksgiving in Idaho was lovely, hosted by DD1. After Thanksgiving, dh and I left for Cabo San Lucas, one of our favorite SUNNY and WARM places.

December - Escaping the Cold
Went to Cabo San Lucas for three weeks. Came home in time to celebrate happy holidays with 3 of our 4 adult children. DSS want to relocate to ID. We decorated the house and put up our tree. It was wonderful! I especially love the ornaments we've collected from our world travels.

On the Financial Front... where did our money go?
I spend less time on things financial now that we're retired. It's not that I care any less about personal finance... it's more that we are on autopilot. We have a property manager handling the rentals, so I do not get involved much. The financial planner I've used for 25+ years does a good job with the tax-deferred investments, so I don't worry about those. Our income is fixed and direct deposited to the bank, and most bills are on auto-pay. Life is simpler now.

I track our retirement income in four basic categories. "Living" is everything we spend that is not travel, giving, or saving: medical, property taxes, food, entertainment, clothes, auto, etc. I was surprised our net worth grew 4.87%, excluding real estate (I expected less). This represents the growth (averaged) of taxable accounts, tax-deferred accounts (to be tapped at 70 1/2), and stocks/mutual funds. I adjusted figures to exclude cash generated from the sale of the CA condo.

Distribution of our 2011 net income is as follows:
~ Living 32%
~ Giving 12%
~ Savings 31%
~ Travel 25%

We spend a lot on travel, made possible by diligent pre-retirement planning and saving. Our expenses are low, our income is fixed (~30% goes to taxes), we save almost one-third of our net income, and we are in relatively good health. This is the "go-go" stage of our retirement. The "slow-go" and the "no-go" stages will follow, but for now we are actively crossing items off our bucket list. 2011 was a good year!

Happy New Year to All at SA!

on our California condo... three weeks late, but at least it's done. We had to be patient due to buyer's loan issues that necessitated signing FIVE extensions to the contract. It's a good thing we knew and liked the buyer otherwise we would have gone with the backup offer and would have had a speedier close.

It's been over a month since we moved our belongings from the condo. Although we really loved our home, we decided to sell because we just didn't use it enough to justify the expense of keeping it. It will be nice to save the money we've been shelling out each month for expenses plus the substantial equity from the sale. Moving and consolidating two homes into one was a project I do not want to repeat anytime soon.

We hired a nationally known company because we thought they would be more reliable. Wrong. The movers showed up 12 hours late. We had to stay in a hotel an extra night because they started the job at 9:30 p.m. and worked until 12:30 a.m. Then they started at 8:00 a.m. the next day and finished at 1:30 p.m. We spent the next night in Nevada because we left CA too late in the day to make it all the way home. Of course, the final cost was MUCH more than the estimate, and even though the movers were respectful and friendly, they were not as careful with our furniture as some of the local movers we've used.

All in all, we survived the move and the furniture survived, although with a few more scratches than before. The task of blending two households into one involved sorting items for donation, giving away loads of extra furniture, household items, and clothes, putting some furniture into storage for my stepson, and shredding old financial records and personal papers. Whew! Glad that is behind us but it has given me renewed motivation to streamline financial record keeping and to think twice before buying anything new for the house.

Most of us have made poor financial decisions at some point in our lives, and I am no exception. I was reflecting about some of my worst financial decisions over the years and thought maybe someone else can learn from my mistakes:

1975 - After the death of my mother and father within a few months of each other, my sister and I sold my parents' home in SF to a relative of our estate attorney. We were young and naive and did not know the sales price was extremely under market value. We essentially gave away a home that was worth much more, especially because of its prime location. Selling the house wasn't the issue, it was making an uninformed decision... we sold it without consulting anyone else (e.g., an appraiser) and trusting our attorney 100%. Of course, we were young, vulnerable, grieving the loss of our parents and inexperienced in real estate matters. Lesson learned: Just because you have known someone for years and they seem kind and fatherly, it doesn't mean they won't take advantage. Think twice, wait a while, talk to others.

1983 - Newly divorced, I entrusted $22,000 to a family friend, a stockbroker, who talked me into the same investments he recommended for his parents. Big mistake. Today, I have approximately $1583 to show for that investment, and a K-1 that won't go away. It was a lot of money back then (and still is!). Lesson learned: Don't let someone talk you into an investment by using an emotional or personal rationale like "I had my parents invest in this." Do your research.

But did I learn my lesson? Nooooo... keep reading and you will see why. First, some background to explain my stock market experience:

1995 – I was a late bloomer getting into the stock market and started buying stocks after researching some major companies, some of which were blue chip. Since I was a beginner, I had a fellow teacher who shared copies of Value Line to help with my research. I focused on companies whose products or services I liked or used, and bought individual stocks in lots of 100-500 shares for several years. My portfolio was doing moderately well until...

1998 – I broke away from my strategy and bought some technology stocks based solely on my dh's raving about how these were the "up and coming" companies, and how his stocks had quadrupled in value, blah, blah, blah. So I bought (VRSN, XICO, XLNX)... and, about two years later, all of these stocks tanked with the dot.com implosion. Why I listened to my dh who had even less knowledge than I did, I don't know.

Then, to make matters worse, I kept those duds for years, despite the fact they could not possibly recover in my lifetime. I eventually sold these dogs, despite my "buy and hold" strategy. Most of my original stocks have been a solid investment, despite taking a beating in the most recent meltdown. Thankfully, I did not take dh's advice to sell my AAPL stock! But the experience gave me cold feet for buying more stocks and I lost my interest in the market for quite a while.

Nowadays, I am ultra conservative when it comes to new investments in the stock market. When I allowed myself to be influenced by my dh's enthusiasm and confident attitude... any maybe even a little by greed, I paid the price. Since retiring, I'm reluctant to buy more stocks, but for the younger folks, there are some bargains to be had.

Stocks I'm glad I bought and held: AAPL, ABT, AMZN, MSFT, WMT, PG, GE, SBUX, HPQ. Slow and steady, my original stocks have grown by an average of ~9.5% a year, excluding APPL which has had phenomenal growth. But then there were duds like WAMU, which became worthless. Lesson learned: Do your homework and think for yourself, then you have no one else to blame for your decisions.

"Self-trust is the first secret of success."
Ralph Waldo Emerson

How much money will I need to retire comfortably? This was the burning question I pondered for several years before retiring. My retirement planning involved some specific steps to answer this question and it helped me feel confident in my decision to retire. Even though I retired two years ago when the economy was imploding, I have not regretted it for a moment.

Here is what I did to come up with my answer:

1. I determined the annual income I would need in today's dollars. This involved creating a budget that allows for unexpected expenses and also a healthy amount for travel. My basic budget categories are:

Housing (includes expenses for second home)
Utilities (includes phone)
Food/Misc.
Auto (gas, maintenance, insurance, registration)
Medical
Charitable Donations/Gifts
Personal Allowance (includes clothing)
Insurance
Entertainment
Travel Savings
Regular Savings
Taxes

2. I chose my planned retirement date: August 19, 2008.

3. With input from my accountant and financial planner, I analyzed the market value of my investments. These included both taxable (cash, stocks, real estate) and tax sheltered accounts (IRAs, 457 and 403b). Taking into account a conservative rate of return on these investments (2%), we projected values at 70 1/2, when Required Minimum Distribution (RMD) kicks in.

4. I requested a benefit estimate from my state teacher's pension plan. In my case, I knew the exact amount of my pension and that it is supposed to have a guaranteed 2% annual COLA.

5. I calculated the withholding on my pensions at approximately 25%.

6. I determined my pension WOULD NOT keep pace with inflation (using a 4% lifetime average inflation rate). In the future it would mean saving less and/or drawing from my retirement accounts to supplement my pension income (definitely will need to do so by age 70 1/2).

I put all this data on a spreadsheet and saw that I could afford to retire on my chosen date, even though waiting three more years would have provided a significantly higher income. In my case, the additional money was not worth the stress generated by my work. My job as an elementary school principal was taking a toll on my health (e.g., high BP) and I wanted to retire on a high note, rather than after I'd burned out.

These are the steps I took to "crunch the numbers." There are plenty of calculators available online, some of them very useful. However, I just used a simple Excel spreadsheet. I did this exercise at least once a year for about 4-5 years before retiring. I knew it was time to retire when I began to review my retirement spreadsheet every month!

My husband retired in 2009 so we are now both able to enjoy a completely different life. People sometimes ask what we do to keep busy now that we're retired. The reality is that we are always busy, but what we do to keep busy is our choice. It's wonderful to have so much control over our lives. We love to travel and have documented some of our adventures on our travel

blog.

In addition to retirement income planning, we downsized in 2006 to a condo in Silicon Valley. This was a good move because we sold our big house when prices were high and we were able to move to the condo that we had bought in 2003 but had rented out. We used profits from the downsize to buy our Idaho home for cash, so there is no mortgage. So now here we are in beautiful Boise where we have relocated. We still have the CA condo, but it is now our second home.

Now that we're retired and free to move about the world without the encumbrance of jobs, we've been contemplating what to do with our condo in CA. Here is what we have discussed so far:

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Sell It

Pros:
No more PITI, HOA fees, and utilities;

We could invest the equity or use it for something else, TBD.

Cons:
The real estate market's just starting to improve here, so it might be prudent to wait;

We might owe taxes since we would not be buying a replacement property.


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Rent It

Pros:
The rent would cover all or almost all expenses (PITI/HOA/Management);

We could save or invest what we now pay in PITI/HOA;

We know a good property manager.

Cons:
Renting can be a disaster with the wrong tenants;

Renting won't help us tax-wise due to income limits.


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So, back to the question: rent or sell? After much thought and discussion, we've decided to do neither. We're going to keep the condo and look at things again in a year or so. This way, we will have a place to stay whenever we're in CA, and we will be spending about 4 months here in 2010. Dh, as an Emeritus Professor, still has access to the campus library and other resources and he wants to do some research/writing (with no stress or deadlines, just for enjoyment). We'll keep the Prius parked in the garage for wheels and thankfully, not have to deal with packing and moving dh's office just yet.

Today I decided to analyze my stock portfolio, something I haven't done in over a year. Here is the lowdown:

1. The portfolio has now surpassed the high of October 2007;

2. It's gained 95% since the low of February 2009;

3. Overall gain since inception has averaged ~7% a year;

4. I have not bought or sold any stocks or mutual funds in years;

5. My portfolio consists of 90% individual stocks and 10% mutual funds;

6. My best performing stocks in terms of gain over purchase price are: AAPL, SBUX, PG, WMT, ABT, HPQ, AMZN;

7. I buy stocks based on liking/using a company's product, not on a high-level analysis. (Note: I DO NOT recommend this approach!) For example, I bought AAPL at $6 a share in 1996, because I'd used Mac computers since they first came out in 1985. I was lucky... AAPL has split twice and has had outstanding gain;

8. Most (but not all) stocks I bought outperformed mutual funds I bought (VFINX, SNXFX, SWPPX);

9. When I decide to buy a stock, I will buy between 100-500 shares;

10. As much as I'm interested in personal finance, I just haven't gotten into educating myself about the stock market, but maybe this is an area to explore. I still feel like a rookie.

I've always thought of my stocks as an asset I'd probably leave to my children or a charity and had not counted on these funds for retirement, but it's a good backup option. On the other hand, my retirement accounts (403b, IRAs, 457), some of which are invested in mutual funds, are entrusted to a professional financial manager.

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In other news, dh and I have been in ID for the last two weeks, enjoying some special time with my daughters and SILs. The weather's been colder than CA, but nothing unbearable. Dh has a new interest: photographing birds and wildlife, so we've spent hours at local parks and wildlife preserves. Idaho has abundant wildlife and beautiful landscapes, so there are endless photo ops. Dh just spent a small fortune upgrading to a better camera (Canon EOS 7D) but saved money on taxes (ID is 6% vs. CA @ 9.25%).

At the end of the week, we'll drive back to CA (with TC the cat) to spend Easter with family and friends. I'm looking forward to seeing my sister, niece, grandniece, and grandnephew. I love how the kids get excited about their Easter egg hunt and we'll all have a wonderful brunch with close friends and family.

Then in mid-April, dh and I are off to Mexico for a few weeks to explore some major archeological ruins in the states of Tabasco and Yucatan. From our base in Villahermosa, we will go to

La Venta and Palenque. Then we'll fly to Merida, and will go to Uxmal and Chichen-Itza from there.

Today I decided to analyze my stock portfolio, something I hadn't done in at least a year. Here is the lowdown:

1. It has surpassed the high of October 2007;

2. It has grown 95% from the low of February 2008;

3. I rarely sell and it has been years since I bought;

4. My best performers in terms of gain vs. price paid are: AAPL, AMZN, PG, SBUX, WMT, ABT, HPQ;

5. The stocks I bought have outperformed the mutual funds I bought in terms of realized gain;

6. My portfolio consists of 90% stocks and 10% mutual funds (VFINX, SNXFX, and SWPPX);

7. I bought stocks based on using/liking a company's products, not because of some high-level analysis (I don't recommend this approach). But it's paid off, especially with stocks like AAPL that I bought for $6 a share and it split twice;

8. When I decide to invest in a stock, I buy between 100-500 shares;

9. Since I began investing, I've had an average annual gain of about 7% overall;

10. As much as I like personal finance, I just haven't been as interested in learning more about the stock market, but maybe I'll feel differently in a year or two.

I've always thought of my stocks as an asset I would leave my children, and not as funds to be used for retirement, but it's good to have this portfolio as a backup in case the need should arise. On the other hand, my retirement accounts (403b, IRAs, 457), some of which are invested in mutual funds, are entrusted to a professional to manage.

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In other news, we've been in Idaho for the last two weeks, enjoying some special times with my daughters and SILs. The weather's been fairly nice, colder than CA, but nothing unbearable. Life is very relaxed here.

Dh has a new hobby: photographing birds, so we've had fun going on walks to the nearby parks and wildlife preserves. Idaho has an abundance of wildlife and beautiful landscapes. Dh just spent a small fortune upgrading to a better camera. But he saved some $$: sales tax in Idaho is 6% vs. 9.25% in CA.

At week's end, we will be heading back to CA to spend Easter with friends and family. I'm looking forward to seeing my sister, niece, grandniece and grandnephew. The kids will have fun with their Easter egg hunt and we'll all enjoy a special brunch.

Then in mid-April, dh and I will head to Mexico for a few weeks to visit Mayan archeological sites in the states of Tabasco and Yucatan. While in Villhermosa, we will visit La Venta and Palenque; in Merida, we will focus on Uxmal and Chichen-Itza.

Maybe somewhere deep down I'm a pessimist, but most of the time I'm a woman who thinks the glass is half-full. But when it came to financial planning and retirement, I covered all the bases.

I am one of the lucky ones who retired with a state teacher's pension. This is touted as "safe" and provides an annual 2% COLA. Participants in this pension system are not eligible for Social Security, however.

But being ever so wary of what could go wrong, and always wanting to be prepared for left curves life throws at us, I also did the following:

1) Contributed annually to my 403b accounts and also to Roth IRAs when I was eligible. So far, I have not had to touch this money;

2) Invested in the stock market. The "star" of my portfolio is AAPL which I bought at ~$6 a share in 1996. I stopped investing in stocks years ago, but I have fun tracking this asset. I don't know if I will ever sell any of it, but it's there if I need it;

3) I also have a stash of cash... some in CDs, some in ING, and some barely earning any interest elsewhere. It would help me survive for several years if my pension dried up.

4) I have avoided debt like the plague, except for a small mortgage.

So, why I am writing about this? Well, yesterday a good friend...also an educator... called and lamented she may have to work until she's 64 or 65. You see, her teacher's pension just won't be enough for living in retirement if she retires any sooner. And even when she does retire, she'll have to make "drastic cuts" to her lifestyle (like no more travel).

Don't feel too sorry for her. Most Americans have to work until 66 or 67, but many teachers we know like to retire around 60 or 62. My friend, though, never saved for retirement because she figured her pension would be enough. And in reality, it should/could be. And it is "safe." But what if...

In June, we hired a property manager who promptly evicted the tenants at one of our rentals. Back in August I

posted about how the evicted tenants had trashed the house. I am happy to report that the property is FINALLY back to normal and it has been rented effective January 1. It was expensive to renovate and if it were not for the sad state of the real estate market in ID, we would sell it in a heartbeat. We are finding that rentals require far more work than we have the energy for.

One of the mistakes we made was hiring a property manager who wanted to do all the work himself. In the long run, he cost us more money because he has a full-time job apart from his rental management business, and he did the work when he had time. He is a hard-working, honest man, but it took him way too long to complete the repairs. And since we were in CA most of the time, it was "out of sight, out of mind." But we are grateful he was able to evict the tenants who had stopped paying rent.

So, more than $15,000 later, here is where the money went:

~ Six PITI payments @ $835 each
~ New linoleum and carpets
~ Two coats of KILZ on the subfloor
~ New paint throughout
~ New blinds on all windows
~ New backyard landscaping (top soil, lawn, sprinkler system)
~ New DW and micro-vent
~ Electrical outlet repairs
~ Trash hauling and cleaning (it was utterly unbelievable)
~ Utilities, including the $329 water bill of former tenants

As it was, the house would not have been ready to rent by January 1 if it had not been for my DDs and SILs who spent the day after Christmas helping us finish up the cleaning and repairing the front and back doors. The property manager was out of town on a family visit and dh and I were determined to get it ready.

You may be wondering if the evicted tenants vandalized the house. They did not! This was the result of four years of living in a house without ever cleaning it. We made the mistake of not having a property manager for several years and not bothering to do an annual inspection. So, most of this is our own fault for being lax about an investment and "assuming" all was well. We paid dearly for our mistakes and learned something about human nature through this experience.

There are people who are simply not clean... they think nothing of fouling their own nest, worse than animals. I have a hard time understanding what would compel a human being to live with animals and their feces... how do they present a semblance of normalcy outside the home? In my career as a school principal, I saw youngsters removed for "neglect" from filthy homes that were cleaner than this one.

And, no, we will not try to recover anything from the former tenants. It would be like trying to get blood out of a turnip. They apparently lost their jobs and like many people living on the edge, were only a heartbeat from being homeless. I feel sorry for these people, especially the children in this family.

New paint, carpets, and blinds:


Sparkling clean kitchen with new micro-vent:

Once a year I analyze our net worth to get a current picture of our financial position. For the sake of simplicity, I don't include the value of autos or personal property, and I use the assessed values of real estate, minus mortgages, to determine equity.

I was surprised our net worth actually grew by 3.44% in 2009. It would have been significantly more except that real estate values continued to drop in CA and ID. Nonetheless, I am grateful for the positive growth, far better than in 2008 when our net worth shrunk by 5.6%.

My goal for 2010 is a 5% gain. It will be a challenge now that we're both retired, our income is lower, and we can no longer contribute to tax-sheltered accounts as we have done in the past. CD interest rates at 2-3% are not much help, but if all goes as planned, we will save about 20-25% of our net income. We'll see where things stand a year from now. Check out the

page on my sidebar for my 2009 Net Worth Analysis if you're interested in more details.

If you're curious how your own net worth stacks up against other folks in the same age/income bracket, use this calculator to compare. I did, and I learned our net worth is above the median for people in both our age and income brackets.

It's weird thinking about my "retirement accounts" because I've been retired for almost a year and a half. I'm fortunate that for the time being, my state teacher's pension enables me to live comfortably and I have health insurance provided at no cost through my former employer. In my early 20s, I got into the habit of saving for retirement, and I never stopped contributing throughout my working years.

When I retired in August of 2008, the plan was to leave my tax-sheltered accounts intact as long as possible, possibly being able to hold off until age 70 1/2 when the Required Minimum Distribution (RMD) kicks in. An emergency and travel savings in taxable accounts rounds out our cash funds. If the need were to arise, I would tap these before the tax-sheltered funds.

Since retiring I hadn't thoroughly reviewed the status of my tax-sheltered accounts (403b, IRA, and 457). So today I analyzed the growth in these accounts from September 30, 2008 to September 30, 2009. I was surprised to see that growth has been 4.6% overall... I expected it to be lower. This is after taking into account that my 457 Plan had 0% growth last year (this account is keyed to the S & P index and makes up ~22% of my tax-sheltered funds).

If my calculations are correct, in ~12 years when RMD kicks in, the RMD will be less than 4% of the total. If the accounts continue to earn @4.6% and I withdraw ~4%, the funds will continue to grow. Of course, this is a hypothetical situation because in 12 years I may need a lot more than 4% to make ends meet... and then there's inflation. My pension has a 2% COLA that may not be enough in the future.

My tax-sheltered accounts include a Roth and a non-qualified annuity that I did not include in the projections because they are exempt from RMD. If I don't have to use these non-qualified funds for my health care or living expenses, then I may use them for a legacy gift. I am considering leaving a bequest to my alma mater to establish a scholarship fund to support single mothers working to become teachers.

We had to evict tenants that had been at one of our rentals for more than four years, and it has made me realize I may want to get out of the rental business altogether. We have never had to evict a tenant before and it is a very unpleasant experience even though I am not directly involved. It is especially distressing to me because the tenants had two young children and I feel very badly about the impact on the children.

In June we employed a property manager who is a "no nonsense" type of person. The tenants had been late paying their rent for the last year and a half, but they eventually paid. We even let them pay in two installments to help them but things only continued to deteriorate. Long story short, the tenants were three weeks late in June and did not pay in their July rent, so our manager gave them their three-day notice at the end of July and proceeded to evict them.

What is mind-boggling is that when the manager went to collect the rent, he found a person living there who was not on the lease (she said she was the sister of one of the tenants). This woman told the manager the tenants were on vacation on the Oregon coast. Beats me how you would go on vacation when you haven't even paid the rent. This was the straw that broke the camel's back, so we agreed to the eviction.

Well, the tenants are out and it looks as if we will need the entire month of August and possibly September to get the property rentable again. So far, the house needs new floors throughout, complete painting, major cleaning, and lots of minor repairs. The tenants left tons of garbage and unwanted items, not to mention they lived in filth.

Words cannot describe the stench and the dirt we encountered when we went to see for ourselves today. Their pets (unauthorized) soiled the carpets right down to the sub-floors. This environment is hazardous for children! The once-beautiful back yard is a weed patch and there are oil/grease stains in the garage and driveway.

Believe it or not, this backyard was once pristine and well-manicured with a lush lawn.


This is the sub-floor after the carpets were removed. The stains are from dog urine. The floors have to be treated and sealed before we can replace the carpets. All linoleum also has to be replaced due to gouges.


This is the space next to the refrigerator. The entire house is this dirty.


I am hoping we can get through this nightmare for under $10,000 including the two months of lost rent (assuming we get it rented by September 1). The security deposit will not even cover the cost of hauling the tenant's trash to the dump (broken washer, 12 tires, old CPU, broken desk, dog house, car parts, swing set, toys, etc.). Even if we decide to sell this house, we still have to clean and repair it. We DO NOT need the headache and expense!! To make matters worse, owning rentals gives us no tax advantage due to income limits, so why are we doing this?

Last week my WAMU/Chase CD matured. It had been earning a rate of 4.17% and now that rates are much lower, I knew I'd be lucky to get even 2%... and Chase is currently offering 1.75% for a 12-month CD. It never hurts to ask, so about a week before the maturity date I met with the manager and asked about the best rate Chase could offer. I told her I would invest the funds with the bank that gave me the best rate. She said to give her a day or two to look into the options. When she called me the next day, she said Chase could offer me a "promotional" rate of 2.25% for 12 months. I like the convenience and proximity of this branch, so I accepted.

Not too long ago BA

posted a graphic about savings buckets and it made me think about mine. "Pay myself first" has long been my motto and a deposit to my savings is always the first "bill" to get paid each month. Over the years, to manage my savings, I've experimented with different strategies and eventually settled on keeping separate accounts (buckets) for different purposes. Some people might think it's a lot to keep track of, but it works for me and that's what matters. To eliminate paper clutter, I access my statements online.

Here is the current situation with my savings buckets:

Reserve Account #1: Used for periodic expenses such as taxes, insurance, HOA and timeshare dues, ID home expenses, etc. I deposit a predetermined amount from our income (my pension and dh's job) to this account each month. I use a "moneylink" feature that enables easy transfers to and from my checking account.

Reserve Account #2: Used for rental property expenses. I deposit a small amount to this account monthly in addition to a small but consistent net rental income. The savings account is linked to a dedicated checking account used only for rental expenses. The purpose is to have a reserve to offset any vacancies and to pay for maintenance and repairs.

Emergency Fund: This account contains ~2 years of "no-frills" living expenses, to be used in the unlikely event that a major economic meltdown results in our state teachers' pension funds being frozen, reduced, or eliminated. In this economy, you just can't count on anything being constant, so I believe in being prepared. These funds are in staggered CDs earning 3.75-4.17%.

Tax Sheltered Retirement Accounts: Now that I'm retired I can no longer contribute to these accounts, but dh will contribute to his until he retires in June, 2009. I am not sure when we will draw from these, but we'd like to hold off until the mandatory age of 70 1/2. The financial planner I've used for many years has invested my 403b and IRA funds in various products that preserve the principal and earn a return of 2-5%. I have always opted for a "conservative" approach with my retirement funds, even when we've been in a bull market, something I'm now happy about given the state of the economy.

Personal Savings: Dh and I each have our own personal savings account that is our sole and separate property. Mine is with WAMU/Chase and his is with a credit union. We are free to use these funds as we please. For example, we draw from these accounts when we need to subsidize travel, a new laptop, or anything else. We each deposit equal amounts into these accounts each month, ~15-20% of our income.

My Fun Fund: Dh and I have a goal of traveling more in our retirement. So, I've decided to dedicate my small ING savings account for travel. The money saved in this travel account will include net earnings from consulting or part-time work and other misc. sources (e.g., recycling, rebates, etc.). Travel can be expensive, so having this dedicated account will motivated me to save in small ways that add up over time.

So, not including the retirement accounts, I have two "reserve" accounts, an emergency fund, our two personal savings accounts, and the ING Fun Fund, for a total of SIX accounts. It is a lot to track, but going online for balances and using a spreadsheet fore record-keeping makes the management easy. Especially now that I am retired, my savings gives me peace of mind, not to mention some welcome passive income.

Note: Stock dividends also provide passive income, but it is automatically reinvested. I don't consider the brokerage account as a "savings" account but rather an investment account that is liquid.

Once a year, I analyze our net worth to get a current picture of our financial position. To keep things simple, I don't include the value of autos or personal property. I use information from end-of-year statements and assessed values for real estate.

At the moment, fluctuations in our net worth do not have a significant impact on our lives. It helps that we live below our means and our income provides for our needs. In the future we will need to use assets to generate some income, but for now we are able to hold off. For example, we will draw from our assets if our pensions fail to keep pace with inflation (likely) or some other unexpected life event requires it. At 70 1/2 we will begin the mandatory Required Minimum Distributions from the tax-sheltered accounts.

Now that I've completed our net worth analysis for 2008, I know my goal of increasing our net worth by 5% in 2009 is very ambitious (see sidebar). Factors that could help: if real estate values bottom out and interest rates start to creep up... both possible, albeit not likely until the latter part of 2009, if at all. So we will see how things stand a year from now. Check out the page on my sidebar for my 2008 Net Worth Analysis if you are interested.

If you're curious how your own net worth stacks up against others your age and income bracket, use this

calculator to compare. I did, and I learned our net worth is above the median for people our age and income bracket... reassuring given that our net worth took a drop in 2008.

Here's another interesting idea: net worth vs. wealth. According to the calculator from The Millionaire Next Door, I am a PAW and my dh is an AAW. Authors Stanley and Danko argue that total net worth alone does not tell a good enough picture of one's wealth. What matters is how much worth you can accumulate on your income considering your own age. Therefore, a 30 year old making $25,000 who has a net worth of $80,000 has more relative wealth than a 50 year-old doctor making $200,000 a year who is only worth $500,000.

Both of the above calculators were borrowed from the Millionaire Mommy Next Door blog. She has a post with 110 calculators... a very handy resource.

My daughter asked me why we would carry a mortgage if we could pay it off. Why not pay off the loan and not have a PI payment at all? Well to start with, my dh and I have different financial positions. While I could come up with my 50% of the loan, it would strain dh's resources to do likewise (it's complicated). So we will continue to have a mortgage on our CA house. And, thanks to a tip from monkeymama, we are now in the process of refinancing to 4.875% and this will save about $225 a month from the current payment. But assuming we could simply pay off the loan, would it be a good idea?

To answer this question using the new 4.875% numbers, I started with a

calculator that weighs various aspects of home ownership including the impact of property taxes, your standard deduction, and your tax rate. I also calculated the interest portion of our payment and what we could reasonably earn if we left the money in the bank. Here are the figures:

Annual payment (interest): $9263
Tax benefit by having a loan (per calculator above): $1936

Amount of interest earned on $190000 invested @ 4% = $7600
Minus 30% in taxes = $2280
Net investment income = $5320

Amount saved if we paid off mortgage: $9263 minus (5320+1936) = $2007

Bottom line: We could save ~$2000 a year we paid off the $190,000 loan, assuming my calculations are not flawed in some way. But we have decided not to for several reasons. Primarily, dh feels contributing his 50% of the payoff would deplete his cash reserves. We plan to live here only 5-6 more years, then we will sell our townhouse or rent it if we cannot sell. By not paying off the loan, we have access to larger cash reserves for future plans that include travel and possibly buying property in a foreign country. So, this compromise works for our situation.

In general, I think it is a good strategy to pay off your mortgage but everyone should assess their individual situation before doing so.

Wall Street gave us a roller coaster ride we won't soon forget and now my bank (WAMU) is faltering! Where will it end... or is this just the beginning of the end? Don't answer that... I really don't want to think about things getting worse right now, especially since I just broke down and checked my stocks, even though I'm trying to get into the habit of checking just once or twice a month (vs. my previous obsession of checking daily). Here's a recap of my battered stock portfolio:

Monday, September 15th - Down 3.72%
Tuesday, September 16th - Up 2.95%
Wednesday, September 17th - Down 4.67%
Thursday, September 18th - Up 3.73%
Friday, September 19th - Up 3.42%

Surprisingly, this week my portfolio fared better than expected considering the havoc in the market. But the bigger picture is bleaker: I'm down 6.1% for the month (from the previous month) and down 14.3% for the year. I'm not too alarmed (yet), but it's definitely disappointing for someone like me who just retired. Well, at least I'm not depending on this money to live on right now, but it sure would be nice for it to be there when I'm 85. I made the decision not to buy long-term care insurance because I thought I had enough assets and we also have good health insurance but I may have to rethink this.

In other money matters, I've been super-busy and this is a good thing because it kept my mind off the stock market. Here's how I've saved money this week:

1) Called my TV satellite company to complain about the high cost of their service. To me keep me as a happy customer, they gave me a credit of $10 a month for a year, gave me the high definition channels free for a year (another $10). I canceled HBO that we rarely watch and saved another $14. Total monthly savings: $34

2) Called the phone company about my landline because I wasn't happy with my rate plan. They reduced my plan to the rate they offer new customers. Monthly savings: $20 and no change to services.

3) Saved $3,000+ by buying airline tickets with miles for a family celebration we're going to in December. See yesterday's post for details.

4) Took an inventory of the pantry and freezer and stocked upon staples to last at least 3-4 months. Spent $192.58 but saved $39.73 by shopping carefully. I stocked up on chicken, ground turkey, pork roast (to be frozen), canned tuna, pasta, marinara sauce, coffee, green tea, 16#s assorted dry beans (red, black, lentils, garbanzos, green peas, and pinto), EV olive oil, salad dressing, canned tomatoes, popcorn, canned corn, cream of mushroom soup (I use it in various recipes), and a large bottle my favorite sake (yes, it's a staple!).

5) Bought a Brita "smart" water pitcher for filtering tap water to use for drinking. (We need to reduce our copious bottled water consumption and be more "green" consumers.) Used a $10 off coupon at BBB and will send for a $4 rebate on the extra filters. Final cost $45 for the large size plus filters for a year. We will also save about $30 a month by not buying as much bottled water. My DD uses a Brita pitcher and they have well water. She says it does a great job filtering.

6) Took a free online defensive driving class sponsored by my employer (my PT job). Not only will my auto insurance company reduce the annual premium by $40, but now I'm also eligible to get reimbursed for my mileage by my employer.

7) I was able to find a solid tenant for the rental that will be available on October 1. Since I leased the house without using a property manager, the monthly savings will be $119.50. I also raised the rent by $45 a month because I was told the previous rent was way under market (I've kept it the same for five years because I had really great tenants). Finding a tenant for this house is a huge load off my mind... a vacancy can suck a reserve account dry in no time.

On top of all this, I worked six hours on on Monday and spent Wednesday in beautiful Monterey at a workshop. My room was paid for, we had excellent meals, and the presenters did a decent job... not the best but better than some I've suffered through. Now, I'm ready to relax for a while. After all, I AM retired!

I have three more paychecks before I retire: June, July, and a smaller one is August. Due to my retirement, I will not be able to contribute to my 457 or 403b after August, thus falling short of the maximum allowed contributions for the calendar year.

To remedy this, yesterday I arranged with the payroll department to deduct more from my last three paychecks so that I will meet the maximum allowances for the calendar year. This will result in much smaller paychecks but I will make up the shortfall by eliminating any deposits to my regular savings, and if need be, making withdrawals from my savings.

Most of my tax-sheltered accounts will earn interest until I am 70 ½ and then I will have to begin mandatory withdrawals. One investment is a Roth and another is a non-qualified annuity, and these can continue to earn interest without concern about mandatory withdrawals. One of my goals in retirement will be to monitor these accounts more closely to ensure I get the best interest rates available to me.

Yesterday I analyzed my portfolio, which consists mostly of individual stocks and a few mutual funds. So far for 2008, I am seriously in the red:

January = down - $25,676
February = down - $7,764
March = up + $7,109
April = up + $11,674
May = up + $6,817

Calendar YTD = down - $7,840

I bought most of my stocks around 1996-2000 and then stopped when the market started going haywire. To date, I’ve never sold anything but know I should do some culling... if only I had more understanding and confidence about what to do and why.

Since January of ‘06, when I started keeping a spreadsheet I update on the last day of the month, my portfolio increased by 9.37% a year. I’m not sure how this compares to indices like the Dow or Nasdaq… all I know is that my portfolio’s produced a better return than anything I’ve gotten from a CD or money fund. To be honest, I do not review my statements from Schwab that are available online. I like to keep track using my own spreadsheet.

While the mutual funds have done OK overall, I have tech stocks that dropped significantly, have never recovered, and possibly never will. Some of these dropped as much as 50-60%, yet I hang on to them. I did get lucky with a couple of stocks bought solely because I liked/used their products or did business with the company (e.g., Apple and Walmart).

My plan is to educate myself more about intelligent investment strategies once I retire and actually have more time, but I’ll probably stick to mutual funds…and maybe I’ll even sell some of my dogs of the Dow. Can anyone recommend a good book/web site on mutual fund investing or portfolio management? I want to get more actively involved in managing my portfolio but don't want to obsess over it, either. There's got to be a better strategy than "ignore and check once a month."