WRITING SHORT: 35/50

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[Come summer heat, much of my blogging momentum melts away. Hence an experiment until Labor Day: fifty minimalist posts about whatever.]

Once upon a time, a well-respected lawyer left a large Boston law firm to open a small litigation practice of his own. He was a genial, generous boss. When he won a big case, he gave liberal year-end bonuses to all fourteen of his new employees, even the ones who weren’t lawyers.

But big trial wins are infrequent; there were occasional cash flow problems at the new firm. On several paydays he left early, ashamed or embarrassed; the young bookkeeper who did payroll would then explain everyone would be paid after the weekend because the deposit to cover salaries hadn’t yet cleared. Some non-lawyers were living paycheck to paycheck. However, in the end no one went hungry.

He was also generous with matching employee 401(k) contributions, up to 5%. In those days, the annual cap on such tax-deferred contributions was 15% of salary, but with his match, it came to 20%. All the lawyers had the full 15% withheld, and some others managed it, too.

Who regularly checks their 401(k) statement? At that firm, one lawyer did. He noticed his account had been without deposit activity for some time. The young bookkeeper explained that holding back 401(k) account deposits was the only way the firm could meet payroll just then, and the boss would make good on both the employee contributions and the firm’s as soon as he could.

Not investing employee-designated 401(k) contributions is a serious violation of federal law. All the lawyers knew it. Even the non-lawyers could recognize it as a kind of salary theft. Yet everyone held their tongues about this tricky situation. Reporting it might have put the firm out of business, the employees (lawyers included) out on the street. Mercifully, more money soon rolled in, so they could all breathe easy again.

I am reminded of this story because many aging people have cash flow problems too. They also closely monitor their retirement accounts. But not for deposit activity. It’s the taxable withdrawals — both the mandatory distributions and others for unforeseen expenses — that make them hold their breath. Talk about tricky situations: How long will the retirement account last? No federal law prohibits outliving one’s money. So there’s nobody to report it to. And no genial, generous boss, either — to make it come right in the end.

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11 thoughts on “WRITING SHORT: 35/50

  1. Surely the world’s largest economy has adequate retirement and old age care? The US might well be like Australia. Meals on wheels and soup kitchen queues for those that have not had the luck with own self-funded retirement. They are deemed by rabid right wingers to be ‘failures’.

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    • People who have been employed in this country can collect monthly Social Security payments, the amount of which is pegged to how much you paid in during your working life. Someone like me, who earned professional money for at least part of my life, will receive a larger Social Security payment per month than a secretary who stopped working when she married, but even the larger Soc. Sec. monthly payments are extremely difficult to survive on if you live alone. Most companies no longer have pension plans. The 401(k) program I refer to in the post is voluntary. You may (but don’t have to) allot a certain percentage of your salary (up to a cap) to a tax-deferred investment account, but that is subject to the vagaries of the market, and is taxed upon withdrawal. Old age care? In the only first-world country without single payer health insurance? Give me a break. Medicare, premiums for which are deducted from your Social Security payments, comes close, since the original version is funded by the government, and it does cover a considerable part of one’s medical expenses beginning at age 65, but to be safe one should also purchase (quite expensive) supplemental Medigap insurance from a private insurer. Medicare Part D, another pricey deduction from the Social Security payment, covers the cost of drugs, sort of. There are deductibles, co-pays, and still what is known as the “doughnut hole” — although that will be phased out slowly — where you pay it all after a certain annual amount of drug expenditure until you reach $5000, when Medicare Part D again kicks in till the end of the year, for 95%. What do you mean, “adequate retirement and old age care?” Why should you think such a thing? And all the umpteen Republican candidates are vying with each other to chip away at what there is. God help us if any one of them is elected!

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  2. Sounds like we live in the wrong country. Retiring itself is tricky. Some states tax pensions no matter how paltry they are. In my state our real estate taxes are very high which creates a burden for retired people on a fixed income. Outliving your income is very likely if you have a devastating illness requiring those outrageous drugs, some of which are not approved by Medicare.

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    • From the perspective of the elderly, Kate, it may well be the wrong country. And we are writing as retired persons who have some income, Social Security based or otherwise, to outlive. I read recently that for 27% of Americans over 65, Social Security is the only source of income, and for another 35% or so, it is the major source. I have no idea where a single old person can survive on the average S.S. monthly payment, but it certainly isn’t anywhere I have ever lived, and I use the word “survive” in its very basic sense. And for those of us slightly more fortunate, it’s still a fingers-crossed quandary: Should we hope to die while there’s still some money, or hope to go on living, even when there’s no money left at all? The alternative is to live like an ostrich and not think about it. Bad me, for bringing it up.

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      • I do know some people who ONLY have SS to live on. They live in trailers at a bare existence. I had a wonderful job that gives me a pension plus a 401(k). There are two of us in this household. All that makes us able to enjoy life (like you are supposed to at retirement) rather than eating dog food or spam. (Not that there is anything wrong with spam…..)

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      • My mother turned up her nose at spam, so I’ve never tasted it, although I imagine brown rice and beans (with a little soy sauce on it) would be the healthier, and even more economical, alternative. Dog food? I thought it was cat food that impoverished old ladies used to eat. Joking aside (and they’re bad jokes, really), you and beloved husband are right to count yourself among the fortunate. Also, like me, you’re property owners. I’m assured (by my expensive financial advisor) that even if I were to run out at the end, there are reverse mortgages to see me through. Although from what I’ve heard of them, they always hugely favor the bank. Let’s hope we don’t get there.

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  3. Rita Stewart

    Now that medical treatments have allowed us to live into older ages, our finances may not be able to keep up with that! Also medicines get more and more expensive for many diseases in our age group. So what to do? Of course, as many on the right proclaim, keep working perhaps until 80+. That’s one option LOL.

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    • I’m glad to see the LOL. Another option would be mandatory death at a certain age, or when the money runs out — whichever comes first. Guaranteed painless, like putting an ailing dog down, and paid for by the state. (And not so different from the days when migrating Eskimos left their elderly women behind to die alone in the snow.) It’s a wonder no rabid right-winger has suggested it. Perhaps because it might require raising taxes to cover the expense. Certainly not for any other, more humane, reason.

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