Debt, Credit Card & Consolidation Current News Digest

You don't hear the words "poodle," "tinfoil hat," and First Amendment in the same sentence often, but they are indeed linked in a classic Facebook melodrama.

Dale Blank runs a Facebook page devoted to accumulating as many fans as possible for a farcical picture of a beloved poodle named Bitsy sporting a tin hat — perhaps a bit like the one you might mentally draw on someone who was espousing tiresome conspiracy theories.

Blank's intentionally clumsy Photoshop job, and his quest for fans, has a specific target — Fox News broadcaster Glenn Beck.  On Feb. 8, Blank created the page with the stated intention of proving that his tin-hatted poodle could accumulate more Facebook fans than Beck, a favorite among conservative talk-show fans. 

Within a week, thanks to several bumps from the blogosphere, the poodle was well on his way, claiming nearly 300,000 fans — and enjoying logarithmic growth. Beck's page stands at about 500,000.

(Full disclosure: both easily dwarf the Bob Sullivan fan page, which sits at a modest 3,400.  Take from that what you will).

But on Feb. 18, the Facebook police arrived and broke up the party. Blank's page wasn't removed, but it was "publish-blocked."  He could no longer post updates or solicit fans in other Facebook ways. The fan-base growth ground to a halt.

That put the tin-hatted poodle at the center of a dispute over First Amendment free speech rights and censorship. There were virtual howls that Facebook was actively siding with Glen Beck over the Poodle, that perhaps someone at Facebook was siding with the conservatives, or at least had developed a hatred for left-wing sarcasm.

In the grand tradition of the Internet, that's overstating things a bit. Facebook, as a private company, has wide latitude in its ability to take down posts and pages that it decides run afoul of its terms of service.  Even Blank said he doesn't want to raise the possibility of a conservative, subversive anti-poodle attack — that's just the kind of knee-jerk reaction he's trying to mock.

"I'm not coming from a place where I think everything is a conspiracy," said Blank, who lives near Milwaukee.  In fact, he didn’t really have his heart set on poking fun of Beck. He simply picked the most popular target, in part to demonstrate how cheap popularity is on the Internet and on Facebook.  “I’m not so much anti-Glenn Beck as I am pro rational thought.”

Still, the conspiracy theories appeared.  It didn't help that Facebook initially failed to give Blank an explanation for taking away his ability to publish. Then, when an explanation finally arrived this week, its vagueness only added fuel to the fire.

"A Facebook administrator looks into each report thoroughly in order to decide the appropriate course of action. If no violation of our Statement of Rights and Responsibilities has occurred, then no warning will be sent," wrote a woman identifying herself as Marissa from Facebook's User Operations department, according to an e-mail provided by Blank. "If a violation has occurred, then a warning or more severe actions are taken. Unfortunately, for technical and security reasons, we are unable to provide details regarding the removed content. We apologize for any inconvenience."

Blank wasn't buying that.

"Technical and security reasons? That's just a cover for the real reason," he said. "I like to think it's not a political thing. When I see some of the pages out there devoted to (criticizing President Obama) that haven't been publish-blocked, you wonder a little.  But I don't want to delve into that.  I just want to know why I was blocked."

Facebook offered a generic explanation to msnbc.com in an e-mail.

“Pages are meant for entities like public figures, musical artists, businesses, and organizations so they can share information, interact with fans, and create a highly engaging presence on Facebook.  They're distinct from groups or personal profiles and designed specifically for these entities’ needs to communicate, distribute content, engage fans, and capture new audiences virally through fans’ recommendations to their friends,” the statement said. “We restrict the publishing rights of Pages that impersonate other entities, represent generic concepts, spam users, or otherwise violate our Pages guidelines.  Unless they also violate our content policies, however, these Pages are left up so that those who are interested in seeing their updates and interacting with them can still do so.  These policies are designed to ensure Facebook remains a safe, secure and trusted environment for our users.”

Some might find that explanation a bit vague, as well. But before providing some helpful speculation on Facebook's actions, it seems necessary to offer some context for Blank's Poodle-vs.-Beck vote-off.  When creating the page, Blank drew on a Facebook fan-building technique that's been around at least since January.

The "bet this can get more votes than that" format has exploded in popularity in recent weeks. There's even another Facebook page that asks, "Can this dung beetle get more fans than Glenn Beck?"  But Beck is hardly the only target.  The trend appears to have taken off with a page devoted to discerning whether a picture of a pickle — yes, the kind you eat — could amass more fans than the Canadian band Nickelback. The pickle, with 2.6 million sign-ups, has won the battle, at least for now.

Nor are the groups limited to witty liberals or music haters. A group allowing people to vote for a picture of a steak over the animal rights group PETA has amassed hundreds of thousands of sign ups.

 To its credit, Facebook has recently taken a hard stand against the presence of hate groups on its site, and is working much more quickly to remove offensive material.  That, in some cases, includes pages which serve no purpose other than to criticize famous people or organizations. Facebook users have reacted by creating these "this can get more fans than that" as a clever end-around to counter elimination of these "hater" pages. So Blank thinks that Facebook might be putting a halt to these new pages, too.

Blank spent a lot of time reading the Facebook policy for fan pages. They require that a fan page be devoted to some kind of sincere commercial enterprise, and the creator have a real link to that enterprise.  The rules became an issue during the Olympics, when a user created a fan page devoted to the wacky Norwegian Olympic team's curling pants. Facebook temporarily shut the page down, until the creator linked to a Web site selling the pants.

Blank feels he's satisfied the requirement by purchasing the domain BobTheWonderPoodle.com, and linking to that site.

Fast growth might be the problem.

Another possible explanation, according to Blank: Facebook keeps a close eye on groups that experience overnight, logarithmic growth.  In the wake of the Haiti disaster, hundreds of groups sprang up claiming that they'd donate $1 for each new member, or offering some similar crowd-gathering incentive.  The groups enjoyed astronomical growth, but — again, to the firm's credit — they were quickly removed out of concern that spammers might take advantage of members, and that many of the claims were fraudulent.

"There seems to be a crackdown on anything that shows rapid growth," said Blank, a Web developer by trade. "But if they are trying to crack down on that, there is no clear policy."

Also unclear – and a question that might never be answered– just how popular could a photo of a dog wearing tin hat be?

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For us residents in California, we’re used to seeing budget cuts applied to a lot of things. The financial crisis in California is particularly apparent when you see its effects on the public school system. Well, this article from my local paper just made me wince, because as you can see, the story describes just another example of how our government (this time, at the state level) has been handling its finances.

Well, here’s the latest expose and more fodder on the California budget crisis — apparently, government employees have made off with pretty huge paychecks here in California, simply by NOT taking vacation time. Their unused vacation time translates into big six figure payouts, with the top 25 checks reportedly ranging from $203,921 all the way to a dazzling $815,736. Wow. Imagine this — those state government positions can be a gold mine, with overtime paying off for a whole lot of people. Here is an image that portrays this predicament (Click this link or the image below for a larger picture.):

And here’s a breakdown of vacation pay amounts across California agencies:

Small wonder California is broke.

Want to Attend A Suze Orman Event?

On another note, I’d like to inform you about a personal finance event that’s coming to Club Nokia in downtown L.A. this Sunday, March 14. Suze Orman is slated to speak at this club at an event called “Waves of Inspiration: Women and Money”. The seminar will feature Suze and other ladies and personalities who will talk about personal finance, self-growth and empowerment. For the curious, TD Ameritrade is the sponsor for this event. If you end up attending, you’ll also receive a free annual all-access pass to Suze Orman’s “Save Yourself Retirement Program” (reg cost: $40). There’s also a planned Q & A at the end of the seminar.

You can purchase tickets from Ticketmaster.com, or if you’re interested in picking up a complimentary ticket, let me know (contact me here) — I may have a couple to give away (while it lasts). Here are the event details:

WHAT: Waves of Inspiration: Women and Money with Suze Orman
WHEN: March 14th, 2010 at 2PM
WHERE: Club Nokia, 800 West Olympic Blvd., Los Angeles, CA 90015

Have fun!

Great Personal Finance Articles

• Wise Bread: Worried About Debt? Tips On Managing Your Loans
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• Free Money Finance: Top Personal Finance Experts
• Lazy Man And Money: Build Your Financial Home Brick By Boring Brick
• Frugal Dad: Implementing PAYGO Rules For Personal Finances
• Million Dollar Journey: Canadian Income Tax Deadline
• Mighty Bargain Hunter: Would you out a friend’s spending patterns on Facebook?
• Miss Thrifty: The Festival of Frugality
• Simply Forties: Carnival of Personal Finance
• Don’t Mess With Taxes: Carnival of Taxes
• FIRE Finance: The Festival of Frugality

Vacation Pay for Unused Vacation Time? Plus A Suze Orman Event

Did you know that if you buy something with an American Express card and it’s lost, damaged, or stolen within the first 90 days, American Express will replace the item or reimburse you up to the amount of the purchase price? My friend Michelle just came back from a skiing trip with her family in which she managed to get an oil stain on her brand new ski jacket. She had no idea how it got there but she took it to the cleaners and they were unable to remove the stain.

Her husband remembered that their American Express Blue offered Purchase Protection and decided to give them a call. Why not right? As it turns out, they’re protected by a consumer protection most people forget about – American Express Purchase Protection.

How does it work? Use your AMEX card when you pay and you get 90 days of protection against accidental damage or theft. You file a claim and the protection replaces the item or reimburses you up to the amount of the purchase price. There’s a limit of $1,000 per occurrence and up to $50,000 per cardmember account per year. You can file an American Express claim online or call 1-800-322-1277 and you’ll be asked to provide proof of theft, accidental damage, or vandalism.

They were sent a claim form to fill out and needed to provide additional documentation such as receipt of purchase, AMEX statement with the purchase, and description of the damage. Had the jacket been stolen, instead of damaged, they would’ve had to include a police report as well.

American Express has a reputation, among merchants, of having the highest processing fees out of any of the issues. Not coincidentally, they offer some of the best consumer protections like return protection and purchase protection.

Her husband told me that they make most of their major purchases using their American Express card because of these types of protections. Between the 90 day product insurance and the doubling of the manufacturer’s warranty up to a year (which many issuers offer), there are two excellent reasons why I can see an AMEX beating out a comparable cash back card.

Every American Express card I looked at on their site included this Purchase Protection insurance policy and I totally forgot it existed. Have you ever used it? Heard of a friend who used it?

American Express Purchase Protection Perk from personal finance blog Bargaineering.com.

This article is by staff writer Adam Baker, who recently released an 83-page guide entitled Unautomate Your Finances.

Courtney and I are big fans of what we call “mental filters”. These are simple little tips and tricks that we can use to increase our financial awareness. (J.D. likes to call these tips and tricks money hacks.)

For example, I’ve talked before about how we taped a picture of our daughter to our credit cards while we were paying down our debt. Many people I know use some sort of 30-day rule to curb their impulse desires, especially those which contribute to clutter.

Both of these techniques are examples of deliberately installing a barrier between yourself and a routine action. Many of us do this in various aspects of our lives to help raise consciousness, but this technique can be particularly powerful in our finances.

Today, I want to share a mental filter (or money hack, if you prefer) that Courtney and I used while passionately attacking our debt. But first, let me share a quick story:

The $6.25 foot-long
Once upon a time, I was approached by a close friend with a question about his credit card statement. He knew one of his rates was out of control, but didn’t know how to go about asking for a reduction (or even where to find the details on his statement).

Always the good friend, I offered to look over the statement for him. As my eyes drifted down the page I saw a frightening sight: 24.99% APR!

Yikes! The amazing thing was that he’d been paying consistently and timely for well over 18 months at this rate! He’d been paying the minimum payment, and occasionally making a small charge here and there. Because the interest was 90% of his minimum payment, his balance was simply treading water.

Trying to help him brainstorm options (and trying to light a little fire under his butt), I turned to him and asked, “Do you realize that, until we get this fixed, every purchase you make is actually costing you 25% more?”

My friend thought for a second and replied, “I guess you mean because I could use the money to pay down the card. I never really thought of it that way.”

To be completely honest, neither had I before that very moment. I pondered the concept for a second and then shoved it into the back of my brain as we piled in the car to search out something to eat. As we drove through town we came upon the very difficult choice every person has to make at some point in their life: Subway or Taco Bell?

My friend paused and then said, “I’m definitely going to Subway. You just can’t beat the $5 dollar foot-longs!”

I tried to fight the urge, but I couldn’t resist: “More like a $6.25 Foot-loooooooooong!”

Realizing I’d just sucker-punched him, my friend snapped back, “You know, maybe you should change the name of your blog to Man vs. Fun!” Ouch!

The hidden cost of being in debt…
While my friend ended up getting the best of me in the story, I did revisit my side of the conversation a couple of days later. At the time, our highest interest rate on a debt was about 14.5%.

I realized that mentally tacking on an additional 15% (or so) to my purchases might help ensure that I only spent on items that were specifically budgeted for or that were absolutely essential.

From that moment on, I tried to think of any non-essential expense as if it was marked up by a 15% premium.

You know what? It worked. It didn’t really affect the small purchases as much — I wasn’t phased by an additional $0.25 or $0.50 tacked on — but when it came to purchases of $50, $100, or $150, I started to feel the effects.

Psychologically, nobody likes to pay a premium. Even if it’s still a fantastic deal, none of us enjoy paying what we think is a 15% premium.

The only downside I can see to this mental filter is if it were taken to an extreme. There’s no need (and certainly no benefit) in examining every single purchase through a tiny microscope. For us, we never felt pressured on expenses that were truly needs. I didn’t feel pinched to buy a loaf of bread because I had 15% credit-card debt.

This wasn’t necessarily a life-changing tactic that we employed, but a combination of these small mental filters did play a huge role in our financial turnaround. Each one helped raise our overall awareness!

J.D.’s note: I remain a huge fan of money hacks. Money hacks are identical to what Baker is calling a money filter; they’re little tricks you can use to make yourself spend less and save more. There are tons of money hacks in the GRS archives.

—
Related Articles at Get Rich Slowly:

• The Hidden Fee Economy
• links for 2006-11-13
• Super-Sizing Your Meal Costs More Than You Think
• The Best of Get Rich Slowly: November 2007
• Best of November, and How to Subscribe to GRS

Last autumn, I shared a list of essential personal-finance e-books. These books covered a variety of topics, and many of them were free. Today I want to draw your attention to two new e-books that you may want to consider.

Consumer Action Handbook
First up is the 2010 edition of the Consumer Action Handbook. I’ve mentioned this book before, and I’ll mention it in the future. This book is from the Federal Citizen Information Center, that small department of the U.S. government in Pueblo, Colorado, which distributes free and low-cost consumer publications.

The 2010 Consumer Action Handbook is a 172-page guide to becoming a savvy consumer, and includes information on buying a car, purchasing a home, preventing identity theft, shopping from home, creating a will, and handling unsatisfactory transactions. And much, much more.

This book would be a good buy at $10 or $15, but it’s freely available from the U.S. government. (Technically you’ve already paid for it with your tax dollars, of course.)

• You can order your copy here.
• A Spanish-language version is also available.
• You can also view the handbook in PDF format. You can view the entire handbook at once [11.9mb], or simply browse individual sections.
• Nearly all of the book’s content is available via the Consumer Action web site.

This book is a great resource, and I encourage you to order a copy, download the PDF, or bookmark the web site. Though the 2010 Consumer Action Handbook doesn’t go into great depth on any subject, it provides excellent informative overviews, and it usually points to further resources. It’s perfectly at home on the shelf with all of my other personal finance books. (And was, in fact, an excellent source while writing Your Money: The Missing Manual.)

Unautomate Your Finances
Elsewhere, our very own Adam Baker has just released his first e-book, Unautomate Your Finances, which lays out his personal financial philosophy. This e-book is not free. It costs $17, but comes with Baker’s “as long as I have a pulse” guarantee. (If you’re not satisfied, send him an e-mail and he’ll refund your money as long as he’s still alive.)

Baker believes that the more you simplify your financial life, the easier it is to control it. He’s not necessarily opposed to all automation, but believes that for many of us, automation breeds more complexity than simplicity. He argues that in most cases, automating our financial lives magnifies existing problems, and we’d be better off un-automating things: spending consciously, making sustainable choices, and focusing on our goals.

Along the way, Baker shares solid personal-finance advice on saving for emergencies, coping with credit, and creating a realistic budget. Is Unautomate Your Finances right for you? I don’t know. But since it comes with a money-back guarantee, it’s certainly worth a look!

—
Related Articles at Get Rich Slowly:

• 2008 Consumer Action Handbook
• Understanding Money
• Essential Personal Finance E-Books
• The 13 Commandments of Savvy Consumers
• 66 Ways to Save Money

LifeLock spent millions spreading its CEO’s Social Security Number all across America. Now the firm will spend $12 million settling claims that it engaged in deceptive advertising and failed to protect customers' personal information.

The Federal Trade Commission and 35 state attorneys general announced on Tuesday that Lifelock is changing its business model to address allegations of unfair and deceptive business practices. 

"They developed a market to capitalize on consumers' fear,"  FTC Chairman Jon Leibowitz said at a news conference.  "They were exaggerating the service they offered to consumers. This was a fairly egregious case of deceptive advertising."

Consumers who signed up with the service as early as 2005 — about 1 million customers in all — will be eligible for refunds. The fine is steep for the firm, said Leibowitz.

"We're taking all the money they had on hand," he said.

The firm remains in business, and has agreed to change its advertising practices. Leibowitz said its services do provide some protection against identity theft, but not the level it repeatedly promised consumers in its well-known advertising campaigns.

LifeLock made a name for itself by plastering CEO Todd Davis' Social Security Number across billboards and other advertising. Many of the ads suggested that LifeLock could provide absolute protection against ID theft.

In one ad, the firm said it could make consumers' personal information "useless to a criminal."

"Consumers received far less protection than they were promised," Leibowitz said.  For example, Lifelock was useless against identity theft involving existing credit cards or bank accounts, he said.

The firm also collected extensive personal information from consumers when they registered, and promised to keep that data safe. The FTC says LifeLock failed to do so. In its complaint, the FTC says the firm:

* Did not encrypt data, but stored and transmitted it in clear text.

* Failed to require employees to use hard-to-guess passwords.

* Did not install patches and critical updates.

* Did not plan for common vulnerabilities to their network, including SQL injection attacks.

* Did not install antivirus software on employee computers.

* Allowed faxes with personal information to be available in open office area.

Illinois Attorney General Lisa Madigan said LifeLock engaged in "scare tactics" while advertising to state residents.  She said the firm sent letters to individual consumers implying they were at heightened risk for ID theft — one of which was mailed to her at home.

"Don't be scared into spending your hard-earned money," she said, addressing consumers. 

Lifelock has numerous imitators in the marketplace.  Madigan said her office will continue to monitor their advertising.

"Know that if you are misleading consumers, we will go after you," she said.

LifeLock CEO Todd Davis said his firm has addressed all concerns raised by the FTC and has long since abandoned many of the techniques the agency said were misleading.

"This has has no impact on current practices or products," he said. "We haven't used the (Social Security number) ad in quite some time."  He also said personal data stored by LifeLock is now carefully guarded, and that the FTC complaint refers to vulnerabilites that have been addressed.

He said he welcomed new federal regulation in the competitive field of ID theft protection, comparing the industry to the early years of automobiles.

Related coverage

Court: LifeLock using 'unfair business practice'

Foolproof way to prevent ID theft? Nope

Experian sues LifeLock, alleges fraud

"When cars came out there weren't speed limits," he said.  "We were told we were speeding. We understand and accept responsibility. We don't want in any way for someone to be misled."

LifeLock consumers will soon receive letters explaining how they can apply for refunds.

Madigan added that most of the services provided by paid ID theft prevention firms are available to consumers for free.  They can place fraud alerts on their credit files at the credit bureaus, and get copies of their credit reports at AnnualCreditReport.com.

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Last week, as I was research the “catch” on a return of premium life insurance policy, I wondered if it was possible for you to self-insure your life. The idea behind self insuring is that you take a lower level of insurance protection and save the difference into an account. With auto insurance, you could take away comprehensive insurance coverage, rental car coverage, or raise your deductible and put the savings into a high interest savings account.

I do this today with my auto insurance. For my Acura Integra, I didn’t carry comprehensive insurance and was able to saving hundreds of dollars a year. When it was totaled, through no fault of my own, I rolled the savings over to do the same thing with my current car, a Toyota Celica. As I’ve gotten older and the premium on excluding comprehensive insurance decreases, I’m tempted to add comprehensive again and pay for it with the fund. I’m able to because of good driving and good fortune, but I think that self-insurance is something everyone should consider.

The General Idea

The general idea behind self-insuring is that you want to reduce your level of coverage and put the difference in savings. The obvious benefit of this is that by having the difference in savings, you earn interest. The not so obvious benefit is that when the more dangerous accumulation period is over, that is the time it takes for your savings to grow large enough to cover potential problems, the benefits accelerate.

It’s like buying a car (self-insuring) and leasing a car (not self-insuring). The first few years of ownership or leasing are pretty much a wash, which is why leasing is appealing to businesses. However, there comes a point several years down the road where the car is basically “free,” excluding some maintenance, after you pay off the car loan. I see self-insurance in the same way, as long as you can avoid calamities for the dangerous accumulation period, you can get ahead by self-insuring where it makes sense.

Where this makes most sense is where the potential catastrophes are relatively small, to whatever benchmark you feel comfortable with (net worth, savings, etc.), and the savings you could get by downgrading coverage is great. There aren’t many cases where this is possible but there are a few notable ones.

Auto Insurance

This example is cleanest with auto insurance because it’s easy to see the savings. If you’re able to save $50 a month by raising your deductible from $500 to $1000, then after ten months you’ll have saved enough to cover the difference in the event of an accident. In this case, by raising your deductible you are exposing yourself to $500 of risk. If you can save $50 a month, then the accumulation period is 10 months… so avoid accidents for 10 months.

On auto insurance, like with many insurances, you have a lot of options:

• Comprehensive insurance
• Rental car coverage
• Deductibles

Homeowners Insurance

With homeowners you may be required by your mortgage lender to keep a certain level of insurance coverage but you may have options picking the deductible you want. Again, like auto insurance, compare the prices to see if it makes sense for you to increase the deductible and put the savings away to cover potential problems.

I’m hesitant to offer up removing flood insurance and guesstimating how much it would cost to repair “typical” flood damage, though those riders are certainly worth considering.

Life Insurance

Is this possible with life insurance? This is really the scenario that prompted this post in the first place. When I started thinking about it, what are we really insuring against? Ultimately I settled on the idea that life insurance exists to do one of two things:

• Insure against a future income stream – this risk is most obvious for a single income family where the death of the breadwinner really puts the family in a bind. If the spouse hasn’t worked in a long time, it’ll be difficult, especially now, it won’t be easy restarting.
• Insure against current debts – this is the risk that probably affects more families and it’s because of the mortgage. If either spouse dies, the survivor is still responsible for the debt. If it’s the breadwinner who dies, that makes the situation even worse because you have both the loss of income and the demands of a loan.

I ran some numbers and it doesn’t seem feasible to self-insure for this sort of thing. If you assume 8% APY on your savings, which puts it into investing terrible (rather than savings account territory), you need to save $71 a month to reach $100,000 in thirty years. $213 a month if you want to reach $300,000. If those issues are concerns for you, I don’t think self-insuring makes financial sense.

Final Thoughts

Remember that you’re up against actuaries, with years of training and tons of statistical data, so self-insurance can be a risky proposition. Even if you’ve had a lifetime of safe driving, you never know when you’ll run into a string of bad luck that saps your self-insurance fund of all its money. It takes a certain time of person, who isn’t afraid of assuming this level of risk, and careful financial calculation.

Do you self-insure? If so, what do you self-insure?

(Photo: ej_imageries)

Consider Self-Insurance Against Calamities from personal finance blog Bargaineering.com.

Some more retirement investing advice.

So how long do you think you will live? I am thinking I will make it to age 81. Well, if I’m lucky. My grandmothers lived to be 88 and 93 so that’s pretty good. The men in my family have all passed in their 60s or 70s. Uplifting thoughts, huh? Morbidity aside it really is important to think about your life expectancy and whether you are really ready to live for a century.

So, what do you think your chances of living to a hundred are? Of course, the fairer sex always wins this particular “race”, if you see it as such. Here’s how it generally breaks down:

This table shows the chances that an American man or woman will reach the target age specified, given that they’re currently middle-aged (in this case, that age is 40). If you’re looking for something more accurate, you can do a search for a mortality or longevity calculator. These statistics are for the “average” man or woman and do not really account for things like genetics, lifestyle, etc.

Following is a Wikimedia map to see what life expectancies are like around the world. If you can’t make out the label and details, just click the graphic and it will expand to a larger image. Basically, this is what the colors break down to: Dark Red = life expectancy of under 50 years; Red = life expectancy of 50 to 60 years; Orange = life expectancy of 60 to 70 years; Yellow = life expectancy of 70 to 75 years; Light Green = life expectancy of 75 to 80 years and Dark Green = you’re expected to reach 80 or older. Well isn’t that interesting! People in Australia and Canada on average, live the longest?

The good news is that there are more centurions alive in America today than in the past, and the U.S. has been in the forefront of medical advances. Also, lifestyle changes and diet allow us to increase our chances of living longer each day. The flip side of this are the issues posed if we do beat the odds: not many of us may be financially prepared to live long lives. For some of us, it would have a potentially disastrous effect on our families.

For instance, a poll by Money Magazine found that 3% of respondents worried about losing their health, 69% of losing their mental abilities, and 60% of running out of money. Where do you fall? What worries you most? Personally, my biggest fears are that of losing my health and running out of money. Not necessarily for my sake, personally, but because I would most likely become a warden of the state or a burden on my family or both.

Financial Retirement Planning For A Life Expectancy of a 100

Let’s go through a few issues involved when planning for the distant future. Here are a few considerations I found important:

1. Review life expectancy numbers.
Of all the assumptions made in financial planning (inflation, rate of return, tax brackets, etc.), your life expectancy is probably one of the biggest of all. Using the wrong number can be detrimental. I would always suggest using a higher number than you think. The averages listed above are just that, averages. They do not reflect anything about diet, exercise, family history, etc. I have always focused on the century mark as a “worst” case scenario.

For instance, based on your projections, you may want to ask yourself: how would you fare should you live to a 100? But, this is the part that truly becomes overwhelming for people. Here’s an example I’d like to run:

Using the landmark ages above (85, 90, 95, and 100), how much would you need to cover your expenses should you spend $75,000 a year currently? The answer (excluding social security or pension payouts) would be $2.5 million (age 85), $3.6 Million (age 90), $4.6 million (age 95) and $5.9 million (age 100).

Those numbers look daunting for anyone. It’s no wonder that people run and hide from planning and avoid trying to provide for their future. But, with the proper planning and due diligence on your part, these numbers seem less awe inspiring. For instance, there are other considerations you’ll need to make — perhaps your expenses may not be that high, or you may be expecting social security and/or pension payments that will supplement your portfolio earnings. Some of us may even consider working past retirement, and may therefore need less. But the point of all of this is to have some idea and plan for it.

2. Visualize your retirement years.
I think it’s a good idea to visualize your retirement years as definitively and concretely as possible. This will help you narrow down exactly what your expenses will be. Part of that is knowing where you are going to live (check out this piece on best places to retire for cheap).

Don’t make the mistake my parents made by moving to some remote area in Colorado. Not only are their winters rough, but access for family members flying in for support is harder and expensive, medical care is less abundant, and networks to nurture and support their older days are few and far between. They also did not think about the practicality of living in a farm house structure. While charming in its own way, it offers a host of challenges for my father’s health now and will become more problematic when they reach their 70s and 80s. Of course, they retired in their 50s and did not think of these things. So, please know where you will live and why.

3. Don’t underestimate your retirement expenses.
You also don’t want to underestimate your retirement expenses. Many people assume that they will spend around 85% of their current expenses in retirement, but that’s pretty arbitrary. You must factor in again where you will be living, your expected lifestyle, getting help as you age, and the huge costs of healthcare. All these factors can lead to your retirement expenses (or income need) being the same or even higher than when you were working.

Some scary statistics from the Employee Benefit Research Institute study showed that a 65-year-old today would need to have socked away at least $122,000 to have a 90% chance of fully covering his or her future healthcare costs. And, that’s with employer-sponsored retiree insurance. As if retirement wasn’t hard enough for many people. So check if you’ve saved and invested enough for your retirement. Make sure to factor additional costs in and try to become properly insured to cover the extras (long-term care, etc.) Otherwise, as you reach the century mark you may easily run out of money.

So, how long do you think you’ll be around? How does that factor into your planning and your current savings and investment plan? Please do yourself and your family a favor and get as specific as possible about your retirement plans. You will most likely be around a lot longer than you think and you want to be prepared.
 
Contributing Writer: Todd Smith, CFP

Financial Retirement Planning For A Life Expectancy of a 100

I did it! After months of struggling and hours upon hours of typing, I’ve finally reached that mythical state of Inbox Zero. My inbox is empty — or nearly so. (I still have a handful of messages about stuff I’m actually working on at this moment, such as publicity for the book.)

I do have a stack of 74 guest-post submissions (including many reader stories), but I’m not including those in this tally. I’ll process those gradually, sending replies as quickly as I can. (If you’ve submitted a guest post, please be patient. I have dozens of them to get through, and can’t answer you all at once.)

While sorting through the last 200 e-mail messages today, I found lots of great stuff you folks had submitted. Here are some of the best bits sent to me over the past few months:

Carmen sent me this article from CNN/Money about living on a cash-only diet. The piece profiles five families that have given up their credit cards and are only using cash. Each family has a different motive and a different story. (Some of this covers ground we explored last month in our discussion about saying “no” to credit cards.)

Jill forwarded an article from (never home)maker in which the author shares five critical reasons you must read your bills. Her mortgage company made a $4,070 mistake. If she hadn’t been paying attention, she would have paid way way too much. Yet another example of how nobody cares more about your money than you do, so stay on top of things!

The folks at Your Money Bus wanted me to mention their work. The “buck-mobile” (my name, not theirs) is traveling around the country, providing a place where financial planners can meet with people and offer free advice. Here’s a list of scheduled stops.

Sam over at Getting Finances Done has begun his 12 weeks to fiscal fitness program. If you’re getting started with personal finance, check this out.

Meanwhile, the people at What Would John Templeton Say? are having a contest for bloggers: Write about some of Templeton’s advice, and you might win $500. (Templeton was a famous investor, and is the Templeton in Franklin Templeton mutual funds.)

Finally, Chris asked me if I could tell you about his project, Be Debt Free America. Apparently this is a tool that helps you create a “debt snowball payoff report”, although the site isn’t transparent enough for my tastes. I’d like to see more screenshots and know more about how this works. Why would I choose this over a free spreadsheet?

Okay, back to work. I have to be sure that nobody has tried to send me e-mail in the past fifteen minutes. Must defend Inbox Zero!

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Related Articles at Get Rich Slowly:

• Backlog of Reader Submissions
• Return of the Daily Links
• Daily Links: A Fool and His Money Edition
• Daily Links: Compound Interest, Web Income, and Happiness
• Daily Roundup: Bringing Home the Bacon Edition

Debt consolidation firm to refund $839000 to SC residents The State A West Coast debt consolidation business that officials say overcharged several hundred South Carolina residents will … and more »

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