Health Insurance: The Saga Begins

Transitions in employment and retirement bring lots of paperwork. Like most boomers, Tom Bold and I give health insurance paperwork top priority. That is introduction to the week. The topic: communications we are receiving about health insurance and COBRA coverage.

Title of a communication received by mail:
CERTIFICATE OF GROUP HEALTH PLAN COVERAGE

The content was not difficult. Three main concepts, paraphrased:

• 1 - This paper proves that you had prior health insurance.
• 2 - This could be important if your next plan excludes some medical conditions.
• 3 - You may have to show it even if your next plan does not exclude anything.

In short, this is a paper I need to hang on to. I know that I'm going to use my COBRA option for a while, but this certificate may be needed after my COBRA coverage ends. The language and content were not problematic. But the presentation required close and repeated reading. So, the complexity of my first communication about my health insurance coverage ranks pretty high, considering it was a one-page letter.

My recommendations back to the State would be:

Readability tip #1. Concerning the title of the communication: never put that many words in ALL CAPS. Full capitalization slows reading by more than 10%. For boomers, I daresay the slow-down is even more. Unfortunately, my State retirement system starts out a lot of communications in ALL CAPS. I had to read the title of this communication several times, and that was after I realized that I had not read it at all when I opened the letter. (ALL CAPS does that to us. Sometimes we skip a line completely.)

Readability tip #2. Never typeset the crucial text of a communication in 8- or 9-point type. I cannot actually say what font the State used. It's that small. Adding to the problem of small text, the width of the text block ran as much as 121 keystrokes. The ideal length is 39 keystrokes. I had to carry the letter into bright light to focus on the very small type. And I had to read the crucial block of text several times in order to catch the full meaning because my eye could not track the line length.

Readability tip #3. Do not use a mono-spaced typeface like Courier. Proportional spacing for characters and sentences helps readers de-code the message. Mono-space typing went out with the typewriters that required it.

© 2008 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.

Short & Long Term Retirement Solution

I've been tracking the strategies being recommended to boomers regarding their retirement monies and the #1 choice is work longer. Specifically, add 2 to 3 years to your career in order to increase savings and, especially important in the current economic conditions, to delay drawing from your 401K. If your intended retirement year happens to fall in bad times, previous projections of your retirement income may not hold up. It's a sequence risk, referring to the sequence of ups and downs in the market that can wreck your plans if you have to go through a catch-up phase at the wrong time. (And any time close to the retirement year is the wrong time.)

Further study took me to an executive summary on Social Security published by the Brookings Institution. Interestingly, the expert there also pointed to the work longer strategy, and he's talking about people who will retire decades from now. Specifically, the policy brief summary identifies mid-60s as the target age for requirement for the next generation. The brief also outlines the likeliest changes America will need to make in Social Security and retirement savings in the coming years. A reform package is possible with compromises by both conservatives and liberals. And a smart reform package will take a few lessons from other aging populations around the globe.

© 2008 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.

Understanding and Ignoring Home Equity

News of Fannie and Freddie. Weekend news is always the most interesting...if you hope to confine the damage of any announcement, you use the weekend schedule of Americans and their news outlets to good advantage. And that's what is happening with the news of government intervention to shore up both Fannie Mae and Freddie Mac.

The mortgage industry will be a bit more stable as the intervention proceeds but the overall result is much the same: housing in America is still in trouble.

For boomers actively buying or selling, the daily swing of events will be important. For boomers not in the housing market, well, we may just want to keep our heads in the sand as long as possible. That's because we are probably much happier not knowing the FMV (fair market value) of our homes today.

As we approach retirement many of us take comfort and even pride in our "home equity." Aside from providing opportunity for loans and lines of credit, home equity just plain makes us feel good. I've always got my equity in my house. We can always sell the house and live on that. And, my personal favorite, it's almost paid for.

But home equity is based on market value minus outstanding mortgage. (If you go shopping for a home equity loan, you factor in 80% to find out what the immediate cash value is.) Most of us walk around on auto-pilot with two figures in our head: what we paid for the home and the outstanding mortgage. That's not quite the same thing as market value minus outstanding mortgage.

If we have the benefit of time (not planning to sell the family home for 5 or 10 more years), we may be able to hold onto our auto-pilot figures and not calculate accurately. Even a net worth statement can keep us on auto-pilot. Only an appraisal will drive home the possibility that our home equity is less a part of our retirement plan than we thought.

On a personal note: If you happen to have a slightly different style of house, market value would have to include the possibility of a long wait for a sale. While geodesic domes are fun to live in and enjoy low energy bills, they do fall into that different category. And when economic times are tight, folks are not so charmed by different. ~ Lida

© 2008 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.

Retirement Planning: A Deficit Model

If you are feeling deficit right about now, that's probably because the conventional wisdom maintains that boomers haven't earned enough, saved enough, or planned enough for retirement. That's a common trend for humans: assume the worst. And the trend is actually a good survival instinct.

The pragmatics of retirement planning are correct: advisers plan for extremes because no one can predict the future. So, the standard assumptions are for high medical costs over a long life span with a need for 80% of your pre-retirement income. Hence, the dire calculator results of You may run out of money at age 78... or 89... or 94.

In order to moderate these predictions, resist the standard expectation that you will need 80% of your income in retirement. (Granted, health costs may be dramatic in the future but even in those terms, don't awfulize.) Instead, try building your retirement budget from the ground up.

My favorite retirement calculator is at Bloomberg.com because I can try out multiple scenarios, including setting "percent of income at retirement" at anywhere between 50% and 150% of current household income. Boomer women should also play with the checkboxes for "If you are married" and "To include Social Security."

On a personal note: Using the Bloomberg calculator, I like to play with predictions of pre-retirement household income that are below my current salary. I also check on what will happen if I make no more contributions to retirement savings...and no salary increases. ~ Lida

© 2008 Mary Bold, PhD, CFLE. The content of this blog or related web sites created by Mary Bold (www.marybold.com, www.boldproductions.com, College Intern Blog) is not under any circumstances to be regarded as professional, legal, financial, or medical advice. Or education advice. Or marital advice. Or even a tip.