Reader Mailbag: Charity

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Studying versus working
2. Student credit card question
3. Dealing with extra income
4. Preparing for job review
5. Pension or Roth?
6. Living frugal versus organics
7. Which debt first?
8. Retirement advice for dad
9. Charged-off debts
10. Dealing with rewards points

A few weeks ago, I was thinking about purchasing something expensive that I had been saving up for (the actual item is completely irrelevant). I was shopping online for it when I discovered that a person I’ve communicated with many times in the past was having some very deep personal troubles. His child is very, very ill and they have extremely poor health care, all of this coming during a period of career uncertainty.

Rather than buying the item, I decided to wait. Instead, I sent my friend a few dollars to help out.

In the end, what’s more important: some material item I don’t really need or the welfare of a friend when they’re really in a bind?

Q1: Studying versus working
I am 21 years old, and I live in Israel – which means I did 3 years of mandatory army service. I am about 6 months out of the army and am currently working at a fair (for my age and education level) paying job. I want to study Computer Science at the local university, but the tuition is about 10,000 NIS per year. My parents told me they would pay for my first year, and the money I got after leaving the army will pay for another one. Now, university applications don’t start until march, so I definitely have a few more months to save money, and that will pay for the final year.

But to get to my question – I got used in the last few months to being financially independent. In Israel it is not uncommon to live with your parents even until the age of 30+, so it’s not really embarrassing for me to be living at my parents’ (side note, I’m living with my girlfriend), but I would feel really bad have I had to start relying on them for money again. So I my dilemma is this: should I start college next year, and go back to asking for money from my folks, or keep working for another year and save enough money to take care of my needs for at least the first year of university (the hardest one), thus postponing the beginning of my “real” life.
- Matt

Sit down and talk with them about it. You have demonstrated that you’re independent at this point, and they’re probably thankful for that. Talk to them as an adult.

Lay out the whole situation and ask them what they think about it. It may be something they want to do or it may be something that they’re reticent about – you should be able to figure this out from the conversation.

I think, more than anything, this comes down to your parents’ situation and whether they feel they should help you or want to help you or whether they view you as an entity that they have no obligation towards or desire to help. Neither reaction is wrong per se – it really depends on your relationship and their situation.

Q2: Student credit card question
I’m a college student that has pretty good credit because I have a car loan (although I split the payment with my parents.) I’ve never been late on it, I’ve had it for a little over a year and I’ve checked out my credit report and score and everything and its at least 650-700. I also have student loans out which I know impact my report even though I haven’t started paying them yet. (I’m only a sophomore.) But I know I need to build even more credit and I’d like to get a credit card so I can boost it even more. I’m really only planning on using it for gas and maybe the occasional meal out or normal necessities. I’m thinking about the Discover More card or the Amazon Rewards card. I do plan on paying it off in full every month as well. I just have no idea which to apply for and I’m nervous to even start applying for fear of picking the wrong one or possibly getting denied.

- Ashlee

If you’ve checked your credit score, shouldn’t you know exactly what it is? My guess is that you used a FICO estimator rather than actually getting your score.

Anyway, if you’re going to apply for a card, I’d choose one that gives you bonuses based on your normal behavior as it is right now, not based on how you think you might behave in some hypothetical future. If you buy gas at BP, get a BP card. If you do a lot of Amazon shopping, get an Amazon card.

Don’t sweat getting declined – if your credit score really is that high, you’ll be issued a card.

Q3: Dealing with extra income
My wife and I have been living together for about a year and a half now. We moved from the West coast to Omaha after graduating college because of a job I got out here. Since then, we’ve been working hard on building our emergency fund/liquid savings. Between saving and a couple of small windfalls that have come our way, we have saved a little over $20,000 in an ING savings account. Aside from that, I have about $6000 in my 401(k), for which I contribute 5% of my paycheck and receive the full company match.

We have no credit card debt. I have two student loans which I am paying back on a ten year repayment plan. Once has a balance of $14,800 at 6% and the other, 7,200 at 6.1%.

As for other goals, we are planning on taking 9 months to a year off in several years to travel. The plan is to have enough save to do this and still have 10-15,000 left in savings when we come back. We are not entirely sure how much this will cost, but I anticipate we would need at least another 10,000 saved. Aside from that, we want to purchase a home eventually, but that’s likely not going to be for at least ten years (we are both 23).

So, our month to month financial situation is that we spend $500 to $800 less than we earn, depending on the month. Aside from continuing to save for a trip, where else could we put our money? I have toyed with the idea of contributing more to my student loans, opening a Roth IRA for my wife (she is a student and doesn’t have any retirement account set up), or some other type of investing. What would you suggest?
- Jeff

Whenever someone asks a question about what they should do with extra saving or investing dollars, I respond with the same general thing.

Set some goals.

Sit down with your wife and talk about where you want to be in five years. If you like where you’re at and want to simply retain it with more robustness, I’d pay off the debt. If you want a more secure retirement so you feel safe switching jobs later, I’d build the Roth IRA. If you want a home, I’d start saving cash.

Your goals lead what you do with the money.

Q4: Preparing for job review
I’m writing to you looking for some advice as to what I can do to prepare for an upcoming Job Review (1 year). I feel like my job is going well, I am liked by those around me and I feel like my employers value me. However, I also feel like they don’t care how much work they give me – they just pile it on day after day with no regard – thus deadlines are stretched and my stress raises. I don’t feel like I am compensated fairly, but I don’t know if a raise is in my future or not. I suppose my question is: what do you suggest, if anything, to do to prepare for a job review?

- William

It depends heavily on your workplace. Is it a workplace that deals with candor well or not?

Based on your comments, it sounds either like your workplace doesn’t handle candid discussions very well or that you’re nervous bringing them up. If it’s the former, you’ll want to tread carefully, as people can view candor in such situations quite negatively. If it’s the latter, you need to bring this up if it’s bothering you.

This sounds like something that is negatively impacting how you feel about your workplace and thus impacting your performance. If that can easily be brought up in the workplace, it needs to be. Both you and your employer are losing because of this situation.

Q5: Pension or Roth?
I am a 25 year old police officer. Our current statewide retirement system takes a portion of our weekly pay and places it into the state account. For example, my gross pay this year is currently at $83,126 (I work a large amount of road details) and they have taken out $7730. When retirement age comes due at 45 years old we receive a portion of our top 3 years of salary, and I expect to be receiving somewhere in the range of $70,000 per year plus a new second career income.

In addition to the pension, I have a deferred compensation plan set up that I contribute $50.00 a week to and have done so since I started work. Due to raises the last three years in base pay I plan on starting a Roth IRA with the same $50.00 a week contribution.

Gross Pay – $83126
State Pension and Def Comp – $10030
8.28% contribution

You have told most people to contribute somewhere in the range of 10 percent to retirement savings. Do I add the deferred comp to the pension money that is taken out or should I contribute in addition to it with more in a Roth IRA? Does my pension put me in a different group of people who should look at retirement savings completely differently?

I currently own a home, have adequate emergency savings, and contribute extra payments each month to my mortgage.
- Ryan

I never, ever fully trust a pension. I usually view a pension as something that’s frosting on the cake if you get any when you retire.

Given that, I would at the very least fully fund a Roth IRA in the coming year. I think that’s your best route for retirement savings at this point.

Never, ever rely on a pension. I’ve seen far too many “guaranteed” pensions vanish out from under the feet of people who relied on them.

Q6: Living frugal versus organics
Anyway, my question is, how do you balance living frugally and using organic/vegan foods and products? Do you buy all organic foods? Beyond produce, how do you decide what is worth paying more for organic?

Do you and your family use organic personal care products, like toothpaste, shampoo, body wash, and deodorant? If so, do you have any recommendations? This is a new idea to me, and its a little overwhelming to change everything, but it makes a lot of sense that we absorb too many chemicals into our body through our skin.

Another idea that I’ve seen on other blogs is making your own deodorant or using baking soda as shampoo. Have you tried any of these ideas, and what do you think of them?
- Maria

I’m not too worried about buying everything organic. I buy organic when the prices are reasonable in comparison to the non-organic items. For some foods, like seafood, the organic label doesn’t have a ton of meaning.

As for organic personal care products, you’re really getting into an area without a specific meaning there. I just recommend reading the ingredients and picking up only products where you understand what’s in them.

I’ve tried various replacements for toiletries and none of them are all that great without significant work. We’ve made our own soap on occasion to great success.

Q7: Which debt first?
I will be coming into a two part windfall this winter when my company distributes profit sharing (allegedly, 33%). I should be receiving roughly 10k this December (post tax if I choose no additional retirement distribution) and another $3,500 in March. I make 55k annually and am doing well enough at my 25 years of age. I purchased my home in August 09 and currently owe 101k on a 30yr note at 5.25% interest. I have 3 student loans consisting of the following:

Loan 1: Fed Stafford, Balance: $2800, Rate: 2.6% now, 3.25% later fixed (in deferment due to me finishing Grad school this December)
Loan 2: Fed Direct, Balance: $12,500, Rate: 6.8% fixed (in deferment too), Payment: $143 (10 yr)
Loan 3: Private student loan, Balance: $8,800, Rate: 3.1% variable (based on LIBOR average, has been high in better economic times), Payment: $51 (15yr)

I currently have 10k in in my emergency fund savings account, 32k in my 401k (saving 10% pre-tax with a company match of 1.5%), own my 2008 Dodge Charger free and clear, and luckily have zero credit card debt. I am single with a serious girlfriend who I could marry in the next two years, but that money would come from my monthly savings and a bond she has with for that purpose.

All that said, which loan (2 or 3) should be paid off first? I’m leaning towards 2 since i’m not paying it currently (although it is in the budget, that money is just saved instead) and it is locked into a high interest rate, but want your opinion on the matter (as well as any other option I’m not considering). What should I do?
- Drew

You should always pay off the loan that has the higher interest rate at the moment first, so I would go with #2 as well.

The only exception to that would be certain loans where if the rate adjusts you’re going to have to pay the back interest (like some credit card balance transfers). In those cases, I would pay the one with the highest adjusted rate first – but that’s not the case here.

Don’t worry about what might happen with things like this. A bird in the hand is worth two in the bush.

Q8: Retirement advice for dad
Background: My dad lives in San Diego and is 63. He recently retired from the Coast Guard and after splitting it with my mom, his ex-wife, gets a monthly payment of $1000. He also got a one-time payment of about $25k because he delayed retiring for 3 years and it piled up. He plans on retiring from his current job at age 66 to get maximum Social Security benefits, which we think will be about $1000 per month. His current job retirement will give him about $1000 per month too, but we’re unsure if he has to split that with my mom. I think he has about $85k in a (government?) Thrift Savings plan offered by his employer, the VA, which he still contributes to but not sure about matching. Finally, I think he has about $15k in liquid savings. Luckily, he’s good at discussing these things with me!

He needs to get some major dental work done over the next 2 years that will cost between $6,000-$8,000. It might go down a bit due to new insurance though. He does not own any property and pays rent of about $800 per month. He owns his car but takes the bus to work at least 2-3 times per week. Dad thinks he will drive his current clunker until it breaks down completely and then buy another used car with cash. He has minimal normal bills like cable, internet and utilities. He also travels about twice a year to visit family, maybe $750 in airfare. He has a secured credit card b/c he sometimes forgets to pay bills and will not listen to my talk of automatic payments. He is on my cell plan and I pay it. He’ll probably move to the east coast when he fully retires and applies for Social Security, maybe near me in Raleigh, NC, to save money and be closer to family. Also, his side of the family usually lives into their 90s and he seems to be on that track. I think his credit score is probably good, although I can’t be sure due to bill payment forgetfulness. Although thrifty, he has problems managing money.

What should his next step be? What should he do with the monthly Coast Guard payment for the next 2.5 years? The Coast Guard windfall? Any changes to his savings plans? Final resting place plans? Long-term care plans? He would like to give some money to an education savings plan for my 18 month old niece too. Any advice is greatly appreciated.
- Shannon

I think he’s doing pretty well other than the bill forgetfulness.

The best things he could do for his own future would be to just bank as much as he can until retirement into something stable – even a savings account would work. He should also really work on that bill paying forgetfulness, perhaps entrusting someone else to handle such bills for him. This will be important when he moves, because many rental managers look at a person’s credit rating before deciding whether to rent to them.

The only thing that really concerns me are the hints of forgetfulness, and that’s something that his pride may prevent you from helping with.

Q9: Charged-off debts
I fall into the “young professional” category of having a negative net worth since I owe more in student loans than I currently have in assets. My question is about charged off accounts/debt on my credit report…these charged off debts are credit cards amounting to less than $5k and medical bills amounting to at least $5k with misc accounts here and there for smaller amounts.

Should I add those to my debt list and try to pay them off if, once paid, they are not removed from my credit report? Or, should I leave them unpaid and wait for them to fall off my report once the 7 year mark is reached? Most of the debt has about 2-3 years left to “fall off”. I rarely hear personal finance advice about old charged-off accounts/debt so I would appreciate your advice.
- Lacey

It depends on whether you want to do the honest thing (paying debts you incurred) or the thing that’s best for your credit history (not paying them).

This is a situation where honesty is not rewarded, and I actually think it’s really messed up. If you have a debt you haven’t paid and then you are able to pay it off and do so, it should benefit your credit history. Quite often, on old debts, doing that hurts your credit history.

You have to answer the honesty conundrum yourself. It’s not something I can tell you – you have to ask yourself.

Q10: Dealing with rewards points
I currently have about 17,000 reward points for my credit card. I get approximately 1 point for each dollar spent on the card. I use my credit card for a lot of purchases and expenses for the very reason of getting the points and then redeeming them for cash. (Don’t worry, I pay the full balance every month.) My question is how long should I wait to redeem the points for cash?

I can redeem 15,000 points for $120 cash ($.008 per point). The next opportunity to redeem points for cash is at 20,000 points, which provides $160 cash (still $.008 per point). After that the next step is 25,000 points, which are redeemable for $250 cash (a bump up to $.01 per point). In the past I’ve accumulated a bit more than 1,000 points per month, but because I’m trying to reduce my spending overall (thanks in part to your blog) that came down to just over 900 points last month (a trend I hope to continue). Hopefully it won’t be up up to 1,000 points again or at least not regularly.

My savings account is an online account through Capitol One with a 1.30% APY rate (if you can suggest somewhere safe with a significantly better rate I’m all ears).

Given all this information, should I redeem 15,000 points now and put the $120 in my savings account, or should I hold out until I get to 25,000 points, which could be at least 9-10 months from now?
- Tanner

A bird in the hand is worth two in the bush. I would cash in the points immediately.

Why? Let’s say you lose your job and are unable to pay a bill or two. The balance builds up. The bank decides to cancel your card. Boom – you have nothing.

There are any number of reasons why you wouldn’t be able to get the bigger amount. The program might change. The points program might be dropped altogether.

If you can get that rewards cash now, get it.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag. However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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48 thoughts on “Reader Mailbag: Charity

  1. Kathleen says:

    Ashlee might have checked all 3 scores an found a 650-700 range.

  2. Beth says:

    @Ashley Q6 — The Environmental Working Group has a list of which foods to buy organic and which ones to skip (based on how much pesticides are used/absorbed during the growing process). I can’t afford to buy many organics as I already have to shell out for wheat and dairy alternatives, so I’m fussy about what I do buy.

    I also talk to the growers when I make my weekly trip to the farmers’ market. A lot of growers don’t use pesticides even though they don’t have an official “organic” designation.

    As for alternatives to body products, I use olive oil as a hot oil treatment for my hair.

  3. Beth says:

    @Matt Q1 I know it’s hard to give up your financial independence for a while, but doing a university degree in Computer Science is an excellent investment for your future. I don’t know what it’s like in Israel, but in Canada developers/programs/etc. earn top wages — tech companies can’t get enough of them, it seems! Besides, in North America, people who have degrees tend to earn more throughout their lifetime than those who don’t.

    I agree with Trent — talk it over with your parents and make the decision that’s best for you. I’m just saying that even though it seems like taking a step backwards right now, the degree could lead to a better financial future.

  4. asithi says:

    @Ryan – I worked for a government agency as well. I always viewed my pension as slightly more secure than a pension from a private company. And even if the pension plan does belly up, there is always the pension insurance that pays $0.25 to each $1 you are owed.

    This said, I have my own savings in a Deferred Comp and a Roth IRA because I want to make sure that I can make it if I only end up getting 25% of my pension. I contributed to a Deferred Comp when I was younger to lower my tax bill. But now that I have a house and a baby (tax deductions), I max out on my Roth first, then contribute the remainer to my Deferred Comp.

    Also, I tend to be more aggressive with my personal retirement savings because I view my pension as the “bond” portion of my portfolio. Not to say that I do no have bond funds, but just slightly less than the typical amount recommended for my age because I have a pension that promised to give me a fixed $ amount. I hope this logic makes sense.

  5. Daria says:

    Trent, I[m curious about your questioning Q2 about not knowing his exact credit score because he gave a range which you said he must have used an estimator. My husband and I just got approved for a home loan and the bank gave us our scores and printouts from the 3 credit bureaus. All 3 had the same exact comments about our credit but each one gave us a different score ranging from 785-820. So my question to you is, which one is our exact credit score? Would you be suggesting that the bank used an estimator instead of getting our exact credit score and we should disregard this range of scores?

  6. valleycat1 says:

    Q4 – annual review – Most of the companies I’ve worked for have the employee provide input on goals for the coming year (and they don’t always let you know that before you walk into the review).

    Whether goal-setting is formally part of your review or not, I suggest you write up a couple of goals for yourself along with a few concrete steps you can take toward reaching them, which you will share with your supervisor at the review. These should address your concerns, so they’d be related to organizing your work, setting priorities, effectively managing your workload, etc. Your proposed approach can include improving communication between you & your boss to make sure you are meeting your boss’s expectations.

  7. valleycat1 says:

    Also, re Q2 & your comment – if I were writing to you I probably wouldn’t give an exact score either, any more than I’d give you my monthly pay to the nearest cent.

  8. Jane says:

    “I just recommend reading the ingredients and picking up only products where you understand what’s in them.”

    I’ve always found this advice inane. So, my friend who is a chemist should buy whatever shampoo she wants because she understands the ingredients, but I (a humanities geek) should stick to baking soda? It doesn’t make any sense.

  9. Kevin says:

    Re: Question #5:

    “When retirement age comes due at 45 years old”

    Wow. No wonder the states are broke. $70,000 inflation-indexed government pension at age 45?

    Wow. I picked the wrong career.

  10. Kate E. says:

    Q6 — I make my own deodorant and it works great! You can find the recipe by googling “Passionate Homemaking Deodorant Recipe.” (I’d include the link, but my comment would get sent to the spam filter.) Also, you can get good deals online for natural products. I often find them on sale and/or with free shipping.

  11. Leah says:

    #8: agreed. I’m a biologist, and I “get” a lot of ingredients — I get that I don’t want them in my body!

    Here are my rules of thumb for toiletries:

    1. NO antibiotics. Not in soaps, not in anything. Soap itself is a natural antibiotic that is effective enough. The triclosan crap they put into antibiotic soaps/toothpaste/whatever is not healthy. This is my #1 biggest rule of life — avoid antibiotics unless medically necessary. Our skin has plenty of good bacteria on it that does keep us safe, and you don’t want to kill that.

    2. Try to use more natural things. I use Environmental Working Group to look up some of this (tho even decent stuff only scores okay on their list). I avoid heavy scents and sodium laureth sulfates.

    3. Stuff that goes in my body receives a higher priority than stuff that goes on it, so I am less picky about lotion, a bit more picky about shampoo, face wash, etc (since it washes over my face), and picky about toothpaste. I currently use Trader Joe’s all-natural toothpaste but am looking around to see if anything with added fluoride could be a bit better.

    4. Use less of toiletries. Higher priced stuff isn’t so bad if you can use less. I only wash my hair 2x a week (and was down to 1x a week before I cut my hair short — I touch my hair more now, so it gets greasy faster). I use only small amounts of soap, and I use a pea-size amount of toothpaste (which is actually what is recommended).

  12. Scott says:

    In reference to the cop’s pay; no wonder cities and state governments are going broke! $83,000 for a beat cop is way too high

  13. Mule Skinner says:

    Re Coast Guard dad: We all have lots of mail coming in, sometimes bills, sometimes other things that need responses, and lots of junk mail.

    As mail comes in I open it and if it’s a bill, I write the due date on the envelope. Then I put it with other such envelopes in order with the closest date on top. Thus I am always aware of the earliest due date I need to deal with.

    When I pay one, the next is revealed, and will get paid at the same time unless the date is relatively far away.

    Before this scheme occurred to me I also used to miss payments, and not due to lack of money.

  14. Mule Skinner says:

    Re Q5:
    I worked 42 years for a large corporation and had a salary higher than this policeman. My retirement pension (I had options) would have been much lower than this public sector employee is getting. Higher salary; many more years of service; smaller pension.

    I also “never, ever fully trust a pension” and so I chose the lump sum option. Now I have to manage it myself but I’m no longer a dependent puppy waiting for their handout.

  15. Tracy says:

    @Q10

    Hold off a few months, max out the cash back. Going forward, you may want to take a smaller return more frequently or not, but I wouldn’t do it now when you’re less than a year away – it’s only a difference of 30 dollars on what you have now, but there’s no way you’re going to get 30 dollars return on 120 in savings.

    I don’t get Trent’s panic over you losing your job or the credit card company deciding to cancel the card – if you lose your job and need the money (I’m assuming you’re NOT living paycheck to paycheck based on your remarks), you can always decide to do it then … and if you’re regularly using your card and not skipping payments, etc, they’re not going to cancel it.

    And I believe that before they change the rewards program, they’re required to give you sufficient notice – which means you can cash out at that point.

    30 dollars isn’t a ton, but unless you need the money urgently for some reason, why give it up?

  16. Des says:

    “$83,000 for a beat cop is way too high”

    I firmly disagree. That is a dangerous, thankless job I would never want to do myself. I will gladly pay decently the people who risk their lives to protect mine.

  17. valleycat1 says:

    Q6 – DHC (website dhccare) makes very nice beauty products out of natural ingredients & explains those ingredients quite well. A little more expensive than drug store items but last a long time. You can get free samples of many of the items.

  18. Kim says:

    For #4 – William

    I suggest, and I’ve done this in the past, especially with a boss that likes to give more than you can handle. Make a list of all your to-do’s/current assignments, especially add priorities and/or due dates. Then when your boss hands you another item, ask him where it fits in your priority listing. There’s a good chance that the boss isn’t even aware that he keeps assigning more and more tasks to the same guy. This is good for several reasons:
    a. It shows you’re being proactive and you want to accomplish everything that there is to do
    b. you’re not procrastinating and missing deadlines because you’re lazy, it shows you have too much work to do
    c. it gives your boss a chance to reorganize and see when things are “really” due vs. when he wanted them done.
    This has definitely worked for me for various bosses and at different companies. If an item is late then the boss is either well aware of it ahead of time and/or he’s the one that changed the deadline in the first place.

  19. Michelle says:

    Q6 – I second (or is it fourth?) using Environmental Working Group to help you winnow down the list of products that don’t have dangerous ingredients or pesticide loads.

    Kettle Care is another online company that makes good, natural-ingredient personal care products.

    Personally, I use coconut oil as a moisturizer and weekly hair treatment. Coconut oil has antibacterial and antifungal properties and cured a resistant case of athlete’s foot for me after over the counter products stopped working.

    I’ve used baking soda to wash my hair and it’s not for everyone, at least to start. Depending on your hair, you may go through a really greasy period before your scalp normalizes its oil production. But it’s winter and if it’s hat weather where you are, now may be a good time to start. The vinegar rinse after is especially important to restore the proper PH balance. The important thing is patience with the process.

    With regard to food, a good rule of thumb is the higher up the food chain, the more important it is to buy organic because of how concentrated it becomes in animal flesh and especially animal fat. Think of how many pounds of (pesticide laden) grain a cow eats before it’s big enough to slaughter. The body stores toxic chemicals in fat to keep it away from the organs.

    So the top of our list of “buy organic” is milk, butter and eggs. Meat is second. Produce is third (use EWG’s produce list). Personal care products are fourth.

    Another rule of thumb which Trent touched on: read the ingredients list; organic isn’t the end all, be all of choosing healthy products. Choose products where you can pronounce and identify all the ingredients over the products that read like a mad scientist’s experiment run amok. This goes for food and personal products.

  20. jim says:

    Q5: Trent said: “I never, ever fully trust a pension….Never, ever rely on a pension. I’ve seen far too many “guaranteed” pensions vanish out from under the feet of people who relied on them.

    2nd week in a row Trent has made negative statements about pensions. Sounds like Trent has known someone who ‘lost’ a pension in some way. But he seems to be using that experience to grossly overestimate the risks of losing a pension. Once you have a pension it is guaranteed. If you are vested in a pension then it is a contractual obligation and the benefit is guaranteed. If a company goes bankrupt then the pension assets are protected. There is little risk in a vested pension. Of course if you are not yet vested then you don’t have anything yet.

    Q9 : Lacey = Don’t pay old debts that are charged off. If you want to feel good about it you can always make a donation to the hospital or some medical foundation affiliated with the hospital to ‘pay it forward’.

    Q10 : Tanner = wait and cash in at 25k points. That will give you $50 extra. Wait for the extra money. Theres risk but its easily negated in my opinion. If you lose your job then cash in that day (if you really need the money). The bank could change the rules of the program but they have to give you advance notice which would give you time to cash in if needed.

  21. jim says:

    Des: “That [police officer] is a dangerous, thankless job I would never want to do myself.”

    Garbage collector, truckers, roofers, farmers, iron workers, loggers and fishermen are more likely to die on the job and generally get less appreciation, praise and thanks for the danger level and value of their occupations.

  22. jim says:

    … not that I don’t appreciate the work police officers do.

  23. jim says:

    “And even if the pension plan does belly up, there is always the pension insurance that pays $0.25 to each $1 you are owed.”

    The Pension Benefit Guaranty Corporation backs pensions 100% up to a maximum amount (around $50k).
    I don’t know of any 25c on the dollar insurance. Is that some sort of scammy private insurance?

  24. krisitne says:

    Des- Everyone takes it for granted that pensions are guaranteed. The PBGC is dangerously underfunded. One huge corporation goes under, and the results to retirees will be catastrophic. If it were a fund it would get a very low rating, And judges have overturned pensions, and pension benefits, in some cases, in order to save companies form going under, as it supposedly served the greater good. One anecdote- my grandfather lost all medical coverage from GM- in his late 80s. And almost all of his pension (unfortunately- the fund was invested in mostly GM stock). He worked there his entire life after being in WWII. Luckily- he has the VA. But many do not.

    Jim- my brother was garbage collector- just as dangerous. But similar in pay and pension to the policeman. He makes more than I do. I have 2 masters degrees and am a public high school school teacher. It’s a weird world.

  25. 8sml says:

    @#19 Michelle: “With regard to food, a good rule of thumb is the higher up the food chain, the more important it is to buy organic because of how concentrated it becomes in animal flesh and especially animal fat.”

    Depends why you’re looking for organic products. For instance, pesticides have major negative effects on ecosystems too (e.g., killing songbirds that eat insects that carry pesticides), so my priorities for choosing organic run more towards which products normally use a lot of pesticides (cotton is one of the worst crops in that regard).

  26. Ryan says:

    Only 8 comments before the inevitable “cops are paid too much” popped up.

    This thread does not disappoint.

  27. Miguel says:

    ” Everyone takes it for granted that pensions are guaranteed. The PBGC is dangerously underfunded. ”

    And PBGC DOES NOT cover pension out there. 25% or so of pensions plans are not covered by it. The risk is very high? Not likely. But it does exist.

  28. Miguel says:

    “And PBGC DOES NOT cover every pension out there. ”

    Sorry for the missing word… :)

  29. jim says:

    Kristine said: “One anecdote- my grandfather lost all medical coverage from GM- in his late 80s. And almost all of his pension (unfortunately- the fund was invested in mostly GM stock). He worked there his entire life after being in WWII.”

    Medical coverage is not the same thing. I don’t believe theres any guarantee for medical benefits.

    How exactly did your grandfather lose “almost all” of his pension? What happened EXACTLY? The GM bankruptcy did not wipe out their pensions. Was he maybe a Delphi employee’s whos pension was over $54,000 a year or was there some change in a contract or was he cashed out?

    Miguel said: “PBGC DOES NOT cover every pension out there.”
    This is true. PBGC does not cover some pensions. State and local government pensions aren’t covered. The governments in question cover those.
    Where did you hear that its 25%? That may be misleading as most of those are small pensions or government pensions. There are a lot of plans with very few people. Most large plans are covered so the vast majority of people are covered.

    Side note: Keep in mind when we talk about a “pension” that is really just the old style “defined benefit” kind of pension. We’re not talking about your IRA, profit sharing, 401k etc retirement benefits.
    Whose cash contribution style plans are not guaranteed by anyone.

  30. jim says:

    Kristine: “my brother was garbage collector- just as dangerous. But similar in pay and pension to the policeman”

    Yes some trash collectors are paid well. But as a group they make much less than police on average.

    Median pay for refuse collectors is $32k /yr while police and sheriff patrol officers made $53k/yr median according to the BLS.

  31. kristine says:

    Jim- I will try to find out about exactly what went down with GM. Gramps is 92 now, and he may not be able to give me specifics. But he went from very comfortable, (and he has always been extremely frugal) to living in a basement, and forgoing dental care as he cannot afford it. It happened in the course of a year when GM went to court over pensions, and stock. I do not know the details, just the impact of a promise broken, and the seemingly secure being yanked. Health care was part of the “retirement package” that included pension payments and med coverage.

  32. jim says:

    “The PBGC is dangerously underfunded.”

    Thats a different matter. The PBGC is a government entity backed by the federal government. Yes its current balance sheet is under funded. However that doesn’t mean that people are not going to get their pension money. For the PBGC to default on pensions the federal government would have to let it fail. That is not going to happen. The government would not let the PBGC simply die and default and stop paying peoples pensions.

  33. jim says:

    Kristine: No need to bother your grampa for details. He could have lost his dental and medical care as that is not backed by PBGC. His healthcare may have been part of the package but its not the same as a pension. No more than medicare is part of social security. I could see how losing health coverage at an advanced age may cost him substantially.

  34. valleycat1 says:

    Re: organic – Root/bulb crops like onions & carrots store pesticides more than above-ground produce; apples and peppers are other pesticide-heavy crops. If my only choices are foreign-grown produce or organic, I go with organic. That said, I don’t obsess about buying organic, as I suspect in many cases that the pesticide contamination of conventional produce is overstated. Disclaimer – my husband is a farmer.

  35. kristine says:

    I do not believe the gov will let the PBGC fail. However, it may pay a percentage on each dollar, just as social security now only promises 70 cents on the dollar. SS was also once considered an untouchable sacred cow too. The biggest thing preventing this will be that Senior Citizens have a very high voting turnout.

    Oh- did get one detail form Gramps- the majority of his pension fund, at company encouragement, was mostly made up of GM stock. Mystery solved- it tanked- he lost hundreds of thousands. That decision was made back when such non-diversified encouragement was considered legit.

  36. SwingCheese says:

    Might I also suggest using Aveda products for eco-conscious hair care. I really can’t allow for any adjustment time regarding oil production (mainly because I can’t stand my hair getting oily), and I’ve found that Aveda products are the most effective for me and my hair.

  37. Jane says:

    I stopped buying organic because I couldn’t afford to but here is the most common list: milk, coffee, celery, peaches, strawberries, apples, blueberries, nectarines, bell peppers, spinach, kale, cherries, potatoes, grapes, leafy greens. As someone said, good idea to avoid imported foods. You should also decide on meat since it contains hormones and antibiotics.

  38. Marle says:

    SwingCheese, I also find Aveda products effective for my hair, but unfortunately they aren’t eco-conscious. They’re still a mash of ingredients you can’t pronounce, and the cosmetics database (skindeep.com) still shows them as having just about as many potential health risks as other products. I know, they say they’re just plant and flower essenses, but they really aren’t.

    The best thing to do when trying to buy eco-conscious is buy local. There’s a small company where I am that hits up all the local farmers’ markets with homemade soaps and shampoos. Everything they sell has only about 5 ingredients, so I know what I’m putting on me, and I’m supporting my local community. The same goes for food. Even if something says it’s organic (or just has eco-friendly advertising like Aveda) how do I know? Well, if I know the person who made it, then I can find out.

  39. Sharon says:

    Cops have another job issue that the other occupations don’t. Potential bribes. I want my cops paid enough that they aren’t tempted by any schmuck who can come up with a couple of grand. It doesn’t stop the problem entirely but stems it somewhat.

  40. kristine says:

    sharon, that is an excellent point.

  41. jim says:

    “the majority of his pension fund, at company encouragement, was mostly made up of GM stock”

    That does NOT sound like a defined benefit pension. Thats a contribution or cash balance retirement plan. Where the company puts money / stock into an account and holds it till as an investment towards retirement. If his pension was in stock then thats handled more like how an IRA or 401k works. Nobody guarantees your IRA will be worth anything. Nobody guarantees that GM stock held in a GM pension account will hold value. So unfortunately your grampa got bad advice which lost him money.

    Defined benefit pensions are the traditional style pension what we mean by ‘pension’ and that is where you work x years and get y% pay. Period. Theres no investment or variability. e.g. if you work 20 years as a federal employee you get 22% of your pay. Period. Its a promise of a ‘defined’ amount. Putting your money in stock is not defined and the amount of the pension is variable and dependent on the performance of the stock market.

  42. jim says:

    kristine: “just as social security now only promises 70 cents on the dollar”

    Nobody has cut social security benefits. The promise has not changed. There is no reduction to 70 cents. There is a PROJECTION that in 27 years they will probably only have enough money to pay around 75 cents of each dollar. Of course the accuracy of that prediction that is based on them accurately predicting the entire economy of the country 3 decades into the future.

  43. kristine says:

    Jim- I give you credit for your optimism.

  44. Nina says:

    Regarding Dad’s forgetting to pay bills – have you considered a medical exam? Sometimes forgetfulness can be a sign of a medical condition.

  45. SwingCheese says:

    @Marle: Really? I had no idea that Aveda was shady, I’m going to have to check that out. Thanks for the heads up! :)

  46. jim says:

    Kristine, my point is that it has not been cut YET. Nothing has changed yet. It seems a given social security will eventually need to change or run out of money. But that doesn’t mean they’ll just slash benefits. They may do all sorts of other things sometime in the next 20 years like increase minimum retirement age, tax high income earners more, privatize portion of it, cut benefits for high income earners, or some combination of any of these. Right now they have done nothing. At least they haven’t done anything lately. They did increase SS taxes about 20 times over the past 70 years. If they did it 20 times before then I think its a safe bet they might do it again.

  47. Marle says:

    SwingCheese, they’re not really shady. They’re just not that much better than other companies, at least not on the eco/health front. Their products do work well though, and I’m sure they do have plants in them. Just not organic plants.

  48. LeahGG says:

    Matt: unfortunately, these days if you don’t work from year 2 onwards, you’ll have a hard time finding a job when you get out (My husband works in hiring of CS/Eng students in a company in Jerusalem). I would head back home if you can take living with your parents. Expect to use your army grant for your first year. Hit Perach for around half the tuition (it was 47% in my day) in 4 hours a week, and try to get a student job as soon as you’ve finished your first year.

    I know it’s hell, because the hours get insane (in a cs degree, 40 hours of class time per week is not unusual.) Figure on taking 4 years to finish instead of 3. But seriously, without the experience, CS degrees aren’t worth that much… they’re kind of a dime a dozen here…

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