Reader Mailbag #89

Each Monday, The Simple Dollar opens up the reader mailbags and answers ten to twenty simple questions offered up by the readers on personal finance topics and many other things. Got a question? Ask it in the comments. You might also enjoy the archive of earlier reader mailbags.

I’m 34 years old; live and work in Washingon, DC for a non-profit organization I’ve been with for 10 years. My salary is quite good, and the benefits are great. Those benefits include a current 13.5% contribution to a 403b (they start at 7.5, then add a point for every two years of service, add a couple of points when you cross each decade threshold, etc) without needing an employee match. So, confession: I don’t contribute to it on my own at all. In the early years, I was wasteful, and now I’ve been focusing my money on getting out of debt first and foremost, and rebuilding my emergency fund (which has gotten tapped to pay for mother’s funeral, emergency veterinarian bills, etc in the last year).

Am I making a mistake not contributing some of my own cash as well? I feel like 13.5% of my salary puts me in good stead over the long-term, and that there will be time enough to contribute more in a couple of years when I am out of debt. My parents both died long before retirement age, too, and I am not planning on having kids who can inherit the retirement money if I have the same fate…).
– Karen

First of all, your benefits are stellar. There’s simply no other word for an organization that puts 13.5% into your 403(b) for you without you having to contribute to it. That’s a benefit most of us would kill for.

At this point, you need to step back and look at the big picture. Are you on pace for the type of retirement you want? I’d take a look at a good retirement calculator.

Two key questions worth thinking about: when do you intend to “retire” from your current career, and at that point, how much of your salary will you need? If you like to work, your intended retirement age will probably be higher than it would be if you can’t wait to retire. If you want to try a second career in your retirement years, your percentage will be lower than if you want to spend your retirement traveling.

Many will argue that you can’t know this. My belief is that the truth is somewhere in the middle – people usually know if they’re of the type who’s happier working and being productive and who’s happier with pure leisure time, but the specifics of your life can change.

Run some appropriate numbers through that calculator and aim a little on the high side. Of course, with 13.5% already being saved, you’re probably fine no matter what you do.

My question, which is prompted by your fall cleaning post, is whether people have been able to find a market for their stuff in this economy, or, to put it a little more optimistically and pragmatically, what strategies have people used to sell their stuff? My neighbor and I have a yard sale in late spring every year, but this year, for the first time ever, we hardly sold anything, making the whole event seem like a waste of time. Along the same lines, I am wondering whether people have found it harder to sell stuff on EBAY, or whether they have had to change their strategies for such sales.
– Barb

My experience in buying and selling on eBay and Amazon auctions, as well as a semi-frequent thrift store visitor, is that the secondhand and discount marketplaces are thriving right now and that it’s a perfectly good time to sell used goods. Most of the economic downturn is coming at the expense of more upscale retailers.

People tend to focus more on bargain-hunting when the economy is down, but rarely do they make true changes to their behavior. They might choose to shop for the thing they want on eBay or Craigslist or at a thrift store, but they’re still going to buy an item if they want it. A retail economic downturn usually means only a 10-15% drop in sales, which means 85-90% of the items they were selling before are still selling.

In short, if anything, now’s a better time than usual to dive into selling used stuff, because there are plenty of buyers out there.

My boyfriend and I are traveling to Prague in the Czech Republic over Thanksgiving weekend and are trying to figure out the best way to exchange money. Is it best to a) change cash in the US to travelers’ checks, b) change US cash in Prague to Czech crowns, or c) take out cash in the form of Czech crowns from local ATMs while there? I also have about 40 Euro left from my last trip to Europe that hasn’t been changed back to US dollars.
– Valerie

Your best bet is to look at your various conversion options before you leave and choose the one that gives you the most crowns for your dollar now. Your best option depends heavily on the policies of the bank you use compared to other options.

Depending on your credit and personal responsibility, it might make the most sense to simply make most of your purchases on a credit card. Visa and MasterCard are widely accepted in Czechoslovakia and you are simply billed for the amount. Be sure to tell your credit card company that you’re traveling before you leave. Assuming that you pay the bill in full when you return, this is a safer option than traveler’s cheques.

One guaranteed piece of advice: avoid currency exchanges at the airport. Their rates are atrocious. I would also probably advise doing the currency exchange there because your options are more limited than they are here in the States.

You’ve talked before about how you don’t like consumerism. How does that affect how you buy Christmas presents for your children?
– Ed

I’m more of the philosophy that you get children a small number of quality presents instead of piles of unnecessary stuff. I also am a big fan of gifting experiences to people.

So, for example, I would have no problem wrapping up a picture of Disney World or of Yellowstone and giving that as a gift along with a promise of a family vacation there. That would be one of, say, three gifts they would receive.

I have no problem with giving gifts or receiving them. However, I’m not a big fan of giving gifts or receiving gifts that are unwanted and just result in more “stuff” for people to manage that they don’t really value.

So, for all of my friends and family reading this, if I ever give you a gift that you don’t want, absolutely feel free to take it back or re-gift it. Please don’t keep unnecessary stuff in your home.

I’m a public school teacher, and as you can imagine, this was a bad year for our union to be re-negotiating the contract. Bottom line is, I’ll be bringing home less money per week next year than I am this year, and I’ll be getting fewer benefits. Though many teachers are well-paid for their efforts, young teachers like me typically start out very low on the pay scale. Next year will be tough.

To sort of “make up” for the wage reduction, our employer has offered us a new health plan called an HSA. Until now, I just had the option of a PPO. It’s an intriguing concept. The language in the contract states, “50% Employee Contribution to deductible, 10% Premium Share cost.” Deductible would be $3,000 for a couple. For a healthy, young couple like my husband and I, who are not planning to become pregnant any time soon, this sounds like it could be a better option for us. However, it’s hard to get straight answers from anyone around here. Many teachers do not understand the program, and the employer and union are talking it up, and perhaps exaggerating its usefulness, in order to try to make the teachers feel like they didn’t get the short end of the stick with the pay reduction.

Could you give me the lowdown on HSAs? I understand the basics. What would be the risks in going with an HSA plan? What would be the benefits? Who would you see as the optimal candidate for HSA, and who would be a person that should stay with a PPO?
– CT

In a nutshell, HSAs are just savings accounts that your employer deposits money in that you can withdraw solely for health-related expenses. This is usually done through a reimbursement system or via a debit card that accesses the account which can only be used at health-related businesses.

In general, HSAs are a solid option for younger workers who are in good health. The older you get – and the more known conditions you have or know you will develop – the better off you are sticking with the PPO.

Given that you’re young and healthy, it’s likely that the HSA is a reasonable option for you. However, it does carry a risk. You’re basically betting against a very expensive medical emergency in the next year or two. While that’s potentially a good bet for you, it becomes a much worse bet for people with pre-existing conditions and people who are older.

When you just close your eyes and let yourself dream, what do you dream about? If everything goes perfectly for you, where will you be in ten years?
– Adrian

I dream of being a best-selling fiction writer. I dream of having a house out in the country with a large office for writing, a small barn in the back, and some woodlands there. I dream of happy, healthy, and curious children.

More than anything, though, I dream of not being afraid of what the future holds. Even with all of the positive changes in my life over the past few years, I’m still afraid of what might come. I haven’t reached the level of financial security I’d like to reach.

My husband and I put aside money into a few mutual funds to save for a house shortly after we were married (about 6ish years ago). The money is in 3 Vanguard index funds: an S&P 500, a long-term bond fund, and a European fund. We are getting closer to buying a house (probably 3-4 years away now). How do I decide when to take the money out and put it in something more safe. Honestly, with the rocky stock market, I don’t think we’ve made any money at all on our investment. It’d be nice to get some more stock market gains seeing how low money market accounts are now, but I don’t want the money to be too volatile, as we would really like to put down a large downpayment on a house once my husband finally gets a real job (i.e. finishes his postdoctoral training and gets onto the academic market).
– Amanda

The real question to ask yourself when deciding whether to move money into something more conservative is to ask yourself whether you can tolerate the worst possible outcome.

For some situations, like retirement, the worst possible outcome – losing 20-30% of the investment over the next few years – is intolerable. For others – perhaps yours – it’s not nearly as vital.

If losing some of that money you have now would really hamper your plans for the future, move it into something more conservative. If that house you’re talking about isn’t an absolute requirement within four years and you’d be fine if it didn’t happen right then, leave it there.

My biggest problem during my workday seems to be uneven energy. I seem to run out of steam at about eleven and so I go eat lunch with some people. After that, I feel almost exhausted for a big part of the afternoon.

I know the solution to this is eating breakfast, but I can’t get into a routine of eating breakfast. I don’t like most breakfast food. What is your breakfast routine like?
– Payton

I usually eat breakfast with my kids each morning. We usually eat something different every day. One day, it might be oatmeal; another day, it might be scrambled eggs. We might have a bagel or toast for breakfast along with some fruit.

Don’t worry about tying yourself into a “traditional” breakfast food. Eat whatever sounds good to you that’s reasonably healthy and provides some energy. If it’s fruit, great. If it’s a salad, great. If it’s a beef and bean burrito, great. Just find a food that works for you in the morning.

I need to have surgery on my left jaw joint. I’ve had various appliances and procedures over the years, all of which have helped (or not) to some degree, but now things have degraded to the point of constant pain and not being able to eat more than pudding (and even that hurts, believe it or not). However, I just found out (literally on Friday, three days ago) that my employer’s health insurance has a specific all-encompassing exclusion for jaw-related treatments of any kind (I have paid for the smaller procedures and appliances out of pocket in the past, so I didn’t realize there was such a total exclusion that would zap me now), and this surgery will be $11,200 minimum. My oral surgeon already sent off an impassioned plea to the insurance company, which was met with a total denial because of the exclusion. I’ve been told there’s no point in appealing, again, because of that exclusion. The dental plan also will not touch it. I can get along awhile longer without the surgery, but the pain and inability to eat much will only get worse, so at some point I pretty much have to have the surgery. I refuse to go the narcotics route.

My husband and I are very lucky at this point in our lives to have the savings that would allow me to pay for this, but it would still be a huge hit. Another possibility is to charge it all on a rewards credit card – we still pay the full amount a month later (I will not carry the balance!) but would get, what, $112+ back. woo! Another possibility is to apply for a no-interest medical loan, which I know about because we investigated that avenue when my husband needed gum surgery last year. Typically there is a period of 6 months to 12 months (depending on the loan and the credit rating) to pay the loan back before any interest or finance charges start kicking in. So that would allow us to parcel it out over x months without having to pay interest. But we still end up paying $11,200 in the end.

Short of quitting my job, divorcing my husband, giving away all my assets and applying for medicare/caid, is there any other option I’m not seeing? Or any other way to handle the finances that might make it less painful in the wallet?
– Cindy

You’re likely far more informed about your options in this situation than I am. However, three things pop into my mind.

First, have you sought out multiple opinions on the subject? If you have not sought a second opinion on your jaw, you might be missing out on a treatment option that drastically reduces your costs and gives you the results you want. Your oral surgeon could be one of the best in the world, but he still might be missing some detail.

Second, have you simply tried negotiating? Tell your oral surgeon that it would be difficult to pay for the procedure. Offer to barter what skills or time you have in exchange for some part of the payment. See what’s possible.

Finally, have you looked at any form of third-party dental insurance? There may be forms of insurance that will cover your procedure. It might not be a bad idea given your spouse has also had oral issues.

Whatever happens, good luck!

Peyton Manning or Tom Brady?
– Evan

Drew Brees.

Got any questions? Ask them in the comments and I’ll use them in a future mailbag.