Mailbag: Questions About Pensions, Cell Plans, Bulk Nonperishables, Refinancing and More

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Retirement savings beyond public pension
2. Best time to file taxes
3. Struggling with cellular monopoly
4. Buying nonperishables for preparation
5. Educational savings with employer reimbursement
6. Are fitness trackers worth it?
7. Renting and quality of landlord
8. Go cheap on electronics?
9. Refinance now?
10. Alternatives to Sirius?
11. Omnifocus worth the money?
12. Board gaming, an expensive hobby

The last several days have featured a burst of glorious early spring weather, making me really want to spend a ton of time outside. Twice during the past week, I walked to a park and worked outside, just to enjoy the weather.

I don’t hate winter. The cold weather doesn’t bother me too much — I just dress warmly. What really gets to me after a while are the short days, since it’s often dark when my day begins and it’s nearly dark by the time my work for the day is done.

Days are getting longer now. The weather is slowly warming up. I can’t wait to be outside as much as possible.

On with this week’s questions.

Q1: Retirement savings beyond public pension

I am 45, my wife is 42. We are finally waking up to the need to save for retirement. Both of us work for the state and have a public employee retirement plan and also have an optional retirement plan. I have about 18 years in the public plan and she has about 16. And we plan to work another 20 years and retire together. We did the math on their calculator and think we could get by on that but we would like to have more. How much should we put into the optional retirement plan and how should we invest it?
– Tom

First of all, I’d assess your current financial state carefully. Are you currently easily able to stay within your means for spending? Do you have any high-interest debts (credit cards or anything like that)?

The thing is, if you start saving some portion of your pay for retirement and that causes you to get deeper into debt or to struggle to keep your head above water, then it’s a losing proposition. Retirement savings is really only effective if it’s paired with spending choices that won’t lead you into accumulating personal debt.

If you do have a lot of credit card debt, rather than saving for retirement right now, I’d focus on getting that paid off quickly. Aim to not add more to the balance of your cards and try to make large payments each month to pay it off. That will require some lifestyle adjustments, but some adjustments are needed anyway. Don’t save for retirement until the debts are paid off, then you can just take what you were putting into getting rid of the high-interest debts and put it into retirement instead.

On the other hand, what if you’re financially stable? In that case, it’s simply true that the more that you save for retirement now, the more you’ll have when you actually retire. I would save as much as you can such that it won’t have a strong negative impact on your life now and won’t risk you sliding into credit card debt or other debt just to enjoy life today, assuming you don’t have other major savings goals.

I don’t know what that number is for you. My suggestion is to go with an aggressive, high percentage to start with and see how it goes. (Choose the “target retirement” option out of the different investment options.) After several months, assess how things are doing. Is the reduced take-home pay having an adverse effect on your life? If it is, tone down the percentage a little. If it isn’t, leave it where it is or even bump it up a little more.

Q2: Best time to file taxes

Is it better to file taxes early or to wait until closer to April 15?
– Andrea

Assuming you have all of your tax documents, it depends entirely on whether you expect to owe money or you expect to get a refund.

If you expect to get a refund, file as early as you can. The earlier you get that refund, the faster you can put it to good use. Getting money to pay off a debt in February versus getting it in May means that you’re saving three months of interest on that debt.

If you expect to have to pay, wait to file and let the money you’ve saved to pay for those taxes accrue a little interest (or give yourself more time to save for it if you don’t have it already).

Aside from that, it really doesn’t matter as long as you can get it done before the filing deadline. In general, I think it’s a bad idea to wait until the last few days, just in case there’s a problem.

Q3: Struggling with cellular monopoly

There is only one cell provider here that has good coverage and they cost an arm and a leg. All of the other cell stores seem cheap but their phones get no signal, sometimes not even in their stores. Cell phones feel like a scam.
– Jenna

Which provider is it that gets good coverage in your area? Figure out which one it is, then shop around online for a pay-as-you-go cellular provider that uses their network.

For example, if the provider with good coverage in your area is Verizon, take a look at Visible as a low-cost alternative. If the provider with good coverage in your area is AT&T, look at Cricket Wireless. If it’s T-Mobile, I’d look at its national pay-as-you-go options. (Sprint is merging with T-Mobile.)

Sometimes, local stores for a good provider in an area where there’s really only one good provider will charge an arm and a leg, so you’ll want to look at other options that use their network, like the options above.

Q4: Buying nonperishables for preparation

I think you’re crazy suggesting that people buy stuff like toilet paper because of coronavirus panic.
– Andrew

My recommendation is clear: it’s not a bad idea to stock up with bulk purchases of nonperishable items you know you’ll use anyway, like toilet paper or dry beans or pasta, things you are certain to use in the next few months. I buy those things in bulk regardless of whether there’s a potential pandemic or not.

Don’t buy stuff you won’t normally use, though. If you would only cook dry rice if there was an absolute emergency, don’t buy a giant bag of it. That’s foolish.

We have probably six weeks of food in our pantry and cupboards, enough to prepare pretty good meals for at least four or five weeks and then some middling ones for a while after that. That’s perhaps a little higher than average, but we buy lots of stuff in bulk to save money and usually have at least enough ingredients on hand for a few weeks of meals at all times.

As for things like toilet paper and cleaning supplies, it’s not bad to have them around. You’re going to eventually use them anyway, so having a couple of months’ supply on hand isn’t a big deal. It just means you’re buying them in bulk now and not buying them a month from now, regardless of what might happen.

I think it is a bad idea to buy those kinds of supplies at levels that are difficult to reasonably store or exceed what you might use in a few months.

Q5: Educational savings with employer reimbursement

My employer is paying for my MBA program, but I need to pay out of pocket for each class, and they will reimburse me after I achieve a C or better. Does it make sense for me to set up a 529 account to pay for my classes? Also, I can accelerate my time to graduation by taking an additional course per year (about $2,000). If I choose to do this, does it make sense to set up a 529 in this scenario?
– Ellen

I don’t think putting money in a 529 confers much of an advantage at all if your timeframe is less than a few years.

Over that short of a timeframe, you’re either going to be investing in something really safe, akin to a savings account, or be exposing yourself to a lot of volatility in other investment markets, meaning you run a healthy risk of having less in the account than you put in there.

In your shoes, I would save for educational expenses by simply putting money in an ordinary savings account. That way, your balance will remain stable; you’ll earn a very small return in interest, but you won’t lose anything and there’s no risk of penalty for non-educational use. I would not use a 529 unless my timeframe was more than a few years down the road, and that’s definitely not the case here.

Q6: Are fitness trackers worth it?

What is the point of a Fitbit? Seems to just be a watch that tells you whether you’re walking a lot or not.
– Brian

That’s basically the core idea. It collects data on your walking and other movements so that you can get a sense of how naturally active you are and then nudge yourself to beat it.

For example, you might wear one for a month and realize you average 7,000 steps a day. Then, for the next month, you can aim to get to 7,500 each day as a goal. That’s going to be a net positive for your health, as there’s a bunch of research correlating an increase in steps taken per day with better health outcomes and better mood (up to a certain point depending on the person, but generally well above 10,000 daily steps).

It’s mostly just a reminder and a nudge and a way to turn moving around more into a game.

Of course, it doesn’t really do anything you couldn’t do yourself by, say, mandating a 30-minute or 45-minute daily walk. The big thing it really does for you is it gives you a nudge to walk more, so if you have other life tools for motivating yourself to do that (or you already walk more than 5 to 6 miles a day), then a fitness tracker isn’t going to be a big helper.

Q7: Renting and quality of landlord

I have some advice for your readers. I have been a renter my entire adult life. The single most important thing has been the quality of the landlord. A landlord that takes care of problems and has a good relationship with you makes renting fantastic and a lot less headache than owning your own place and dealing with problems yourself. A bad landlord who ignores you and doesn’t do any maintenance makes renting [a bad situation]. Before you rent, try to find out about the landlord from people who live there. Don’t sign a lease if you hear horror stories no matter how nice the place seems. Speaking from experience here.
– Tessa

This is good advice. I rented three different apartments during my twenties and this lines up pretty well with my own experience.

I had one good landlord that was incredibly proactive if there was an issue (incredibly fast to deal with anything), did some proactive maintenance (with lots of notice), and got to know us pretty well. I had another landlord who basically did nothing at all —  I’m not sure they even came to the property during the two years I lived there and sent a repair company a few days later for the one issue the had. A third landlord was awful — they did nothing at all to fix some very serious issues with the apartment and would go in and “inspect” things at least once a month, usually leaving weird notes about minor things we were apparently supposed to fix ourselves, and on at least a couple of occasions apparently took our possessions out of the apartment.

All three apartments were fairly similar two-bedroom places, yet I have good memories of one, OK memories of another and nightmares about the third. I’m actually surprised no one got hurt or seriously ill in the third place.

Don’t just decide to rent based on the apartment. If you can, check out the landlord first. Avoiding some duplicitous property owner will save you a ton of headaches and heartache.

Q8: Go cheap on electronics?

Is it better to go cheap on cell phones or to spend a lot so that it lasts longer? How about other electronics like headphones?
– Colleen

My philosophy is this: the more frequently you use an item and the more you rely on it, the more you shouldn’t go cheap on it.

If it’s your first item of a particular type — meaning this isn’t something you’ve used before — don’t hesitate to get a lower-end version of that item. You need to establish first what your usage of that item really is.

If you use it on a daily basis, then when it needs to be replaced, get a higher-end and more reliable version of that item. If you use it a little less frequently but rely on it, get a higher-end version really focused on reliability. Consider the features that you really need and value in that item and make sure they’re present.

On the other hand, if you use it fairly infrequently and it’s not that important in terms of your daily life, replace it with something cheap.

I don’t know how you currently use cell phones, so I can’t really answer for you. If you just use it to play games and check social media and send a few texts a day and get a call or two and they’re not really a big deal for you, go cheap. If you absolutely need one for your job or because of a caregiver for someone, get a more reliable one and spend a little more. It really depends on how you use it.

Q9: Refinance now?

We have a 30-year mortgage at 5.75% that we got in 2018. Yesterday I saw an ad for a 15-year refinance for 3% with good credit. That seems unbelievable to me. Back of the envelope math says we basically cut 13 years off of our mortgage and barely change our monthly payment by refinancing. Thoughts?
– Darwin

Rates are really low at the moment after the Federal Reserve cut interest rates last week, but that rate seems really low, like someone at that bank is betting on another rate cut shortly and is trying to get ahead of the curve. I think it’s a really good deal and I’d lock it in, even given the possibility of another rate cut in the near future.

Assuming your mortgage was for, say, $300,000, your mortgage payment is somewhere around $1,750 a month on a 30-year mortgage at 5.75%. You’ve likely paid off about $10,000 of that, so you’d turn that into a $290,000 15 year mortgage at 3%, which gives you a payment of about $2,000 a month.

Basically, your payment will go up, but not by a lot — probably about 15% or so. However, you’ll eliminate the last 13 years of your mortgage with that simple move. I’d do it.

Q10: Alternatives to Sirius?

My wife and I have used Sirius in our cars since 2009. While we both enjoy it, we calculated the money we’ve spent on it and it adds up to about $6,000 including subscription and devices. We’d probably have another $10K in retirement. I tried switching back to normal radio but it is garbage with nonstop ads or the monotone voices on NPR. Other options?
– Andrew

It depends on what you like to listen to. If you’re listening for the music, I’d suggest looking at Spotify, which can basically create a music station on the go tweaked to the kind of music you like. A subscription costs about $100 a year for no ads, and there are some other options if you don’t mind some ads. You would stream it off your phone through your car speakers using Bluetooth, which most newer cars have. My daughter has a Spotify account (a Christmas gift of one year of Spotify without ads) and we sometimes listen in the car.

If you listen to mostly talk stations, I’d suggest looking into podcasts. There are tons and tons of great podcasts out there to listen to for free, on pretty much any topic you can imagine. This is mostly what I listen to in the car, along with audiobooks for long trips. Just download a podcast player on your phone, like Overcast or PocketCasts, and look for some popular podcasts in your area of interest. They’re completely free; most are supported by a brief ad at the start or end of the podcast, usually something tied to the type of podcast, or by some form of crowdfunding.

I very rarely listen to normal radio in the car; if I do, it’s usually NPR (yep, the “monotone voices” that you mention; while some of their programs are definitely monotone, many are not). I agree with you that most normal radio stations are so jammed with ads and with political nonsense that they’re not worth listening to.

Q11: Omnifocus worth the money?

You suggest using Omnifocus as a task manager so I looked into it to use on my phone and tablet. It is quite expensive. Is it really worth it?
– Jerry

Years ago, I went through a bunch of to-do list management tools to try to find one that just did everything I wanted to do. I was really struggling with juggling a lot of things in my life and I realized that my old strategy of just using a notebook wasn’t really working anymore. I tried the trial version of a bunch of different tools and decided that I would commit and pay for whichever one clicked with me, and it was Omnifocus. However, I had a really strong sense of exactly what I wanted a to-do list manager to do for me and Omnifocus checked those boxes.

Now, would I suggest that everyone use Omnifocus if they were looking for a tool to manage their to-dos? Absolutely not. It is basically a giant kitchen sink of features, the equivalent of trying to learn to use Photoshop to do really basic photo editing like cropping. I love it, but I wouldn’t ever tell a friend to buy Photoshop if they want to touch up their selfies or if they know nothing about photo editing.

For someone who’s never used a to-do list tool before, I’d probably suggest trying Todoist. It’s free in the basic version ($3 a month for the premium version with some more features), works on lots of platforms, and is pretty easy to get started with.

What exactly do I get out of Omnifocus that would compel me personally to use it instead of Todoist? The big thing, for me, is custom perspectives. Basically, custom perspectives are a really clever way of viewing particular small slices of to-do lists, and you can save them and use them again and again. I have a bunch of these that I’ve honed over the years that really work well for me in terms of keeping track of things I want to get done and now that I have them, I really wouldn’t want to work without them. In fact, I’m pretty sure I’ll still use Omnifocus when I stop working because I use it — and those custom perspectives — to manage all of my personal tasks, too, and they make up more of my tasks than professional ones.

The thing is, custom perspectives aren’t particularly useful until you have a system built up with a ton of tasks in it, which is why I wouldn’t push people to Omnifocus unless they’ve got some very specific things they’re looking to do. Todoist is a much easier tool to get started with and does almost everything Omnifocus can do.

Q12: Board gaming, an expensive hobby

I find it strange that you suggest board gaming as a frugal hobby. The boring games that litter the shelves at Goodwill aren’t fun for thinking adults and decent games cost $50 a pop these days.
– Brenda

Let’s break that down a little bit.

You’re correct in stating that a lot of good modern board games — the kind that are really enjoyable for a game night for adults — are fairly expensive. Let’s go with your price of $50 MSRP for one of them.

For starters, if you bargain hunt very much at all, you can easily cut 20% to 30% off of MSRP of pretty much any tabletop game these days. If you wait for sales, you can cut 40% off of MSRP easily. That takes the price down to $30.

Let’s say a game takes an hour and entertains 4 people for that hour. You play it, say, 10 times before it gets old. That’s 40 hours of play for $30, or $0.75 per hour. You’re pretty hard-pressed to find active entertainment (meaning not sitting in front of the television) that’s less than $1 per hour.

OK, but what about after that? You can then sell it off. Most Half Price Books will give you store credit for a used board game that isn’t completely beat up. You can sell used games on many different websites and on eBay. Most cities have board game meetups and groups where you can sell games (and also meet other people who enjoy board games in your area). Let’s say you get $10 out of selling it. That means your total cost was $20, meaning you spent $0.50 per person per hour of entertainment.

You also may be able to just trade it off. Many local gaming groups have regular swap meets and trading days, where you can swap the game for something else you might play. Your copy of Castles of Burgundy, which you played 10 times and are bored with, becomes a copy of Everdell, ready to be played several times, and it costs nothing.

Furthermore, let’s say the other three people you play games with also buy a game once in a while. If you all buy them at the same rate and play them together, then 3/4 of your game time is essentially free — you’re playing their game, after all.

The only time the hobby gets expensive is if you get caught up in the desire to constantly have new games, and that’s true for a lot of hobbies. If you can avoid that, tabletop gaming is a pretty inexpensive hobby.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

Loading Disqus Comments ...