Still Clickin

Is social security really guilt money? Although we seniors will receive a 5.8% cola increase in 2009 (which will partially compensate for the shortfall this year.), are these funds intended to be a retirement benefit or to compensate for the age discrimination that we face everyday?

During this holiday season, it is nice to notice the many senior citizens working at the various stores. They are invariably courteous, friendly, and helpful. They act as if they actually care. Take a good look at them. They will be gone in January.

Any employee in the US knows that finding a job becomes more difficult as you get older. Once you reach out beyond your personal network, and become just another resume in the Inbox, your odds of succeeding become considerably more difficult. There are some organizations that recognize the problem and offer help. 40Plus has been around for years, and its local chapters are dedicated to helping workers over age forty find employment.

Imagine what it is like after age sixty-five!

A personal friend of mine is an employment specialist who works specifically in the sector of senior citizens. As he reports, he can find jobs for people, but the pay scale is typically limited to $10 or $12/hour. Although some of his clients may have operated as top executives or academics and have advanced degrees and credentials, the best he can find for them is $10 to $12/hour.

Senior citizens don’t want a handout. Like any person, they simply want an opportunity and a chance to demonstrate their value. In the current economic climate, where portfolios have been reduced by forty percent or more, they also want to survive. It is a tragedy that age prejudice in our current society severely limits their ability to do that.

So it would appear we are back to our original question.

Is social security really guilt money?

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Our biggest Halloween 2008 scare is certainly the financial news. For seniors who have retired, or are about to, this type of news is certainly not encouraging. The Federal Reserve has cut interest rates by half a point once again, and the stock market seems to be primed for ‘another record’ rise or fall. The only sure thing happening is uncertainty. Whatever nest egg anyone has is certainly smaller at this point. Any income from that smaller egg is shrinking.

Of course, the financial picture is never just about finances or sub-prime mortgages. In this week’s cover story for Newsweek, The World That Awaits, by Richard N. Haass, Mr. Haass addresses President #44. He writes,

“There will be days when you will wonder why you worked so hard to get this job. What will make it so difficult is not just all that awaits, but the constraints that will limit what you can actually do. When George W. Bush became president nearly eight years ago the world was largely at peace, the U.S. military was largely at rest, oil was $23 a barrel, the economy was growing at more than 3 percent, $1 was worth 116 yen, the national debt was just under $6 trillion and the federal government was running a sizable budgetary surplus. The September 11 attacks, for all they cost us as a nation, increased the world’s willingness to cooperate with us. You, by contrast, will inherit wars in Iraq and Afghanistan, tired and stretched armed forces, a global struggle with terrorism, oil that has ranged as high as $150 a barrel, a weaker dollar (now worth 95 yen), substantial anti-American sentiment, a federal budget deficit that could reach $1 trillion in your first year, a ballooning national debt of some $10 trillion and a global economic slowdown that will increase instability in numerous countries.”

What does this mean for seniors? Truthfully, I have no idea. I can only share my suspicions.

• Since the current mess isn’t just financial, I suspect this downward cycle will be both deep and long. Financially, the world is too inter-linked for anything to happen too quickly.
• If you are mainly in stocks, I wouldn’t anticipate much performance over the next year. The bottom of the stock market isn’t going to be the result of any daily spike. It will occur as the result of some external event in the middle of a long trough. The improvement out of that trough will be very gradual for a number of weeks. I suspect the current daily spikes are simply nervous, knee-jerk reactions.
• If you are mainly in cash, feel blessed that you have maintained the principal. However, the revenue you can generate from that cash will get less before it gets better. One-year CD’s may be a smart choice at the moment, because rates may not improve that much over the next 12 months.
• If you are on social security, the cost of living formula that penalized seniors last year made up for it this year. At 5.8%, that adjustment together with the lower energy costs that are starting to ripple through the economy, will help dealing with this coming year.
• With the outlook for cash so dim, I also intend to take another look at restarting the social security clock. Check out the . Such a move might be rash, but it is certainly worth doing the math.

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There is no question that age discrimination is very real. It’s not due to workers costing more or driving up health care costs. It’s due to fear.

Step back and take a look at your standard corporation, Stagnant, Inc., today. The principal job most employees are working at is survival, i.e. to look good and avoid blame. One of their biggest exposures in that job is the hiring process. A brilliant hire reflects well on them; a poor one is an exposure.

Enter the headhunters, the experts in ‘safe’ hiring. They are in the business of providing clones of whatever that manager considers to be a brilliant hire. Age is definitely one of the criteria, and it is going to be less than the age of the hiring manager. Certainly, the hiring manager does not want to feel threatened by someone with more market savvy and business acumen.

Unfortunately, this leaves Stagnant, Inc. with the ‘same old, same old’ orientation and vision. Their hiring practices not only insulate them from experience in their own field, but in other fields as well. Today, it is impossible for someone from the petrochemical industry to switch to manufacturing. But if they did, think what a different orientation they would bring to the job. Cross pollination would be at work, and innovation would be the result.

Innovation used to be the business skill that set our country apart. Is our current economic struggle due to a loss of innovation? Certainly, you see very little innovation sparked by major US corporations today.

In the face of this, what actions should a senior take?

1. Forget the large companies. Follow the innovators, i.e. young companies doing less than $25 million in annual sales. The owner doesn’t have the time or the temperament for fear. That owner simply has a thirst for market survival and success.
2. Research the small companies in your area and identify ten that are in a growth mode. Study those firms and their competition. Identify ways that facets of your experience can help them develop their competitive edge. Once you determine that angle at a particular company, you are no longer old, you are golden.
3. Once you have an angle, get aggressive. Visit their lobby. Pick up their literature. Walk out the door and explore the lunch spots in their neighborhood. Pick one and talk to your server about the company. They may know someone or something that can help.
4. Take a deep breath and check your confidence level. Attitude is everything. Everyone is impressed by competence and confidence.
5. Once you feel confident enough to that you have something to say, it might be smart to make a ‘cold call’, i.e. walk through their door and ask to see the CEO or their HR honcho. A good outfit will route you to an assistant.
6. Use your time with the assistant to convey and validate your understanding of the company’s issues. Because they are at the assistant level, they will typically try to convey their best knowledge. They will also take your paperwork and contact information.
7. If you are uncomfortable with the cold call, write directly to the CEO. Stress your competence in the area you believe is under performing. It is always your responsibility to make the follow-up. Never leave it to them.
8. In negotiations, be flexible. If you start out as a contractor or temp, you will limit their legal and compliance exposure while getting a chance to demonstrate your skill set. If the chemistry is right, they would be foolish to miss the opportunity.
9. Smile and get to work. You have a challenge awaiting you, and the CEO is watching.

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Lately, the news media has started to highlight the idea of selling your collected “stuff” over the Internet as a way for seniors to realize some additional revenue. This variation on the traditional garage/yard sale does have some definite positive aspects. Obviously, it also has some negatives, which you should be aware of before posting your item.

The very first thing you need for Internet Retailing is access to a digital camera. One picture truly does tell a thousand words. Without a photo, nothing will sell near its value.

The three most popular sites for selling items on the Internet are -

1. Craigslist.org, which is targeted at given localities and is entirely free for 99% of its postings. This is the site to use if you are selling something that you don’t want to, or can’t, ship. However, a craigslist.org posting can specify that the item will be shipped and include a charge for that service. Craigslist.org transactions are typically cash deals. Your posted price is the sale price.
2. Ebay.com, which is targeted by country and charges a fee for every posting. Ebay has many more categories for your items, but you are charged for each posting in each category. Although it is not usual, an eBay listing can specify that the item must be picked up by the buyer. Ebay.com transactions are generally credit card deals, and you normally are using their credit card service, PayPal.com, which entails a fee of about 3% of the sale price. You also must define multiple prices for the item, i.e. an initial price at which the item will be first listed, and a minimum price, which is the least amount at which you will sell the item.
3. Amazon.com, which permits you to open your own store. It can establish an Internet retail “presence” for your ongoing transactions.

Positives -

• Using the Internet, you are able to reach a much wider audience than any garage sale will ever deliver.
• You have the facility to change your listing at any time while it is published.
• Anonymity is maintained throughout the selling process. Once a sale is agreed to, however, the buyer and seller typically identify themselves.
• These services involve no (craigslist.org) or small (eBay.com) costs.

Negatives -

• With many Internet sales venues, it will be necessary to pack and ship your items. The cost of this activity might be greater than you suspect. To be safe, you have to assemble your packing materials, weigh your items, and determine your actual shipping costs before you post the sale.
• You need to do some research on prices to establish a good, fair price. Pretend you are trying to buy the item and search for any similar items for sale. This can be difficult for unusual items, but it is required if you are going to be successful.
• If your items are used, remember that “beauty is in the eye of the beholder”. If you want your item to sell, you have to identify a price that will be attractive to a buyer. If this is less than the value of the item to you, don’t sell it!

Internet retailing is something of an adventure. In a real, but limited way, you are opening your own store. If you love it, you may become an amazon.com e-tailer. If not, you will at least clean out a corner of the attic.

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This is a new one on me. I always thought that the start date for Social Security was final. Once you made your choice of a start date you were locked into that decision forever.

Apparently, that is not the case. Just like kids playing a game or weekend golfers, you do have the opportunity for a do-over. During the past year, 71 people restarted their Social Security benefits clock. It may have cost them a worthy sum, but they were actually able to do it.

Don’t rush out to your Social Security Office just yet. The nasty fly in the ointment is that you first have to write a check out to Social Security for the total of all of the benefits you have received to date. No wonder only 71 people made the choice.

But it may be worth going through the exercise just to see what would be involved. Here is the drill.

1. Go through your records and calculate the total amount you have received from Social Security to date. That amount includes all benefits, including those deducted for Medicare.
2. Calculate how much additional you would receive from Social Security if your start date was two or three months from now. The Social Security web site does not disclose specific rates but does explain how rates are adjusted for different start dates.
3. For comparison purposes, calculate what the relative interest rate would be to achieve a similar return on that total amount of money you would have to pay. If it seems to make sense for you, then the next steps apply.
4. Download Form 521, Request for Withdrawal of Application, from the Social Security web site and fill it out.
5. Visit your local Social Security office in person. Their web site also will give you the location of the local office.
6. Social Security will process your request, and -

• your benefits will stop almost immediately,
• you will receive a statement from them specifying the amount you will have to repay,
• you will wait 2-3 months for the higher benefits to start being paid.

Obviously, this deal is not for many people. However, if you have some cash available, it may be worth reviewing the option. There is an good article in Kiplinger’s Personal Finance that describes the process in greater detail. It may not be a deal for many people, but it is nice to know it’s possible.

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Once we became eligible, my wife used to laugh whenever we went out to the movies. I would very firmly declare “two seniors” at the ticket window to secure the discount, while she would observe that we were grouped together with the children on the discount scale.

In many ways, we seniors are coupled with children. Both are subjected to age prejudice for the same reason, i.e. we are not viewed as major players in contemporary society. Our experience can be seen as passé, and our contacts have diminished through sickness, retirement, and death.

We also receive the same brand of prejudice, i.e. the “look through” brand of prejudice rather than the more hurtful “look away” variety. Because we are not viewed as players, we are ignored rather than avoided. It is a kinder form of prejudice, but it is still very frustrating.

How do you deal with this mindset during a job search?

1. To combat age prejudice, the first person you have to convince of its inaccuracy is yourself. If you allow yourself to focus upon, or be intimidated by, this barrier, it has achieved its exclusionary objective. Do not let it compromise your action plan.
2. Humor is the most effective weapon against prejudice of any kind. In a few quick words, it both recognizes the reality of that prejudice while at the same time removing the venom from its stinger. Remember how, in a presidential debate, Regan deftly responded that he would not use his opponent’s youth and inexperience against him. That classic zinger defused the entire age issue in that race.
3. In a job search, revise your resume to downplay the dates and stress the experience. You also may want to omit some early work and focus upon more recent activities.
4. Don’t be afraid to spend some time in volunteer efforts. These situations can present you with an opportunity to demonstrate your skills, make new contacts, and heighten your sense of self worth while producing a benefit for others.
5. As has always been the case in a job search at any age, contacts are your most important resource. Leverage your own as well as your children’s.

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This decision can be quite different for seniors than it is for younger adults. For seniors,

• the tax deduction for mortgage interest is less attractive because, with mature or no mortgage payments and lower tax brackets, it can have little impact.

• the leverage of home equity is limited to reverse mortgages, the last will, or medical expenses.

• the headaches of home maintenance can be burdensome.

• the exposure to significant homeowner association assessments can be worrisome.

Although renting frees a senior from these issues, it comes with issues of its own.

• Rents can, and do, rise.

• The ownership of rental properties can, and often does, change.

• The level of care and maintenance exercised by any landlord can vary greatly.

• Neighbors can change more frequently.

Whether it is less expensive to rent or buy depends entirely upon the market. When rental properties are scarce and demand is high, the cost of owning might prove to be more attractive. If the balance is reversed, the opposite is true. An interesting financial analysis can be made by dividing the market price of a home by the annual rent of a similar home in the same neighborhood as described in a recent article in the Ny Times. The result of that calculation was referred to as the rent ratio. In this article, the author makes an interesting comparison that when the rent ratio exceeds 20, it is financially smarter to rent.

Finances, however, are only one part of the equation. Each day you defer the choice of where you want to “just be” carries its own cost as well. Your relationship to a view, an ambiance, or a neighborhood carries its own rewards.

How should you proceed in making this decision? Some practical steps are -

1. Talk to a banker or financial professional to determine what is possible financially.
2. Learn about the real estate rights and laws for renters in your state.
3. If you can afford to, let the decision be influenced by your lifestyle, e.g. freeing yourself from the need to rake the leaves from the yard.
4. Visit any rental property both during the week and on the weekend, and note the activity and friendliness of the people you see.
5. Let your final choice be guided by the place where you want to be each day.

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Yesterday, an article in the NY Times described the problems that a senior encountered with a reverse mortgage. What was bothered me was that the entire article referred to a reverse mortgage as a loan. Nothing could be farther from the reality.

Reverse mortgages must follow a set of rules established by the federal government. These rules are not entirely comprehensive, but they do have a broad scope, e.g.

• Not every financial institution offers these deals. There are government approved lenders for the different areas of the country.
• The different lenders will charge different fees, offer different valuations for your home, as well as the amount of your payments.
• The maximum amount for which you can “sell” your house is limited by a government scale that varies by location. It tops out at about $350,000 no matter what your house is actually worth. Typically, you should be offered about 75% of your home’s value up to that maximum.
• The bet the financial institution is making is that you will die before their payments to you exceed the amount that they can realize by selling your house after you die.

A reverse mortgage has its place, but that place is defined by a narrow set of circumstances. Specifically -

• You are effectively selling your house in exchange for the right to live in it until you die.
• Once the deal is done, you have ceded control over your house. Theoretically, you could regain the home by paying back everything you have received plus interest, but that is unrealistic. Effectively, you have sold your house.
• The bet you are making is that you will live much longer than the norm, and the total payments that the financial institution must make to you exceed the amount you could realize by selling your house today. In a very real sense, you are betting your house.

What’s a senior to do?

1. Depending upon your relationship with your children, it may be wise to let them know that you are thinking of selling your home. Since the home may form the core of any inheritance they might envision, they might choose to help you financially rather than lose the asset of your home.
2. Evaluate any total dollar offer as if you are selling your house . . . because you are!
3. If your house is worth more than the maximum permitted for your area, this deal is not for you. It may be time to sell the house, as beloved as it may be, and move into a rental.
4. If you have modest income, you may qualify for Section 8 housing, a government program that limits rents to a certain percentage of your income.
5. If the total offer sounds like a fair selling price for your house and your forbearers have a history of extended longevity, you may be among the small percentage of people for whom a reverse mortgage is a good deal.
6. If you do decide to apply for a reverse mortgage, plan to get three different quotes. Also, don’t be afraid to ask for help. The AARP can offer some independent help.

Some other sources of information include - Reverse Mortgage Summary, Reverse Mortgage Calculator and Comparison Tool, HUD Vouchers, and HUD on Reverse Mortgages.

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Recently, the daughter-in-law of a Still Clickin reader wrote to ask how to best help her mother-in-law through a difficult financial situation. She raised four issues which occur fairly often in communications across the generation divide - (1) the financial issues, (2) the senior’s fear of change, (3) family relationships, and (4) the tension imposed by the constraints of time, distance, and caring.

Some of the details involved follow.

1. Financial: Because the mother-in-law owned some real estate, one possibility to help with her cash flow was the choice of a reverse mortgage. That option would provide both some funds and a familiar setting. However, if those funds were not sufficient, the sale of that property together with qualification for Section 8 rental alternatives might provide her with a different possibility of adequate housing at an affordable level.
2. Fear of Change: Since her mother-in-law had recently experienced the loss of her own husband and another son, any change of her living conditions would make her feel extremely vulnerable - exposed to loneliness, lack of security, and loss of independence. Asking her to move from her current surroundings would be bound to threaten her further.
3. Family Relationships: It seemed that the daughter-in-law and her husband were the only family members that were actively engaged in resolving the issue. In such a situation, they had to recognize that ANY mother-son relationship comes with a history of emotions that can cloud any person’s ability to listen. It did not mean that anyone had done something wrong, but it did mean that there was a communication hurdle that had to be overcome.

One plan of action that could be suggested to help this situation is -
1. Create a simple summary of the financial situation highlighting the monthly shortage of funds.
2. Develop a set of options for the mother-in-law to consider. For example,

• Stay at her current location, change nothing and risk foreclosure in xx months.
• Move back to her own house with a reverse mortgage and risk ??
• Move into section 8 location #1 and live independently on $$ per month.
• Move into section 8 location #2 and live independently on $$ per month.

3. Identify a non-family member whom she trusts. It could be someone she has met at the hospital, a local church, or a friendly neighbor and ask them to present these options to her.
4. Allow her to make the choice. If she trusts this other person and the options are clearly presented, she should be able to make a good choice. By letting it be her choice, rather than her son’s decision, she retains her dignity and sense of independence.

Regarding the last issue of tension, I wish I could say handling such issues is ever easy. It is not, because in a family members care for each other too deeply. Sometimes that love really does hurt. But once you pass through the period and have proved your love, the truth and fidelity of that effort bring great peace.

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To get a senior discount, the most important thing you can do is to ask the question. Store or service clerks may not offer the information because they might fear the risk of offending someone. If you ask, however, you might be surprised at what you find.

Senior discounts are never required, but they can make good business sense for many merchants. Seniors can be the most reliable customers, they may shop during slack periods, and their wealth of experience can make them easier to service. In short, it can be a win-win opportunity for any merchant or service provider.

Make certain you carry some sort of verification with you in case you are challenged. (Don’t you just love to be carded?) Also, be aware that the age threshold may vary, e.g. 50, 55, 60, 62, or 65, by location. Each organization can set its own rules. For example, Kroger offers seniors a 5% discount on Wednesdays in some locations.

What seems to be the best approach?

1. Don’t be embarrassed to ask the question everywhere, e.g. hair stylist, barber, cleaners, theaters, travel services, grocers, tire shops, etc. Even if they don’t currently have a discount, they may decide to offer it to you just because you asked.
2. Sometimes it is called an AARP discount rather than Senior. Don’t let semantics get in your way.
3. Do your homework, especially for any major purchase. A higher priced location may actually offer a better deal for you once the discount is applied.
4. Some operations may only offer discounts on certain days or on certain lines of merchandise.
5. Don’t forget to include your local government and utilities. Some offer discounts to seniors or at least will freeze rates.

Some other places to look for information include Discounts by The Rubins, About Senior Discounts, Database of Senior Discounts - for a Fee, and AARP Benefits.

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