The Boomer Chronicles

A Roth IRA can be an emergency fund. According to personal-finance guru Suze Orman, “With a Roth IRA, you can withdraw your original contributions any time you want. That’s regardless of age or how long that money has been in there, and without taxes or a penalty. If you need money, the best place to get it if you have an emergency would be from a Roth IRA if you have no other money. If there’s extra money, you can set up a separate emergency fund. But if you only have a limited amount of money, why not just set up a Roth IRA?”

I hate people telling me what to do, but I finally decided — for my own good — that I would consult a financial planner. I got the names of a few good ones from friends. My aim is to hire someone I can pay by the hour (not the kind who sells you all manner of stuff because they make a commission off of it). I have been winging the financial thing on my own for a long time, but I think I’d feel better if I could either confirm that what I am doing is right, or scrap everything and start over. Here goes…

So yesterday morning I was hanging around the house when my phone rang. Another 800 number. Some solicitor. Sometimes I erase that kind of call without even listening to it. For some reason, I didn’t do that this time. And am I ever glad for that. It was my bank calling to ask if I’d charged $278 for a railroad ticket in Austria. NOOOOO. The closest I’ve ever come to Austria is my grandmother on my dad’s side. Then I got patched in to the Fraud Lady, who immediately closed my credit card account.

In the afternoon I went with a friend to a shopping mall. She got busy searching for a pair of jeans while I wandered aimlessly. The cash in my pocket was all I had to spend. It was an odd feeling but it also made me think twice about everything I looked at. Do I REALLY need those shoes for $65? Do I REALLY need that Annie’s pretzel with the cheese dip, which would set me back about $3.50? Could I live without the T-shirt on sale for $14? Having cash only made me think about everything. It was a great experiment that everyone should try.

But it also reminded me of a time, back in 1998, when I cut up my credit card and lived without one for five years. Why? Because I had gotten myself into credit card debt to the tune of $22K. I paid off the debt when I sold my house and then only got another card when I was truly convinced I would never get into debt again. I’m happy to report that I completely pay off my balance each month, and have done so for the past six years.

I bought a house in the Boston neighborhood of Jamaica Plain in 1994. I sold it in 1998, hoping to use the windfall to spend time writing my screenplays. Of course, the money goes faster than you’d ever imagine, so I decided to stash away a bunch of the money instead of using it to support my writing.

Since 1998, real estate prices have soared, and I’ve never been able to buy back in at a level I was happy with. So these days I devour real estate news every day and I try to keep up with price changes in my neighborhood. I’m trying to decide when to pounce. I believe that we have a very long way until the housing and jobs markets correct themselves, so waiting to buy a house is not a bad thing. But renting, for me, sucks. I crave the independence of house owning. But there’s one silver lining to being a renter: I’ve been fortunate in finding a string of amazing roommates, all of whom have become friends. I always remind myself of this happy fact whenever I grumble about the renter’s life.

The report from the Center for Retirement Research at Boston College sums up the trouble:

The sharp decline in the stock market in 2008 placed the retirement security of many Americans at risk. Although the market has rebounded sharply since its trough in March 2009, as of mid-October 2009 the Standard and Poor’s 500 Index (S&P 500) remained 29.8 percent below its peak level two years earlier.

Are you in the half that’s doing OK, or the half that’s underwater? So far, so good for me. Although I don’t have anywhere near the requisite $1 million they say you need, I feel like I’m doing OK. Am I delusional? Maybe. Meanwhile, I’m working on developing a taste for Fancy Feast.

Here’s a link to a summary of the retirement study, and here’s the full retirement report.

This morning I read a piece by Nouriel Roubini, professor of economics at the Stern School of Business at New York University, that was astounding. If you think the economy is going to turn around anytime soon, you are mistaken. Above, I’ve linked to Roubini’s entire piece and I recommend you read it. In the meantime, here are a few highlights:

…We can expect that job losses will continue until the end of 2010 at the earliest.

While the official unemployment rate is already 10.2% and another 200,000 jobs were lost in October, when you include discouraged workers and partially employed workers the figure is a whopping 17.5%.

…If you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down…. The jobs just are not coming back.

Based on my best judgment, it is most likely that the unemployment rate will peak close to 11% and will remain at a very high level for two years or more.

I had a fantastic opportunity this morning to hear a talk by Dr. Lisa Lynch, a labor economist and chair of the Federal Reserve Bank of Boston. Her message was nothing but doom and gloom, and I ate it up. She confirms everything I believe. Housing prices must come down to earth. We are in this for the long haul. She said the  factors that drive foreclosures are  these:

• Life events, specifically, a job loss, a divorce or a health issue
• Rising home prices

Her recommendations for correcting the massive problems in the U.S. economy are:

• Extend unemployment benefits
• The states will eventually need to be shored up with financial packages
• Job creation

Lynch, who is also dean of the Heller School for Social Policy and Management at Brandeis University, was speaking at a Leadership Breakfast for the Boston-based Career Collaborative, an organization that “works to end working-class poverty by helping adults get and succeed at life-changing jobs.”

All the happy talk about the Dow hitting 10,000, all the talk about how the recession is “officially” over, and all the talk about “green shoots” makes me sad. Sad for the people who believe this stuff. The United States is not right around the corner from a recovery. That’s a fact.

Foreclosures will continue, retail sales will drop lower, jobs will be lost, businesses will be shuttered. Remember that the news industry is on a 24/7 cycle, so they will report every little up and every little down. An ‘up’ is not really an ‘up’ until there is a pattern of ‘upness’. If there is no pattern, then the ‘up’ was merely a blip. That’s how recoveries happen. Gradually. We’re in this for a long time to come.

Rant over.

I’m feeling kind of nostalgic today, so that brings me to today’s topic: metal detectors. When I was a kid I was always searching for a Get Rick Quick scheme. So, naturally, I became obsessed with metal detectors and eventually bought one. I think you have to be a total nerd to buy a metal detector, but there you have it. I never found anything of value with it and I ended up concluding that it was a waste of time. Except a few days ago, some guy actually found gold treasure. Terry Herbert, 55, an unemployed guy, was in a farmer’s field in Staffordshire, England, with his metal detector when he found a bunch of items likely dating back to the 7th century and worth over $1 million. But listen, friends, if you’re unemployed, don’t invest in a metal detector. Herbert spent 18 years metal-detecting and finding nothing of interest. This was a once-in-a-century kind of find.

Every once in a while my checking account drops to a dangerously low level. It’s mostly because I have a bunch of automatic deductions (car insurance, cable, utilities) and sometimes I’m caught short. Today I had a scare when I checked my balance and saw $47 in my account. I quickly arranged to transfer a few hundred over. I have the few hundred. I realize how lucky I am. I have a job, no debt, and good health. Being the kind of person I am, I quickly thought about “What if I lost my job? What if I got sick?”