The Pension Couch: Pension Buyback or Freedom Buyback?

Posted on 16-November-21 by Grumpus

Based on the title of this post, can you guess which article on the Golden Albatross blog has the most views? If you said The Pension Series (Part 17): Buying Years – A Case Study, then have a beer on me. I promise I’ll pay you back when I get my next US $20 royalty check from my publisher! In any case, the contest isn’t even close. Part 17 has triple the number of views than the second most-viewed post, The Pension Series (Part 3): What Is Your Pension Worth?. It’s probably as close to viral as one of my pension-related posts will ever get. Although, it did this over two years instead of two weeks. I guess that means a lot of readers have access to a pension buyback.

As I describe in Part 17, a pension buyback (aka buying back years) is a process through which pensionable workers can transfer the number of years they worked in a former pension plan into their current pension plan through a cash purchase. This allows the pensionable employee to increase tenure (in the eyes of their current pension system) when the value from their previous pension doesn’t transfer over. Therefore, it makes a pending pension annuity from the current pension plan more valuable. As a result, buying back years isn’t typically cheap. Pensionable employees with this option need to determine if the purchase is worth it.

The option to buy back years isn’t offered universally by pension plans. If you want to know more about the basics of a pension buyback, and how to calculate if it’s worth it, I encourage you to read Pension Series Part 17 if you haven’t already. Doing so will boost your understanding for the remainder of this article … and increase those view numbers even further! Continue reading →

Worth vs. Worth It: Homeownership

Posted on 06-October-21 by Chris Pascale

A Word From The Editor

Guest post time! This article is another from friend of the blog, Chris Pascale. Never one to shy away from the controversial money topics, Chris takes on the homeownership versus renting debate. He does this by comparing the running costs of homeownership to renting over decades. In doing so, Chris concludes that while owning the property in which you live is usually a money-losing proposition, it’s a vastly smaller money-losing proposition than renting. Therefore, since we all have to live somewhere, owning is the most efficient use of one’s housing money.

Chris’s cost comparison methods are vastly different from my opportunity cost method, which determined my first home’s $750K opportunity cost. While I focused on what my down payment money could have been doing, Chris concentrates on the housing option with the least cost associated with it over time. Mine was very much a “property as investment” argument, while he makes a “most bang for the smallest buck” argument. Same topic, different points of view. We value differences of opinion at GM HQ, especially when backed up by numbers. That’s a royal “we” since GM HQ is still a one-man show.

Financial Independence (FI) enthusiasts who like to optimize their financial decisions for efficiency may find Chris’s homeownership argument particularly persuasive. Where FI adherents often look for the financial option with the 1% better outcome, Chris’s analysis shows that owning creates financial savings with a much higher order of magnitude. Not only that, but he presents his findings in a much more concise manner than I ever could.

Golden Albatross readers will recognize Chris’s “worth vs. worth it” argument as well. He’s good at relating his Life & Money articles to the basic value proposition this blog is built upon. For Chris, homeownership is very much “worth it.” So, with that introduction out of the way, sit back and enjoy the read. As always, the words are his, but the pictures and comments are my attempt to provide some levity!

— GM Continue reading →

A Guest “Worth vs. Worth It” Post: Is It Worth Your Life?

Posted on 16-December-20 by Chris Pascale

**Is Your Crap Really Worth It? By “It” I Mean Your Life**

I was at an estate sale. Among the hundreds of cups and glasses, I bought a dozen for $3.

Inside the house, passing a glass-encased wall display of ceramic dolls, I went to the basement. It was wall to wall hardcover popular novels – read once and then occupying shelves beyond the owner’s death. I wouldn’t buy them for a quarter, and the library wouldn’t take them for free. At $20 retail, there was at least $10,000 worth of purchases.

Leaving the basement and seeing more commemorative glass sets for sports teams and other themes, I saw that this was a theme – whatever they had, they had a lot of.

All of it cost money, and each purchase was a trade-off that initially appeared to be cash for a Stephen King book, a New York Mets beer stein, and a fourth coffee maker. Continue reading →

Worth vs. Worth It: Stretching Out The Family Van

Posted on 14-June-20 by Chris Pascale

Guest Post Time!

Howdy Folks! Friend of the blog, Chris Pascale, slipped me this article a few weeks ago to tide everyone over until I get another break from my master’s program. He took my Worth vs. Worth It decision process (which I developed for the pension decision and showcase in The Golden Albatross book) and applied it to his decision to replace his family’s van. Whereas my original article explained the theory, this post shows you the math. It’s a quick and easy read that will help you the next time you consider buying a car. It was worth my time to publish, and I believe it’s worth your time to read it.

— Grumpus Maximus Continue reading →

The Golden Albatross vs. The Insurance Industry (Part 2): Annuity Valuation Case Study

Posted on 19-February-18 by Grumpus

Insurance Annuity Valuation Question

What me worry?

A reader, whom I’ll call Lady J, recently asked me if I could value her future insurance annuity scenarios vs. her current cash-out value. She wanted an annuity valuation done in the same manner as the Pension Lump Sum Case Study I wrote for the Pension Series. The question intrigued me. My initial reaction was, yes, I could. Since a Defined Benefit Pension (DBP) is just another phrase for an annuity; I didn’t think it would prove too hard if she could provide the appropriate details. I told Lady J as much, and she promptly supplied me with details I needed.

Surprisingly, the annuity valuation proved both easier and harder than I initially thought. Easier in the sense that based on the numbers provided by Lady J, my Master Pension Value Calculator spit out an answer to her question in no time. Harder in the sense that once I reviewed the terms of her annuity policy, and the facts surrounding her initial investment, it forced me to ponder numerous “what if’s”. Thus, consider this article in two parts. First, I walk through the facts surrounding Lady J’s situation and the process of annuity valuation. Second, I address a few different issues, both good and bad, I noticed with this annuity. Continue reading →

Mental Health: Sad Work And Stuff

Posted on 21-January-18 by Grumpus

I Am Grumpus Max-bob-bomb …

…and I am here to make you think about work and get sad and stuff.

Part of the side effects from my PTS means the wrong damn song, movie, book, or thought can be problematic from time to time. This happened recently. While I was typing an article about pensions and streaming some music, a sad song played over my headphones. That’s not always an issue, except I’d never heard this song before, so I didn’t know to skip it. The song’s subject related to one of the causes of my PTS. As a result, I scrambled for the volume control before tears erupted uncontrollably. Alas, I was too slow. As a result, I spent the next few hours trying to control the flood of emotions that washed over me.

Unlike my previous articles on my mental health and job struggles, this article isn’t about anger. It’s about sadness. In true Grumpus Maximus form though, the article is still relevant to the topics of personal finance, careers, and the Golden Albatross. Yet, much like my Worth vs. “Worth It” article, this story is raw and personal. Even more so than my previous article in fact. If that isn’t your thing, I completely understand and don’t hold it against you. Click away now.

For those who choose to stay, consider yourself warned… Continue reading →

Track Your Money (Part 3): Passive Tracking

Posted on 31-December-17 by Grumpus

A Passive Tracking Experiment

I’m ready to blow up this lab whenever you are!

In case you can’t tell from my title, this article is a follow-on to my previous two “Tracking Your Money” posts. In the first article, I reviewed my historical use of various software applications to track my money over the past 20 years or so. In the second, my brother (Grumpus Brotherus the Younger) reviewed the software application called You Need A Budget (YNAB).

If you did not read the first post in this series, you probably should. I don’t just say that because my brother’s post sucked (it did), and I think mine is much better (it was), or I want the extra site traffic (I do). No, I say that because I actually made a few worthwhile points in the post … if I do say so myself. However, if you’re unwilling or unable to go to the post, let me provide you a re-cap. Continue reading →

An Unintentional Meander Up Grumpy Avenue (Part 2)

Posted on 30-July-17 by Grumpus

Grumpus the Story Teller

Gather round the campfire kids. Did I ever tell you the story of how I lost $766K?

If you are one of my three avid readers, then you may have wondered if I was ever going regale you with more (true) stories about my rather substantial money mistakes. Well wonder no more, the time has come. And while this story does not have the “I sold 300 shares of Amazon in 2004 to buy a house in the height of the market in Southern California” hook that An Unintentional Meander Up Grumpy Avenue Part 1 did; it does have an otherwise avoidable $20,000 dollar tax bill waiting at the end of it. Not as memorable as my $750,000 opportunity cost? Fair enough, that sum still makes me light-headed. However, what if I told you I paid someone for the privilege of the $20,000 tax bill? And it was potentially avoidable? Stick with me and by the end of the story if you are not busting out the tried and true “Man that Grumpus is an idiot” line, then I promise you a full refund on your time and a beer next time we meet.

Continue reading →

An Unintentional Meander Up Grumpy Avenue (Part 1)

Posted on 02-July-17 by Grumpus

“You only have to do very few things right in your life so long as you don’t do too many things wrong.” — Warren Buffett

Learning Lessons the Hard Way

In the fall of 2004, I sold 300 shares of Amazon stock as part of a down payment on my first, and to this point only, home. Wait, before you say “Man, that Grumpus is an idiot” there is more to the story. I bought a home in Southern California (SOCAL) only eighteen months before the height of the housing bubble. For those of you unfamiliar with historical SOCAL housing prices, I’ve posted the below chart of what housing prices did in San Diego from 1987 to 2015:

Yep, that’s bad. So bad, in fact, that my home’s value only recently passed the original price for the first time since the bubble burst. In the meantime the amount of Amazon stock I sold in 2004 would have done this: