From A Bloody Sock To A Bloody Mess

Curt Schilling was one of my favorite baseball players in the 2000’s.  Whether you love or hate the Red Sox, anybody who follows baseball surely remembers the Red Sox ending their 900 year title drought partly because Curt Schilling wanted it so bad that he pitched throughout the playoffs with a tendon so bad that his foot bled and turned his sock blood red.  Regardless of the pain and the blood, his performance helped the Red Sox win the 2004 World Series.

He was a dominant force before and after that and the ‘Bloody Sock’ is one of the icons that shows his talent and his heart of a champion.

Unfortunately, that didn’t carry through for very long in his post-baseball career.

After retiring from baseball, Curt decided to form a video game company.  He invested just about every penny he had saved from his baseball earnings into this company.

It went belly up.  Recent reports indicate that all of the money that he made from baseball is gone.

Imagine that.  Being one of the best pitchers in the game.  Having one of the most iconic pieces of clothing enshrined in the Hall of Fame (that’s where one of the bloody socks ended up).  Representing the force behind ending a decades long curse.

Only to lose every dollar that’s associated with it.

What a mess.

Here are the three things that I think Curt Schilling did wrong with the whole video game fiasco.

  1. Got involved with something that he wasn’t an expert at – I’ve heard that Schilling was a gamer.  He loved playing video games.  Cool.  Maybe he loved playing them and beat all the other players in the clubhouse and on the team planes.  I don’t know.  Even if he was the master at playing video games, I can’t really imagine that Curt Schilling was a seasoned video game developer.  Chances are he had people pitching him ideas and decided to act on it, but did so without the expertise and knowledge that someone forming this type of company and making this type of investment should have.
  2. The investment itself – Speaking of making an investment, what was he thinking investing everything into this company?  You often hear success stories of people starting a company with everything they have and turning it into a roaring success.  That’s all fine and good if you have a few thousand bucks, but he lost fifty million dollars.  Fifty million.  That’s insane.  If he wanted to get involved in the video game industry, fine.  Let him have his fun.  But, under no circumstance should he have invested any more than $10 million dollars.  He should have found investors to make up the rest, and if he couldn’t, maybe that would have clued him in that the idea he was working on wasn’t a winner anyways.
  3. The blame game – The story of the investment goes that Rhode Island made an investment into his company with the promise that the company would provide 450 jobs to Rhode Island residents.  When things seemed to be going south, someone in the political system talked about the problems.  This essentially shut the video game company down.  Schilling said that if this information hadn’t been disclosed, he could have found investors to keep things going.  In other words, he was putting his own mistakes on others.  I don’t buy it.  If he was playing the blame game at the end, chances are he was delusional the entire time that things were headed south and his money was going out the window.

Where will Curt Schilling go from here?  I have no idea.  Will he be penniless?  Somehow I doubt that.  But, maybe his retirement will be going around and charging for autographs.  I know many former stars can make a living doing that, but nowhere near the lifestyle and security that $50,000,000 (or even $40,000,000 had he followed my second point above) would have offered.

From bloody sock to a bloody mess.

And it really could have been avoided.

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Figuring Out the “Where” Of Retirement

Planning for retirement involves asking – and answering – a number of important questions. When are you going to retire? How are you going to save money for your post-career life? What investment vehicles (IRAs, 401Ks, money markets) will you use to insure the optimal amount of savings? Certainly, there are plenty of questions to ask and factors to consider whenever retirement comes to mind.

But while you’re busy answering the whens, hows, and whats of retirement planning, make sure not to forget an important but oft-overlooked question: the “where.” Specifically, where do you envision retiring when the time comes? You don’t need to have concrete and detailed plans, but it’s important to have a good conception of your retirement location when planning savings and spending during your work life.

The first step in addressing the “where” is to determine whether you plan to stay in your current home, move elsewhere (i.e. to a condo or smaller residence) in your local area, or move to another region of the country or the world altogether. Most people choose to stay in their local area out of contentment, familiarity, and family ties. If this sounds like a situation that you may find yourself in, you then want to determine whether you stay in your home or try to downsize your residence. My wife and I could never imagine leaving our home once our mortgage is finally paid off. Others, however, want to seek out a smaller living space or a more vibrant neighborhood once their careers are over and their children are grown. And still others, of course, will choose to move across the country in search of warmer weather and a more retiree-friendly lifestyle.

So what’s the value of figuring this all out now? While it’s always good to plan ahead from a logistical perspective, the real benefit of location planning is much more real: it allows you to answer the “how” question and determine exactly how much money you’ll need for retirement. The general consensus is that a retiree will need 70 to 80 percent of their annual income in order to retire comfortably. Use this number as your starting point. Then, factor in the “where.” If you plan to stay in your current home, expenses will generally be lower and you can bump down your estimate to as low as 60 percent. You may also be able to save less if you plan to move to a college town or to a rural area where the cost of living is lower. On the other hand, a move to a condo downtown or to a highrise in San Diego will likely push you to the 80 percent level and beyond. This isn’t simply the result of housing costs; it also reflects higher entertainment and meal expenses, two areas where retiree spending falls on all parts of the spectrum.

All this is to say that location matters when retirement is concerned, and that you can best plan and prepare by considering location sooner rather than later. You may find that your location allows you to save less than you originally thought. Or you may need to save more or retire later in order to live comfortably in your desired location. Either way, it’s good to ask the “where” of saving now so that you can enjoy the “where” of retirement later.

This is a guest post.

Copyright 2017 Original content authorized only to appear on Money Beagle. Please subscribe via RSS, follow me on Twitter, Facebook, or receive e-mail updates. Thank you for reading.

Drum Roll Please…What Was The Paycheck Like?

Last week I wrote about how I was curious what the first paycheck of the year would look like in light of the fact that things changed, primarily on the health care cost (unfortunately, there was no salary increase involved *sigh*).

To recap, we changed the plan option and also reduced our FSA contribution level, both as a result of the fact that we are not planning on having a baby, which was why costs were higher in 2011, and hopefully not having any other unplanned major medical expenses.  I wanted to see what the net effect would be on the paycheck and the results are in.

It basically resulted in around a 2% net increase in pay.

Which is sort of what I was expecting.

Not very exciting.

Unfortunately, what we’re spending it on is as equally un-exciting.  We’re really not spending it.

I haven’t bumped up my retirement contribution level in over three years, since we haven’t had any raises in that long.  This doubly hurts because the company used to match, but cut that out at the same time they froze salaries.  Especially in light of Sam’s recent article on where people should be in terms of retirement savings (note: we’re not close to Sam’s numbers), I wanted to increase our contribution.

So I did.  From ten to eleven percent.  This eats up about 70% of the ‘extra’ money.

The rest I want to use as a backup savings to our FSA card, in the event we go over for any reason, that we have money to back this up if we run out of dollars before the end of the year.

So, while I was excited to see what the paycheck would be, in the end it turned out pretty much on spot what I had expected, and the results are kind of a yawner, unless you are excited by extra savings and retirement contributions.

Which I guess I am and hopefully a few readers are too 🙂

What changes have you seen in your first paychecks of the year?

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With 401(k) Rollovers, It’s Not The Amount That Matters

When I started my first job out of college, it didn’t pay a lot of money.  I kept expenses low by splitting an apartment, driving my five year old car, and generally living the cheap, bachelor lifestyle.  As such, I was still able to contribute a few bucks to my 401(k) plan.

When I say ‘a few bucks’, I literally mean a few bucks.

Not only was retirement the last thing on my mind, but I wasn’t making enough to really be able to contribute a great deal.  The little bit I did contribute grew to a couple of hundred dollars.

I stayed at that first job for almost two years, at which point I realized it was time to start making more money.  So, I took a job that offered an almost 50% increase.

After a few months, I got a check in the mail from my old employer.  I guess I had received a letter or two telling me that I could roll my 401(k) over into my new employers plan or an IRA, but I didn’t do anything about it, so they sent me a check.

I had already started contributing to my new employer’s 401(k) plan, and it was actually a decent amount given the raise.  But, at the end of the year, the person that does our families taxes called and asked what had happened to the balance of the original 401(k).  I told him I had just taken the money, but that it wasn’t a big deal because it was only a couple of hundred dollars.

He wrote me back advising that I never do that again.  The lesson became clear when I read that it wasn’t so much the amount, it was the practice.

By taking the cash, I potentially established a precedent in my mind of saying two things:

  1. That a small amount of money is OK to take off the table when it comes to retirement planning
  2. Saving for retirement can wait until later.

The problem, as it became clearer to me in the subsequent years was as follows:

  1. The definition of ‘a small amount of money’ will change over time.  When I left that first job for the higher paying job, I got a 50% bump in salary and I thought I was flying high.  Yet, that amount is still less than half of what I make today.  At any point, the salary and what we define as ‘a lot of money’ will change. Thus, in the end, the balance in our retirement fund doesn’t really matter.
  2. The earlier the better when it comes to saving for retirement.  I don’t feel that much different as a person than I did when I made that choice, yet fifteen years had passed.  If I had continued to kick the can down the line, I would always be promising myself to save later, but who knows when that would have started?

I learned my lesson and I’ve never failed to roll over my 401(k) since, even though it’s transferred nearly half a dozen times.

As a young 23 year old, I couldn’t understand what was ‘the big deal’ about a couple of hundred dollar retirement account.

As a 37 year old, I can now say:

I get it.

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