Sunday, November 27, 2016

Managing CDs as an Annuity

Buying an immediate pay annuity that fixed the interest rate on current historically low rates for the next ten years bothered me. CDs can fix interest rates from one to five years and take advantage of rising interest rates.

Chart 31
Chart 31 shows the interest rates for five CDs worth $90,000. The other $10,000 is in the bank to pay current expenses out of a $100,000 pot; that annuities divide into ten parts plus the expected compound interest ($10,823 per year payments).

Chart 32
Chart 32 shows the interest earned by the CDs over a ten-year period corresponding to an annuity. I found the “2%” CDs actually earn an average rate of 0.82% over 10 years.  Over five years, that would be an average rate of 1.64%.

Chart 33
Chart 33 ladders the five-year CDs. It produces the same total interest as not laddering. There is a shift in the time the interest is earned. The jumbo CD earned 80% of the interest in the first five years; the laddered CD earned 75% in the first five years. Therefore you ladder when expecting higher interest rates and start with a jumbo CD when expecting lower interest rates.

If I were to reinvest the interest at twice the 2% rate rather than spend it, the jumbo CD scheme would yield $71 more over laddering for the ten-year period. This is not practical but does show again, the earlier you invest the more you make.

You can always cash a CD. Annuities are binding contracts for their duration. Until this month, I did not know of any insurance company offering a free liquidity rider. It would let me take out part or all of the remaining funds in the pot. There is a catch. I will get the “discounted” value of those remaining funds.

Chart 34
After several emails and telephone calls I found out what this means. Chart 34 shows the compounded interest value of $100,000 in ten years ($108.230). The insurance company holding the annuity could discount that value (the Future Value) along the very same route (0.82%) that created it (blue line) IF it would settle for the same CD rate of return (1.64%). It will not do that nor tell me what the discount rate is until I ask to cash the annuity in. The rate will be set at that time.

[The CD rate of 1.64, on Chart 34, turns out to be 1.59 with an annuity. That 0.05% is the difference between the annuity compounding each month and my CD model set up on annual payments. The annuity is more efficient. It needs less start up money.]

Chart 35
I like Chart 35 better that Chart 34. Chart 35 shows the cost of either cashing in an annuity or selling the payments to an annuity buyer. The new free liquidity rider seems to follow the red line. Selling the payments seems to follow the green line. I would be more likely to sell a lottery win of $100,000 for $65,000 than an annuity.

Chart 36 shows what happens with CDs if half the Present Value (about $60,000), after the end of the fourth year, is withdrawn ($30,220). This is one year before the five-year CDs mature.

Chart 36
I cashed the jumbo CD with a penalty of $500. I bought five new $6,800 CDs of different durations to continue the annuity model. That left $30,220 to withdraw. The net cost $1,337. This same operation could have cost between $15,000 and $27,000 with an annuity (Chart 35) unless you are good at negotiating.

The financial market Is very competitive. The stock market is very unpredictable on the short term, but is predictable on the long term. I see little difference between immediate pay annuities and CDs under stable conditions and there is absolutely no need to cash in or sell an annuity. Buy an annuity before interest rates fall and enjoy a steady cash flow. Buy CDs when interest rates are expected to rise and you manage the CDs.

We bought our annuity with the house sale money at a low point in the market. It covers my wife’s medical bills for ten years when added to my Missouri state pension and social security. The cost of residential care may remain fairly stable with the decrease in the number of people turning that age in future years.

Again, if there is any question about this post, please comment or send me an email.

Thursday, November 17, 2016

Residential Care Transportation

Residential Care Transportation

One of the most common items marketed with residential care is free transportation. My wife’s trip to the emergency room, the first month we were at Provincial Living at Columba, in an ambulance, cost us $200 to get there, and a taxi fare to get back.

Last night about 8:00 pm, the resident nurse, a residential care person, and I had a conference on what to do with my piercing earache. It was Saturday. An ambulance would be $200, or a lot more if the insurance failed to pay because the ER determined that the earache was not an emergency.

Drivers are available during the day and by previous arrangement to almost any event or purpose. They were in no way letting me drive my self.

That was something new. What do we do when we cannot drive? And when do we sell the car because it is a luxury we no longer really need? A year ago Columbia, MO, and Honolulu, HI, had the highest taxi prices in the country.

Columbia, MO, now has Uber. I downloaded it at noon yesterday. I played with it a bit. This morning I clicked Uber and found it already had me connected up with a driver sitting about a mile away. The fare was $5 to go from somewhere near here to the Boone Hospital (so I thought). I could not find the cancel button again. The car started moving on the screen. I turned Uber off and then back on. The car was closer.

I had ordered my breakfast, so I went out front to see if a Volkswagen Jetta had arrived. The concierge also watched. No car. I ate breakfast and returned to memory care. I explored Uber a lot more.

The trip history was from 522 E. Broadway (green dot) to 200 S. William St. (red dot). This was a different driver from last night, who I though I had cancelled in five minutes (and did) going to Boone Hospital. (Trip history: 301 Tiger Ln to I-27 N Stadium Blvd)

I later found a message, “7:22, Here Main Entrance.” Cancellation charge $5.00.

The trip I ordered, and cancelled yesterday at noon, and the trip that “just happened,” and I did not get cancelled this morning both have flaky trip histories. Each trip is about one mile long. The two trips are about three miles apart and much further from Provision Living. Whatever I did yesterday rattled Uber’s brain.

I just now clicked UBER to see what I did to receive a $5.00 refund, and the address 1800 Chapel Wood Rd is showing in the SET PICKUP LOCATION window. None of the trips or this address included 2333 Chapel Hill Road where we live.

Click the three horizontal lines in the upper left of the screen for help. Then click HELP. Then click  “Report an issue with this trip”. Then click “I had an issue with my fare.” Then click “I was charged a cancellation fee.” And see “We’ve credited your Uber account”.

Click the three horizontal lines for help. Then HELP. Then “A Guide to Uber.” Then “Taking a Trip”. Then “Cancelling an Uber ride”. Read carefully.

The software works. You can actually contact the driver by phone or email. You have five minutes to find out if the service is free of tobacco smoke and air fresheners or cancel and click another driver.

One of the RAs in memory care has a husband who switched from a smoke free taxi service (we did find one in Columbia before we moved here) to drive for Uber. He figures that Uber costs about 2/3 the cost of a taxi.

Uber gives you an estimate for a trip. Prices vary with the demand for service. Higher prices on busy times. At 3:05 the estimate to Boone County Hospital is $10-$14. “Pickup Time is Approximately 14 minutes . . . 13 minutes . . . 19 minutes . . . 15 minutes . . .” A map shows the trip. Now is the time to click “REQUEST uberX” and be ready to cancel if things do not look as expected. Hold down the cancel button until confirmation is requested. gives a good estimate with a better map for Uber but nothing for taxies in Columbia. Google ( to get estimates for taxies in Columbia, MO. [Enter Columbia, MO at top of screen]

At $25/round trip, our car insurance alone would pay for more than one trip a week. Day trips would require a car rental. Scheduled Provision Living trips are free to shopping centers, medical appointments, various attractions, and even (weather permitting) to the St. Louis zoo.

Enterprise will pick us up and drop us off for $40 a day economy and $45 a day for a car just like ours, a Chrysler 200C, as a one day rental. I need to renew my driver’s license in November. I will be 86 on December 6. [Done for 3 more years.]

As long as we have the car and I can drive, I can believe I am a free spirit (independent living second person) guest at Provision Living. I am not yet one of “them” but an observer of three developing communities that share this gigantic building.

I share a table in the main dining hall at noon near the windows where we look out to the North at the forested bank of the Missouri River through the windows of a tourist boat tied up for a spell (heavy rains) or grounded on a mud bar (no rain).

With enough tai chi and time in residence, time stretch’s and shrinks. Toss in the History channel and you can be any place and at any time. I think of my time again on the USS Billy Mitchell troop ship in the Pacific Ocean, where it was the flu that brought me to grief rather than an earache.

Thursday, November 3, 2016

Individual Fitness Program

Several muscle groups contribute to my back pain. Each needs to be treated appropriately. Whatever that happens to be. The only way I know is to try working with them to find out, with an instructor watching. 

Last week I started reviewing “do in bed exercises” I learned several years ago. I found some I could still do forever. I found one (a version of planking) that I could hardly get out of, it hurt so bad. I found one that markedly reduced my back pain.

Exercising to replace the normal activities in our lives that residential care is now replacing, needs specific activities that are fun (games and skill building) or that contribute an easily identified feel-good response or training effect. The training effect can take up to 2-4 weeks. 

Normal activities keep us in shape because they demand our muscle groups work for extended periods every day. If these maintain our strength and stability we are safe. Otherwise we need a few exercise periods to help keep in shape.

In residential care we need many more exercise periods. To mimic normal activities, we need to periodically tuck these little exercise periods into our daily routine (use the stairs rather than the elevator, if you have that choice).

Now to design an individual activity or fitness (feel good) program for each person, that to a needed extent, restores their neuro-skeletal-muscular system. It must be something the resident wants to do and can see positive results. It must provide the needed instruction to try something new to replace old normal ways.

Residents have the time to participate, as they no longer need the time for former normal activities. We need to replace housekeeping and working with activities that maintain our strength and health. This can now be done in valid ways (the gym and training) rather than as a token (the original fitness room).

This is a lot easier to write about than to actually do. My first attempt was to use the marching in place exercise in the morning while watching TV to warm up and clear my head (10 minute minimum). Add a few standing on one foot exercises for balance. Fill out a 30 minute period with tai chi and yoga stretching exercises (standing, seated, and lying down).

Each hour at the keyboard needs to include a 5-10 minute of exercises that I have learned to do (if only I could remember them). This is very important for my back and general posture. I have now gone over two hours this morning without stopping or doing the wake up session! My back is telling me it is time to get up and do something I should already have done.

[I ended up going to the gym for 30 minutes. I checked out the heart rate meters on five machines. They are as delicate as the ones at the Columbia ARC. They start with a high false reading and eventually settle down to a reasonable value. My $25 pulse oximeter works as well, but I must remember to bring it!]

Yoga and Muscle Groups

A couple of weeks ago I had an interesting surprise. Most surprises are a sharp jab in a newly detected or old muscle group; after which it works better. This time I saw double to my right side. 

Full Carpet Pattern
For years I have had the impression that a car was sliding over to my right side. If I turned my head, there was no car. Going farther back, I walked through the narrow tobacco smoked office halls in the New Science Building with one finger on my right hand held out to detect the wall before I bumped into it. I doubt if anyone knew how unstable I was.

We were seated in tai chi class working on a yogo eye stretching exercise.

Look straight ahead. Then only move your eyes. Pause 2 seconds after each move.

1. Look up. 2. Look down.

3. Look left. 4. Look right.

5. Look up and right. 6. Look down and left.

Starting Phantom Spot Location 
7. Look up and left. 8. Look down and right. Hold in this position.

A dinner plate portion of the surface is displaced up and to the left.
It slowly slides down into the correct position. Relax.

I write about this as one example of the value of exploring all muscle groups. In this case I have a set of eye muscles that are way out of balance, but never knew that. There are even exercises to correct far and near sightedness as well as stigmatism, if you are willing to stick with them the weeks and months that may be required to rebalance the muscles that control the shape of the eye ball.