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Q: In your column you frequently recommend taking a lifetime pension and not a lump sum. I could understand not putting the pension lump sum at risk, but it seems to me that taking a fixed pension over, say, a 25-year retirement has some problems. First, since there are no cost-of-living increases, the pension checks will remain fixed and won't keep up with inflation. Second, if something should happen to me and my spouse, the pension does not pay into our estate and benefit our heirs. Third, should the company fail and be unable to meet its pension obligations, we could lose out. So I would favor taking the lump sum and investing it in very safe assets, designed to produce income to us similar to what the monthly pension checks would have been. Am I missing something? -- P.K., Tucson, Ariz.
Q. I recently purchased a large (for me) amount of the Lehman 1 to 3 month Treasury bill ETF. How would you estimate the risk of that investment in light of Lehman's current financial position? Is this still safe, based on the Treasurys? Or is it high-risk because of being with Lehman?---L.B., by email
A.Not to worry. You’re nowhere near the wreckage. The Lehman 1-3 month Treasury bill ETF (ticker: BIL) is based on an index Lehman produces. The actual ETF is a SPDR (Standard and Poor’s Depositary Receipt) sponsored by State Street Global Advisors.
Q. I am 40, single, and my estate is worth around $300,000. I have never been married. I am thinking of getting married in the near future.
By Scott Burns
Q. My understanding of Social Security is that your benefit is based upon an average of your last three years of earnings. My wife (age 60) would like to draw at age 62, using savings as a bridge from now until then. She is currently earning about $150,000. If she took some part-time work for a year or two, is there a way to keep that diminished income out of the average? ---G. L., by email from Salem, OR
A. Social Security benefits are calculated on a much longer time basis, all adjusted for inflation, using a complicated formula. The formula uses your highest 35 years of earnings.
SAN DIEGO. “License to Chill” glides by a wonderful sight in San Diego harbor. Hundreds of sea lions, basking at leisure, occupy their own private resort, a long dock that is anchored out in the harbor. Respectful pelicans, cormorants and gulls mingle carefully, searching for inconspicuous resting spots.
Not far away, the “sausage defense” protects a portion of the naval base. It’s called the sausage defense because it is a long chain of large inflated objects with a strong resemblance to… sausage links. Think of it as the Jimmy Dean anti-terrorist ring. Looking toward the city we can see the skyscrapers of modern San Diego, the constant arrivals and departures from the airport, and the amazing bulk of the aircraft carrier Nimitz, now being restored. This is a beautiful bustling harbor.
Presidential candidate Barack Obama speaks with a broad brush. He explains the current crisis with typical overgeneralization. It is, he says, the result of “eight years of failed Republican policies.”
Republicans take the opposite tack. They follow a narrow trail from the Community Reinvestment Act. It required banks to make “affordable loans” to poor credit risks. From that, the trail goes to the profit (and bonus) engine at Fannie Mae and its major contributions to leading Democrats--- who happen to include Barack Obama.
As Strother Martin famously said in one of the late Paul Newman’s best movies, “What we have here is a failure to communicate.” (“Cool Hand Luke,” 1967)
