In Search For Empathy For The Unemployed

Unemployed Daughter With FatherMy no crying streak came to an end recently when I went to the Employment Development Department (EDD) to help out an unemployed friend and learn a little bit more about the process for my book.

Alex and I sat down in front of one of the public computers to get the EDD to resend a paper copy of the Continuing Claim Form.  Because Alex finally received his accrued vacation as part of his severance, he clicked “Yes” to the very first question of the online Continuing Claim Form questionnaire:

“Did you receive money other than wages (vacation, pension, etc) for the two week period ending XX/XX/XX?”

Instead of getting approved to receive unemployment benefits for the past two weeks like usual, the system denied his benefits and told him to file a paper claim form instead!  After verifying with the EDD in person, receiving vacation payment does not preclude one from receiving unemployment benefits if there is no set return date for employment.  Alex dodged a bullet and finally did receive his unemployment benefits a few weeks later.

During this process, I noticed a roughly 35 year old woman accompanied by her 65+ year old father (see picture).  I glanced over at her screen to see that she was editing her resume in order to apply for one of the many CalJOBS that were listed in the system.  The father sat quietly behind her daughter, waiting patiently for her to finish.

When the daughter finally submitted her resume to the various opportunities online, her father said, “Great job daughter, I’m so proud of you.

SADNESS AND HOPE

Winners And Losers Of Obamacare Hooray!

In N Out Double Double BurgersIn a close 5-4 decision, the Supreme court says Congress was acting within its powers under the Constitution when it required Americans to carry health insurance or pay a penalty!

The legislation is 1,000 pages long so I can’t even come close to understanding all the nuances of the bill.  All I understand is that those against Obamacare think the bill is a violation of individual rights by our big bad federal government.  In addition to the perceived violation of human liberties, the question is who is going to pay for universal healthcare?

Those for Obamacare say that the legislation is not a violation of individual rights but only a tax on people who don’t have healthcare.  Justice Roberts explains, “The mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the government taxes, like buying gasoline or earning an income.”  I guess that makes sense.  The other reason for Obamacare is that in a country as rich as the USA, all people should be have health insurance, rich or poor.

LOTS OF UNINSURED

There are supposedly 32 million people in America without healthcare.  Some of them think they are healthy enough that they don’t need healthcare.  Meanwhile, the large majority of people who don’t have healthcare is because they can’t afford healthcare!  Hence, the irony is that if you penalize people who don’t have healthcare with a 1-2.5% extra income tax hike a year, you are essentially making the poor even poorer!  They are already annoyed the government is making them abide by more rules!

Meanwhile, payroll taxes for small businesses and income taxes for the wealthier population will go up to fund Obamacare because income tax hikes on the poor are not going to cover the cost of the program. Supposedly most of the 32 million people without healthcare will get partial or if not full subsidy by the government to get healthcare.  Of course that is not going to make the people who have to pay more taxes happy.

If the poor and rich and independent people of America are all pissed off about Obamacare, who is really happy the bill may pass besides President Obama and the people who serve him?  If you have health insurance or can’t afford health insurance you’re likely unaffected.  Those who are stuck in the middle now need to watch out for the encroaching Sentinels!

WINNERS AND LOSERS OF OBAMACARE

What’s It Like Being Unemployed?

Unemployed Man On Dirty Beach In MumbaiMy name is Rachel, and I was unemployed for just a bit more than 6 months starting at the end of 2008, just when the “Great Recession” was in full bloom. The company I worked for was forced to close its office in my state and lay off all of its workers. I didn’t even qualify for severance since I’d started as a temp and was less than a month shy of the cut off date at the time of lay off.

The last thing I wanted was to be unemployed. The economy had already tanked, and now I would be forced to look for work along with 250+ of my coworkers with the exact same qualifications or better. I would have rather not taken unemployment, but the alternatives of moving cross country to live with my parents in the even worse economy of California or starve in the streets were unappealing.

I made about $500/week gross in unemployment benefits, which was the max benefit in my state. Had I lived on the other side of the state line, my benefit would have been reduced by $100/week. This matched my net, so I didn’t suffer any financial hardship being unemployed. The first $3000 you get on unemployment is tax free. After that, it is taxed at your income bracket. However, there is only a one size fits all option for withholding. It is a flat 10%. I decided not to have the government withhold anything, and it worked out well since my unemployment was spread out over two tax years. I got to take advantage of that $3000 tax break twice.

TRANSITION FROM EMPLOYED TO UNEMPLOYED

Can I Collect Unemployment Insurance If I Have Passive Income?

My friend and I have both developed a healthy amount of passive income over the years.  We are talking true passive income where we don’t have to do anything to make money.  It gets us excited thinking about passive income because we have the optionality of quitting our jobs, moving to some tropical paradise, and not die alone if we don’t want to!

My definition of passive income comes directly from CD interest income.  With an average yield of 4% (7-yr CD’s), my passive income isn’t sexy by any means.  But, it’s a great feeling knowing the principle will still be there and then some years from now.  Collecting dividends is not my idea of generating passive income, because you have to actively manage the portfolio as you could blow yourself up in a downturn.

We got to talking about the article, “Don’t Quit, Get Laid Off Instead“, and we began to wonder what if we successfully did engineer our own layoffs?  Would we be able to collect the ~$1,800 a month in unemployment income while generating five figures a year in passive income?

After speaking to people in human resources, a couple unemployed folks, and doing some searching online, I’ve come to the conclusion that it doesn’t matter if we make $100,000 a year in passive (unearned) income, we still get to collect unemployment insurance.

EXAMPLE WHERE COLLECTING IS PERFECTLY FINE

Let’s say you work for 20 years and diligently save a majority of your after tax income every year. You somehow amass $2.5 million and decide to go really conservative and buy ten, $250,000, 7-year CD’s with a 4% interest rate. The reason why you buy 10, $250,000 CD’s is because of the $250,000 FDIC guarantee limit ($500,000 for couples per account). Fair enough.

You love your job, but due to a restructuring, you are let go. The $100,000 a year you earn in passive income has no bearing on your ability to collect unemployment benefits since the $100,000 a year is a result of your past work.  You are no longer working to make that money, as that money is now working for you. Your company could technically refute the unemployment benefit claim upon realizing you earn six figures in interest income, however, you don’t have to reveal your personal finances to your employer. And if they do deny you, you have recourse.

The more interesting question is, “Should you collect $1,800/month in unemployment benefits if you have enough passive/unearned income to live on?” My answer is, absolutely yes. Just look at your W2 and see all the federal and state income taxes you pay.  Mine makes me absolutely sick. Your employer is happily paying you less than you could truly earn so they can pay for unemployment insurance.

There really isn’t a moral question to taking unemployment insurance while earning enough money passively to survive.  You and your company have paid for it after all those years you’ve worked, and if you’ve found yourself out of a job for reasons no more than performance related, then you deserve to collect some money back for once!

Recommendation: I encourage everyone to shop around for health insurance, especially with the Affordable Care Act debacle that is not proving to be cheaper for many people. The internet has really helped lower the cost of insuring yourself and your family. eHealthInsurance has some of the lowest rates and best coverage due to its largest network online. They are based right here in the Bay Area, and I have met a number of their representatives.

Photo: Jitsu Relaxing At The Four Seasons, HK.  SD.

Regards,

Sam

Should I Get Long-Term Care Insurance?

Old Man In SantoriniI spoke to my father yesterday and curiously asked him about his thoughts on assisted living facilities.  “Absolutely depressing!“, he said.  I couldn’t agree more that assisted living programs are depressing given it reminds us everyday about our mortality.

Who wouldn’t want to stay put in a home they’ve lived in for years instead?  I know I would.  Home is a special place that makes us feel comfortable and warm.  Ideally, you own your home outright in retirement and no longer have payments.  However, this is a topic for another post.

We can only hope that we remain healthy for the rest of our lives, but we’ll eventually need some help thanks to injuries or illnesses.  Some of us will have the financial strength to comfortably pay for our healthcare in retirement.  Others might have wealthy children to rely on.  But what if you do not want to burden anybody, and don’t have that much money to last?

Buying long-term care could be an ideal solution for your retirement years.

THE IMPORTANCE OF LONG-TERM CARE INSURANCE