One Thin Dime January 30, 2008January 5, 2017 HAIR CLUB FOR MICE As you may have seen on the Today Show yesterday, or read elsewhere, we may now be just a few years from being able to use stem cells to grow new hair follicles. It already works on mice; there is a large economic incentive to move full speed ahead with human trials. What this means is that the photo, top left – now about 15 years out of date – will by 2013 or so, with some luck, be about right. THE FALLING DOLLAR I went for my five-mile ‘power walk’ Sunday but stopped to ‘stretch’ against a nearby parking meter. This involves putting one’s hands on the top of the meter, planting one’s feet far enough back so that you form a sort of right triangle with the meter and the sidewalk; and, of necessity, burying one’s head between one’s outstretched arms and looking down. Got the picture? So there I am looking down at the sidewalk, thinking, ‘I really should stretch more, but it’s so boring and stupid,’ and what do I see but a dime. Well, even so, it was just a dime, and, doing a little instinctive calculus (sloth divided by greed), I am a little embarrassed to say I did not pick it up. I finished my 30 seconds of stretching (isn’t that enough?), clicked PLAY on my iPhone, and took off briskly through the streets of Eighteenth Century New York listening to Ron Chernow’s wonderful biography of Alexander Hamilton. That was Sunday. Yesterday, I went for the same walk, found myself at the same parking meter in the same stance – and the dime was still there. Do you see what I’m saying? No one else had picked it up, either! First pennies, then nickels, now dimes – will quarters (I still stoop for quarters) soon be next? What kind of currency have we? This is embarrassing! THE UNDERWATER iPOD If you power swim instead of power walk – but how could you? It’s so boring without something to listen to or some way to talk on the phone or read the paper as on a stationary bike – then this device might change your life. (Thanks, Jesse B.) THE $9,000 MASSAGE David Poneman: ‘You miss a crucial step in this psychological device you suggest to encourage frugality: Annuitize the annual obligation that comes with a life as a caffeine fiend. TIPS are the only truly prudent investment for retirees in these treacherous times, and they pay about 2%. So in order to support your Starbucks habit, you will need an additional $100,000 in your retirement nest egg to throw off that $2,000 a year.’ ☞ An annuity throwing off an inflation-adjusted $2,000 for life would not cost quite $100,000 once you reach retirement age. But you make a good point. Not only does the $4.50 five times a week mocha grande work out to be $2,000 a year (with tip) – which you have to earn $3,000 before taxes to produce. Once your earning years are over, you better have saved up several tens of thousands of dollars just to throw off enough cash to support this one expense. Jeff Rasmussen: ‘You stated that a $774,000 nest egg equals a $56,000 annual payout, which by my calculations works out to a 7.2% payout; and a $1,000,000 nest egg equals a $78,000 annual payout – 7.8%. Conventional wisdom says take no more than a 4.0% annual payout if you want your nest egg to last 30 years. How are you able to almost double the payout for a 30 year period?’ ☞ Good question. I was assuming your remaining principal would continue to grow at 6% after inflation and taxes (inside a Roth IRA, say) even after you had begun withdrawals. Using that assumption, the money lasts 30 years. To be on the safe side, it’s probably wiser to assume just 3% growth after inflation and taxes, not 6%. But I was trying to make “frugality” appear as attractive as I could (hey, anything to get folks to take their medicine) . . . without falling into the abyss of shameless trickery by (as is often done in these situations) ignoring inflation and taxes. (‘If you invest $5,000 a year for 40 years at 11%, you will have $2.9 million, which could then provide $333,000 a year for 30 years!’ – which is true if you can earn 11% after taxes and inflation, but you can’t.) So my example was on the aggressive side (in a good cause) but not, I think, over the edge.