You probably are using too low of Safe Spending Rate (SSR%) for your calculation of your annual Safe Spending Amount (SSA). (See Chapter 2, Nest Egg Care (NEC).) My schedule of age-appropriate Safe Spending Rates (SSR%) is too low. (See Graph 2-7 and Appendix D, NEC. That means 1) you could pay yourself more than you’d calculate using the data and steps in NEC; or 2) you can take consolation that your plan is even safer than you thought; you have more years of guaranteed full withdrawal for your spending than you may have originally planned for. The purpose of this post it to explain how I conclude the age-appropriate SSR%s I display NEC are too low.

 

== Review: our plan and SSR% in late 2014 ==

 

Patti and I picked 19 years – her life expectancy then – as the number of years we wanted for ZERO CHANCE of depleting our portfolio. (See Chapters 2 and 3, NEC.) I put our inputs into my favorite Retirement Withdrawal Calculator (RWC), FIRECalc, as I describe in Chapter 2, NEC. I iterated the spending rate that gave me 19 years of full withdrawals for spending in the face of the Most Horrible sequence of returns ever. That was a spending rate of $44,000 per $1 million initial portfolio. I can run the same inputs in FIRECalc today and get the exact same result of 19 years. That’s not a surprise, since no sequence has supplanted the Most Horrible sequence from six years ago, the sequence of returns starting in 1969.

 

== What’s different now? ==

 

I assert I have a more accurate spreadsheet for that Most Horrible sequence than FIRECalc’s. The first four of these have a small cumulative effect; it’s the last factor below which I described in last week’s post that makes the significant difference.

 

• I use a better data source for real – inflation-adjusted – bond returns over time. FIRECalc’s default for bond returns in any year is “Long Interest Rate”, and that’s not the same as annual real return rates that I get from the most recent version from this source.

 

• I use the average of Long-term and Intermediate-bond returns for the sequence of bond returns. I think this is more representative of what an investor will own when he our she invests in bonds. Patti and I own a US Total bond fund – IUSB – which holds Short-term, Intermediate-term, and Long-term bonds – more than 13,000 of them.

 

• I lower the default input for investing cost to 0.10% from FIRECalc’s 0.18%. The 0.18% may have been appropriate for the expense ratio for index funds years ago, but fund costs are much lower now. For example, the total weighted expense ratio for Patti and me is about 0.05%

 

• Last week I showed the effect of a better withdrawal tactic than assumed in basically all RWCs: sell solely bonds when stocks crater and rebalance your portfolio in normal years to the resulting stock vs. bond mix – not back to your original design mix. In the example I showed, that tactic adds several years of safety to your financial retirement plan.

 

== 4.40% is 22 years of full withdrawals ==

 

I use the same inputs to my plan in December 2014, and my spreadsheet shows that 4.40% SSR% gives 22 years of full withdrawals for spending, not 19. My original plan was safer than I had planned for! This is the spreadsheet.

 

== 19 years of full withdrawals is 4.70% ==

 

Our decision for 19 years of ZERO CHANCE to take a full withdrawal for spending was appropriate: in Chapter 4, I show the chance of 1) one of us being alive after 19 years and 2) riding along a Most Horrible sequence of returns that deplete a portfolio in a future year is about 1 chance in 50. (And that’s without taking corrective actions during retirement; we would know very early if we’re riding on a Horrible sequence.)

 

I iterate the constant dollar spending amount in my spreadsheet until I get to 19 years of full withdrawals. That’s 4.70% SSR%. That’s about 7% more ((4.7-4.4)/4.4) than I used to calculate our spending from our nest egg in our first spending year – 2015. This is the spreadsheet.

 

== What are the implications? ==

 

I could argue that I should revise the Graph 2-7 and the data Appendix D to reflect greater age-appropriate SSR%s. The line on Graph 2-7 would shift upward. But I don’t plan to make this argument. I don’t want to argue with the calculations in FIRECalc; I just conclude that FIRECalc errors by being too conservative. I have more confidence in using the current age-appropriate SSR%s in NEC; I have more confidence that WE AREN’T GOING TO RUN OUT OF MONEY!

 

 

Conclusion: I used the results from FIRECalc to calculate age-appropriate Safe Spending Rates (SSR%s) in Nest Egg Care. I now conclude those rates are conservative.

 

I built a spreadsheet that perform the exact same math as FIRECalc to the track portfolio value year-by-year for a given sequence of returns and set of inputs, such as spending rate, mix of stocks vs. bonds, and investing cost. I assert my improvements result in a more accurate tracking and understanding of the risk of failing to be able to take a full withdrawal for spending in a future year. I find that FIRECalc is pretty darn conservative. When I used FIRECalc for my plan inputs in late 2014, it told me I should use 4.40% SSR% to lock in 19 years of ZERO CHANCE of full withdrawals for our spending. (I would find the same 19 years with those same inputs today.) My more accurate spreadsheet says I should have used 4.70% – that’s about 7% more.

 

I have a new rule I recommend for selling bonds for your spending. The rule results in a safer financial retirement plan. It can add several years to your ability to take a full withdrawal for spending. The purpose of this post is to explain the rule: in most years, I will sell stocks and bonds for the upcoming year and rebalance back to my design mix of stocks. In rare years – when stocks steeply decline – I will solely sell bonds and use the resulting mix as my design mix from that point on. This rebalancing tactic results in the improvement. This rebalancing tactic is refinement of Chapter 7, Nest Egg Care (NEC).

 

Reminder: bonds are insurance in your financial retirement plan. You’ll sell a greater amount of bonds when stocks perform poorly relative to bonds. You’re selling more bonds to give stocks time to recover. That’s it. You aren’t holding bonds to somehow smooth out peaks and valleys in the total value of your portfolio over time.

 

== Two weeks ago ==

 

Two weeks ago, I compared two approaches to selling bonds.

 

• The “usual” (Usual) approach is to sell stocks and bonds for your spending in proportion such that you get back to your design mix of stocks vs. bonds at the start of each year. If you picked 80% as your design mix, you’d sell the amount of stocks and bonds for your spending that gets you get back to 80% start of each year. You’re getting back to your full complement of bond insurance at the start of each year. This is the approach I’ve followed for the last six years.

 

• With a “Bonds first” (Bonds First) approach, you set an initial mix – let’s say 80% stocks – and then sell bonds for your spending until you’ve depleted them. You’re not really viewing bonds as insurance in this approach: you’re depleting them year-by-year unrelated to good or bad stock returns. After a few years your portfolio is 100% stocks. I showed that Bonds First provides the same level of safety as Usual – both provide the same number of years of full withdrawals for your spending in the stressful example I displayed.

 

== Test another alternative ==

 

I made up another rule to test. This is a “hybrid” (True Hybrid). 1) Use Usual in most all years: sell stocks and bonds for your spending such that you have rebalanced back to your original design mix before the start of each year. 2) Use Bonds First – meaning you solely sell stocks for your spending in a year where stocks have gone off the rails; I arbitrarily pick -10% real decline or worse return for stocks as off the rails requiring an emergency action. 3) But then use the resulting mix – a greater portion of stocks – as the new design mix. Rebalance back to that mix, not the original design mix in future years.

 

 

== Result: two more years of safety ==

 

I use same spreadsheet from two weeks ago to tell the story. That’s the maximum stress test that shows the weaknesses and strengths of decisions you’ve made for your financial retirement plan. The spreadsheet uses the Most Horrible sequence of stock and bond returns in history – starting in 1969. I use the same initial choice of stock mix of 80% that I used two weeks ago for the comparisons. I’m using a time horizon of about 20 years.

 

 

True Hybrid is superior. It gives two more years of full withdrawals for spending than Usual or Bonds First. That’s a meaningful improvement.

 

I get the summary information and conclusions from the detail of three spreadsheets.

 

#1. Usual is the reference case: sell stocks and bonds for your spending such that you are back to your design mix (80%) at the start of each year. (This the same base or reference case from two weeks ago.)

 

#2. “Not quite True Hybrid.” The rule is to sell only bonds when stocks decline by -10% or worse. That will result in a mix of more stocks at the start of the next year: 83% in our example. But in this option, you rebalance back to your initial design mix (80%) at the start of all other normal years. This isn’t significantly better than #1.

 

#3. True Hybrid is #2 with the refinement that you do not rebalance back to your initial design mix at the start of all other years. You use the resulting mix after you’ve solely sold bonds for your spending – 83% after the first year in our example – as your new design mix. Stick with this mix in the future. This could change again – to an even greater mix of stocks – if you hit another year of -10% return for stocks and therefore only sell bonds.

 

You may or may not use up all your bond insurance, depending on the number of craters that you hit. In spreadsheet #3, you would use up all your bond insurance – have a 100% stock portfolio – after hitting four HUGE craters in nine years! That’s a VERY UNUSUAL number of craters.

 

Mentally, I’d be Okay with True Hybrid and 100% stock portfolio in the future. With True Hybrid, I’m using bonds in the way that makes more sense  to me: when I really want to avoid the damage of a steep drop in stocks.

 

== What’s happening ==

 

What’s happening with True Hybrid? You’re solely using your insurance in a very unusual year for stock returns, and you are not renewing it back to its full value after that year. You are implicitly assuming it is rare to hit a year of -10% real return for stocks. It is rarer to hit two and very rare to hit three throughout your retirement. You’ve hit a Most Horrible year. You’ve used some insurance. Don’t buy more insurance. Move on, expecting it will be rarer to hit another crater. Keep a bit more in stocks to give yourself the benefit when they recover, and they will recover. The result is a healthier portfolio.

 

Hopefully none of us see a year when stocks crater and we have to use this Rule. If you calculate your Safe Spending Amount (Chapter 2, NEC). for the upcoming year on the same day that I do – immediately after November 30 each year – you don’t have to remember how to execute this rule. You’ll see that in my post the first week of December.

 

 

Conclusion: You can improve your financial retirement plan by the way you sell bonds for your spending. I show an approach that results in a safer plan. 1) You solely sell bonds for your spending when stocks have gone off the rails: I use -10% real return as a guideline. 2) you rebalance thereafter to the mix of stocks vs. bonds that results from this action. In the severest stress test, this approach added two years of ZERO chance of depleting a portfolio. That’s a big improvement.

I just read this headline (I’m writing on Wednesday afternoon.) that the Senate may agree to increase the debt ceiling. That would avoid a government shutdown, no payments of Social Security and, potentially, the default of US payments of its debt obligations: interest on billions of US Treasury Notes and Bills: Republicans are expected to back a bill to avert a shutdown …. That would avoid what I think would be a DISASTROUS event: the loss in faith and trust in dollar. I give my opinion as to what a US default might mean.

 

== Money is a fiction =

 

Years ago I read the book Sapiens: A Brief History of Humankind by Yuval Noah Harari. I learned a lot. I originally saw videos before the book was translated to English in a course at Coursera. I no longer find the course. I think these are the same videos from 2013.

 

Only mammals have a neocortex – “new bark” covering over our older, more primitive brain. Humans have a very large neocortex and the ability to imagine much more than any other mammal. Our ancestors in Africa needed to imagine. Those that first had this capacity could see reality, go back to their band, describe place where they just saw a dead elephant. They could imagine how to cooperate to be able to scavenge meat and keep other predators away. Those best at this found more food, lived longer, and had more off-spring. That’s part of evolution.

 

Our brain builds imagined realities largely based on stories. National boundaries, basic human rights, corporations granted the rights as individuals, and rules and laws are imagined realities that guide how we act. Our economies would not work if corporations didn’t exist in our imagination. They need capital to grow. They tell a story of how money you invest with them will be used to fuel their imagined growth. We imagine how much more valuable this company will be in the future, and we invest.

 

Money is an imagined reality. A fiction. It did not exist before the advent of agriculture. Money is something that is valuable, because I think you think it is valuable. You think money is valuable because you think I think it is valuable.

 

Almost all money in history stamps or prints images of famous dead people to give an image of importance, trust and value. We imprint images of the power-center of government on our money. We state on our paper money, “This Note is Legal Tender for All Debts, Public and Private.” Sounds good, but what the heck does that really mean? The implication is that our US government backs our money.

 

This is a great podcast about how money is an invented, imagined reality, “The Invention of Money” from This American Life. This first episode tells how a change in the story about money changes its value: “The Lie that Saved Brazil.”

 

== The story if we don’t pay our debts ==

 

If the government defaults on its obligations, we’re changing the story that gives value to money. That different story can convince others that our money is not that valuable. I remember that banks failed to pay interest on overnight lending in September of 2008. The trust that banks had in other banks was shaken. Paul O’Neill, former Secretary of the Treasury in 2001-2002, was quoted in our local paper as saying our economy “could have evaporated” at that point. I’ll never forget that word, EVAPORATED.

 

 

Conclusion: Money is an imagined reality – a fiction. Governments go to great extent to build a story as to why you can trust their money. My stomach churns when US politicians talk about not extending a somewhat arbitrary debt ceilings for legislation they’ve already passed. They’re playing with FIRE. They run the risk of changing the story as to why money has value. That could be a DISASTER for all of us.

My friend Jay sent me an article years ago that argued the best withdrawal strategy for retiree was “Bonds first.” You set a constant dollar withdrawal amount for spending and an initial mix of stocks and bonds. You sell bonds for your spending until you’ve depleted them; that then leaves you with a 100% stock portfolio that you’ll then sell for your spending. This differs from the normal or “Usual” strategy that one can evaluate in a Retirement Withdrawal Calculator (RWC) like FIRECalc: all RWCs assume that you rebalance back to your target mix of stocks vs. bonds at the start of a year. The purpose of this post is to examine “Bonds first” to see if that tactic gives the same safety – the same number of years of full withdrawals from a portfolio in the worst-case sequence of returns – as the “Usual” process of rebalancing back to your design mix of stocks and bonds. Conclusion: it does.

 

== The attraction of Bonds first ==

 

“Bonds first” recognizes that stocks generally outperform bonds. By selling bonds first from your portfolio, you’re allowing stocks to compound in value. When you start selling stocks only, you’ll have greater portfolio value than if you were selling them year after year. For example, stock returns have far outdistanced bonds for the three years of the six year since the start of our plan at the first of 2015. The math that gets me back to my design mix of stocks vs. bonds for the start of the next year told me to solely sell stocks for our spending. And then it told me to sell more stocks to buy bonds to get to my design mix. That means I’ve foregone stock returns and have a lower total portfolio value now than if I had previously sold “Bonds first”.

 

The disadvantage of “Bonds first” is that it is very hard to get in your head that you should ever be 100% in stocks when you are retired and withdrawing from your portfolio for your spending. I find it IMPOSSIBLE. I would go crazy if I were 100% in stocks no matter how much I had. I hate the thought of having no bonds to sell in a year when stocks crater. It’s worse than that: I can’t imagine how I would feel if I was 100% stocks and withdrawing, say, 5% from my portfolio each year and saw my portfolio decline to LESS THAN HALF its value in real spending power in 24 months. That happened in 1973-1974! That happened in 36 months in 2000, 2001, and 2002!

 

== We use an RWC to judge ==

 

We use an RWC to judge the safety of our decisions for our financial retirement plan. An RWC shows how a portfolio fares over time for sequences of returns that the RWC constructs. For a set of inputs, an RWC tells you the number of years you can count on for a full withdrawal for your spending. The fewest number of years will be result of the worst case or Most-Horrible sequence of returns that the RWC constructs.

 

The actual Most-Horrible sequence of returns since the 1870s starts in 1969. I described that sequence here and here. It’s really Most Horrible. The worst seven-year return period for stocks starts in 1969. The worst seven-year return period for bonds starts a few years later. The poor returns in that sequence, coupled with your on-going withdrawals, shrink a portfolio to its tipping point, less than half its initial value. It spirals to depletion even when returns turn to be well above average.

 

The “Usual” RWC uses a fixed mix of stocks and bonds. The RWC rebalances a portfolio back to its design mix at the start of every year. You can’t use the usual RWC to examine a different approach like “Bonds first”. The only way to do that is to build a more detailed spreadsheet that allows you to pick what you want to sell for your spending each year and start the next year with a revised mix.

 

I built a basic spreadsheet I described and link to in this post. I altered it for this post to track stocks and bonds separately. I can input “Bonds first” and calculate portfolio value year-by-year.

 

== The test ==

 

I want to compare “Bonds first” to “Usual”. Does “Bonds first” match “Usual” in the number of years of full withdrawals for spending?

 

I input the following into my spreadsheets: initial $1,000 portfolio value; mix of 80% stocks and 20% bonds; total investing cost of 0.10%; and an annual withdrawal amount for spending of $44 in constant spending power. All returns are inflation-adjusted.

 

== The two options ==

 

Option 1: This is the base case, the “Usual” way all RWC’s work. I assume a portfolio is rebalanced to its design mix after the annual $44 withdrawal for spending for the upcoming year. You see that spreadsheet here.

 

Option 2: I use the expanded spreadsheet, and I withdraw “Bonds first.” The first $44 withdrawal comes from the starting balance of $200 of bonds (20% of the $1,000). In the example, I consume the bonds in about 3¼ years. You see that spreadsheet here.

 

== The comparison ==

 

I display how many years a portfolio provides a full withdrawal for spending for the two options:

 

 

“Bonds first” for all practical purposes has the same safety as “Usual”. The portfolios have almost the same amount at the end of the 20th years, basically just enough for a full withdrawal for the 21st year, but they don’t have enough for the 22nd year.

 

I don’t display the results from other inputs to the spreadsheet, but I’d reach the same conclusions over a very wide range of spending rates, mix of stock vs. bonds, and investing cost. I find no case where “Bonds first” is significantly different in terms of safety than the “Usual”.

 

 

Conclusion: This post examined if you should consider a tactic of “Bonds first” as an approach to deciding what to sell from your portfolio for your annual spending. Is that approach as safe as the “Usual” approach of rebalancing back to your design mix every year? I judged the effect on a portfolio using the Most-Horrible sequence of returns for stocks and bonds in history. I find found that “Bonds first” and “Usual” result in the same number of years of full withdrawals from a portfolio in the worst-case sequence of returns.

For many years I fiddled annually with my stock portfolio. Decades ago, I would spend hours and hours trying to pick winning stocks. Years ago, I would spend hours trying to pick winning, actively managed stock mutual funds. I stopped all fiddling for the last seven years when I started our financial retirement plan: I concluded that fiddling was adding uncertainty to my future returns: we don’t want to add more uncertain to an already uncertain future. Stick with broad based, low cost index funds. But this past month I could not resist fiddling with the ~20% of my portfolio that is bonds. Patti and I now own three US bond funds, not just one that I’ve held for more than six years. The purpose of this post is to explain my thinking.

 

 

== Bonds are insurance ==

 

We all hold bonds as insurance against steep declines from stocks. (I’m a broken record in saying this, but most folks just don’t get this concept.)

 

You get the same basic insurance value with almost any mix of broadly diversified bond fund. This post shows that both Long-term bonds and Intermediate-term bonds outperformed stocks in their ten worst years by an average of 27 percentage points. Those Horrible Years for stocks are the years when you collect on your insurance: you will disproportionately sell – or even solely sell – bonds for your spending needs. You’re giving stocks time to recover before you must sell them for your spending.

 

Patti and I hold 5% bonds as a Reserve and 15% in the balance that I call my Investment Portfolio (See Chapter 1, Nest Egg Care [NEC].) To simplify, I have about 20% bonds in total. Our spending rate is nearing 5% (We are older.) We have, at minimum, four years of spending as bonds. We could, if stocks cratered, live off bonds for at least four years, giving stocks four years to recover. (Patti and I could easily spend less than our current annual Safe Spending Amount [SSA; see Chapter 2, NEC] and extend those years. Our SSA now is +30% greater in real spending power than in 2015, the first spending year of our plan.)

 

Here’s the extreme example: Stocks declined by 37% real return in 2008. Obviously, you don’t want to sell stocks when they’ve declined that much. You would have sold your Reserve (bonds) at the end of 2008 for your spending in 2009. (Long-term bond returns were +25% real return in 2008!) At my mix, you’d have at least three more years of spending as bonds: you could sell only bonds at the end of 2009 for your spending in 2010; you could do the same at the end of 2010 and again in 2011 for your spending in 2012. Let’s assume that you’d be out of bonds, and at end of 2012 you would have to sell stocks for your spending in 2013. But by the end of 2012, stocks had clawed back all their decline. You would not have sold stocks at a value lower than their value in January 2008.

 

 

== Better returns? ==

 

I changed by view from this post. I decided to chase a slightly better returns from bonds:

 

The expected return for Long-term bonds is 3.1% and it’s 2.2% for Intermediate-term bonds. My choice of total market bond fund, IUSB, and the average duration of all of its holdings (5.8 years for 9,747 different bonds!) means it’s really an Intermediate-term bond fund. Since all broadly-based bond funds have the same basic value as insurance, shouldn’t I invest more in Long-term bonds for the added expected return?

 

 

The 0.9 percentage point difference in returns cumulates to 7% more from Long-term than from Intermediate-term over the past 6.7 years. Had I invested in only Long-term bonds, I would have expected to have about 7% more bonds than I do now. That’s not peanuts for Patti and me. I should not dismiss that dollar difference for Patti and me or for those who will ultimately benefit from our portfolio.

 

Those long run averages from 1926 both have ~45 year stretches of 0% real return. Maybe the comparison of returns shouldn’t be from 1926 to the present. Maybe I should compare returns after the nadir for bonds in the mid 1980s. I can draw a line point-to-point over the last 20 years on the graph above – from 1990 through 2020 – and see that the lines are steeper than those long-run averages. That means the annual return rates have been greater than the averages from 1926. I find that Long-term bonds have outpaced Intermediate-term bonds by an average of 3.7 percentage points per year over the past 20 years. If I assume those return rates over the past 6.7 years, I’d have about 26% more in bonds than I do now. Now were reaching a serious dollar difference.

 

 

Finally, I can compare returns for a specific Long-term bond index fund and IUSB over the past 6.7 years. I pick VCLT from the short list I displayed in this post: the ETF for Vanguard’s index funds of Long-term Corporate bonds. (Its expense ratio is .05%, a shade less than that for IUSB.) If I had solely been in VCLT, my return would have been +5% more per year on average, and I’d have about 40% more in bonds than I do now. I certainly can’t dismiss that!

 

 

No one knows what the future will bring. Prices of bonds move in the opposite direction to interest rates. Long-term bonds are more sensitive to increasing interest rates than intermediate term bonds: prices of bonds will fall more than intermediate bonds. Interest rates will increase with inflation, and inflation has increased. Is this the exact worst time to hold Long-term bonds? I don’t know. I said the heck with thinking about timing, and decided to sell some IUSB in our retirement accounts to avoid any tax consequences to hold VCLT. In essence, I’m adding more Long-term corporate bonds than IUSB already owns. Patti and I now have VCLT as 20% of our bond holdings.

 

== Is FBND better than IUSB? ==

 

I generally DISLIKE actively managed funds. Morningstar lists funds that it judges are in the same category of “Core-Plus” total market bond funds. FBND is one I find in that prior post that has bettered IUSB over the past few years. FBND started just about the time that IUSB started, in mid-to late 2014. Its expense ratio is 0.36% compared to 0.06% for IUSB. That’s a 0.30% mountain it must climb every year just to match IUSB, but it’s beaten IUSB by an average of .5 percentage points per year over the last 6.7 years.

 

 

 

I decided to sell some IUSB, again in our retirement accounts, to buy FBND. Our total bond portfolio looks roughly like this now:

 

 

My plan is to stick with FBND for at least three years. FBND has the highest expense ratio of any fund I own, but since I own so little relative to the total (about 6% of the total), I still will have a total weighted expense ratio of less than .07%.

 

 

 

Conclusion: I’ve been very good about not fiddling with our portfolio. I did not make a change in more than six years. But I fiddled and added two bond funds (ETFs) to my portfolio. I added the index fund VCLT for a greater weight of Long-term bonds than I get from my Total bond fund, IUSB. I added FBND as a direct alternative to IUSB, since it has performed better over the past six or seven years. In my view, these changes do not harm the safety of my portfolio, but they may add a bit of return over time. The power of compounding tells me means that a slightly better return could add a relatively significant dollar amount over time.

I have no idea if you like to spend on travel. Patti and I really look forward to traveling, and it’s our biggest category of discretionary spending by far. It’s been 22 months since we traveled abroad, and we just got back from our trip to the UK. This post gives my opinion: it is safe to travel abroad. If you have a trip planned, keep it on the books. If you don’t have one planned, go ahead and plan it.

 

We judged that COVID would be on the wane in August and Patti bought our airline tickets to England in March at the bargain price she seems to always find. We went a bit longer this time and added four days along the best part of Hadrian’s Wall Path slightly to the north and east of the Lake District, an area we have visited a number of times.

 

We walked on trails of at least four miles for 14 days straight. My iPhone says we averaged over 15,000 steps per day. I was happy that, at my age, I did not fall apart. It was GREAT to feel earth under my feet and not the sidewalks I’ve been pounding on our routine walking routes here in Pittsburgh. And, oh man, the views – if I only take time to not look down for my next step!

 

 

== COVID tests ==

 

I described the logistics related to COVID and the UK in this post. The process was more of a hassle to understand what to do than to actually complete the steps:

 

1) We took a PCR test here (and test negative) before travel. 2) We completed a UK locator form online. 3) We had to pay for a UK test kit that was delivered to where we were first staying; we had to take the test in our room and then mail in the tube + swab. 4) We took US text kits with us and took that test using video on our iPhones; someone had to watch us take the test. All those steps were not hard to complete.

 

Note: No one asked to see our vaccination cards. Good thing, since Patti forgot to bring them! (We had images on our iPhones and would have been OK.) The UK locator form asks you attest that you have been double vaccinated. If they find you have not, you are subject to ~$15,000 fine. I also think they judge that no international traveler would travel unvaccinated.

 

I think you’d have to do three of the four steps for any international travel. I think only the UK requires a test upon arrival.

 

We rigorously kept our distance inside; used masks inside; and Patti regularly squirted hand sanitizer. Still, we were a bit nervous waiting for results in the UK: if we had tested positive there, we would have had to quarantine for 10 days.

 

== Air flight logistics changed ==

 

The other logistical hassle with travel to the UK is that our flights over and back were changed: UK travelers are not allowed in the US, airlines can’t fill flights easily. Our direct flight from Philadelphia to Manchester was changed to New York – Amsterdam – Manchester. Our return flight from Manchester to Philadelphia was cancelled and we had to take a two-hour train to London to fly from Heathrow to Boston, and then we were saddled with a long layover to get back to Pittsburgh.

 

== COVID in the UK ==

 

The UK is “not recommended” for travel by the CDC, but Patti and I judged it to be no greater risk than travel in the US. The UK got a MISERABLE start with COVID (It’s cumulative death rate was about the highest in the world for many months.), but it has made big strides. It’s been hit with the Delta variant earlier and harder than in the US: the current rate of new cases is higher than in the US. But this table shows that they have a far lower percent who are unvaccinated than the US, and as a result they currently have far fewer hospitalizations and deaths.

 

 

== Masks not required ==

 

The biggest difference we noted from practice here was that masks are not required on public transportation: that’s buses and trains for us; we don’t rent a car when we are there. The temperature every day was in the mid 60s and the buses had open windows. I’d say about 80% of bus passengers still wore masks. Trains, obviously, don’t have open windows and were nearly full; we seemed to be sitting where other travelers chose to wear face masks.

 

The four places we stayed and all stores had hand sanitizer stations prominently displayed and asked that you use them. Some stores had signs that stated that masks were preferred – similar to our grocery stores here – and I’d guess about 70% of customers wore masks. (I’d guess the practice in grocery stores here in Pittsburgh is near 100%.)

 

One of the places we stayed delivered breakfast to our room. Lunches were always on the trail. We did take out and ate in our room or on a table outside where we were staying about five nights. When we didn’t eat outside, we seemed to get tables that were not close to other diners. Most restaurants in the honeypot towns where we stay are fully booked for weeks ahead. UK citizens could not travel to Europe this summer, so they are traveling in England, and the Lake District, in particular, is a popular destination.

 

== Go ==

 

Patti and I don’t go on many group tours. We know England well enough to organize what we want to do; we use tour companies to organize the logistics for self-guided walking elsewhere. Our biggest effort to avoid COVID when we are there is to keep our distance and masks on. I think traveling on a group tour would be fine, since all those on the tour will be fully vaccinated and will have recently tested negative; you’re in the same bubble of people; your tour will likely have greater control of close interactions with others than Patti and I had.

 

== Trip Highlights ==

 

We did not realize how much we missed the green paths and sweeping views. England has excellent walking trails, most with fantastic views. I don’t think we’ll ever grow tired of them.

 

My favorite walk is Catbells close to Keswick. After breakfast we walk to the boat launch on Derwentwater, about 3/8 mile from where we stay. We take the 9:30 boat for about ten minutes across the lake to Hawes Landing. From there we walk the less steep route around the back side of Catbells to the top. We walk down to Littletown Farm at the head of Newlands Valley and buy lunch to eat at a picnic table, and then it’s about 30-minute walk back to Hawes Landing and a boat ride back. Back by 3:00. Terrific!!

 

 

We really liked the area of Hadrian’s Wall. It did not hurt that I picked the best place we’ve ever stayed in England. I blew an added $150 per night for four nights, and it was worth it. I picked out the best 20-25 miles of the Hadrian’s Wall Path. A bus runs each direction hourly on the road just south of this section of the Wall and just in front of where we stayed. It was easy for us to get to our starting point each day and get back to where we stayed. We visited three sites/museums that are excellent: Vindolanda, the Roman Army Museum, and Housesteads. We’re thinking we will go back next year and walk more of the path.

 

 

Conclusion: Patti and I have pent up desire or demand – and money that we have not spent for almost two years – for travel abroad. We just got back from our favorite area in the UK. While the UK currently has a higher rate of new cases than the US, Patti and I felt relatively comfortable. I judge it is no greater risk of getting COVID there than here. If you have a trip abroad planned, I think you are taking no greater risk traveling abroad than traveling here.

You DO NOT want to buy an annuity to substitute for bonds in your portfolio! I read this article about a month ago, “Using Annuities During Retirement: When to consider annuities rather than bonds.” The article suggests that one should seriously consider buying an annuity rather than hold bonds because an annuity provides a larger stream of annual payments than the interest earned on a bond. The purpose of this post is to explain why I think YOU SHOULD NOT BUY AN ANNUITY to substitute for bonds in your portfolio.

 

== Why Bonds? INSURANCE ==

 

The article states that the primary benefit of an annuity rather than bonds is to provide a better stream of cash payments than the interest from bonds. This is the incorrect way to judge bonds. We don’t hold bonds in our retirement portfolio based on their potential for cash payments. WE BUY BONDS AS INSURANCE. We want to sell bonds when stocks crater, and stocks can really crater, and we can judge bonds by their ability to provide insurance – protect the value of our portfolio given that we retirees withdraw from it every year for our spending.

 

This post describes the value of bonds as insurance. Stocks outperform bonds by almost a factor of better than 2.5 times over the long run: stocks 7.1% real return and 2.6% for the average of intermediate+ long term bonds. If we could count on that every year, the decision as to what to hold would be EASY. But stocks don’t outperform in all years. Bonds have outperformed stocks in 28 of the 95 years since 1926.  In the ten worst years where stocks have tanked, they averaged -27% real return while bonds in those years average 0% real return. Bonds outperformed stocks by an average of 27 percentage points in those years. And look at that most recent disaster for stocks in 2008. Wow! Now, that’s what I call INSURANCE.

 

 

== Where’s the insurance? ==

 

Let’s assume you decide on a mix of  bonds 25% bonds and 75% stocks. (Patti and I are 85% stocks and 15% bonds.) Let’s follow the logic of annuities and assume you substitute annuities for ALL the bonds you would otherwise have in your portfolio. What’s that mean? You have a portfolio of 75% stocks in your brokerage account. That’s it. Stocks are only thing you can sell for your spending from your nest egg. When stocks crater, you have no bond insurance to tap. You are forced to sell stocks when they’re depressed. This makes NO SENSE to me. It makes no sense to give up any portion of what you consider as your bond portfolio – your insurance – for an annuity.

 

== How do they pay more than bond interest? ==

 

How do the companies selling you an annuity provide a greater payment stream than the interest from bonds? You think they’re doing something magical as to how they’re investing in bonds and they’re not. They invest mostly in stocks! The companies hold an investment portfolio very similar to the one you’d have with Nest Egg Care: let’s assume they settle on 75% stocks and 25% bonds. They use a Retirement Withdrawal Calculator similar to FIRECalc, to find the payout, somewhat analogous to your Safe Spending Amount. They then figure out how much they want to keep – a big chunk of it – and how they can dress up what they want to pay you to make it look attractive to the retiree fretting about low interest rates for bonds.

 

== The payout to you is low ==

 

You will receive far LESS than you’d calculate for your Safe Spending Amount (SSA, Chapter 3, NEC) on the amount you’d pay for the annuity contract. The folks who sell annuities don’t pay out ANYTHING CLOSE to the spending power that you calculate as your SSA in NEC. Your SSA at least adjusts for inflation each year. They pay out a flat dollar amount per year. They can make that flat payout per year look attractive in the early years, because you’re absorbing the inevitable loss in spending power due to inflation. If inflation is 3% per year, You’ve lost 15% in spending power in about 5 years; 25% in 10 years; and your last payment of a 20-year annuity will have about 55% of the first-year spending power.

 

 

You get no benefit if stock and bond returns – what they’ve really invested in – are anywhere close to expected returns: 7.1% annual real return for stocks and 2.6% as the real return for the average of intermediate and long-term bonds. They have many annuity contracts spread over many years, and they know that they’ll average close too average returns over the years. But you’ll never see that.

 

What might you miss? Patti and I started with a payout for spending in 2015 of $44,000 per initial $1 million invested. Stock and bond returns have been above average over the last six year – and the look good so far this year – and our SSA payment on has in six years $62,700 for spending in 2021 – +43%. And it looks like we’re on track for another boost, greater than an adjustment for inflation. An annuity totally loses out on this potential.

 

You are giving them, unless you structure a death benefit or special features, the terminal value of your investment. Without special provisions that you pay for, you get no payout at the end of the annuity period and perhaps on death.

 

Graph 2-4 in NEC shows that at expected returns, a retiree who takes out 4.4% ($44,000 in constant spending power relative to $1 million initial portfolio) will have about 40% MORE in real spending power at the end of a retirement period than he or she started with; that assumes the mix assumption for the graph and average stock and bond returns. But even at poor future returns, one can see from the graph that a retiree will wind up with more than half of their initial portfolio’s spending power. Not zero. The obvious exception is the MOST HORRIBLE sequence of returns – the few chances out of 100 – that will eventually deplete a portfolio.

 

 

Conclusion. An article suggest retiree should consider buying an annuity contract for the bond portion of their retirement portfolio. This makes NO SENSE to me. The logic is incorrectly focuses on the annual payout of the annuity relative to interest received on bonds. We retirees don’t buy bonds in our retirement portfolio based on interest rates. We buy bonds as INSURANCE to protect us with stocks crater. We want to hold bonds to solely sell or disproportionately sell when stocks have cratered. We sell bonds to buy time for stocks to recover.

 

The economics of annuities are poor: they pay out far less than you’d calculate as your Safe Spending Amount, following the decisions you’d make for your plan following the steps in Nest Egg Care. Typically you’re giving up a significant terminal value that you’d like to pass on to your heirs.

When Patti and I officially started our Nest Egg Care retirement plan in December 2014, I had no Roth IRA. All our retirement accounts were Traditional IRA, and most of our money was in retirement accounts. I posted here and here about the importance of Roth IRAs. I converted some of my Traditional IRA to Roth in 2018, 2019, and 2020. Our total in Roth is small relative to the total if our retirement accounts – less than 5% of our total – but I see Roth as a valuable tool to avoid taxes that I would otherwise pay. I described my thinking on using Roth just in May, but this post links more clearly to my tax planning of three weeks ago: it’s a clearer description of when to withdraw from Roth to get most bang for your buck – more tax dollars saved relative to the taxes you paid when you contributed to your Roth.

 

== Review: why convert Traditional to Roth? ==

 

You incur no cost when you convert from Traditional IRA to Roth – Traditional or Roth result in the exact same after-tax dollars to spend in the future. Yes, you pay taxes at your marginal rate in the year you convert, but you are avoiding the same (or more) marginal taxes in a future year. Both have the same benefit of tax-free growth, and if you use Roth to save the same marginal taxes that you paid when you contribute, you wind up with the same after tax proceeds.

 

 

Roth gives you the opportunity to avoid higher marginal taxes that you would pay in the future had you not converted. You can get more than you paid.

 

Example: each year I have to pick my sources for our Safe Spending Amount (SSA; Chapter 2, Nest Egg Care). I described this in the post three weeks ago. Our age-appropriate Safe Spending Rate (SSR%, also Chapter 2) is always greater than our RMD percentage. (Patti and are both subject to RMD.) Therefore, our SSA is always greater than RMD. Each year I withdraw more for our spending from our Traditional IRAs than our RMD total.

 

Let’s assume I paid 22% marginal tax on the amounts converted. I breakeven – I wind up with the SAME after-tax dollars to spend – if I use Roth to replace withdrawals from our traditional IRAs that would be taxed at 22%.

 

I come out AHEAD with Roth – I gain after-tax dollars to spend – if I can use my Roth for spending and avoid a tax that I would pay if I used another source for our spending. I potentially avoid two taxes by planning out our Adjusted Gross Income and taxable ordinary income, like I did three weeks ago.

 

• I gain after tax dollars if I can use Roth to get under a tripwire of total income – Adjusted Gross Income – that triggers an increase in Medicare Premiums. (I consider premium increases as added taxes.) This is clearly the most important use of Roth: I can save an incremental $1,700 by using, as an example, $10,000 of Roth: I get an immediate 17% incremental return.

 

Our Medicare Premiums are deducted from our Social Security benefits. $1 of income above the first tripwire costs us $1,700 and others tripwires cost much more. I need to estimate how close I am to a tripwire every year. Because the tripwires don’t automatically adjust with inflation; I’m being pushed closer to a tripwire with no real increase in taxable income. This is the first thing I looked at when I did my draft tax plan for 2021 three weeks ago. The tripwires are spaced about every $50,000 of total income for married, joint filers and about every $25,000 for single filers. This post shows the Medicare tripwires for 2021.

 

• I come out AHEAD when I use Roth if we (or Patti or I) would ever be in the 24% marginal tax bracket. I paid 22% marginal tax, and I come out ahead if I can avoid falling into the 24% marginal tax bracket. This is an incremental 2% benefit, but I should take advantage of it assuming I will still have enough remaining to avoid a tripwire for increased Medicare premiums.

 

== Roth is more important when there is one of us ==

 

Taxes change when it’s just a single taxpayer and no longer joint, married taxpayers. It’s highly probable that the taxable income of the survivor of the two of us will crawl into the 24% marginal bracket. And the 32% marginal bracket is not out of the question for some retirees if the survivor lives long enough and if returns for stock and bonds track close to their expected return rates. See here.

 

Why are taxes higher? The marginal tax brackets for the survivor – single taxpayer – are half that for married, joint filers. Yet, the single tax payer will record the same real increases greater portfolio value as if both were alive; that leads to greater real amount of spending power subject to RMD; and RMD percentages increase with age.

 

This gets hairy, and each of us needs to figure out if we want to spend the time to keep track of this. I do like to keep track, since I think over time I’ll “make” $1,000s by spending a few hours each year to make best use of my Roth.

 

== An example ==

 

Here’s an example of how taxes and Medicare tripwires can change: assume a couple, Herb and Wendy, have total ordinary taxable income of ~$105,000. They pay total tax of $14,700. About $15,000 of ordinary taxable income is taxed in the marginal 22% bracket. They aren’t close to a Medicare tripwire that would increase the premium.

 

 

Let’s assume Herb dies. Wendy will have lower total income: she’ll lose the lower Social Security benefit, as an example. She would have about $20,000 less taxable ordinary income in this example, but would pay $16,400 in tax – about 25% more than if Herb was still alive. About $50,000 of income is taxed at the 22% or 24% marginal tax rate. She also would cross a Medicare tripwire that would cost $860.

 

 

This PDF shows greater detail than these two images.

 

== My annual checklist and story to Patti ==

 

It’s important to use your Roth wisely. Here is my checklist when I do my draft tax plan each August. I redo this in the first week of December, when I know exactly the tax implications of our SSA for the upcoming year. I will be much closer to our full year tax return. I ask these two questions:

 

1. Can I substitute Roth for Traditional this tax year to drop our Adjusted Gross Income to avoid a Medicare tripwire?

 

2. Can I substitute Roth for Traditional this tax year to avoid paying tax in the 24% tax bracket?

 

My story to Patti is this: after I’ve died, use Roth generously. Try to complete a tax plan (or have someone help) to at least avoid a Medicare tripwire EACH YEAR. Any Roth that you use if you cross into the ≥24% tax bracket is a good use of Roth.

 

 

Conclusion: I recommend you convert some Traditional IRA to Roth, being careful not to cross into a higher tax bracket when you convert. Conversion costs you noting in terms of future after-tax dollars to spend. Roth, however, gives you opportunities to avoid future taxes that you do not need to pay. You need to spend some time each year to sort this out, but the two opportunities are to 1) use your Roth for spending and not another source that records taxable income that crosses a tripwire that increases your Medicare Premiums; and 2) it is very likely that the survivor of a couple will be pushed into a higher marginal tax bracket; use Roth generously when that happens.

What changes in your financial retirement plan and, most importantly, how is the surviving spouse’s financial well-being affected when one spouse dies? This purpose of this post is to describe the key changes as I see them. The key point is that the surviving spouse’s Safe Spending Amount (SSA; Chapter 2, Nest Egg Care [NEC]) will at least be the same as if both of you were alive. I conclude that Patti will be just fine in the future after I die.

 

== Expenses will decrease ==

 

Expenses for one will be lower than for two; that should be obvious. I estimated our routine spending in this post. If it was just one of us, the major expenses that would decline are car (sell the second car for cash; pay no annual insurance or on-going expenses), food (not an insignificant amount!), and airfares on travel. My rough estimate is that these lower expenses roughly match the effects of lower Social Security income.

 

== Social Security benefits will decrease ==

 

If both collect Social Security, and one spouse dies, the surviving spouse retains the highest benefit and foregoes the lowest benefit. Example: Patti and I both receive Social Security benefits. One is ~70% greater than the other or +60% of the total. If one of us dies, the other will retain the higher benefit and not the lower benefit: the gross Social Security benefit will decline by about 40%.

 

You may have other distributions from a defined benefit plan or other sources of income that will change on the death of one of you. For Patti and me, the changes would not be significant.

 

== SSA will not decrease ==

 

The Safe Spending Amount that you now pay from your nest egg for spending in a year will not decrease. Depending on which spouse dies first, it could increase.

 

Your SSA is your Safe Spending Rate (SSR%) times your Investment Portfolio. (See Chapter 2, NEC). SSR% is determined by the number of years you choose for ZERO CHANCE of depleting your Investment Portfolio in the face of the MOST HORRIBLE sequence of stock and bond returns in history.

 

Patti and I decided to use her longer life expectancy for our choice of the number of years we wanted for ZERO CHANCE of depleting our Investment Portfolio. (See Chapter 3, NEC.) That choice set our initial SSR%, and the logic of using her life expectancy sets all our future age-appropriate SSR%s. I use the appropriate SSR% in the calculation that tells me if our SSA increases in real spending power for the next spending-year or simply adjusts for inflation.

 

If I die first, nothing changes: Patti uses the same SSR%s that we have already scheduled for all years in the future. If Patti dies first, I’d reset the SSR% schedule based on my life expectancy: I’d use a greater SSR% than we now have scheduled.

 

Example: At the start of our plan in December 2014, Patti’s life expectancy was 19 years. Nineteen years for ZERO CHANCE for depleting an Investment Portfolio translates to an initial SSR% of 4.40% – $44,000 spending power per $1 million initial Investment Portfolio. (See Appendix D, NEC.) My life expectancy at the time was 14 years; that would have translated to a higher SSR%.

 

It’s now mid 2021, almost seven years later. We use the age-adjusted SSR% – based on Patti’s life expectancy – that I’ve laid out on my calculation sheet in this post. That was 4.85% last November 30; Patti’s life expectancy from the Social Security calculator then rounded to 15 years. I will test to see if I can use 5.05% this December; her life expectancy then rounds to 14 years.

 

If I die first, NOTHING CHANGES in Patti’s calculation of SSA. The age-adjusted SSR%s do not change for any future year. My retirement accounts first pass to Patti; our taxable accounts are held jointly; therefore, our total Investment Portfolio does not change. She can pay herself the same SSA that we both would have received.

 

If Patti dies first, then I’d use my shorter life expectancy to set a new schedule of SSR%. If Patti died now, I’d use the SSR% associated with my 11-year life expectancy for the calculation this November 30 – 5.80% (See Appendix D, NEC). It looks like our portfolio will earn far more than we withdrew for our spending last year (4.85%). That tells me that I’d use the new, greater SSR% to calculate spending for 2022. If that still holds to the end of November, my SSA for spending in 2022 would be 23% greater than if would be if it is the two of us or just Patti alive [(5.80%-5.05%)/5.05%)].

 

 

== Taxes will increase but will not damage ==

 

The surviving spouse will pay more total tax than the married couple. Even though the Social Security benefit declines, Patti’s total income will roughly 80% of the total for the two of us. That will result in higher taxes because higher marginal tax brackets start at half the income for a single taxpayer as for a joint, married taxpayer: more of the total is taxed at higher marginal rates. Also, the tripwires that result in increases in Medicare Premiums are half the total income as for a joint, married tax payers. 

 

I worked through this for Patti and me as a single taxpayer relative to us as married, joint filers and find the increased taxes are meddlesome – the surviving taxpayer will pay perhaps a couple of $1,000 in higher income tax than the two of us pay now and would cross a Medicare tripwire that the two of us do not cross. (I give a specific example in next week’s post.)

 

I conclude Patti clearly have enough for spending after taxes each year to enjoy the money we worked so hard to accumulate. She’s may judge that she has More-than-Enough. (See Chapters 5 and 10, NEC.)

 

== With planning, the survivor can lower taxes ==

 

If one is a stickler like I am, it is more important to take an annual snapshot of a tax plan, like I did here two weeks ago with this spreadsheet. My Roth will be more valuable to the survivor of us, because there will be more annual opportunities to avoid taxes that he/she does not need to pay: added Medicare premiums and higher marginal tax rates than we paid to contribute to Roth.

 

I’d likely do that annual tax planning; I like those details and finding if I can completely avoid paying a tax. Patti REALLY likes to save money, but she’s not a spreadsheet person. I think she is up to learning how to save perhaps $1,000 per year, though. That’s much more than she saves on another set of plastic food containers – that we don’t need – from The Dollar Store!

 

 

Conclusion: If you follow the plan in Nest Egg Care and you are a couple, I conclude you can be comfortable thinking that the survivor will be just fine in the future. Expenses will decline. Some income will decline – Social Security benefits are the key example. Total taxes paid on the same sources for SSA will be higher for a single taxpayer than they were for married, joint filers. But, most importantly, the Safe Spending Amount you pay yourselves now will be the same for the survivor in the future. SSA never declines; it can only get better. I am not at all concerned about Patti’s financial future if I die.

This post doesn’t have anything to do with financial retirement planning, but I thought I would describe the current COVID-19 requirements to travel to the UK and to return to the US – as best as I understand them. That’s because this was the all-consuming task for Patti and me this week. We must have spent more than 10 hours to sort this out and implement the steps. We did not find a succinct description of what to do and how to meet the requirements. I’ll be shocked if this went smoothly for other passengers on our flight to the UK.

 

We had planned a trip in May of 2020; we try to go that time every year. It was the first trip we cancelled in 2020. Patti bought new tickets this March, soon after we’d been vaccinated. Right now, the CDC suggests not traveling to the UK because of their rate of new cases, which is very similar to ours, but we still plan to go.

 

 

I display the steps:

 

 

== Meet UK requirements before we leave ==

 

• Get a proper NAAT COVID test in the US within three days of departure. 0 is your departure day. Our departure day is Wednesday. We have to get tested no earlier than Sunday. We booked a test time on Sunday at a CVS MinuteClinic about a mile from us. They overnight all tests to a lab, and we will get results on Monday or Tuesday with a link to results. We’ll have to show the printed report or documentation on our phone of the negative test results before we get on our initial flight from Pittsburgh and, I assume, again on arrival in the UK.

 

• You need to purchase a UK approved “Day 2” test. We need to complete the test within two days of arrival: 0 is your arrival day. We arrive on Thursday. We need to complete the test by Saturday.

 

We needed to order this test a couple of days before our flight, since we need evidence – a Locator Reference number provided by the company that supplies the test. That number is stated on our receipt. The number is required for the UK passenger locator form we must fill out within 48 hours of departure (see below).

 

We used this site to find UK government approved testing companies. From the site, we picked 1) Day 2 test, 2) self swab at home, and 3) location of North East England: that’s the area where we first stay. We get a long list of providers (373!). The test kits we ordered, including next day delivery to the first place we are staying, were about £75 each – roughly $100 each. We ordered the kits six days before arrival. Our provider sent us an email as to exact time of delivery, and the place we are staying confirmed today that they have our kits.

 

A test kit has instructions and a return envelope for our swab. We mail that envelope in a “Priority” Royal Mail Box that is collected at the end of every day with tests delivered to testing labs the next morning. There are 35,000 in the UK. This site shows the identifying label. This site tells you the location of a nearby priority mailbox. It lists where we are staying has a priority post box or is a priority collection point.

 

 

We will get test results emailed to us within 72 hours. The NHS also gets those results. We’re assuming we will be negative, but if not, we’ll follow the instructions that I’m sure we will get in the email. If positive, I assume for now that we would have to quarantine and totally change our internal travel plans.

 

While new case rates are slightly higher in the UK, I think our risks are no worse than traveling in the US. As of now, 75% of all adults are fully vaccinated in the UK as compared to about 50% in the US.

 

• Complete a passenger locator form no earlier than 48 hours before we arrive in the UK. We arrive in the UK about 5:30 AM on a Thursday, Pittsburgh time. We must fill out the form after 5:30 AM on Tuesday.

 

== Meet US requirement before we return ==

 

We need to present a negative test for COVID before we depart. This is a “supervised” home swab test. We need to carry the correct test kit with us to the UK to use within three days of our return flight from the UK. 0 is the departure day. We leave the UK on a Monday. We need to complete the test no earlier than Friday.

 

The test is a BinaxNOW Ag Card home test made by Abbott. The supervision is a video-connected observation of us taking the test and then reading the result displayed on the test card. That’s with a company called eMed. We get an App for our iPhones: NAVICA. We’ll use that App when we are ready for the test and video connection to eMed. If we are negative, they’ll give each of us a digital health pass, a QR code similar to an airline boarding pass, on NAVICA. We’ll have to present passes before we board and maybe at passport control when we arrive.

 

We bought the test kits from eMed. The basic package has more than one kit. We’ll take two each. The test is not as accurate as an NAAT/PCR test and can have false positives. I’m sure we would use the second kit if the first test shows we are positive.

 

We fly Delta, which links to a form that we use to attest that we have a negative COVID-19 test. We complete that form online and print it or we can complete the form at the airport.

 

 

Conclusion: Patti and I are traveling to the UK next week. We had difficulty understanding what we had to do and by when to meet COVID-19 requirements to enter the UK and then to return to the US. This post describes the requirements and how we will complete them.