The Pension system in Austria

In Austria, it is, more or less, dead simple. Whenever you are employed, that is working as an employee in a company (no matter if part or full time), part of your salary is contributed to a public pension scheme. When you reach a certain age, currently its 65 for men, the individual has legally gained the right to retire, meaning that he is able to drop out of the workforce and receive a certain amount of pension, paid for by his contributions made to the fund over e.g. 40 years in the workforce. The amount that he gets is typically around 70 to 80 percent of the salary he last received while still working. So considering that the cost of living in Austria is, by far, not as high as in the UK or in California, someone can expect to still make a decent living on these 70 or 80 percent.

Of course, the fact that people live longer and that there are fewer and fewer ‘younger’ people in the workforce being able to ‘pay’ for the pensions of the ones retiring, this system is no longer sustainable in the long run and prompted some reforms already which cut down on the amount of pension a retiree can expect. Experts are already advising people to, if financially possible, compensate these cutbacks by contributing to pension schemes offered by private companies, such as national insurance companies like UNIQA. Similar to the state-run public pension schemes, one makes regular contributions and when the age of retirement comes around, gets a certain amount as a pension paid out on a monthly basis.

So far so good.

The American DIY approach

As with many other things, Americans want choices and be responsible themselves about when to retire and what to do about it – and the last institution they would like to trust with the task of taking care for their retirement is the government. Or so it seems.

I remember that after the first year in the US, I started to do a little research as to how Americans save up for retirement, well knowing that I might have to do the same thing if I am considering to stay here longer than just 2 or 3 years. Very naively I was expecting to find a similar system to what I was used to from my home country, but I could not have been more wrong, at least speaking from my current point of view and level of knowledge.

Please correct me if I am wrong but so far I have identified the following options:

• 401(k). Many Americans seem to opt for this, as, especially in larger corporations, the employer matches the 401k contributions of the employee up to a certain percentage. However, I also heard that because the funds contributed into a 401k plan are invested on financial markets, meaning stocks and the like, the money is by far not guaranteed to grow until your retirement age comes around. I heard stories that when the economy crisis hit, some people had lost 50% or more of their 401k contributions because some of the shares their 401k money was invested in took a plunge on Wall Street. To me this does not seem like a system I would want to trust my money with when I can’t be sure I am actually getting enough out of it at the end to retire on.
• IRA.I am little confused about IRAs in general, but from what I understand is that it is an account, e.g. as many banks offer it, that give the account holder certain tax incentives when used for retirement savings. From what I gathered, it is possible to make annual contributions to an IRA up to a certain limit and that money can then be used to either invest in funds, stocks and bonds for example, or, more conservatively, in a CD. Depending on the type of IRA, there are tax incentives related to either the contributions or the earnings of an IRA.

These are the two options I have identified, however neither of them seem to provide the financial security I would hope for when putting away money for my retirement. To me it seems that, with both systems, if investment decisions turn out to be bad when you are 60, you might be getting a lot less. A whole lot less if you are really unlucky. Doesn’t sound that secure to me.

In addition to these options, there is something else I need to remotely consider: It is true that I really like it here in California, in the US, but it is a possibility that I might have to go back to Europe, to Austria even, at some point in the future. If I already made considerable contributions to either a 401k or an IRA, what is going to happen with that money once I leave the country?

As you can tell, this topic brings up a lot of headaches for me. It would be great if any of you, my dear readers, have any tips or recommendations as to which way to go or how you, personally, are tackling the whole ‘saving for retirement’ subject. Thanks in advance!

No Car? No Way!

When I moved to Sunnyvale end of January 2009, I already knew that I had to get my US drivers license and then a car in the foreseeable future. Living out here in the South Bay, without a car is…doable, yes, don’t get me wrong. It just takes ages to go somewhere on public transport. You will get where you want to eventually, but it just takes looooonger. A rough estimate I came up with was that it takes about three times longer to take public transportation over here than doing the same using a car. But that is not supported by any evidence, just a guess on my end.

I had to go through the written and practice test at the DMV, which was not a problem after studying the DMV handbook (PDF version) and keeping the pitfalls in mind. And after that, I had to think about which car to get and making up my mind about it.

I have a soft spot for German cars, I have to admit. I have had two cars before in Austria, both of them were VW Golfs (a 1996 in black, and a 2003 in silver), very popular and reliable. But this time I decided that I would like to go with something more sporty. In the end I decided to go with a coupe by BMW. After thinking about the financial impact, I went for a certified pre-owned car from a dealer instead of a e.g. leasing a new one. Also because the whole leasing process is, in general, pretty confusing (at least to me) and so I feared that they might put in some additional hidden fees into the leasing rate that might in the end increase the financial burden.

Buying a car from a dealership and not from a private party was also a decision I made, simply because the risk of getting a not-well-maintained car with some hidden defects is higher buying from a private party than from a dealer. Besides, buying a certified pre-owned vehicle means it comes with original manufacturer warranty, which is another big plus in my mind. Of course, you pay more for that warranty but to me it seemed worth it.

Research

So once I had figured out the model I was looking for, I did some research to see which dealers had one in their inventory. I ended up with finding three dealers (two of the cars were black, one was silver). I visited all three and test-drove the vehicles. Actually I only test-drove two, because at the third dealership they either were unable to find the car on their lot or it was already sold. Whatever.

After doing that, Internet research came into play, because I wanted to be prepared for the negotiation phase. Edmunds.com was a very helpful resource for that. Apart from various guides, articles about the car market and tips about buying a car, it also lets you calculate what they call TMV (True Market Value) of a used car, based on color, mileage, extras and condition. This is very helpful as you can take this amount as a basis for the negotiation phase.

Negotiating

In the end I ended up with a choice between two similar vehicles, black and silver with more or less the same sticker price set. I started by calling dealer A and naming essentially the TMV provided by Edmunds.com minus about a thousand dollars. I was not really expecting from them to meet that offer, but rather drop their sticker price. So they did, by about 300 Dollars. With that in mind, I hung up, saying I have to think about it and called dealer B, doing essentially the same. They dropped the price as well, by about the same amount. Then I repeated the procedure, getting back to dealer A, naming an amount slightly higher than my first offer to dealer A, saying that the other dealer offered me this and asking if they could match it. They would then drop the price again.

After going back and forth a couple of times, at some point you feel that it probably does not go down any further. In the end, the offers from both dealers where pretty similar and actually a couple of hundred dollars below the actually TMV I had from Edmunds.com. I finally based my decision on how I was treated by the sales person and so I went for the black car and felt that, based on the numbers, I got a pretty good deal. I am pretty sure that, if I had gone for an American car, I could have lowered the price even more, essentially getting a bargain. But, to be honest, when talking about new cars, I have to say “No, thanks.” to American. Sorry.

Of course when we talk about good old American muscle cars, like Scott’s (a colleague at Yahoo!) 1967 Pontiac Firebird, now that is a different story

Conclusion

I picked up the car over the weekend and again, I was treated very nicely by the sales person. I was in contact with many car salespeople during the last couple of weeks, some of them were very aggressive and would like you to sign a contract right away after the test-drive. And I have to say that most of them live up to the stereotype, wearing silver or gold jewelry (necklace, ring, watch), having kind of a slimy attitude and saying things like “You look good in that car.” No way. Really? That sales person I finally ended up doing the deal with did not do any of that and I felt this should be rewarded by giving her the deal.

Below I have put together a couple of links to resources on Edmunds.com and elsewhere that I found helpful doing this “Buying a Car in the US” project:

• Edmunds.com’s TMV: The Magic Number
• How to Get a Used Car Bargain
• Negotiating 101
• 10 Steps to Buying a Used Car
• Confessions of a Car Salesman: This is a multipage-long article about the experiences of a journalist who worked undercover at two different car dealerships. Very worth the read with some quite amusing parts.
• Vehicle History Report: Your Key to a Good Used Car

Also, for people preparing for the written test at the DMV, I found the following sample tests useful for practicing. Some of them offer up to 20 free questions, some only 5, but it is good to mix and match to be prepared for most questions which eventually might come up:

• Samples of Driver Written Tests at dmv.ca.gov
• DMV Sample Test at esampletest.com
• California DMV Practice tests at dmv.org

So what happened in those last two months without anything happening on my blog or my Flickr stream for that matter?

First, I came back from celebrating Christmas and New Year’s in my home town Vienna (which, so I learned, Mr Drew paid a visit to just recently) together with my family and close friends. Even though it was only for just more than a week, it was totally worth it to get back and spend the holidays with my loved ones.

The time between coming back to California and moving to Sunnyvale Jan 20 is a total blur. I commuted for at least 2 hours a day, that’s for sure, cause I was still taking the Yahoo! shuttle service from SF to Sunnyvale. I worked, so that’s obvious as well. Apart from that, I don’t remember much. Drinking? Drugs? Other forms of intoxication? Who knows…

January 20 was the big day. I moved out of my friend Cindy‘s place (and I can’t thank her enough for letting me stay there for so long) and to my own place in Sunnyvale. Let me state that I love San Francisco and would the office be there, I would have loved to find an apartment there. But I am a bit allergic to commutes that take more than 45 minutes a day. I know, I am probably spoiled, but that’s just how I feel. So I moved closer to the office and my commute time is now—even though I have to take a public bus until I have my US drivers license sorted—cut down to about 40 minutes. Door to desk. That’s more my liking.

Because my apartment came unfurnished, like so many places around here, I had to play the “plan-and-get-furniture” game. And I am still playing it, cause I am far from done with getting all the things I need, but I got the bare necessities covered for now. The rest can wait until I don’t have to rely on public transport any longer. Thankfully, my beloved Swedish furniture store is in Palo Alto, so not that far away.

Work is good and pretty busy recently, not least because we have a new CEO and things are being reorganized. But in economic times like this, more work is certainly better than out of work.

What else…let me think. Ah yeah: some of you guys might remember that I did my first half marathon last year in April. It was such an amazing experience that, a few months later, I decided that no matter what, I want to do it again the following year. So I am doing it again this year, which means I am going to Vienna to visit my parents and participating in the race mid April. Exciting. I will most likely not be able to beat my personal record, because I don’t have enough time this year to train as much as I want to, but I don’t care. This time, the experience counts, not the time.
Oh yeah, whilst I was at it…I also signed up for another half marathon, which is probably a little closer to where I live currently. Derek is still gonna laugh at me, but I don’t care

That’s about it, in a nutshell. The next couple of weeks will (apart from working at Yahoo!) consist of some more running, getting my US drivers license sorted, getting a car and some more pieces of furniture. I also have a couple of web development related tasks on my list and some ideas for articles which I hope I can also get to fairly soon-ish.

Until next time.