November 2, 2024 - Money Matters Podcast
Managing financial decisions in uncertain times, leveraging a paid-off home, and when NOT to worry about money.
On this week's Money Matters, Scott and Pat discuss the complexities of making financial decisions in unpredictable times, particularly with the backdrop of upcoming elections and market volatility. Plus, they share insights on the importance of having a financial advisor, reflecting on an article about a retirement expert who made financial mistakes despite her expertise. Finally, Scott and Pat guide callers facing unique financial dilemmas. From decisions about selling a home to addressing fears about retirement savings, Scott and Pat offer practical advice tailored to individual circumstances.
Join Money Matters: Get your most pressing financial questions answered by Allworth's co-founders Scott Hanson and Pat McClain live on-air! Call 833-99-WORTH. Or ask a question by clicking here. You can also be on the air by emailing Scott and Pat at questions@moneymatters.com.
Transcript
Announcer: Would you like an opinion on a financial matter you're dealing with? Whether it's about retirement, investments, taxes, or 401(k)s, Scott Hanson and Pat McClain would like to help you by answering your call. To join Allworth's "Money Matters," call now at 833-99-WORTH. That's 833-99-W-O-R-T-H.
Scott: Welcome to Allworth's "Money Matters." Scott Hanson.
Pat: Pat McClain.
Scott: Glad you are with us. Both myself and my cohost here, are both financial advisors, certified financial planner, chartered financial consultant. We spend our weekdays...some of our weekdays helping people like yourself and broadcast our program on the weekends to be your financial advisors in your ears I guess, podcast, radio.
Pat: In your ears?
Scott: Yeah.
Pat: Yeah, see how we can help, add value.
Scott: Yeah.
Pat: We have world experiences.
Scott: We're not going to talk about politics today because the election is in a couple of days and I'm sick of it.
Pat: Holy smokes.
Scott: And how many times do I have to put "Stop" on my cell phone?
Pat: Oh, I know.
Scott: The political texting.
Pat: Report junk. I'm like, why?
Scott: Anyway, we did say we're not going to talk about politics.
Pat: Okay. Anyway, "And you get a car! And you get a car!" The great giveaway. That's all I'm going to say. I just find the whole thing humorous. I wanna mention, I wanna mention...I can't help it.
Scott: I just said we're not going to talk about politics.
Pat: I can't help it. I can't help it. I've had conversations with clients already worried about the outcome of the election and how their portfolio should be, from both sides, from the right and the left. Clients.
Scott: Yeah.
Pat: Both sides.
Scott: And we're actually in the studio the morning after the elections just in case something goes so strange so we can put something fresh out.
Pat: But I would direct you back to a podcast we had a few weeks ago with Andy Stout. He was on our show talking about...
Scott: Well, Apollo Lupesco was the...
Pat: Correct as well. That's right. That's right. We had a couple of guests on.
Scott: And there's some stuff on our...
Pat: On our website.
Scott: Yeah, and our YouTube channel as well, that we've got...
Pat: Yes. So if you're worried and, "This time it's different," yes, I know. This time it's different. Every time it's different. Every day is different. But they're similarities that run through life, including whether a Republican or Democrat is in charge. So okay. There we go.
Scott: So, before we take calls, Pat, there was an interesting article in The Journal a week or two ago. Boston College has been a leader in retirement issues. We've got the Boston College Center for Retirement Research, which we've done some work with over the years off and on. They do a great job of collecting research. And the woman who's led it the last...well, ever since I can remember, Alicia Munnell or Munnell...I don't know how to pronounce her last name. I meant no disrespect. Sorry, Alicia. But she's retiring. And the headline of this article...I don't know if you read this article.
Pat: I did read it. I didn't know you were going to talk about it.
Scott: "She's a Retirement Authority - And Still Made Mistakes. Here's What She'd Do Differently." And the thing that kind of shocked me the most was...
Pat: First of all, was how old she was when she actually retired.
Scott: Well...
Pat: Right?
Scott: You know what? That's an interesting point. The woman in charge of retirement research chooses not to retire until she's 82.
Pat: Yeah. That's one of the things. But then I thought, she's not swinging a hammer, working on an assembly line, selling real estate...
Scott: She's in a university.
Pat: She's in a university.
Scott: Leading a think tank.
Pat: She's tenured.
Scott: Is it a think tank at a university? Is that what they call it?
Pat: I don't know what they are.
Scott: I don't know, some research [crosstalk 00:04:02.972]
Pat: She's a tenured professor.
Scott: Yeah, life's probably pretty good. And she's had some big jobs. She worked as the assistant secretary to the Treasury Department during the Bill Clinton years. She had 20 years at the Federal Reserve Bank of Boston. But the thing that I found the most surprising, she mentioned a few mistakes she had made over the years.
Pat: She's 82. She's got tons of time to make mistakes.
Scott: She has no financial advisor. "Like many people, she lacks the time and interest to manage money," she says. "She relies on occasional advice from her son, who works at a financial firm. 'Every now and then, he tells me to send him his asset allocation. Then he tells me how to adjust it. If I had to figure out what to invest in, I'd have no clue.' People have busy lives. Retirement planning should not be something they have to put a lot of effort into. Yet, she chose..."
Pat: To not do it.
Scott: And she mentioned several mistakes she made over the years. And I just thought it's so strange.
Pat: Well, Scott, think about this. Here's a lady that has probably spoken at a thousand conferences with financial advisors. I don't know if I'd hire a financial advisor after going to one of those conferences.
Scott: Okay. Fair enough.
Pat: Look, there are some great financial advisors out there. And I would love to believe that our firm is one of those, right?
Scott: Yes.
Pat: Educated, client-first...
Scott: A system and structure that forces you to put the client's interest first when human nature can get in the way.
Pat: Products that are appropriate at all times, the best use of technology, and the new products that have become available in the last 10 years. But that's not what most financial advisors look like.
Scott: Okay. But she's at a point, she...
Pat: She could probably tell good from bad.
Scott: ...could tell the difference between good and bad.
Pat: Fair enough.
Scott: And you've certainly met plenty of... Look, I remember I was talking to a guy at a conference and I thought to myself, "I should have him be my financial advisor." Not that he knows any more than I do in the space, I just remember thinking, he's clearly the kind of person who not only understands, he's just such a great communicator as well. But when you've got somebody who they dedicate their career, they're in financial markets, their career, retirement advice, and she talks about the mistakes she made and she relies upon a family member who works for a financial firm, whatever that might mean.
Pat: Yeah, whatever that means. There's lots of flavors.
Scott: And does her asset allocation periodically as well.
Pat: Two of my children use advisors. Not me. They were using me and I said, you know, I think that it's a time in your life that you actually just separate me from your finances.
Scott: I think we discussed this a couple of weeks ago on the show.
Pat: Did we?
Scott: Yeah. We can talk about it again.
Pat: Okay.
Scott: I might forward through this part. Not very long ago we had this conversation. Not to set you up or anything.
Pat: But you did. But fair enough.
Scott: But look...
Pat: You need a financial advisor.
Scott: The longer I'm in this industry, the more convinced I am of the value that we provide to clients. I think a good advisor is worth every penny they charge. I really believe that. They deliver way more in value. But there must be so many inept or unethical advisors out there when you've got someone in charge of a retirement center that chooses to avoid the whole industry.
Pat: Yes. It's pretty amazing. Maybe she never thought she was going to retire though.
Scott: You still have to manage your money. You have a fiduciary responsibility to yourself, I would think.
Pat: That's true. And to your heirs.
Scott: I don't know if fiduciary is the right term. You have a stewardship.
Pat: To yourself and your heirs.
Scott: Yeah, that's your money. It's got to go somewhere.
Pat: It's got to go somewhere. Even if your heirs are nonprofit. Are you just going to narrow it down to being a nonprofit? I don't know. But you get the point.
Scott: Yeah, I understand the point there. Anyway, if you're looking for an advisor, there are a couple things that are really low-hanging, super simple.
Pat: Super, super simple.
Scott: The first thing is all you have to do is Google BrokerCheck.
Pat: And look at their background.
Scott: Google BrokerCheck, it is going to bring you to a website. You put the person's name in, it'll give you the background. If they're licensed, what licenses they have, what their employment history has been.
Pat: How long they've had the licenses.
Scott: Yeah. And if there's been any...
Pat: Marks on their...complaints.
Scott: Yeah. Have they been terminated for cause somewhere? Has there been...whatever it is, right there. And look, this was what? Six years ago in Northern California. This is a guy who used to live in the same neighborhood that I lived in when my kids were born. Lived less than a quarter mile from me. I knew this guy, not really that well. I knew his first name. And I recognized his wife. I'd see them around town. Our kids are roughly the same age. Soccer or whatever and say hi. And he's in...
Pat: It's the same way you got all of your friends, they're parents.
Scott: So he's in prison now for embezzlement. And he stole money from seniors. He lived around the corner from me. He had dropped his... He was some sort of financial planner who specialized with teachers, selling tax-deferred annuities. That was what he was doing. And then he dropped his licenses completely. Had no license and had just kind of a fake business.
Pat: And it would have been so easy for anyone.
Scott: All they would have had to do...
Pat: Low-hanging fruit.
Scott: That's what I mean. If they would have just simply said, "Before I move forward, let me just do a quick check on the firm." You can do that for Allworth or any firm you work with. QuickCheck on the firm.
Pat: Or any of the advisors that work for the firm.
Scott: QuickCheck on my advisor. What's my advisor? What kind of history? What complaints are there?
Pat: What's the second thing you should do?
Scott: Well, look at their education and then interview the person.
Pat: And then sit down with the advisor and ask them questions.
Scott: Or her questions.
Pat: Them questions. They...
Scott: They...them. Okay.
Pat: The questions that... It's a relationship. And you're going to be working with this person. If they come across as pushy or trying to sell you things, then you just kind of slow down. If they're asking questions about what you're trying to achieve and what assets you have and how they're positioned, right? They don't go right to the solution. Right? And oftentimes there's a plan associated, which is, "Well, here's an idea. Here's an idea. But we really need to take a look at the big picture." And that's what a good financial advisor does.
Scott: Exactly.
Pat: They don't go to products or solutions immediately. They say, "Well, we should..." "Let's think."
Scott: Yeah. And ask probing questions. A good advisor asks probing questions.
Pat: That's right.
Scott: Because all financial planning is really shepherding your assets in such a manner to help accomplish your objectives in life. And sometimes it's just getting some clarity on what it is you want these dollars to do for you.
Pat: And it's not just asset allocation.
Scott: That's what I thought was... Well, she did list a few mistakes that... And it's not just asset allocation.
Pat: It's not just asset allocation. And it's hard. I tell you, I've had two friends of mine say, "You know, I don't know why I own bonds." Man, you've got a short memory.
Scott: Yeah. Well, look, this market right now, it almost feels like a melt up. We have some days down here or there, but... I mean, if you look at the returns for the year...
Pat: Oh, "What was the point?" "Well, you don't have to own bonds. Well, you can own stocks, you can have 100% in stocks." I have clients that have almost 100% in equities, but they know. We've discussed the downsides and we've discussed the upsides.
Scott: And it's not a bad exercise to go through and say... Here's my account. Here's my life savings. What does this look like with a 25% downturn in the stock market? There are tools that can simply do that for you. We use those tools with our clients today. Like, this is what you should expect. Like, this is what you should expect.
Pat: Yes, what did that... He used to call it the lifeboat drill.
Scott: Nick Murray.
Pat: Nick Murray.
Scott: He's still out there doing his stuff. He was a gentleman who was good at... He would train advisors on how to communicate well to clients on sticking with it, essentially. The hardest part about investing is not picking the investment, it's the investor making poor choices, acting emotionally, forgetting why they own bonds in a portfolio. We had the worst year in 100 years.
Pat: Yes, in bonds.
Scott: Like, literally, the worst year in like 100 years.
Pat: And large-cap can do no wrong. Large-cap growth can do no wrong.
Scott: U.S. stocks, why have anything else? Yes. I think it can be a useful exercise to go through. And if you don't need your money for many years, great, you've got the time to ride these things out.
Pat: And maybe it's the appropriate thing for you if you don't need the money.
Scott: That's right. I'm 58. My 401(k) is 100% in stocks. I don't plan on touching it until I have required minimum distributions.
Pat: As is mine.
Scott: Anyway, let's take some calls. If you want to join us, you can send us an email, questions@moneymatters.com. And that's probably the simplest way, questions@moneymatters.com. Or call us at 833-99-WORTH. We're talking with Jamie. Jamie, you're with Allworth's "Money Matters."
Jamie: Hi guys, how are you doing?
Scott: We're wonderful. How are you doing, Jamie?
Jamie: I'm well. Thanks for taking my call. I wanted to go over my financial situation and kind of ask for your recommendation about what you would do as far as where you would take cash for moving forward. So my situation is I've been unemployed for two and a half years. The first two of those being purposely, I was taking care of a sick parent. And then for the last half, the last six months, now that parent has deceased. So I now have started to look for a job, but it's been really hard and I haven't been able to find the appropriate job for what I'm looking for. So with that being said, I wanted to go over my financial situation and then kind of ask what you would do.
Scott: How old are you, Jamie?
Jamie: I am 49.
Scott: And do you have any kids at home or anything?
Jamie: I have one daughter who just started college.
Scott: And are you helping pay for that college?
Jamie: I'm paying 50%.
Scott: And are you married or single?
Jamie: I'm single. So I have three mutual funds that total about $182,000 and then I have about $20,000 in cash. I don't have any debt and my credit score is high, it's over 800. And I do own my house and it's worth...it was assessed a couple months ago about $1.2 million. So I'm wondering in this situation because my house is my biggest asset.
Pat: No question.
Jamie: And so obviously I'm in a position now my daughter's at school, should I sell? I certainly could sell.
Scott: Where do you live? What area of the country?
Jamie: In Lynnfield, Massachusetts.
Scott: And is a $1.2 million house a tiny little house where you are or is it a big huge house? Like, around the country some places you get a mansion for $1.2 million some places you get a closet for $1.2 million.
Jamie: It's about 2500 square feet and an acre of land, so it's okay. But my question is if I move, I'll probably be buying a condo that's probably $800,000 and I don't know if that makes sense. And so where do I get that available cash? Because now I need some cash. So do I continue pulling from that $20,000 that I've been living off of? Or should I get a credit line off of my house?
Scott: How did you manage to pay that house off? Was that just high discipline over the years? Did you inherit some money?
Jamie: Yeah, it was through parents.
Scott: If you got the job you were looking for, what kind of pay range is that?
Jamie: Like 250.
Pat: And why do you think you haven't been able to? Is it geography that has stopped you from getting this job? Is it the fact that you've been out in the marketplace for a while?
Jamie: It's probably a combination of that. I've been out of the marketplace, but more than that is that it's a very high-level executive position. So there's not a ton of them out there.
Scott: Yeah. These $182,000 and three mutual funds, are those inside IRAs? Are they outside of IRAs? Are they in 401(k)s? How are those held?
Jamie: IRAs.
Scott: So it's an interesting position. So you have 20 grand left of cash and you're thinking, "Uh-oh."
Jamie: Yeah, I'm getting really nervous.
Scott: Well, you've got assets, so don't worry too much here for a moment. And also if I think about where you are at this stage in life, your one child just went off to college, so it's a really new life experience for you and you just lost your final parent, sounds like, six months ago.
Jamie: No, I have one parent left.
Scott: Lost a parent. So you've got a lot kind of personally going on that sometimes...sometimes we don't make the best decisions when we've got other emotions driving us. So again, a perfect world, we would say, well why don't you stick in the house for a while and see what happens? But here we're in a situation where we're running short of cash. Have you asked about a line of credit? You've got so much... Challenge, you have no income.
Pat: Yeah, that's the issue. Do you expect an inheritance?
Jamie: I do. Which will probably be pretty hefty.
Pat: What's pretty hefty?
Jamie: Several million probably.
Pat: Okay. And are there multiple beneficiaries to the estate?
Jamie: Yes, yes. There are four.
Scott: But your cut you believe would be several million. Yes. And do you expect that the parent that's still alive, that you'll be taking care of them sometime in the near future?
Jamie: Possibly, yes.
Scott: Would you move...
Jamie: He's doing okay now, but you know, you never know.
Pat: Would you move for work?
Jamie: I would, yes.
Scott: Have you thought about having a...I mean, if you step back for a moment, you left the workplace to take care of your mother in her last years, right? Two years of your life. And then she passes and you're having trouble getting back to the position you were before, right? You have a short-term financial crush. That's all. It's a short-term thing. You've got assets in your home, obviously. And you're going to, I mean, what about just having a conversation with your father about, can I borrow a chunk of cash?
Jamie: I know this sounds so strange, but...and I don't want to get into the weeds here, but this is a case of elder abuse. And my father no longer speaks to me because a family member has taken control of his assets and they're all frozen now. And it's very, very much.
Scott and Pat: Okay.
Pat: I'd sell the house, but the problem is...
Scott: How long have you had the house? How emotionally attached are you to this house?
Jamie: Ten years.
Scott: Ten years?
Jamie: Yeah, 10 years. No, actually 12 years.
Pat: I'd sell the house.
Scott: You know, it's always interesting when you do these over a call, we don't have a chance to get to know you that well, right? So I like to picture, like, you're my sister, you're my younger sister. What advice would I... And to be pretty clear, sell the house.
Pat: I'd sell the house and rent until I got a new job and see where it's at.
Jamie: My biggest concern with selling the house is that where I live is an extremely marketable place, like location, location, location. And it will only go up and up and up. And so, my biggest concern is that I sell this, I make a rash decision, and if I had held on to it, it just would be more of an asset for me.
Pat: Okay. Well, the problem is that you may not be able to hang on to it. You have another choice, which is you could take a lower-paying job that isn't one that you necessarily want.
Scott: Yeah.
Pat: I mean, that is an absolute choice. If you're making $250, you could take a job that you're making $100 grand or $125 grand and stay in that house.
Jamie: But you really can't, to be honest. I mean, like, my skill set is at an executive level and no one wants to hire someone at an executive level for a lower position because they just believe you won't stay in that role.
Pat: Well, if that's the case, then the house is... You're talking about a possible opportunity cost, that's what you're talking about.
Scott: And the reason the house is worth $1.2 million today, location, location, location, is in part because people believe that it's a great location that's going to do well long term, which from a financial standpoint...
Pat: May or may not be true.
Scott: ...it might have already been bid up in price. In other words, maybe the return going forward is only going to be 3 or 4% a year.
Pat: Yeah, we don't know.
Scott: Nobody knows.
Pat: If you were calling from Naples, Florida, a year ago, you would be saying the same thing and it would not have been true.
Jamie: Yeah, I know.
Pat: Things change. So you're thinking about long term, but you asked a short-term question.
Jamie: I know.
Scott: Right? I mean, the other option is you take money from your IRA and you pay an early withdrawal penalty. You don't have any taxable income this year.
Pat: I wouldn't where I...
Scott: I would definitely do Roth conversions this year. You have no other income, right?
Jamie: Well, no, actually, I do have available cash in my mutual fund. I have $28,000.
Pat: That's not going to last you very long.
Jamie: Yeah, no.
Pat: So you can run that for another couple months. And then if...
Jamie: And then I have $50,000. I have another $50,000.
Scott and Pat: Where?
Jamie: So I have a mutual fund with $190,000. That is $50,000 of available cash.
Pat: I understand. That's in an IRA though, correct?
Jamie: I believe. I'm not sure. That's what you said earlier. Well, I did, and that's what I believe it to be.
Pat: Okay. Yeah, the IRAs... You can take that money out of the IRAs and basically because you have no income, you'll just pay the penalty on it.
Jamie: It says RBC insured deposit. Does that...
Pat: Yeah, that doesn't tell us. So those are the choices. Stay with the available cash take, the money out of the IRA, or sell the house?
Jamie: If I could get a credit line against my home because I have so much equity in it, would you recommend doing that?
Pat: Well, that would be the place I would go, but it would be difficult for you to get a credit line because you have no income to pay it. Not only do they want to know how much equity you have in your home...
Scott: They don't want the house.
Pat: ...they want to know how you're going to pay it back.
Scott: They need a conforming...they need a loan that's in good standing.
Pat: So those are the options, right? Sell the house, rent for a while. By the way, it makes you mobile. If you really said that you're going to take a job, you're going to end up having to sell that house anyway.
Scott: Then the whole country is your option.
Pat: The whole country is where you can work.
Jamie: What do you guys think about renting the house?
Pat: You turning around and renting the house to someone else?
Jamie: Just an option. Something I was...
Scott: How much could you get for rent?
Jamie: I don't know. That's the thing. I'm not sure. I think I probably could get probably $6,000 a month.
Scott: How much could you rent something for yourself? I mean, I suppose short-term, you could get a renter and someone leases the house for a year and then you go and find an apartment for $3,000 a month or something.
Pat: And live on the spread?
Scott: That's an option.
Jamie: I probably could find something for $3,000.
Pat: That's an option. It'll give you more time.
Scott: But then you're going to go out and sign a lease somewhere in an apartment, which is going to make you stuck in that region as well.
Jamie: But I'd have to do that anyway if I was renting, wouldn't I?
Pat: I don't know. I don't know. But if you were my little sister, I'd sell the house.
Scot: Yeah, I would agree with that. Just because...
Jamie: Okay, one more question then. So if I'm selling the house, do I do it now or do I wait for the spring?
Pat: You need to sell it now. You need the money.
Jamie: Yeah, okay.
Scott: If it's a desirable area, then I imagine things are selling.
Pat: Then It doesn't really matter.
Scott: Yeah. The whole concept of waiting until the spring... I've got a good friend that is moving now and his oldest daughter is in the eighth grade. Not the ideal time, but sometimes that's what has to happen. So the house is on the market, moving his kid. So obviously, the springtime is the best time for families and stuff, assuming that there's a family buying the house.
Pat: Home sales are down 3.5% this year from last.
Scott: Is that all? Even the price?
Pat: No, the number of sales.
Scott: Appreciate the call, Jamie.
Pat: Anyway, appreciate the call.
Scott: Is that all?
Pat: Yeah, that's what I saw this morning.
Scott: I think it's much more than that. Home sales?
Pat: I might be wrong.
Scott: I think you're wrong.
Pat: I'll look it up.
Scott: I mean, if you look at some of these businesses that live off home sales, whether it's mortgage industry, title insurance, escrow companies, even moving companies...
Pat: Well, not the moving companies. "Home sales on track for the worst of year since... Existing home sales in September fell 3.5% from a year earlier."
Scott: You would think it would be more than that, wouldn't you?
Pat: No, well, the title and escrow and all that, they're supported by the refinance industry as well.
Scott: What refinance industry?
Pat: Well, they were. That's my point. Which is, by the way, I read a great article about title insurance the other day, which has always perplexed me. Always perplexed me. Our title insurance industry...
Scott: I don't have title insurance on my 401(k).
Pat: I understand.
Scott: Or my savings account.
Pat: But didn't we just pay for a title search and now you want me to insure it in case you actually miss something? Relative to the rest of the world, it's...
Scott: Good business if you can get it.
Pat: Yes, that is right. There has been a massive consolidation in that industry. Massive consolidation.
Scott: Well, even just the whole real estate commission, that whole thing is in the process of being changed.
Pat: It's pretty arcane relative to the rest of the world. Although...
Scott: The rest of the world?
Pat: The rest of the developed world.
Scott: I can... "I don't know"
Pat: Not the whole world, the developed world.
Scott: I'm pretty sure if you're in Shantytown, there's no title insurance.
Pat: I'm pretty sure that someone tells you what you get to own.
Scott: Yeah, all right, let's continue on.
Pat: When I was bicycle riding through Vietnam, so we were... I did a trip down the Mekong Delta.
Scott: Really?
Pat: Yeah.
Scott: I haven't heard about your trip to Vietnam.
Pat: So we started in Cambodia and we took a boat down the Mekong Delta. But most days, we would take a smaller boat, go to shore with these bicycles and just ride around in these little villages.
Scott: Was it just dirt roads, gravel roads?
Pat: Mostly, yes. So they're like a mountain bike sort of thing. But even the houses were just like, well who's... They just take it. Just like here, we're going to do it here. But the thing that was perplexing most to me, is these little villages with the speakers on the poles talking all day long. All day long. And I'm like, what do they say? And they say, "Ah, they don't really say anything." I'm saying to the guy, "Well, they're saying something." And they say, "Well, the crop is bountiful. Life is good." All day long in these speakers, in these little villages.
Scott: They're messages of positive encouragement stuff?
Pat: All day long.
Scott: Oh, my gosh, that would drive me crazy. What if you're having a bad day? Sometimes you just want to like...I just want to sit in my misery for a moment. Let me, please.
Pat: You're not going to go out and throw rocks at the speaker. That's what you're not going to do.
Scott: Well, one of the benefits of doing some travel, particularly in poor countries, is it reminds you of how so much the world is and how so many people in the world live. And it's just an attitude of...
Pat: Our worst is better than most.
Scott: I took one of my sons... We'll get back to calls here in a second. I took my son when he was going into eighth grade, between seventh and eighth grade, I went down to São Paulo, Brazil, to work in a favela for a week.
Pat: What's a favela?
Scott: It's the slums there. And so the favelas, they're created...you could call them invaders. So if there's an empty plot of land, they come in in the middle of the night and start building it. And if they get built far enough along, which isn't much, I forget what it was, you get a toilet in there or something, then you have claim to the property.
Pat: No title insurance?
Scott: No, there's no title insurance. So there's these high-rises, literally, in a business district, high-rises, and then there'll be a couple of lots where you would think there'd be more high-rises that are just slums, Favelas.
Pat: And you worked in them?
Scott: Yeah, we were at this church doing...they had an outreach for the kids there.
Pat: Do you help them build in the middle of the night so they can create new favelas?
Scott: I mean, part of my objective was to show my son, like, this is life. And I actually... And we'll get into the calls here in a second, but I remember we were driving around getting a tour of Sao Paulo, and we were hearing about all the crime, terrible crime, the drug lords ran everything, and there was the high-rise brothel, there was literally a high-rise brothel. This guy was telling us about it. We pulled over to get dinner somewhere, and my son gets out of the car and he says, "I'm not feeling too good." I said, "Oh, are you a little car-sick?" He says, "No, too much information."
Pat: Oh, is that right? It just kind of blew his mind.
Scott: So much for the little bubble that we grew up in, right? This is the world, son, for a lot of the population. Anyway, I don't know why we're talking about this stuff.
Pat: I brought it up.
Scott: Maybe it's...you know, the funny thing about...and we're going to talk to Pam here a minute, the funny thing about money, there's never quite enough, right? I've yet to have a client say, "Scott, quit growing it. That's too much." It's like, whatever it is, we'd always like a little bit more. And I think the one thing that's healthy when you go and experience things like this, it's just kind of a reminder that we actually have enough. Most of us have enough.
Pat: Yes, not as much as we want, but enough.
Scott: Not as much as we want.
Pat: But enough.
Scott: Certainly, life is pretty dang good here. And in spite of the craziness with the political environment and all that...
Pat: It's still great.
Scott: It's still unbelievable.
Pat: It's still great. Right? And as they said to Elon Musk, "You're the richest man in the world." And he said, "No, I think Putin is."
Scott: He's right. I guess when you could just send in the army and take over parts of the world, "That's mine." All right. Let's talk with...we're talking with Pam. Pam, you're with Allworth's "Money Matters."
Pam: Hi.
Scott: Hi, Pam.
Pam: Hi, Scott and Pat. Thanks for taking my call.
Scott: Yeah, glad you're here.
Pam: So, I'm 72. I'm still working two part-time jobs. I've lost my savings five times for various reasons. Lost job, medical expenses, and that sort of thing. So, I'm still working because I have this fearfulness that I'm not going to have money to support myself as I age and need more care.
Scott: Is it a valid fear?
Pam: Yeah. I mean, I've had some serious cancer diagnosis and back problems. But one of my family members said, "Well, you know, you're not enjoying life. You're not doing anything. You're not going on vacations. You don't even buy a Starbucks," because I'm like...I've got this stranglehold on the money that I do have in my assets. And so, she said, you should take out a reverse mortgage. I don't like that. I've had three friends that did that and ended up with disasters. And then they had nothing because they had to use the money for the health disasters that they had. And of course, then they don't have their home. They've signed their home over. So, they don't have any real estate to fall back on.
Pat: Okay. So, walk us through what your assets are.
Pam: Okay.
Scott: What's your home worth?
Pam: My total assets with my income right now in that is about $960,000.
Scott: Does that include your home?
Pam: No.
Pam: My home is probably worth $1.2 maybe if I put some money into it. My income is about $60...
Scott: What do you owe the house?
Pam: Oh, my house is paid off. I don't owe money on anything.
Scott: And where's the other roughly $1,000,000, the $960,000?
Pam: That's in stocks and investments.
Pat: Okay. And how much are you earning at your job?
Pam: On my two jobs, I make about $58,000 a year. Now, they're physical jobs. So, you know, whether I can keep doing this for very much longer, I don't know. And then my yearly costs are around $49,000. And that's everything. I have long-term insurance, which you know is extremely expensive. And so, it's my insurance and car maintenance.
Pat: And what are you getting in your Social Security benefit?
Pam: I'm getting... See, I had to apply for it early because I worked 20 years for a company and they let me go two weeks before I would have qualified for my pension. So, they robbed me of my pension. So, right now...I'm looking it up on my handy little spreadsheet. I'm getting around $1,200 on my Social Security. And so, is that included in your $58,000 a year in income?
Pat: Yes. And you have not... So you included this $14,400 a year in that. So, from your jobs, you're making $43,000 a year. Is that correct?
Pam: Yeah, roughly.
Pat: Okay.
Scott: And have you ever taken any money out of this $960,000 you have in savings?
Pam: No, no. I took care of my parents, both my parents, for 10 years. And so, that really, whatever savings I had, that just took everything. And, you know, trust me, I would do it in a heartbeat again. But, as you know, 10 years of taking care of parents when they have...
Scott: Do you really enjoy your jobs? Do they give you a lot of purpose and meaning and relationships?
Pam: One of them, yes. One of them, yes. The other one, no. They're physically demanding jobs.
Pat: The one that you like, tell us why you like it.
Pam: I work as a personal assistant dog walker for a woman who is extremely disabled from strokes. And so, you know, I really feel like I'm helping someone who's disabled.
Scott: Yeah, what do you make on that job?
Pam: Let's see. Well, it depends because sometimes she varies the things that she has me do. But it's about maybe $1,500 a month.
Pat: Okay, so $18,000.
Scott: Let me ask you this, if Elon Musk gave you a check for $1 million for signing a petition... I'm just saying if you came into a chunk of cash...
Pam: I'm not signing a petition. Forget it.
Scott: If you came into a chunk of cash, if you inherited $1 million today or won the lottery or whatever, would you continue these jobs?
Pam: No.
Pat: You wouldn't?
Pam: Maybe the one that I like, I would continue.
Scott: Well, then I would recommend you quit the job you don't like and continue to do the job you do like and start taking a little bit of income from this. You have $2 million dollars of assets.
Pat: You do not need a reverse mortgage, number one.
Scott: No.
Pat: Just flat out. Just flat out.
Scott: There are times when they work wonderfully well.
Pat: It would be a very, very bad idea for you to do a reverse mortgage. You need to start taking...
Pam: Do you think...
Pat: What's that?
Pam: Do you think that I should take any kind of other equity out of my home to...?
Pat: No, no, no.
Scott: There's no such thing as taking equity out. All it is, is you can borrow and you pledge your house as collateral. So if you don't make good on paying the loan back, they take your house. So this whole concept of equity, you're just sitting on the equity and taking some equity out, it doesn't...
Pat: You have $960,000 of assets that two years ago wasn't $960,000. What was the value of it two years ago?
Pam: Well, that's hard to say because we were still coming out of a pandemic and my stock was...
Pat: I know, but it was a lot less.
Pam: Yeah, it was a lot less.
Scott: I would recommend two things here. One is I would make sure that $960,000 has the proper allocation for you at your age at a time when you're probably going to start taking some income from that. Secondly...
Pam: Right, and next year I have to take income out of an annuity. So I don't have a choice.
Scott: And I would quit the job you don't like and set up a monthly income for whatever structure, from that $960,000, that drops into your checking account each month to replace the pay that you've been on the job that you hate that's physically demanding.
Pat: That's right. And I would do $2,000 a month. If you do $2,000 a month, right, the numbers you've shared with us between Social Security and the dog walking personal assistant, between those two, that income is approximately $32,000 a year. If I took $2,000 a month out of that $960,000 the distribution, right, is 2.4%, 2.5% a year.
Scott: It's going to conitnue to grow.
Pat: It's going to continue to grow over the long term. And you will have the same amount of money coming in. That's what I would do immediately. Like I wouldn't even wait.
Pam: You wouldn't even wait?
Pat: No, I'd quit the job tomorrow.
Scott: Maybe give them a week or two notice.
Pam: Tell the boss to go stuff it and walk out?
Pat: Well, I haven't been a boss for many, many years. I'd discourage that.
Scott: Actually, I did quit three hours before my shift at Marie Callender's when I was in high school because the manager was such a jerk. And I had it. Like, I couldn't, "I can't go into one more shift."
Pat: You seem to have let that go, the manager being a jerk, Scott. You seem to. It doesn't seem to bother you anymore.
Scott: He would ridicule me.
Pat: We know this. This is an ongoing, we've heard about this guy so many times I feel like I know him.
Scott: I keep trying to find the right therapist to tell me it's okay for me to... I'm just kidding.
Pat: You're going to have to let it go. So, Pam?
Pam: Well, and the thing is if you're a boss and you're a good boss then you have no patience with bad bosses.
Pat: Well, I mean, good and bad is in the eye of the beholder. So don't ask anyone that has ever worked for me. I would give my notice on that job. I'd start a distribution and I would sit down with...
Scott: You're very worried about your finances. And I don't know if you have a good financial advisor running a plan so you can see where you'd be a year from now, 5 years from now, 20 years.
Pam: Well, I do have a good financial advisor and you know and we meet every quarter, and I'm going to meet him next week and just you know have a further discussion with him. But I think I'm just...because I've lost my pension and money from medical bills and different things in my life, I'm a little paranoid about...
Pat: You worry.
Scott: You've got long-term care insurance, right Pam? So, if something happens...
Pam: Yeah, which is like about $8,000 a year now.
Pat: I understand. That's what the premiums are.
Scott: You've got that in place. You've got $2 million of assets. You're fine.
Pam: You think so?
Scott: If you take the 72-year-old women in the United States and line them up, you are top 10%...top 2, 3% maybe?
Pat: Single 72-year-old women.
Scott: A million bucks in savings and a house worth $1 million. It may not feel that to you...
Pat: Which is why you worry about it.
Scott: ...but you're fine.
Pat: When you sit down with your advisor, just say, "What do you think about me quitting this one job I really don't enjoy and starting a distribution of $2,000 a month out of my assets?" And you'll be good to go.
Pam: Yeah. Okay.
Scott: All right. And listen, if you show me someone that doesn't worry about money and I'll show you someone that doesn't have any.
Pam: Yeah. I know. I know. I know.
Pat: It comes with the territory. If you didn't worry about it, you wouldn't have any.
Pam: That's right. That's right. But you know I look at my assets and I think, well, 20 years ago, I would have felt like I was rich. Now in this economy and the cost of everything I feel like it's...
Scott: Pam, I bet you if it was $2 million you would feel the same way.
Pam: Well, probably.
Scott: I'm just saying.
Pat: I have clients with $10 million that they sound just like you.
Scott: The reason we asked if you liked your job, if you said you like both your jobs, we would say, "Who cares about traveling? Obviously, you're doing what you want to do." But if you're not liking one of the jobs and it's too physically demanding, then [crosstalk 00:45:02.160]
Pat: Actually, it's okay to take even a little bit more money out of that $2,000 a month. If you came to me and said, "I want to take $4,000, $5,000 out a month," I'd say, "Sure." Right? $4,000 a month out of that account is a little bit over 5% distribution. You're 72 years of age.
Pam: Yeah. It's time to go on a vacation.
Scott: Well, if that's what you want to do, you're not getting any younger, right? No one gets out of here alive. We don't know how many years we've got and we don't know how many years of good health we have.
Pam: That's right.
Scott: Glad you called, Pam. We wish you well.
Pat: Hopefully, you leave this conversation smiling.
Scott: I wonder how many other advisors she talks to. She has an advisor she meets with on a quarterly basis. He probably has the same conversations or she has the same conversations with her. She calls us on this show. I wonder if she calls other shows.
Pat: I don't know.
Scott: Money is a really interesting thing.
Pat: Yes. Well, it's scarcity.
Scott: As you stated though, you show me somebody who doesn't worry about money and I'll show you who's somebody who doesn't have money. We've worked a lot. Thirty years ago we started working in this industry. The phone company at the time was having these downsizes and they downsized by offering pension buyouts and made these tremendous enhancements to people's pensions. And so some people say, "Wow, what a great opportunity. I'm going to leave this job go work somewhere else. I'm going to take that pension throw it into an IRA let it grow," and it worked out extremely well for them. But you can tell, Pat, if you remember, in the first minute I could tell if someone had any money saved. If they had no worries at all coming in laughing, I'm thinking, they don't have any money, this is going to be hard for them. The ones that came in completely white, scared, they're the ones that had the savings.
Pat: That's right.
Scott: Right? I'm not making it up. I mean, that's exactly how it is. So, let's...
Pat: I don't know what...in the house I grew up in... Yeah, I mean, not like my dad at all. Not like my parents even a little when it comes to money. I'm not.
Scott: Oh, I'm not either. Not even close.
Pat: Right? Why would you be like my parents?
Scott: But my parents divorced when I was young and both remarried, so actually I kind of have two different families of examples that I can look at.
Pat: Yes. But your stepdad is super conservative with money.
Scott: Oh, yeah. Still has his first dollar. Very conservative. My mom's 85, she still saves every month. I asked her what for and she doesn't have an answer. She just feels better about herself if she's taking some money and putting it aside.
Pat: Scott, who knows how it works. I don't know. And there's five siblings in my family and none of us treat money like my parents, like my father did.
Scott: And how did your father treat money?
Pat: He liked to spend it.
Scott: My dad, in his latter years, he was widowed and pretty simple lifestyle. But he would say, "Scott doesn't it just feel like everything's free?" Like, "What?" He says, "I go to the supermarket. I can pick out anything to eat. This wonderful produce, I put it in a basket. I go up there. I give them this little card. I walk out. It's free." I would say, "Dad, you realize there's a finite number of times you could go into the grocery store because there needs to be something to back up that card." He says, "Well, maybe, I guess, but..."
Pat: That sounds like your dad.
Scott: He says, "I figure I'll always have something in my checking account when I die. So, yeah."
Pat: It sounds like he was right.
Scott: Fortunately, he didn't have big needs. He wasn't impressed by fancy things, so he avoided those. That was his kind of secret. In some ways, he had more financial security than I have.
Pat: Because he didn't worry about it.
Scott: He had no worries and had a very modest lifestyle and really could kind of care less.
Pat: And he was a funny guy. He was not trying to be funny, just a funny guy. Right?
Scott: Yeah.
Pat: I went to a museum. We went to the Martin Luther King Museum in Atlanta. He was with me. You were there. We were on a business trip. You invited him. We were there for the weekend. And he had a camera with him. And as we were walking I was freaked out because he would set the camera down. And I'm like, "This guy's going to lose the camera." And he'd walk 20 or 30 feet. The camera would be sitting on a counter. And I would just go pick the camera up and then carry it. And then he'd turn around like, "Did someone see my camera?" I'm like yeah, "I have it." And it happened four...
Scott: Like, how in the world does he not lose this?
Pat: He did. He lost his keys on that trip too. He was in a gym. He was at a gym at the hotel. And he put his keys in someone else's shoes.
Scott: Yeah, thinking they were his shoes.
Pat: Thinking that they were his shoes.
Scott: That was my father.
Pat: Yeah, I love the guy.
Scott: Well, we took him on that trip and it was the only time I took him. He stood up in the middle like, "This is amazing. You guys are going to crush it."
Pat: We were teaching advisors. We were doing a seminar for...
Scott: Anyway. We're going to go to one more call.
Pat: There we go.
Scott: Real quick. I had a tree trimming business when I was still living at home, I was like 19 or something, going to junior college part-time, running this treachery in business that I managed to buy with no money down. I paid a percentage of revenue. And then I sold it a few years later for cash. It worked out pretty well for me. But I ran it out of my bedroom and it was back in the day when there was answering machines. And so I had an answering machine. There was no cell phones. I had an answering machine if someone called when I wasn't able to pick up the call. And I'd say, "Dad, never touch my phone, please." And so every once in a while, I'd listen to the tape.
Pat: You could hear it on the tape.
Scott: "No, this is Scott's dad." I'm like, "Dad, I'm trying to act like a professional business. My mailing address was the P.O. Box, but it was 428 Pacific Coast Highway instead of P.O. Box, trying to make it look like a real business because I'm a 19-year-old kid stringing it together.
Pat: That's funny.
Scott: Anyway, hey, want to let all of our listeners know about our YouTube channel. I think we briefly mentioned it last week. But we've got a pretty robust YouTube channel. Who doesn't anymore? Whatever that means.
Pat: Come on.
Scott: But on YouTube, I mean, you can watch the show. You can get the full shows there. But there's also video clips of interactions with some of our callers. So if you're kind of looking for a certain type of thing, you can view that. And then also some other video production stuff that we've done along the way on a variety of different things, whether it has to do with the election and what might happen with the markets, or saving for retirement or social security. We've got a lot of other videos on those various topics that you can find. Anyway, it's been great being here with you and having you as part of this. If you find these podcasts helpful, please forward it on to somebody that you know could benefit from it as well. We'd appreciate that. And we'll see you next week. This is Scott Hanson, Pat McClain of Allworth's "Money Matters."
Announcer: This program has been brought to you by Allworth Financial, a registered investment advisory firm. Any ideas presented during this program are not intended to provide specific financial advice. You should consult your own financial advisor, tax consultant, or estate planning attorney to conduct your own due diligence.
Scott: Welcome to Allworth's "Money Matters." Scott Hanson.
Pat: Pat McClain.
Scott: Glad you are with us. Both myself and my cohost here, are both financial advisors, certified financial planner, chartered financial consultant. We spend our weekdays...some of our weekdays helping people like yourself and broadcast our program on the weekends to be your financial advisors in your ears I guess, podcast, radio.
Pat: In your ears?
Scott: Yeah.
Pat: Yeah, see how we can help, add value.
Scott: Yeah.
Pat: We have world experiences.
Scott: We're not going to talk about politics today because the election is in a couple of days and I'm sick of it.
Pat: Holy smokes.
Scott: And how many times do I have to put "Stop" on my cell phone?
Pat: Oh, I know.
Scott: The political texting.
Pat: Report junk. I'm like, why?
Scott: Anyway, we did say we're not going to talk about politics.
Pat: Okay. Anyway, "And you get a car! And you get a car!" The great giveaway. That's all I'm going to say. I just find the whole thing humorous. I wanna mention, I wanna mention...I can't help it.
Scott: I just said we're not going to talk about politics.
Pat: I can't help it. I can't help it. I've had conversations with clients already worried about the outcome of the election and how their portfolio should be, from both sides, from the right and the left. Clients.
Scott: Yeah.
Pat: Both sides.
Scott: And we're actually in the studio the morning after the elections just in case something goes so strange so we can put something fresh out.
Pat: But I would direct you back to a podcast we had a few weeks ago with Andy Stout. He was on our show talking about...
Scott: Well, Apollo Lupesco was the...
Pat: Correct as well. That's right. That's right. We had a couple of guests on.
Scott: And there's some stuff on our...
Pat: On our website.
Scott: Yeah, and our YouTube channel as well, that we've got...
Pat: Yes. So if you're worried and, "This time it's different," yes, I know. This time it's different. Every time it's different. Every day is different. But they're similarities that run through life, including whether a Republican or Democrat is in charge. So okay. There we go.
Scott: So, before we take calls, Pat, there was an interesting article in The Journal a week or two ago. Boston College has been a leader in retirement issues. We've got the Boston College Center for Retirement Research, which we've done some work with over the years off and on. They do a great job of collecting research. And the woman who's led it the last...well, ever since I can remember, Alicia Munnell or Munnell...I don't know how to pronounce her last name. I meant no disrespect. Sorry, Alicia. But she's retiring. And the headline of this article...I don't know if you read this article.
Pat: I did read it. I didn't know you were going to talk about it.
Scott: "She's a Retirement Authority - And Still Made Mistakes. Here's What She'd Do Differently." And the thing that kind of shocked me the most was...
Pat: First of all, was how old she was when she actually retired.
Scott: Well...
Pat: Right?
Scott: You know what? That's an interesting point. The woman in charge of retirement research chooses not to retire until she's 82.
Pat: Yeah. That's one of the things. But then I thought, she's not swinging a hammer, working on an assembly line, selling real estate...
Scott: She's in a university.
Pat: She's in a university.
Scott: Leading a think tank.
Pat: She's tenured.
Scott: Is it a think tank at a university? Is that what they call it?
Pat: I don't know what they are.
Scott: I don't know, some research [crosstalk 00:04:02.972]
Pat: She's a tenured professor.
Scott: Yeah, life's probably pretty good. And she's had some big jobs. She worked as the assistant secretary to the Treasury Department during the Bill Clinton years. She had 20 years at the Federal Reserve Bank of Boston. But the thing that I found the most surprising, she mentioned a few mistakes she had made over the years.
Pat: She's 82. She's got tons of time to make mistakes.
Scott: She has no financial advisor. "Like many people, she lacks the time and interest to manage money," she says. "She relies on occasional advice from her son, who works at a financial firm. 'Every now and then, he tells me to send him his asset allocation. Then he tells me how to adjust it. If I had to figure out what to invest in, I'd have no clue.' People have busy lives. Retirement planning should not be something they have to put a lot of effort into. Yet, she chose..."
Pat: To not do it.
Scott: And she mentioned several mistakes she made over the years. And I just thought it's so strange.
Pat: Well, Scott, think about this. Here's a lady that has probably spoken at a thousand conferences with financial advisors. I don't know if I'd hire a financial advisor after going to one of those conferences.
Scott: Okay. Fair enough.
Pat: Look, there are some great financial advisors out there. And I would love to believe that our firm is one of those, right?
Scott: Yes.
Pat: Educated, client-first...
Scott: A system and structure that forces you to put the client's interest first when human nature can get in the way.
Pat: Products that are appropriate at all times, the best use of technology, and the new products that have become available in the last 10 years. But that's not what most financial advisors look like.
Scott: Okay. But she's at a point, she...
Pat: She could probably tell good from bad.
Scott: ...could tell the difference between good and bad.
Pat: Fair enough.
Scott: And you've certainly met plenty of... Look, I remember I was talking to a guy at a conference and I thought to myself, "I should have him be my financial advisor." Not that he knows any more than I do in the space, I just remember thinking, he's clearly the kind of person who not only understands, he's just such a great communicator as well. But when you've got somebody who they dedicate their career, they're in financial markets, their career, retirement advice, and she talks about the mistakes she made and she relies upon a family member who works for a financial firm, whatever that might mean.
Pat: Yeah, whatever that means. There's lots of flavors.
Scott: And does her asset allocation periodically as well.
Pat: Two of my children use advisors. Not me. They were using me and I said, you know, I think that it's a time in your life that you actually just separate me from your finances.
Scott: I think we discussed this a couple of weeks ago on the show.
Pat: Did we?
Scott: Yeah. We can talk about it again.
Pat: Okay.
Scott: I might forward through this part. Not very long ago we had this conversation. Not to set you up or anything.
Pat: But you did. But fair enough.
Scott: But look...
Pat: You need a financial advisor.
Scott: The longer I'm in this industry, the more convinced I am of the value that we provide to clients. I think a good advisor is worth every penny they charge. I really believe that. They deliver way more in value. But there must be so many inept or unethical advisors out there when you've got someone in charge of a retirement center that chooses to avoid the whole industry.
Pat: Yes. It's pretty amazing. Maybe she never thought she was going to retire though.
Scott: You still have to manage your money. You have a fiduciary responsibility to yourself, I would think.
Pat: That's true. And to your heirs.
Scott: I don't know if fiduciary is the right term. You have a stewardship.
Pat: To yourself and your heirs.
Scott: Yeah, that's your money. It's got to go somewhere.
Pat: It's got to go somewhere. Even if your heirs are nonprofit. Are you just going to narrow it down to being a nonprofit? I don't know. But you get the point.
Scott: Yeah, I understand the point there. Anyway, if you're looking for an advisor, there are a couple things that are really low-hanging, super simple.
Pat: Super, super simple.
Scott: The first thing is all you have to do is Google BrokerCheck.
Pat: And look at their background.
Scott: Google BrokerCheck, it is going to bring you to a website. You put the person's name in, it'll give you the background. If they're licensed, what licenses they have, what their employment history has been.
Pat: How long they've had the licenses.
Scott: Yeah. And if there's been any...
Pat: Marks on their...complaints.
Scott: Yeah. Have they been terminated for cause somewhere? Has there been...whatever it is, right there. And look, this was what? Six years ago in Northern California. This is a guy who used to live in the same neighborhood that I lived in when my kids were born. Lived less than a quarter mile from me. I knew this guy, not really that well. I knew his first name. And I recognized his wife. I'd see them around town. Our kids are roughly the same age. Soccer or whatever and say hi. And he's in...
Pat: It's the same way you got all of your friends, they're parents.
Scott: So he's in prison now for embezzlement. And he stole money from seniors. He lived around the corner from me. He had dropped his... He was some sort of financial planner who specialized with teachers, selling tax-deferred annuities. That was what he was doing. And then he dropped his licenses completely. Had no license and had just kind of a fake business.
Pat: And it would have been so easy for anyone.
Scott: All they would have had to do...
Pat: Low-hanging fruit.
Scott: That's what I mean. If they would have just simply said, "Before I move forward, let me just do a quick check on the firm." You can do that for Allworth or any firm you work with. QuickCheck on the firm.
Pat: Or any of the advisors that work for the firm.
Scott: QuickCheck on my advisor. What's my advisor? What kind of history? What complaints are there?
Pat: What's the second thing you should do?
Scott: Well, look at their education and then interview the person.
Pat: And then sit down with the advisor and ask them questions.
Scott: Or her questions.
Pat: Them questions. They...
Scott: They...them. Okay.
Pat: The questions that... It's a relationship. And you're going to be working with this person. If they come across as pushy or trying to sell you things, then you just kind of slow down. If they're asking questions about what you're trying to achieve and what assets you have and how they're positioned, right? They don't go right to the solution. Right? And oftentimes there's a plan associated, which is, "Well, here's an idea. Here's an idea. But we really need to take a look at the big picture." And that's what a good financial advisor does.
Scott: Exactly.
Pat: They don't go to products or solutions immediately. They say, "Well, we should..." "Let's think."
Scott: Yeah. And ask probing questions. A good advisor asks probing questions.
Pat: That's right.
Scott: Because all financial planning is really shepherding your assets in such a manner to help accomplish your objectives in life. And sometimes it's just getting some clarity on what it is you want these dollars to do for you.
Pat: And it's not just asset allocation.
Scott: That's what I thought was... Well, she did list a few mistakes that... And it's not just asset allocation.
Pat: It's not just asset allocation. And it's hard. I tell you, I've had two friends of mine say, "You know, I don't know why I own bonds." Man, you've got a short memory.
Scott: Yeah. Well, look, this market right now, it almost feels like a melt up. We have some days down here or there, but... I mean, if you look at the returns for the year...
Pat: Oh, "What was the point?" "Well, you don't have to own bonds. Well, you can own stocks, you can have 100% in stocks." I have clients that have almost 100% in equities, but they know. We've discussed the downsides and we've discussed the upsides.
Scott: And it's not a bad exercise to go through and say... Here's my account. Here's my life savings. What does this look like with a 25% downturn in the stock market? There are tools that can simply do that for you. We use those tools with our clients today. Like, this is what you should expect. Like, this is what you should expect.
Pat: Yes, what did that... He used to call it the lifeboat drill.
Scott: Nick Murray.
Pat: Nick Murray.
Scott: He's still out there doing his stuff. He was a gentleman who was good at... He would train advisors on how to communicate well to clients on sticking with it, essentially. The hardest part about investing is not picking the investment, it's the investor making poor choices, acting emotionally, forgetting why they own bonds in a portfolio. We had the worst year in 100 years.
Pat: Yes, in bonds.
Scott: Like, literally, the worst year in like 100 years.
Pat: And large-cap can do no wrong. Large-cap growth can do no wrong.
Scott: U.S. stocks, why have anything else? Yes. I think it can be a useful exercise to go through. And if you don't need your money for many years, great, you've got the time to ride these things out.
Pat: And maybe it's the appropriate thing for you if you don't need the money.
Scott: That's right. I'm 58. My 401(k) is 100% in stocks. I don't plan on touching it until I have required minimum distributions.
Pat: As is mine.
Scott: Anyway, let's take some calls. If you want to join us, you can send us an email, questions@moneymatters.com. And that's probably the simplest way, questions@moneymatters.com. Or call us at 833-99-WORTH. We're talking with Jamie. Jamie, you're with Allworth's "Money Matters."
Jamie: Hi guys, how are you doing?
Scott: We're wonderful. How are you doing, Jamie?
Jamie: I'm well. Thanks for taking my call. I wanted to go over my financial situation and kind of ask for your recommendation about what you would do as far as where you would take cash for moving forward. So my situation is I've been unemployed for two and a half years. The first two of those being purposely, I was taking care of a sick parent. And then for the last half, the last six months, now that parent has deceased. So I now have started to look for a job, but it's been really hard and I haven't been able to find the appropriate job for what I'm looking for. So with that being said, I wanted to go over my financial situation and then kind of ask what you would do.
Scott: How old are you, Jamie?
Jamie: I am 49.
Scott: And do you have any kids at home or anything?
Jamie: I have one daughter who just started college.
Scott: And are you helping pay for that college?
Jamie: I'm paying 50%.
Scott: And are you married or single?
Jamie: I'm single. So I have three mutual funds that total about $182,000 and then I have about $20,000 in cash. I don't have any debt and my credit score is high, it's over 800. And I do own my house and it's worth...it was assessed a couple months ago about $1.2 million. So I'm wondering in this situation because my house is my biggest asset.
Pat: No question.
Jamie: And so obviously I'm in a position now my daughter's at school, should I sell? I certainly could sell.
Scott: Where do you live? What area of the country?
Jamie: In Lynnfield, Massachusetts.
Scott: And is a $1.2 million house a tiny little house where you are or is it a big huge house? Like, around the country some places you get a mansion for $1.2 million some places you get a closet for $1.2 million.
Jamie: It's about 2500 square feet and an acre of land, so it's okay. But my question is if I move, I'll probably be buying a condo that's probably $800,000 and I don't know if that makes sense. And so where do I get that available cash? Because now I need some cash. So do I continue pulling from that $20,000 that I've been living off of? Or should I get a credit line off of my house?
Scott: How did you manage to pay that house off? Was that just high discipline over the years? Did you inherit some money?
Jamie: Yeah, it was through parents.
Scott: If you got the job you were looking for, what kind of pay range is that?
Jamie: Like 250.
Pat: And why do you think you haven't been able to? Is it geography that has stopped you from getting this job? Is it the fact that you've been out in the marketplace for a while?
Jamie: It's probably a combination of that. I've been out of the marketplace, but more than that is that it's a very high-level executive position. So there's not a ton of them out there.
Scott: Yeah. These $182,000 and three mutual funds, are those inside IRAs? Are they outside of IRAs? Are they in 401(k)s? How are those held?
Jamie: IRAs.
Scott: So it's an interesting position. So you have 20 grand left of cash and you're thinking, "Uh-oh."
Jamie: Yeah, I'm getting really nervous.
Scott: Well, you've got assets, so don't worry too much here for a moment. And also if I think about where you are at this stage in life, your one child just went off to college, so it's a really new life experience for you and you just lost your final parent, sounds like, six months ago.
Jamie: No, I have one parent left.
Scott: Lost a parent. So you've got a lot kind of personally going on that sometimes...sometimes we don't make the best decisions when we've got other emotions driving us. So again, a perfect world, we would say, well why don't you stick in the house for a while and see what happens? But here we're in a situation where we're running short of cash. Have you asked about a line of credit? You've got so much... Challenge, you have no income.
Pat: Yeah, that's the issue. Do you expect an inheritance?
Jamie: I do. Which will probably be pretty hefty.
Pat: What's pretty hefty?
Jamie: Several million probably.
Pat: Okay. And are there multiple beneficiaries to the estate?
Jamie: Yes, yes. There are four.
Scott: But your cut you believe would be several million. Yes. And do you expect that the parent that's still alive, that you'll be taking care of them sometime in the near future?
Jamie: Possibly, yes.
Scott: Would you move...
Jamie: He's doing okay now, but you know, you never know.
Pat: Would you move for work?
Jamie: I would, yes.
Scott: Have you thought about having a...I mean, if you step back for a moment, you left the workplace to take care of your mother in her last years, right? Two years of your life. And then she passes and you're having trouble getting back to the position you were before, right? You have a short-term financial crush. That's all. It's a short-term thing. You've got assets in your home, obviously. And you're going to, I mean, what about just having a conversation with your father about, can I borrow a chunk of cash?
Jamie: I know this sounds so strange, but...and I don't want to get into the weeds here, but this is a case of elder abuse. And my father no longer speaks to me because a family member has taken control of his assets and they're all frozen now. And it's very, very much.
Scott and Pat: Okay.
Pat: I'd sell the house, but the problem is...
Scott: How long have you had the house? How emotionally attached are you to this house?
Jamie: Ten years.
Scott: Ten years?
Jamie: Yeah, 10 years. No, actually 12 years.
Pat: I'd sell the house.
Scott: You know, it's always interesting when you do these over a call, we don't have a chance to get to know you that well, right? So I like to picture, like, you're my sister, you're my younger sister. What advice would I... And to be pretty clear, sell the house.
Pat: I'd sell the house and rent until I got a new job and see where it's at.
Jamie: My biggest concern with selling the house is that where I live is an extremely marketable place, like location, location, location. And it will only go up and up and up. And so, my biggest concern is that I sell this, I make a rash decision, and if I had held on to it, it just would be more of an asset for me.
Pat: Okay. Well, the problem is that you may not be able to hang on to it. You have another choice, which is you could take a lower-paying job that isn't one that you necessarily want.
Scott: Yeah.
Pat: I mean, that is an absolute choice. If you're making $250, you could take a job that you're making $100 grand or $125 grand and stay in that house.
Jamie: But you really can't, to be honest. I mean, like, my skill set is at an executive level and no one wants to hire someone at an executive level for a lower position because they just believe you won't stay in that role.
Pat: Well, if that's the case, then the house is... You're talking about a possible opportunity cost, that's what you're talking about.
Scott: And the reason the house is worth $1.2 million today, location, location, location, is in part because people believe that it's a great location that's going to do well long term, which from a financial standpoint...
Pat: May or may not be true.
Scott: ...it might have already been bid up in price. In other words, maybe the return going forward is only going to be 3 or 4% a year.
Pat: Yeah, we don't know.
Scott: Nobody knows.
Pat: If you were calling from Naples, Florida, a year ago, you would be saying the same thing and it would not have been true.
Jamie: Yeah, I know.
Pat: Things change. So you're thinking about long term, but you asked a short-term question.
Jamie: I know.
Scott: Right? I mean, the other option is you take money from your IRA and you pay an early withdrawal penalty. You don't have any taxable income this year.
Pat: I wouldn't where I...
Scott: I would definitely do Roth conversions this year. You have no other income, right?
Jamie: Well, no, actually, I do have available cash in my mutual fund. I have $28,000.
Pat: That's not going to last you very long.
Jamie: Yeah, no.
Pat: So you can run that for another couple months. And then if...
Jamie: And then I have $50,000. I have another $50,000.
Scott and Pat: Where?
Jamie: So I have a mutual fund with $190,000. That is $50,000 of available cash.
Pat: I understand. That's in an IRA though, correct?
Jamie: I believe. I'm not sure. That's what you said earlier. Well, I did, and that's what I believe it to be.
Pat: Okay. Yeah, the IRAs... You can take that money out of the IRAs and basically because you have no income, you'll just pay the penalty on it.
Jamie: It says RBC insured deposit. Does that...
Pat: Yeah, that doesn't tell us. So those are the choices. Stay with the available cash take, the money out of the IRA, or sell the house?
Jamie: If I could get a credit line against my home because I have so much equity in it, would you recommend doing that?
Pat: Well, that would be the place I would go, but it would be difficult for you to get a credit line because you have no income to pay it. Not only do they want to know how much equity you have in your home...
Scott: They don't want the house.
Pat: ...they want to know how you're going to pay it back.
Scott: They need a conforming...they need a loan that's in good standing.
Pat: So those are the options, right? Sell the house, rent for a while. By the way, it makes you mobile. If you really said that you're going to take a job, you're going to end up having to sell that house anyway.
Scott: Then the whole country is your option.
Pat: The whole country is where you can work.
Jamie: What do you guys think about renting the house?
Pat: You turning around and renting the house to someone else?
Jamie: Just an option. Something I was...
Scott: How much could you get for rent?
Jamie: I don't know. That's the thing. I'm not sure. I think I probably could get probably $6,000 a month.
Scott: How much could you rent something for yourself? I mean, I suppose short-term, you could get a renter and someone leases the house for a year and then you go and find an apartment for $3,000 a month or something.
Pat: And live on the spread?
Scott: That's an option.
Jamie: I probably could find something for $3,000.
Pat: That's an option. It'll give you more time.
Scott: But then you're going to go out and sign a lease somewhere in an apartment, which is going to make you stuck in that region as well.
Jamie: But I'd have to do that anyway if I was renting, wouldn't I?
Pat: I don't know. I don't know. But if you were my little sister, I'd sell the house.
Scot: Yeah, I would agree with that. Just because...
Jamie: Okay, one more question then. So if I'm selling the house, do I do it now or do I wait for the spring?
Pat: You need to sell it now. You need the money.
Jamie: Yeah, okay.
Scott: If it's a desirable area, then I imagine things are selling.
Pat: Then It doesn't really matter.
Scott: Yeah. The whole concept of waiting until the spring... I've got a good friend that is moving now and his oldest daughter is in the eighth grade. Not the ideal time, but sometimes that's what has to happen. So the house is on the market, moving his kid. So obviously, the springtime is the best time for families and stuff, assuming that there's a family buying the house.
Pat: Home sales are down 3.5% this year from last.
Scott: Is that all? Even the price?
Pat: No, the number of sales.
Scott: Appreciate the call, Jamie.
Pat: Anyway, appreciate the call.
Scott: Is that all?
Pat: Yeah, that's what I saw this morning.
Scott: I think it's much more than that. Home sales?
Pat: I might be wrong.
Scott: I think you're wrong.
Pat: I'll look it up.
Scott: I mean, if you look at some of these businesses that live off home sales, whether it's mortgage industry, title insurance, escrow companies, even moving companies...
Pat: Well, not the moving companies. "Home sales on track for the worst of year since... Existing home sales in September fell 3.5% from a year earlier."
Scott: You would think it would be more than that, wouldn't you?
Pat: No, well, the title and escrow and all that, they're supported by the refinance industry as well.
Scott: What refinance industry?
Pat: Well, they were. That's my point. Which is, by the way, I read a great article about title insurance the other day, which has always perplexed me. Always perplexed me. Our title insurance industry...
Scott: I don't have title insurance on my 401(k).
Pat: I understand.
Scott: Or my savings account.
Pat: But didn't we just pay for a title search and now you want me to insure it in case you actually miss something? Relative to the rest of the world, it's...
Scott: Good business if you can get it.
Pat: Yes, that is right. There has been a massive consolidation in that industry. Massive consolidation.
Scott: Well, even just the whole real estate commission, that whole thing is in the process of being changed.
Pat: It's pretty arcane relative to the rest of the world. Although...
Scott: The rest of the world?
Pat: The rest of the developed world.
Scott: I can... "I don't know"
Pat: Not the whole world, the developed world.
Scott: I'm pretty sure if you're in Shantytown, there's no title insurance.
Pat: I'm pretty sure that someone tells you what you get to own.
Scott: Yeah, all right, let's continue on.
Pat: When I was bicycle riding through Vietnam, so we were... I did a trip down the Mekong Delta.
Scott: Really?
Pat: Yeah.
Scott: I haven't heard about your trip to Vietnam.
Pat: So we started in Cambodia and we took a boat down the Mekong Delta. But most days, we would take a smaller boat, go to shore with these bicycles and just ride around in these little villages.
Scott: Was it just dirt roads, gravel roads?
Pat: Mostly, yes. So they're like a mountain bike sort of thing. But even the houses were just like, well who's... They just take it. Just like here, we're going to do it here. But the thing that was perplexing most to me, is these little villages with the speakers on the poles talking all day long. All day long. And I'm like, what do they say? And they say, "Ah, they don't really say anything." I'm saying to the guy, "Well, they're saying something." And they say, "Well, the crop is bountiful. Life is good." All day long in these speakers, in these little villages.
Scott: They're messages of positive encouragement stuff?
Pat: All day long.
Scott: Oh, my gosh, that would drive me crazy. What if you're having a bad day? Sometimes you just want to like...I just want to sit in my misery for a moment. Let me, please.
Pat: You're not going to go out and throw rocks at the speaker. That's what you're not going to do.
Scott: Well, one of the benefits of doing some travel, particularly in poor countries, is it reminds you of how so much the world is and how so many people in the world live. And it's just an attitude of...
Pat: Our worst is better than most.
Scott: I took one of my sons... We'll get back to calls here in a second. I took my son when he was going into eighth grade, between seventh and eighth grade, I went down to São Paulo, Brazil, to work in a favela for a week.
Pat: What's a favela?
Scott: It's the slums there. And so the favelas, they're created...you could call them invaders. So if there's an empty plot of land, they come in in the middle of the night and start building it. And if they get built far enough along, which isn't much, I forget what it was, you get a toilet in there or something, then you have claim to the property.
Pat: No title insurance?
Scott: No, there's no title insurance. So there's these high-rises, literally, in a business district, high-rises, and then there'll be a couple of lots where you would think there'd be more high-rises that are just slums, Favelas.
Pat: And you worked in them?
Scott: Yeah, we were at this church doing...they had an outreach for the kids there.
Pat: Do you help them build in the middle of the night so they can create new favelas?
Scott: I mean, part of my objective was to show my son, like, this is life. And I actually... And we'll get into the calls here in a second, but I remember we were driving around getting a tour of Sao Paulo, and we were hearing about all the crime, terrible crime, the drug lords ran everything, and there was the high-rise brothel, there was literally a high-rise brothel. This guy was telling us about it. We pulled over to get dinner somewhere, and my son gets out of the car and he says, "I'm not feeling too good." I said, "Oh, are you a little car-sick?" He says, "No, too much information."
Pat: Oh, is that right? It just kind of blew his mind.
Scott: So much for the little bubble that we grew up in, right? This is the world, son, for a lot of the population. Anyway, I don't know why we're talking about this stuff.
Pat: I brought it up.
Scott: Maybe it's...you know, the funny thing about...and we're going to talk to Pam here a minute, the funny thing about money, there's never quite enough, right? I've yet to have a client say, "Scott, quit growing it. That's too much." It's like, whatever it is, we'd always like a little bit more. And I think the one thing that's healthy when you go and experience things like this, it's just kind of a reminder that we actually have enough. Most of us have enough.
Pat: Yes, not as much as we want, but enough.
Scott: Not as much as we want.
Pat: But enough.
Scott: Certainly, life is pretty dang good here. And in spite of the craziness with the political environment and all that...
Pat: It's still great.
Scott: It's still unbelievable.
Pat: It's still great. Right? And as they said to Elon Musk, "You're the richest man in the world." And he said, "No, I think Putin is."
Scott: He's right. I guess when you could just send in the army and take over parts of the world, "That's mine." All right. Let's talk with...we're talking with Pam. Pam, you're with Allworth's "Money Matters."
Pam: Hi.
Scott: Hi, Pam.
Pam: Hi, Scott and Pat. Thanks for taking my call.
Scott: Yeah, glad you're here.
Pam: So, I'm 72. I'm still working two part-time jobs. I've lost my savings five times for various reasons. Lost job, medical expenses, and that sort of thing. So, I'm still working because I have this fearfulness that I'm not going to have money to support myself as I age and need more care.
Scott: Is it a valid fear?
Pam: Yeah. I mean, I've had some serious cancer diagnosis and back problems. But one of my family members said, "Well, you know, you're not enjoying life. You're not doing anything. You're not going on vacations. You don't even buy a Starbucks," because I'm like...I've got this stranglehold on the money that I do have in my assets. And so, she said, you should take out a reverse mortgage. I don't like that. I've had three friends that did that and ended up with disasters. And then they had nothing because they had to use the money for the health disasters that they had. And of course, then they don't have their home. They've signed their home over. So, they don't have any real estate to fall back on.
Pat: Okay. So, walk us through what your assets are.
Pam: Okay.
Scott: What's your home worth?
Pam: My total assets with my income right now in that is about $960,000.
Scott: Does that include your home?
Pam: No.
Pam: My home is probably worth $1.2 maybe if I put some money into it. My income is about $60...
Scott: What do you owe the house?
Pam: Oh, my house is paid off. I don't owe money on anything.
Scott: And where's the other roughly $1,000,000, the $960,000?
Pam: That's in stocks and investments.
Pat: Okay. And how much are you earning at your job?
Pam: On my two jobs, I make about $58,000 a year. Now, they're physical jobs. So, you know, whether I can keep doing this for very much longer, I don't know. And then my yearly costs are around $49,000. And that's everything. I have long-term insurance, which you know is extremely expensive. And so, it's my insurance and car maintenance.
Pat: And what are you getting in your Social Security benefit?
Pam: I'm getting... See, I had to apply for it early because I worked 20 years for a company and they let me go two weeks before I would have qualified for my pension. So, they robbed me of my pension. So, right now...I'm looking it up on my handy little spreadsheet. I'm getting around $1,200 on my Social Security. And so, is that included in your $58,000 a year in income?
Pat: Yes. And you have not... So you included this $14,400 a year in that. So, from your jobs, you're making $43,000 a year. Is that correct?
Pam: Yeah, roughly.
Pat: Okay.
Scott: And have you ever taken any money out of this $960,000 you have in savings?
Pam: No, no. I took care of my parents, both my parents, for 10 years. And so, that really, whatever savings I had, that just took everything. And, you know, trust me, I would do it in a heartbeat again. But, as you know, 10 years of taking care of parents when they have...
Scott: Do you really enjoy your jobs? Do they give you a lot of purpose and meaning and relationships?
Pam: One of them, yes. One of them, yes. The other one, no. They're physically demanding jobs.
Pat: The one that you like, tell us why you like it.
Pam: I work as a personal assistant dog walker for a woman who is extremely disabled from strokes. And so, you know, I really feel like I'm helping someone who's disabled.
Scott: Yeah, what do you make on that job?
Pam: Let's see. Well, it depends because sometimes she varies the things that she has me do. But it's about maybe $1,500 a month.
Pat: Okay, so $18,000.
Scott: Let me ask you this, if Elon Musk gave you a check for $1 million for signing a petition... I'm just saying if you came into a chunk of cash...
Pam: I'm not signing a petition. Forget it.
Scott: If you came into a chunk of cash, if you inherited $1 million today or won the lottery or whatever, would you continue these jobs?
Pam: No.
Pat: You wouldn't?
Pam: Maybe the one that I like, I would continue.
Scott: Well, then I would recommend you quit the job you don't like and continue to do the job you do like and start taking a little bit of income from this. You have $2 million dollars of assets.
Pat: You do not need a reverse mortgage, number one.
Scott: No.
Pat: Just flat out. Just flat out.
Scott: There are times when they work wonderfully well.
Pat: It would be a very, very bad idea for you to do a reverse mortgage. You need to start taking...
Pam: Do you think...
Pat: What's that?
Pam: Do you think that I should take any kind of other equity out of my home to...?
Pat: No, no, no.
Scott: There's no such thing as taking equity out. All it is, is you can borrow and you pledge your house as collateral. So if you don't make good on paying the loan back, they take your house. So this whole concept of equity, you're just sitting on the equity and taking some equity out, it doesn't...
Pat: You have $960,000 of assets that two years ago wasn't $960,000. What was the value of it two years ago?
Pam: Well, that's hard to say because we were still coming out of a pandemic and my stock was...
Pat: I know, but it was a lot less.
Pam: Yeah, it was a lot less.
Scott: I would recommend two things here. One is I would make sure that $960,000 has the proper allocation for you at your age at a time when you're probably going to start taking some income from that. Secondly...
Pam: Right, and next year I have to take income out of an annuity. So I don't have a choice.
Scott: And I would quit the job you don't like and set up a monthly income for whatever structure, from that $960,000, that drops into your checking account each month to replace the pay that you've been on the job that you hate that's physically demanding.
Pat: That's right. And I would do $2,000 a month. If you do $2,000 a month, right, the numbers you've shared with us between Social Security and the dog walking personal assistant, between those two, that income is approximately $32,000 a year. If I took $2,000 a month out of that $960,000 the distribution, right, is 2.4%, 2.5% a year.
Scott: It's going to conitnue to grow.
Pat: It's going to continue to grow over the long term. And you will have the same amount of money coming in. That's what I would do immediately. Like I wouldn't even wait.
Pam: You wouldn't even wait?
Pat: No, I'd quit the job tomorrow.
Scott: Maybe give them a week or two notice.
Pam: Tell the boss to go stuff it and walk out?
Pat: Well, I haven't been a boss for many, many years. I'd discourage that.
Scott: Actually, I did quit three hours before my shift at Marie Callender's when I was in high school because the manager was such a jerk. And I had it. Like, I couldn't, "I can't go into one more shift."
Pat: You seem to have let that go, the manager being a jerk, Scott. You seem to. It doesn't seem to bother you anymore.
Scott: He would ridicule me.
Pat: We know this. This is an ongoing, we've heard about this guy so many times I feel like I know him.
Scott: I keep trying to find the right therapist to tell me it's okay for me to... I'm just kidding.
Pat: You're going to have to let it go. So, Pam?
Pam: Well, and the thing is if you're a boss and you're a good boss then you have no patience with bad bosses.
Pat: Well, I mean, good and bad is in the eye of the beholder. So don't ask anyone that has ever worked for me. I would give my notice on that job. I'd start a distribution and I would sit down with...
Scott: You're very worried about your finances. And I don't know if you have a good financial advisor running a plan so you can see where you'd be a year from now, 5 years from now, 20 years.
Pam: Well, I do have a good financial advisor and you know and we meet every quarter, and I'm going to meet him next week and just you know have a further discussion with him. But I think I'm just...because I've lost my pension and money from medical bills and different things in my life, I'm a little paranoid about...
Pat: You worry.
Scott: You've got long-term care insurance, right Pam? So, if something happens...
Pam: Yeah, which is like about $8,000 a year now.
Pat: I understand. That's what the premiums are.
Scott: You've got that in place. You've got $2 million of assets. You're fine.
Pam: You think so?
Scott: If you take the 72-year-old women in the United States and line them up, you are top 10%...top 2, 3% maybe?
Pat: Single 72-year-old women.
Scott: A million bucks in savings and a house worth $1 million. It may not feel that to you...
Pat: Which is why you worry about it.
Scott: ...but you're fine.
Pat: When you sit down with your advisor, just say, "What do you think about me quitting this one job I really don't enjoy and starting a distribution of $2,000 a month out of my assets?" And you'll be good to go.
Pam: Yeah. Okay.
Scott: All right. And listen, if you show me someone that doesn't worry about money and I'll show you someone that doesn't have any.
Pam: Yeah. I know. I know. I know.
Pat: It comes with the territory. If you didn't worry about it, you wouldn't have any.
Pam: That's right. That's right. But you know I look at my assets and I think, well, 20 years ago, I would have felt like I was rich. Now in this economy and the cost of everything I feel like it's...
Scott: Pam, I bet you if it was $2 million you would feel the same way.
Pam: Well, probably.
Scott: I'm just saying.
Pat: I have clients with $10 million that they sound just like you.
Scott: The reason we asked if you liked your job, if you said you like both your jobs, we would say, "Who cares about traveling? Obviously, you're doing what you want to do." But if you're not liking one of the jobs and it's too physically demanding, then [crosstalk 00:45:02.160]
Pat: Actually, it's okay to take even a little bit more money out of that $2,000 a month. If you came to me and said, "I want to take $4,000, $5,000 out a month," I'd say, "Sure." Right? $4,000 a month out of that account is a little bit over 5% distribution. You're 72 years of age.
Pam: Yeah. It's time to go on a vacation.
Scott: Well, if that's what you want to do, you're not getting any younger, right? No one gets out of here alive. We don't know how many years we've got and we don't know how many years of good health we have.
Pam: That's right.
Scott: Glad you called, Pam. We wish you well.
Pat: Hopefully, you leave this conversation smiling.
Scott: I wonder how many other advisors she talks to. She has an advisor she meets with on a quarterly basis. He probably has the same conversations or she has the same conversations with her. She calls us on this show. I wonder if she calls other shows.
Pat: I don't know.
Scott: Money is a really interesting thing.
Pat: Yes. Well, it's scarcity.
Scott: As you stated though, you show me somebody who doesn't worry about money and I'll show you who's somebody who doesn't have money. We've worked a lot. Thirty years ago we started working in this industry. The phone company at the time was having these downsizes and they downsized by offering pension buyouts and made these tremendous enhancements to people's pensions. And so some people say, "Wow, what a great opportunity. I'm going to leave this job go work somewhere else. I'm going to take that pension throw it into an IRA let it grow," and it worked out extremely well for them. But you can tell, Pat, if you remember, in the first minute I could tell if someone had any money saved. If they had no worries at all coming in laughing, I'm thinking, they don't have any money, this is going to be hard for them. The ones that came in completely white, scared, they're the ones that had the savings.
Pat: That's right.
Scott: Right? I'm not making it up. I mean, that's exactly how it is. So, let's...
Pat: I don't know what...in the house I grew up in... Yeah, I mean, not like my dad at all. Not like my parents even a little when it comes to money. I'm not.
Scott: Oh, I'm not either. Not even close.
Pat: Right? Why would you be like my parents?
Scott: But my parents divorced when I was young and both remarried, so actually I kind of have two different families of examples that I can look at.
Pat: Yes. But your stepdad is super conservative with money.
Scott: Oh, yeah. Still has his first dollar. Very conservative. My mom's 85, she still saves every month. I asked her what for and she doesn't have an answer. She just feels better about herself if she's taking some money and putting it aside.
Pat: Scott, who knows how it works. I don't know. And there's five siblings in my family and none of us treat money like my parents, like my father did.
Scott: And how did your father treat money?
Pat: He liked to spend it.
Scott: My dad, in his latter years, he was widowed and pretty simple lifestyle. But he would say, "Scott doesn't it just feel like everything's free?" Like, "What?" He says, "I go to the supermarket. I can pick out anything to eat. This wonderful produce, I put it in a basket. I go up there. I give them this little card. I walk out. It's free." I would say, "Dad, you realize there's a finite number of times you could go into the grocery store because there needs to be something to back up that card." He says, "Well, maybe, I guess, but..."
Pat: That sounds like your dad.
Scott: He says, "I figure I'll always have something in my checking account when I die. So, yeah."
Pat: It sounds like he was right.
Scott: Fortunately, he didn't have big needs. He wasn't impressed by fancy things, so he avoided those. That was his kind of secret. In some ways, he had more financial security than I have.
Pat: Because he didn't worry about it.
Scott: He had no worries and had a very modest lifestyle and really could kind of care less.
Pat: And he was a funny guy. He was not trying to be funny, just a funny guy. Right?
Scott: Yeah.
Pat: I went to a museum. We went to the Martin Luther King Museum in Atlanta. He was with me. You were there. We were on a business trip. You invited him. We were there for the weekend. And he had a camera with him. And as we were walking I was freaked out because he would set the camera down. And I'm like, "This guy's going to lose the camera." And he'd walk 20 or 30 feet. The camera would be sitting on a counter. And I would just go pick the camera up and then carry it. And then he'd turn around like, "Did someone see my camera?" I'm like yeah, "I have it." And it happened four...
Scott: Like, how in the world does he not lose this?
Pat: He did. He lost his keys on that trip too. He was in a gym. He was at a gym at the hotel. And he put his keys in someone else's shoes.
Scott: Yeah, thinking they were his shoes.
Pat: Thinking that they were his shoes.
Scott: That was my father.
Pat: Yeah, I love the guy.
Scott: Well, we took him on that trip and it was the only time I took him. He stood up in the middle like, "This is amazing. You guys are going to crush it."
Pat: We were teaching advisors. We were doing a seminar for...
Scott: Anyway. We're going to go to one more call.
Pat: There we go.
Scott: Real quick. I had a tree trimming business when I was still living at home, I was like 19 or something, going to junior college part-time, running this treachery in business that I managed to buy with no money down. I paid a percentage of revenue. And then I sold it a few years later for cash. It worked out pretty well for me. But I ran it out of my bedroom and it was back in the day when there was answering machines. And so I had an answering machine. There was no cell phones. I had an answering machine if someone called when I wasn't able to pick up the call. And I'd say, "Dad, never touch my phone, please." And so every once in a while, I'd listen to the tape.
Pat: You could hear it on the tape.
Scott: "No, this is Scott's dad." I'm like, "Dad, I'm trying to act like a professional business. My mailing address was the P.O. Box, but it was 428 Pacific Coast Highway instead of P.O. Box, trying to make it look like a real business because I'm a 19-year-old kid stringing it together.
Pat: That's funny.
Scott: Anyway, hey, want to let all of our listeners know about our YouTube channel. I think we briefly mentioned it last week. But we've got a pretty robust YouTube channel. Who doesn't anymore? Whatever that means.
Pat: Come on.
Scott: But on YouTube, I mean, you can watch the show. You can get the full shows there. But there's also video clips of interactions with some of our callers. So if you're kind of looking for a certain type of thing, you can view that. And then also some other video production stuff that we've done along the way on a variety of different things, whether it has to do with the election and what might happen with the markets, or saving for retirement or social security. We've got a lot of other videos on those various topics that you can find. Anyway, it's been great being here with you and having you as part of this. If you find these podcasts helpful, please forward it on to somebody that you know could benefit from it as well. We'd appreciate that. And we'll see you next week. This is Scott Hanson, Pat McClain of Allworth's "Money Matters."
Announcer: This program has been brought to you by Allworth Financial, a registered investment advisory firm. Any ideas presented during this program are not intended to provide specific financial advice. You should consult your own financial advisor, tax consultant, or estate planning attorney to conduct your own due diligence.
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