And good evening.
You've got More Than Money.
You've got Gene Dickison, your host, your personal financial advisor.
Happy to be of service this evening on what I believe to be the most relevant financial show airing on TV today.
Pretty bold statement, wouldn't you say?
Not really.
Not if you understand financial shows.
Lots of them have their own agendas, topics they want to push, topics they may want to educate you about.
Others are simply selling you stuff, maybe wanting you to buy into an idea or an investment or a concept.
We are the exact inverse of those shows.
We respond to you.
What makes us the most relevant?
You do.
My 780 years of experience has something to do with all that, I'm quite certain, or at least I'm hopeful.
But the reality is, we answer questions that are important to you.
They're on the top of your mind.
There are impactful in your lives.
So we could talk about generic topics of retirement, income taxes, estate planning, business planning.
Those are general topics.
They have lots of value in terms of discussing what may or may not happen in those general areas, but the likelihood that it really zones in, really focuses in, really hones in on what's important to you, it's hit or miss.
Not here - because we're answering your questions.
And I've got to confess, your questions are way more interesting than anything I might come up with off the top of my head.
So, two things that you should know.
Number one, half an hour goes quickly.
And number two, the term off the top of my head when you have 780 years of experience, that actually has some value to it.
Something coming off the top of my head actually might be useful.
We are unscripted.
So, other than the e-mails that you hear our financial correspondents share with you, we are unscripted.
So the idea that maybe this has all been plotted out, not so much.
So all of the little glitches that you might see, all the mispronunciations that you might hear, all of the goofiness that you might experience, it's all real.
It's all the real deal.
It's all the reaction to the questions that you are asking.
If you have a question you think would be valuable to share, or if you simply want great information directly back to you, send those to us... We answer every single question back to you, and as many as we can possibly fit, we bring to the airwaves in a future show.
So please make sure that you help us stay the most relevant financial show on television today.
The person who typically brings us our questions, our financial correspondent, Ms Megan, was on assignment last week.
She was not with us, made me do double duty, fly solo, as they say.
So, assignments can be sometimes not that fun.
But, Megan, where exactly were you on assignment?
- I was a little far away from here.
- I was on the other side of the country in Hawaii for a few days.
I was visiting my best friend from college that lives there.
So... - Hopefully you picked up a few financial ideas while you were there.
- Yes, I was on my laptop, on the beach, working away.
The scenery was much nicer than my cubicle at the office, even though I do love being at work.
But, yeah, it was a great trip.
Definitely recommend going.
It's as beautiful as they say, so... - Well, it's wonderful to have you back.
And hopefully I was very tongue-in-cheek about doing a lot of financial stuff while you were there.
I'm hopeful it was just a modest amount.
- It was.
It was the perfect balance.
- Well done.
Well done, indeed.
Well, let's start serving our audience.
What's our first question this evening?
- Our first question is pretty long.
- It says, It has taken me many months to write to you to ask your advice about our financial situation.
But the financial advisor I hired many months ago has disappointed me.
And so I'm turning to you as we would like to make a decision soon.
We have never been financial planners.
When younger, we didn't have much money to manage.
And as my husband's salary increased over the years, we still did not attend to it.
About 18 months ago, my husband was given leave without pay for nine months by his employer of 30 years, just as he turned 64, for failing to comply with their vaccination policy.
Thankfully, they did continue our health care coverage during that time.
He has now returned to work, but during that time we had to dip into his retirement fund for our living expenses.
I am a 72-year-old artist, but not making any money from my art currently.
I do collect a pension and have been drawing my Social Security for about ten years now, which gives me a combined income of 20,000 a year.
My husband's fund was at about 700,000 when this whole thing began.
Without advice, we took out a home equity loan and paid off some high interest credit card debt and our school loans that have been siphoning off money for decades.
We did not have a government direct loan, so we were not eligible for the relief we might have gotten in that case.
The nine months brought the original retirement amount down to about 600,000.
The paying off of the cards and our school loans brought our debt up to approximately 300,000 total, but with much lower interest rates.
As the loan amounts are now held by our credit card union, this figure also includes our mortgage.
We are thinking of making some changes in what we are going to do with my husband's retirement fund.
Last year he transferred half of the fund money, $300,000, to save for things that guarantee a 3% interest rather than in the stock market.
Right now we are thinking of using the other half, which were left in stocks and bonds, to pay off the first mortgage and the second mortgage, which is a home equity loan.
This would leave us at this time with approximately 300,000 as a retirement fund.
If he takes his Social Security at his full retirement age, he will get about $2,400 per month.
Of course, if he continues to work, his retirement fund would increase.
And if he does not work past his full retirement age of 66 and a half, we would at least not have the burdens of these mortgages to pay out of his and my Social Security and my pension on a monthly basis.
My husband is quite concerned with the unstable world situation in terms of financial security and has little trust in banks, our government or the global economy as it now exists.
Although I share some of his views, I by no means think I have the financial knowledge to guide us through these important decisions.
I would be interested to know what you think of this proposal and/or your recommendations for us.
I want to thank you in advance for any help you can offer.
- Wow.
Goodness.
Very, very interesting.
Lots of layers to this to unpack.
So, first of all, thank you so much for your question and for the details that you provided.
I think this is a particularly valuable question for our audience to be able to dig into, because it covers a lot of different challenges, a lot of different questions.
And it really does challenge a financial advisor as to how to build a response that covers all the bases.
So I'm going to guide you through that.
And I took some extensive notes so that I'm going to keep you on track in terms of how you might unpack a similar challenge.
I want to make a comment first about they worked with an advisor, have worked with an advisor and it's been disappointing.
That happens.
Sadly, not all professionals are equally competent, and in some cases it's an issue of incompetence.
In some cases, that professional, it could be an advisor, it could be a tax planner, it could be a doctor, it could be a surgeon, is simply not competent.
In many cases, particularly in the field of the financial advisory world, it's not incompetence, it's miscommunication.
And very often what is interpreted by a client as negligence or incompetence is either a lack of communicative skills, not a good bedside manner, or a combination of both of those.
And as a result, the chemistry is so disjointed, so disconnected, that the value is lost.
The value is lost.
Which is why most quality financial advisors will offer an individual a free, absolutely no charge, no obligation second-opinion meeting where you could sit down with a financial advisor with this fact pattern in hand and say, Here's what my current advisor is recommending.
What do you recommend?
And that could be very useful.
That would be the first recommendation I make to this couple.
The second is, you must start with the most important piece of information that will unlock the answers to everything else.
And that is this question.
What do you and your husband need on a monthly basis so that your bills are paid and you're happy and healthy?
Very important foundational question.
If I have the answer to that question, all the other answers fall in line easily.
I'll give you an example.
This young lady currently is receiving a pension and Social Security totaling about $20,000 a year.
If her husband were to retire at his normal retirement age, approximately 67, so a year and a half, two years away, he'll receive about $30,000 a year.
In combination, $50,000 a year of income.
My question - what do you need?
Bills that are paid, happy and healthy.
if that number is approximately 4,000 a month or less... ..everything else is easy.
All the other answers are easy.
If the number is higher than 4,000 a month, then it gets more challenging.
For example, the idea that we will take a big chunk of money out of a retirement plan, pay a huge amount in taxes in order to pay off the mortgage and the home equity line might be a good idea if 4,000 or less is the right number.
Because if we don't need to supplement our income from his retirement savings, then how we use the retirement savings can be much more relaxed, much more...taking a much broader view of things, including...we really don't care that we're spending a lot of money on taxes, we're going to eliminate, feel better, have more peace of mind, be more relaxed, and we still have all the income we need to pay our bills.
If, on the other hand, for example, 4,000 a month does not do it, 6,000 a month....
I have no idea why I'm doing visual aids at this point, but 6,000 a month is the number.
Then taking all that money out of the retirement plan is a dreadful idea.
It's already a challenge that half the money is at a fixed 3%.
Interest rates have been rising significantly since your husband made that move.
Currently, two year treasuries are paying 4.5%.
An extra 1.5% guaranteed on $300,000.
$4,500 a year of additional income is a lot of money to forego because of anxiety.
So you need a base foundational piece of information.
How much money do you need on a monthly basis?
Number two, you need to develop a relationship with an advisor that you trust, that you communicate with really well, that you have good chemistry.
And then, three, you need to add those two things together to begin answering all your other questions.
You are faced with challenges, of course.
Good information will help meet those challenges rather readily, and getting good advice that you trust will bring it all together and give you the opportunity to have a comfortable, confident retirement.
Megan, fantastic start.
Where do we go from here?
- Our next e-mail says, My question concerns inheritance tax law in Pennsylvania.
If the beneficiary of an estate inherits not money but a property, in this case a unit in a co-op building, does that beneficiary owe inheritance tax on the monetary value of the property?
I'm trying to help a friend who is facing this situation.
Thank you very much for your advice and your help.
- Well, you're very kind.
The answer is yes.
I wish I could sugar-coat it.
I wish I could make the answer different so that you could save some money, your friend could save some money.
But the reality is there are very few exceptions, very few exceptions to the Pennsylvanian inheritance tax law that anything of value, anything, any asset that has real value should be inventoried and included in the estate.
Liquid assets, bank accounts, credit unions, stocks, bonds, mutual funds, of course.
Real estate interests, whether it's a home, a condo, etc, of course, any other assets that were owned by the decedent, so very few exceptions.
Yep.
Depending on the relationship of your friend to the decedent...
If it's a direct descendant, it's only 4.5%, which could still be a lot of dollars if the estate is rather large.
And of course, if it's not a direct descendant, it could be as high as 15% Pennsylvania inheritance tax.
It's absolutely imperative that you sit with either or both, but either a trusted tax preparer, tax advisor, tax professional, or a trusted experienced estate planning attorney, or both, to make sure that you're covering all your bases.
That was a brief one.
Megs, what's next?
- This one is a little bit longer.
It's about annuities.
It says.
I was listening to the show tonight.
And you talked about working with a financial planner, not an annuity sales person when trying to determine which type of annuity would be appropriate for generating a monthly income.
I will be retiring from Vanguard after 29 years at the end of this year.
At this point, my wife and I would like to lock in some pension-like money and have looked into SPIAs.
I've gotten quotes from Stan, the Annuity Man and Blueprint Income.
Both are brokers for various annuity companies.
I've talked to our planner at Vanguard.
However, he isn't able to provide much guidance on this topic.
I'm looking to get some help to determine if this or another annuity product would be more appropriate.
I'd also like some guidance on how much I should set aside to cover your basic living expenses with guaranteed income, Social Security annuities.
Is there any is there someone at your firm who might be able to assist us?
Sorry, I tripped up a little bit on that one.
- Not to worry, I get the gist.
And the gist is this.
This gentleman and his wife are interested in creating peace of mind.
They're interested in creating a retirement payment system, income plan - pension-like is a very useful phrase.
I think that's very, very helpful.
Their intent is between Social Security and any pension-like annuity they can create to have enough income on a monthly basis so that they...
This sounds deja vu.
...their bills are paid, they're happy, they're healthy.
I think it's a fabulous idea.
Now, a couple of things of note.
Gentleman works for Vanguard 29 years.
A lot of folks are going, Whoa, whoa, whoa, Vanguard.
It's one of the biggest financial advisory firms in the world, and he works there.
Why would he be asking someone else?
Well, a couple of things.
Investment advisors are not always financial advisors and vice versa.
An investment advisor, Vanguard, one of the world's largest, most respected, well known investment advisory groups ever - ever.
Jack Bogle started something decades ago and it just exploded.
Tons of you watching me own Vanguard funds, have invested through Vanguard.
If you're a client of our firm, you likely have Vanguard funds.
We use them all the time.
It's an investment advisory firm.
A question about annuities often is not part of that investment advisory firm.
I'm not familiar that Vanguard has any annuity offerings at all.
So they are advisors.
Investment advisors may or may not - in this case has not - been trained in these areas.
The difference between an investment advisor talking to you about your investments logically and a financial advisor is that a financial advisor may very well be talking to you about all your investments.
Oh, and tax planning and estate planning and insurance planning and any other topic that may come up.
So, asking for a second opinion in this case, perfectly reasonable SPIA is the reference in the e-mail.
SPIA.
Single premium immediate annuity.
Perfectly appropriate reference.
And yes, I have said many times on this show, do not work, do not work with an annuity salesman, work with a financial advisor who has access to dozens, if not hundreds, of annuity companies.
That advisor can then...
He or she can pick or choose, pick and choose the best contract for you.
They are not all the same.
They do not offer all the same benefits, all the same interest rates.
And to be very, very clear, there are some SPIAs, single premium immediate annuities, that cover one life - his for example.
There are many that will cover both lives.
And that way, you are giving confidence to husband and wife.
And since wives often outlive their husbands, that's a very wise thing to do.
And having said that, in addition to SPIAs, there are half a dozen other annuity options that will give you guaranteed lifetime income and some other benefits.
Now, should you be looking at those?
Absolutely.
Get well educated.
Look at all the pros and cons, benefits and drawbacks.
Nothing's perfect.
So make sure you're working with a trusted, experienced financial advisor and make sure that you're discussing in detail your options across the annuity spectrum and then make the choice that best fits you.
Excellent question.
Fantastic question.
Megan.
Again.
- Sure.
This question says, I am contemplating selling some shares at a loss of a Pennsylvania tax free municipal bond fund that I own in a non retirement account to help offset the taxes I will owe on capital gains and dividends from another mutual fund I own in a non retirement account.
My question is this.
If I use the proceeds from the sale to purchase I bonds directly from the US Treasury in 30 days or less, will this be considered a substantially identical investment and violate the wash sale rule?
Thank you for your help.
- Wash sale rule.
I don't even have to explain it, because I know all of you bump into that on a near-daily basis and you're well versed in the wash sale rule.
No, you're not.
Very few people even know what that is.
Uncle Sam, the IRS, says that if you sell an investment at a loss, you can deduct some or all of that loss and get some of that loss back in tax savings.
That's a beautiful thing.
But there's a requirement.
If you sell Apple stock at a loss... ..and you wish to deduct the loss, you must wait 30 days - 30 days - to rebuy Apple stock.
Otherwise people would sell it at a loss, buy it back within the hour.
And the IRS says, That's not what we're intending to do here.
So, bottom line for you is the question - are Pennsylvania bonds and I bonds substantially identical?
And the answer is absolutely not.
Two totally different animals.
You will have no struggle whatsoever.
You can sell your PA municipal bond this moment.
You can buy I bonds the next moment.
Still take your deduction.
No worries whatsoever.
For those of you out there going, Wash sale rule?
I'm not sure that applies to me, make sure you send us your e-mail to gene@ask.mtm.com.
Megan, I'm smiling.
That was a little promo.
So, who actually has sent us an e-mail and how can we help them?
- Our next e-mail says, We have seen your program on PBS and believe we are a good match for your perspective and various services.
We have handled our own investing and done our own taxes for the last 10 to 15 years, so we have some broad financial and investment understanding.
We are in a transition time that we feel again we need some advice and that would be helpful.
We are in good health, in our 70s, and this year both beginning to draw RMD from IRAs.
We want to downsize from our mortgage free home in the country to simpler living in an apartment closer to family, medical care and assistance when that time comes - we may need it.
Our plan at this time is not to purchase a home or condo, so we have flexibility to figure out where we want to live.
We're not afraid of moving several times if needed.
Our investments are mostly with Vanguard Mutual Funds and with Schwab in individual stocks, mutual and index funds.
Another piece of money management is my wife is trustee and beneficiary of bypass trusts set up and funded upon sudden death of her first husband in 2001.
Thank you for your help with our question.
- Oh, goodness.
Well, thank you.
My number one observation, maybe my most valuable observation about this question, is the fact that you have substantial, broad based experience on your own.
It makes you the ideal candidate to work closely with a financial advisor.
Now, a lot of folks would find that kind of a head scratcher.
Don't you mean the opposite?
If folks like to do it on their own, wouldn't they be kind of at odds with an advisor?
Quite the opposite.
A quality financial advisor is looking for clients that they can work with as a team, not one talking down to another, not one taking orders from another, but working very much as a team.
The more you know, the broader your exposure to good ideas, the better you are as a client, the more effective you are as a client, the more you bring to the table as a client.
So from a financial advisory standpoint, you're asking the right questions and you're looking for the right assistance.
A transition in this time and some assistance makes perfect sense.
Your plan to downsize and go into an apartment I think is brilliant.
Too many people make that automatic choice either to move to another location, another state, maybe five states away without any real thought about, Well, what happens if it doesn't turn out the way we hope?
You're willing to explore and figure out from a location, geographic standpoint what fits you the best.
I think that's brilliant.
The management of these funds, taken in an overall picture - of course, financial advisors can help with that - making sure that you're protecting each other should either of you or both of you lose your house.
Of course, a trusted advisor can help you with that.
But the word transition is fantastic.
I think you've already done a great deal to make your transition very, very smooth and you can move forward with confidence, and sitting with a trusted financial advisory firm is a very good move on your part.
Speaking of a good move, you've made a very good move to go all the way through our show with us.
Again, the most relevant show on TV today, because it's all about you.
If you have questions you would like to pose to us, we would welcome those, whether they're similar to the ones we answered this evening, or vastly different.
Interesting questions are always welcome, and the way you do that is simple.
You send those to me.
You can expect to hear back from one of our team.
For every single e-mail, there is a response and we're happy to serve that to you.
I hope you picked up some ideas.
I hope you were mildly entertained along the way.
I hope you welcomed Megan back from assignment in Hawaii.
And I hope you'll rejoin us next week right here when we return to the studio for our next More Than Money.
Goodnight.