Michelle, I'm sure you will have many posts like mine. I really enjoyed your article in the Sunday paper, countered by the article written by your daughter Olivia. What a wonderful young woman you have raised! My husband and I have two college age sons and have followed a similar path in paying for college....local school for one (his preference) and out of state school for the other, supported by his contribution with summer work. It feels good to know that each will leave school understanding the importance of a good education without facing a pile of debt. Love your columns!
Thank you so very much. We are very proud of our Olivia. But, as we both have written, she was NOT feeling us a year ago about this time. Still, we held our ground and look at her now! On way to a debt-free college education.
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In her Ask Amy column today, Amy Dickerson advises that student loans can be a good thing for a young person. Your thoughts on her column?
I like Ask Amy. But on this I disagree. Debt isn't good for anyone. We may think it's necessary to get what we want -- a home, car or college education but it's not good. NEVER!
Having said that I recognize we -- me too -- will borrow. We borrowed for our home. And at one time our cars. But I'm very, very concerned about the level of debt families are taking on for college. It's too much. And it's too much to ask a young person, who has not been working to save, to be expected to take on debt. So I tell people do what they can to avoid college debt. Commute. Go to local college or community college. Apply for lots and lots of scholarhips and grants. Work a while and then go to college. We have to think out of the box so that debt isn't the first resort.
I'm currently in grad school part time, and so my loans from undergrad were automatically put in deferment. It seems it'd be more effort to take them out of deferment, and since one loan is subsidized, it's not earning interest while in deferment. I'm still making payments, and paying about double the minimum. Right now the extra is proportionally divided between the subsidized and subsidized loans. by the loan company. My question is should I keep doing what I'm doing, or target the subsidized or subsidized portion while they're in deferment(I have 4 more semesters remaining). On one hand, if I target the subsidized loan, I'm basically paying back only the principle and no interest, and can probably pay off the whole loan before they come out of deferment. On the other hand, if I target the subsidized portion, I'm lowering the total interest paid on that loan. If it matters, it's about 5k subsidized and 20k unsubsidized, both with a 6.6% interest rate.
I think I got this. Hopefully you are not taking on more debt for grad school. So if you have available money, would target payments to the loans that can grow in deferment. You don't want to end up further in debt while you continue your schooling.
when to move to a retirement home
The time to consider moving to a retirement home is when you obviously are no longer able to handle your day to day activities, but as Michelle pointed out in her article, it's important to think about more than just yourself if you find yourself in that situation. As I suggest with the other talk concept this really needs to be a family discussion and ultimately decision. As you consider the retirement home decision, you should also look at your alternatives such as living at home with in home care, living with your kids, living with some friends and then finalize your decision when you sit down to have the other talk
I really couldn't agree more. So often seniors take a stand that they "won't" do one thing or another. But your deicsion can impact a lot of people, especially family that will be helping to take care of you.
My teenager got a paid internship for this summer. What is your advice to teen wage earners (and parents) on saving and investing? Should we set up some kind of beginners retirement account now? At what amount do teen earnings start being taxed? Thanks so much!
I told my daughter that she had to save her money. She had to do a budget. She had to tithe on her earnings. At this point rather than be concerned about retirment, I would encourage your teen to save for college or the beginning years of adulthood if he or she isn't going to college. If college, he or she will need money for a lot of things outside of tuition,fees, etc. My daugther used her summer savings to pay for her books, entertainment and personal itesm she needed. As for what's taxed, I don't have that info on hand right now. But you can go online to irs.gov to see the taxable limit for wages for young folks.
What should kids do if parents don't want to talk about these issues?
what I've heard from readers both aging parents and adult children is that one way to get these issues on the table is rather than confront the other with the need to discuss it's often more effective and less confrontational if you use the book in what I call a third party transaction. What I mean by that is rather than you saying to Mom and Dad we must have this conversation which then causes the barriers to rise, the confrontation to begin,and the inability to have the conversation. What I've heard from my readers is a more effective approach is to hand them the book, ask them to look at it, and when they're ready let's sit down and talk about the book. What this seems to do as a third party transaction is to focus everyone's attention on the book and not on the potential confrontation.
The college loans of today are not the college loans of 25 years ago when I had it. My debt was small but it impacted my decision not to join the Peace Corps because of my debt. As this time rolls around, please students and parents remember that college debt is the worse debt. Pushing this debt down the road at 21 or 22, and seeing that huge amount prolongs your inability to buy a car, a house, take a dream job that may not pay as much, get married, may negatively impact your credit score and affect your car insurance, employment prospects (now a credit risk for positions handling money), etc. Community colleges are affordable and then you can transfer to a 4 year college or university. I know a child who has $70,000 college loans and has not finished. Houses sell for that amount in some parts of the USA. I could not get a loan for the amount some students have now and I have excellent credit and a job.
Nothing more I need to say.
Hi Michelle, I've been working on my MBA part time and have about a year left, I should finish up in May 2015. My employer fully reimburses all tuition and books at the end of the semester, once you provide proof of completion and a good grade. Up until now, the college has had an agreement that students with these type of arrangements can pay at the end of the semester, once we've receive our employer's reimbursement. Beginning in the fall, they're doing away with this plan, and I wanted to hear your opinion on my options. In savings, I do have the money to pay the tuition upfront, however it's almost half of what I have in savings. The other options are to apply for federal student aid or make 3 tuition payments over the course of the semester. I'm nervous about forking over that much in August, even though I know I'll be reimbursed in December, in the event something were to happen. Federal loans don't seem like a good option to me, so I'm torn between the 3 payments or paying in full at the beginning of the semester. With the three payments there's a 1% interest fee per month on the remaining balance, but I'm thinking this might be best, given my savings account won't see as big of a hit. Thoughts?
If you are pretty confident your job is secure, I would just pay the tuition out of savings. By next spring, you'll get all the money back when you finish school. In the meantime, if you want to pump up your savings, take what you would have paid for the three payment plan and put that in your savings. So by Dec., you would have built back up your savings. Then take the Dec. check from your employer and use that to make the Spring 2015 tuition payment.
What are the pros and cons of living with your adult children as you get older?
As I learned with my own family growing up with my great grandparents in the same home there are many benefits to sharing your lives together. But there are also responsibilities and potential for conflict. So I suggest before you make this move that you sit down and ask some very practical questions. For example, how will the finances work? What are the guidelines for using different parts of the house? Who is responsible for food, for housekeeping? What responsibilities do the grandparents have for the kids? How do you and your spouse maintain a healthy marital relationship? There are many things to consider but it can work and a very fulfilling experience.
My name is Susan Burket. I am Director of Communications for Montgomery Hospice. We are always encouraging people to talk and to plan. But it is hard to convince people to do this. It is so uncomfortable for people to talk about death. Do you have suggestions for making it easier? Thanks.
One of the reasons I wrote the Other Talk was to give families a different way of talking about the aging parent's later years. There are a myriad of books out there written for the adult children on how to make decisions for their parents. We know from AARP that the result is that 75% of families never have this conversation. I felt that there had to be a better way. So I set out to write a book about and for the aging parent with the idea that the parent takes the initiative and leads the conversation. What I am hearing from readers is that this has opened up the possibility for dialogue in ways they never thought possible.
Hi Michelle - What % of my income should I put into my 401K?
I couldn't tell you.
And I couldn't tell you because I don't know your situation. I don't know how old you are, what you've got saved already. Do you have a pension? How much will you get form Socical Security? Will you have debt going into retirement? Where do you expect to live when you retire? How much do you think you'll need a month to live in retirement? Do you plan on adding other expenses such as a lot of travel.
See where I'm going. There isn't a one-size-fits-all percentage on what you need to save. It depends on answers to the questions I just raised and several others.
But to get a ball park by inputing some of the answers to those questions go to choosetosave.org and use play around with the retiremetn calculator.
Last week when someone mentioned the age for taking out a mortgage you cautioned paying the mortgage when retired. I am a bit baffled. Do rent payments go down because one retires? Currently in out 60s and just bought a house. The mortgage payments are the same as what we were paying in rent. The only difference is that the landlord increased the rent each year while I know what the mortgage payments will be for the future. One has to live somewhere so I see no big difference if it is rent or mortgage money paying for whee I live. (Not having to put up with a picky landlord and being able to decorate like I want is priceless).
You make good points but I also said the older person needs to make sure she can pay the mortgage in retirement. You are right that you have to live somewhere. But taking on a mortgage you can't afford in retirement is not the alternative to not renting. The point is to find or figure housing that you can afford long-term. There are a lot of other expenses to owning a home that could still far outweigh renting, even with a picky landlord.
My young one is 6 and so far has been very good about putting gift money into a piggy bank. I'm starting to get a few requests to use some of the gift money to buy toys/candy. What is a good way to get kids on a solid path to saving and spending? Can you recommend any books or articles?
I can recommend YOU!
You are the best source to teach your child about being a good money manager. So set some guidelines. For example, tell the little one he or she has to save 10 or 20 or 30 percent of gift money. But he or she can also buy something now. Because if they can't buy anything and have to save only, he or she will may learn to hate saving.
Here's what we tell our kids when they get money.
1. You have to tithe.
2. You have to save some of it for big purchases you may want down the road.
3. You get use some of the money to get something you like now.
4. When we are out and they want something I don't want to pay for, I tell them to use their own money. How quickly they then decide what they want isn't worth it :)
What do you recommend as investing options for seniors who have a medium-sized nest egg? How much should you let your children get involved in those investments?
One of the main techniques for a successful Other Talk is that the parents commits themselves to full disclosure. This has to do with medical, end of life, but certainly financial. In my research I heard many excuses for not sharing the parent's financial situation with the kids. For example, "I'll do it when the time is right"," I'm embarassed that I didn't save enough." "My kids don't know how to handle money." The fact is your financial situation will end up in your kids lap eventually, so it's incumbent upon you to sit down now and take them through your financial situation and discuss how you want to manage it from now until the end. I would even encourage you to introduce them now to your financial advisors so they know who to talk to when it's time for them to begin to take over that responsibility. Don't wait unti it's too late.
Here's the thing, your adult kids don't have to be "involved" in investments or choosing what you invest in or how you save. But you should, as you get older, think about sharing what you have that can be used to take care of you should you need long term care.
I want to start the "OTHER" talk with my kids. I am contemplating buying them all your book as a starting point for this discussion and outlining the important topics. Is this a way that you would recommend starting this difficult subject?
I would definitely encourage this approach not just because I'm trying to sell books, but because the vast majority of the reader reviews on amazon took your exact approach and found this to be very successful. It seems to go back to that third party transaction idea I talked about earlier.
I'm lucky enough to be selling my condo for a profit in the next few weeks. I'm not going to be buying a new home for about a year and am wondering what to do with the approximately $30K in profit in the meantime. High interest (ha!) savings account? CD? Something else?
Either one is fine as long as the CD matures when you want the money.
Hi Color of Money My husband and I recently hit the million-dollar mark - that is, we have 1 million in assets less our debts, not cash lying around. It is mainly retirement savings but also 529s, a rental property, etc. I didn't realize that this was still a meaningful number until CNN did a piece on the number of millionaires in the US. I worked out the percentage and it seems that my husband and I belong to a select 2.9 percent of American households. The reason that I am writing is this: every single retirement calculator that I have entered our information into tells me that we cannot retire until we are 67, and even then, we will not have enough for retirement. My husband is due for a generous pension and of course we both qualify for Social Security. My point is this: if we, in the top 2.9 percent of US household according to our assets, are not predicted to able to retire comfortably, then the rest of America is really up the creek as far as retirement is concerned. It makes me question how realistic the retirement calculators are but also makes me wonder how my peers are going to get along when the day comes.
A lot of the reports you hear with the scare tactics are the source of reporting by people selling investing. It's not that they are wrong, it's just that want you to invest so they can make money too.
I tell folks not to get scared by the big numbers of the retirement calculators. Because the reality is most Americans will not retire as millionaires. But it is possible to have a comfortable retirement if you don't drag a mortage into it or other consumer debt. It's possible if you have decent health insurance and you keep your spending in check.
It can be done but your expecations may need to be adjusted.
And hey the 60s are the new 40s!
My question is about 'getting started'. While the importance of having 'the other talk' is clear to me, what would you suggest are the most important specific 'outcomes' to achieve? I would imagine, for example, that the first talk would just lay the foundation for having a series of different talks about specifics e.g. medical directives, long term care etc. Are we talking about having multiple talks with ones kids so as not to bite off too much in any one conversation, and if so, which topics come first and which ones come later? Thank you!
You raise a great question. There is a lot to cover in the Other Talk and you don't want to overwhelm your kids initially. But what you do want to do is begin to establish the partnership between your kids and yourself. I hear many aging parents tell me I don't want to do this because I'm losing control. The point of the Other Talk concept is that you are not losing control, you're sharing control.
The other part of your question is also right on. The Other Talk is not a one time event. It is something you should do every year because things change. Your health changes, your finances change, your kids jobs change, your opinions expressed in that first Other Talk may change. So it's important that you maintain the dialogue by sitting down annually and going through the talk.
When should you start having "the other talk" with your adult children?
The quick answer is do it now. I almost learned this the hard way when in the middle of writing this book my wife and I took a trip to Italy. Toward the end of our stay we ended up renting a sailboat with a crew and set out to sail the Mediterranean for the day. The wind came up, we headed back to the harbor and it was obvious to me that the captain was not much of a sailor. So I told him to point the boat in the wind I would help the crew. Unfortunately he didn't listen. He decided to help us. Which meant the boom slammed into me from the back which is the last thing I remember. When I came to in the hospital I couldn't move, I couldn't speak, but I could think, and I thought My God, I'll never have the other talk with my daughter. My message to you is don't wait, have the other talk now.
Where can I keep my emergency savings so that they will keep pace with inflation?
Your emergency savings can't keep pace with inflation because there isn't a safe haven for such money that earns that much these days. But remember your emergency money is supposed to be ready cash you can get to if the unthinkable happens. It's not money meant to be invested or grow.
Mr. Prosch, I am single woman, so I don't have anyone to have that "other" talk (otoh, I didn't have to do That Talk either!) Right now my executor, POA, and health care POA are all the same people--my oldest friend. But we are both approaching 60, I have no younger relatives to trust, and I am only now grappling with what to do in retirement. On a positive note, my house is paid for, I have no debt, and I have pretty good savings in retirement accounts. What to do?
You raise an excellent point. While I wrote the book for parents and their kids, the reality is it's written for someone your age who needs to talk to the support group who is going to help them down the road. This could be a sibling, a neighbor, church members, but no matter who they are you need to involve them in the issues and the challenges and the decisions that you as a group will face in the years ahead. Perhaps you might want to look into paid advisors. But, as I said in my last answer, do it now.
Hi Michelle. Love your chats - I've gotten really good advice in here! My fiance and have moved in together and we have 2 cars. We live across the street from a Metro, and we use it to get to work and often when we go out--meaning we rarely use our cars now. We both have loans on our cars, but plan to pay at least one off by the end of the year (after our wedding in June). My question is whether it is smarter to pay off the car first and then sell it? Or, sell it now and take the loss. Thanks!
If you are close to paying off one car, why would there be a loss? Unless you overpaid for it or the loan was too expensive. If selling the car is a break-even deal, you might still sell now because you then save on insurance and gas.
You recommend that people have several months worth of living expenses saved in an emergency account. I've followed this advice, but I've been worried for several years that my emergency savings are losing value. The return on my money market (where I save my emergency funds) is well under 0.50%. How can I save money for an emergency and keep up with inflation? I hope savers stop getting punished soon!!!
You can't. Not now anyway.
So really you have to get comfortable with understanding this parking lot money. You park it for when you may need it. And for that reason it's okay that it's not earning much if anything.
Because to do otherwise would be to put the money at risk and you don't want to do that with your emergency fund.
I am a widow, my adult children live in other cities...and they are the ones who do not seem to want to have 'the talk'. I am going to give my daughter and her husband your book...and hopefully we can talk!
I love this answer from Tim and his transparency. Similar things have happened to me. Relatives I thought I could work with on trust issues, elder care, turned out to be not good or we clashed big time. So my husband and I changed our wills to switch out people who as time went on we realized they wouldn't do what we wanted or we didn't agree with how they made decisions. I think you should watch what folks do and while you can when you realize you are not aligned change the person you give your POA to or other decision making authority.
My parents sat down my sister and I several years ago to let us know about their end of life wishes, etc. My sister is an attorney and a few years older, so it made sense to make her the power of attorney for both of them at the time. However, since that talk, we've gone through several major health issues with my grandfather, and my sister and I often had contradictory advice for my parents when they asked for it. The biggest issue was that my sister, early on after my grandfather' stroke, had the immediate response of "put him in a home," with really not accounting for my grandmother's wishes or for the fact that rehab might be an option (my grandmother wanted to try to make it work at home). There was really no listening or conversation,she was convinced. Thankfully, my grandfather is nearly fully recovered, living at home and doing well. But, now Im worried about having my sister as the decision maker when my parents are in this position. Thoughts about how/if I should bring this up with my parents?
Your experience is an excellent example of why you and your sister and your parents should sit down and have the Other Talk. Based on your experience with your grandparents, it may be an effective strategy as was suggested by one of the earlies chat members to provide each of them with the book and to suggest that it's time to have your own family's other talk.
My husband and I, in good health in our mid-60s, have no children, but several adult nieces and nephews, on two continents. None of them live close by, but we do see them once or twice a year and keep in touch on Facebook. Between the bunch of them, some are better money managers than others, some need help, and we are indeed helping pay the college tuition for a couple of the youngest of them. So - when the time comes, do we worry about treating each of them equally? Should we divide any inheritance taking into account the financial assistance already given? Do we just pick among the oldest ones to have "the talk" with? I'm thinking about starting to discuss these issues with my sisters, as perhaps they might have an opinion about all of this, but basically nieces and nephews rarely feel the same sense of obligation towards their elders that sons and daughters do, so I'm a bit at a loss as to how to think ahead and prepare for family involvement, if any.
Another great question about an issue that often can blow up a family. When I talked earlier about full financial disclosure I was referring to sharing your financial condition with your family. However, an equally important part of full financial disclosure is sharing with your family, in your case your neices and nephews what you financial plans are when you are gone. If you wait until you are gone, I suggest you will probably ignite some serious family "squabbles". To avoid that, I would suggest you do two things. Number one, don't discuss these issues idividually because that will only leave the rest of them to guess at what was really said. Rather I think it's critical that you bring the whole tribe together at once and lay out your thought processes. If there is disagreement that's the time to have it. But the fact is it's your money.
Also, remember it's your money and you get to decide where it goes when you die. But I agree with Tim, let folks know that you aren't punishing anyone but that there's a reason behind your decisions such as you want to help relatives who need the money more, etc.
After reading "the Other Talk" I have begun a binder....with information on medical and financial matters and personal personal data. Passwords, bank accounts, charges, social security, etc. Now it seems to me that if that fell into the wrong hands....it could be a mess!
You are right to be concerned about the liability of losing control over your information. So perhaps the simplest for you could be either put it in a safety deposit box, giving a key to each family member or perhaps storing it in the cloud. But don't let concern for security preclude sharing all this information with the people who will need it down the road.
Just my opinion: I think that financial literacy is a choice. I did not grow up loving math or understanding the dangers of debt. I learned that lesson - from choices that made a huge impression on me! I don't think it is anyone else's responsibility to bail me out of my decisions. I read finance-related stuff now because my future matters to me. Anyone who continues to borrow for frivolous things, fails to save for retirement, signs bad loans... those are all choices. We have the internet - there is an endless supply of quality, easy-to-understand information. You even provide some of that!
Yes, life is a choice.
But I choose to encourage people and fuss at them to get educated becasue often they need it. They need the push. So I push in this space on Twitter, Facebook, my column, weekly electronic newsletter. It's important to help people help themselves.