Color of Money Live: 'It's about balance.'

Dec 06, 2018

Send in your questions to Washington Post nationally syndicated personal finance columnist Michelle Singletary.

“Knowledge isn’t power. The right knowledge is power.”

Stay informed.

Read & share Michelle Singletary’s Color of Money Column on Wednesdays and Sundays: https://wapo.st/michelle-singletary

Follow Michelle Singletary on Twitter (@SingletaryM) and Facebook www.facebook.com/MichelleSingletary

So glad you could join me today. 

As always, would love to get some testimonies. As the year comes to a close what have been your financial successes?

Let's get started.

I need the title and author of last month’s recommended book, had the word ‘millionaire’ in the title.

Read Michelle's column: How to be richer than a millionaire

There's a link to the review of the book. Here's the title: "Richer Than A Millionaire" by William D. Danko and Richard J. Van Ness. 

 

Due to a recent inheritance, I am able to pay off my mortgage. But should I? It would use almost all of the windfall, leaving a few thousand for other things I'd like to do, such as travel. I hope to retire in 1 1/2 years, and was expecting to have the mortgage, but now, maybe not. No other debt, but expect to replace my car before retirement.

I'm all for being mortgage free before heading into retirement. But I would need to know more to say you should take the windfall and pay it off. 

The things is you should strive to pay off your mortgage before you retire but not if it will make you "cash poor."

The saying goes you don't want to be "house rich but cash poor," which means a lot of your money is tied up in your home.

However if you have a good stream of retirement -- Social Security, pension, and well funded retirement savings -- and the windfall is truly extra heck yeah pay off the mortgage. Housing is the biggest expense in most people's budget. Get that gone (except for insurance and property taxes of course) and you set yourself up for a very management budget in retirement. 

We fit the profile of high savings, low cost of living, no kids, and no debt (we've been frugal since before it was a Thing). So it's plausible for us to detach from employment in our mid-50s. But what about health insurance? If you've written on this topic, or know of others who have, can you please post links to reliable info?

Read Michelle's column: 3 myths about this early retirement movement

I have mentioned in my column and newsletters the concern that people who retire may not have health care or will have to get it on the open market and that can be very, very expensive. So you are right that any discussion about early retirement should include provisions for health care. In a lot of stories you read one spouse may still be working and thus have employer-based health insurance. 

Hi Michelle - I usually agree with most of what you say but I was floored at your article about Michelle Obama, saying how wrong Sheryl Sandberg is. The whole point of Lean In was to get women to recognize unconscious tendencies that often stymie careers and highlight behaviors that both men and women can engage in to help solve the issue (for example, she talked about her one boss who would only have lunches with work people - no dinners, because it allowed equal access without the implications of men and women having dinner one-on-one). Sheryl Sandberg was never trying to indict women who consciously chose to not advance to high levels in their careers, as you suggest in your article. You also miss a HUGE part of Sheryl's message, which is to believe in yourself and recognize your own worth in the work place and beyond. This is a message of encouragement and hope, not lambasting women for failing to make it to the top. She also promotes ideas and thought experiments to help improve work place equality. I feel really passionate about this issue because I personally have heeded Sheryl's advice and I have benefitted from it. You'll like this part - I point blank asked for a raise after reading her book when I fully believed I deserved one for at least a year prior but was too nervous to ask --- and they gave it to me! So fine, if we need to have a debate about "having it all", let's do it. But let's not throw the baby out with the bathwater; it is a disservice to women with career-oriented ambition to just throw Lean In aside. Sheryl Sandberg created this conversation and put this issue on the map, we would do well to listen.

Read Michelle's column: Michelle Obama is right. We can’t have it all

Thanks for a civil and well-reasoned counter to my column. I love that. We need more of this kind of debating.

I actually agree with a lot of what you said. But some of the things she said just didn't sit well with me. Often it appeared as if she was saying it's our fault for not rising high enough. 

Further, I thought she overstated that having a great career could be equal to making sacrifices with your children or spouse. Not equal. Ever. They lose when we are not there. Now, we may still choose to climb and not be completely available but we do give up something and that needs to be said. 

I think actually in the end we are in "violent agreement" as my husband likes to say. 

Yes, women should ask for raises and promotions and fair opportunities to compete. Yes, we are held back. Yes, many of us chose not to be as aggressive in the workplace because it will mean less time with family. 

What both women said and how I ended the column was that we can not have it all. 

Hi Michelle, I have young adult daughters who have just started working. We have opened and help fund Roth IRAs for them. Should we also be steering them towards a broad index fund investment account -- and explain the benefits? We are in a position to help them by contributing to it. Any other advice for young adults just starting out?
Read Michelle's column: Why Trump’s tweets are scaring inexperienced investors

The most helpful thing we can tell young adults is:

-- Start investing early. Time is the thing they has that we older folks can never get back. The sooner they invest, the less they have to invest but the more they have over time thanks to compounding.

-- Don't be to conservative. Again, they have time. So yes, invest in a diversified portfolio that is heavier in stocks. The thing they need to watch out for is not having their investments keep pace with inflation. 

-- Live on a little less now so that you can have a choice of when to retire later and still live well. 

I do ok, but never had it all. I have worked since I completed graduate school, raised two children and have now decided to retire at 70 when my Social Security maxes out, rather than when I have 20 years in my current (federal) job when my retirement formula would increase. I am currently drawing spousal social security on top of my wages and am saving the max in my TSP plan. Meanwhile, I always knew I did not have enough time for my work life because of my home life, nor enough time for my home life because of my work life. I now have grandchildren, so enough is enough. I will have a financially comfortable retirement, but there were sacrifices all along the way, and I expect there will continue to be.

It's about balance. Many people don't have the financial luxury of not working. But I agree with you. Enough is enough. I chose to work a certain way so that I could be more available to my children. I miss out on a lot of things at work because of these choices. However, I'm okay with that.

It will be my kids, husband and friends who will be there for me when I need care not my job/career.

1) We paid off our mortgage almost 2 years ago, and I can testify that the relief of having our biggest expense off our backs has opened up lots of possibilities, including... 2) Early retirement. We're 60 and 61, and the only things preventing us from making the leap are the health care insurance concerns and the roller coaster ride the stock market has been on all year. Sigh.

I so feel you. My husband and I are delaying an early retirement because we wouldn't have health insurance unless we got it in the open market. And for a family of five with no chance of a subsidy that would be cost prohibitive. 

I opened a credit card to take advantage of a 0% APR for X amount of months on balance transfers so I could pay down the little bit of unavoidable debt that I accumulated during a transition. I've since paid off the debt and now I'm wondering what I should do with the card. It doesn't offer any rewards or bonuses like the day to day card that I use. Should I close the card? I've only had it for about two years. I'm planning some overseas travel next year and I'm wondering would it be worth it to open a card that offers miles rewards? Will it affect my credit to close and open a new card? Or would it be worthwhile to keep the card open and just unused? I have a great credit score (close to 800), so I'm not too worried about just losing a couple of points.

If the card doesn't have an annual fee, sure you can keep it open and just not use it. Definitely don't close it if you have credit card debt outstanding that you carry month to month. 

If there is an annual fee and you don't have outstanding credit card debt, I would close it. The good history won't go away. But opening another card will likely drop your score. But if you are high 700s the drop shouldn't be large or permanent. Just be careful of moves that will drop our score below 750. 

Love your chats, Michelle! You have helped me and my family become financially stable and debt-free except for our mortgage. As our income has grown, I've tried to increase our charitable giving by around $1,000 each year. The problem is, it feels really scattershot -- small amounts to various GoFundMes, friends' appeals, impulse giving, etc. Any advice for developing a more organized and effective approach in 2019? Maybe joining a giving circle?

Thank you for your kind comments. And I love that you are giving back. How about talking with your family about the causes or charities you may want to support with your regular donations. For example, my husband and I love the theater so we give to Arena Stage in DC where we also have a subscription. We tithe to our church because of all the great community work it does. We support public television. We give to the colleges that we attended and now where our three children go. 

So get a giving plan. Decide what things matte to you. Could be conservation, the homeless, etc. Pick some well run charities to direct your donations and give to them year round. Having a giving plan also allows you to say no to solicitations that don't meet your giving plan. And you don't have to feel guilty because you are still giving. You might also carve out a little money for causes that come up that you want to support such as when a natural disaster hits and people are in need. 

So, I don't play the lottery regularly (maybe once or twice a year), but if I suddenly found myself with $5 to $10 million bucks I still wouldn't retire until I was sure I could keep my group health insurance until Medicare kicks in. That varies from job to job, but there are too many expensive things that can happen to you. Cancer, needing a transplant, MS, Parkinson's, etc.

That would be my plan too!

One option that might be worth considering for some : government employment before retirement. From what I have understand, a huge federal benefit is being able to continue that health coverage into retirement if you have the insurance for the 5 years before your retirement. Isn't your husband a federal employee, Michelle?

He is and that's exactly our plan although he didn't start working for the government for that reason. My husband actually loves being a public servant. He truly does like working for the American people. 

But having lost my retirement insurance we switched to the federal plan so that we could take it into retirement since we will likely still have two of your three kids on our plan into your 60s. 

If you're not working you have no income -- don't you qualify for all the subsidized insurance?

Not necessarily. You could have a pension and Social Security that pushes you out of the bounds of getting subsidized health care. 

We're having the wrong debate. Our country is medieval when it comes to supporting families. Our neighbor to the north, for example, offers a full year of some cash benefits when welcoming a new baby to the family. Family leave, health benefits, a public educational system that is not dictated by zip code-- I could go on. Women --- EVERYONE -- needs all of these supports in place in order to "lean in" to a career.

You said it!

Hi Michelle! Love your advice! I am 40, divorced a few years, 2 kids under 10. I left my marriage with a pile of debt, but worked hard to pay off the credit card debt and just paid off my last student loan. YAY!!!! I know I need to funnel pretty much all of what I was paying in debt into college savings plans - I am way behind. But I’ve done the math and know what I need to do. My issue is that my other savings goals seem impossibly far out of reach and I’m having a hard time finding the motivation. I’m doing OK on my retirement savings, I have a small “ life happens” fund. But I have no 3-6 emergency fund, and I’m renting and would like to eventually own a home again - for stability for my kids and to not have to pay a mortgage after retirement. There’s just so little left after the college savings that I feel like both of those goals will take me forever, and will take even longer once my 12 year old car finally dies and I’ll have an additional (used) car payment expense. How do I stay on track with the long term savings goals when achieving them seems so far away and I would so much rather take my kids on a vacation or get a couch that isn’t a falling apart hand-me-down?

You only have so much. If your job is fairly stable -- as stable as any job is these days -- pull back on the college fund until you can save at leas one month's of household expenses for the emergency fund. Build the small life happens fund to about $1,00 to $2,000 if you can. Once you hit those goals then go back to aggressively saving for college.

The things is you do need savings for when life happens. But for now with other goals you don't have to do the maximum we personal finance folks encourage. Just do enough to have a fairly good cushion/savings. Also, be realistic about the college savings. Maybe you can only save enough for tuition and fees and have the kids commute. Or go to community college for two years and then transfer to 4-year university. 

As for the vacation and couch, you can find ways to travel on less and search online sites for a better couch. But first hit the savings goal. That's so much more important than a vacation or even a couch (just throw a blanket on it for now). 

Also consider how you use smaller amounts of money. Do you give a little to teachers at the holidays? Give a little more. Leave a bigger tip at an inexpensive diner because 20% of your $6.50 meal is.... not much. Send a college aged relative $20 for pizza money.

Good tips. Just be sure to budget for your generosity. 

Interesting comments on health insurance. Sounds like at least some folks are continuing to work ONLY to maintain employer-sponsored group health insurance coverage (a post-World War Two fluke). Meanwhile the US is the only industrialized nation that doesn't provide health care coverage as a generic right to all citizens, whether employed or not. There are a variety of ways it's done overseas (some are "single payer" and some, such as Germany, are not). I wonder if we are capable of learning….

Can we learn? We could if we elect more leaders who want to truly fix this issue. 

One of the issues from Lean In that rubs me wrong is that it is pretty easy for a very well off person to tell others how they should work. Perhaps getting back to the underlying reasons WHY (usually) women take a step back would be more useful, which to me, start with the lack of paid maternity leave and the astronomical cost of daycare and preschool. Want more working class women to lean in? Make it a financially possible decision.

Amen!

I'm financially preparing to retire in my early 50s, if possible (I'm early 40s now), but it will absolutely be contingent on my work offering an early out so that I can keep my health insurance and not take the pension haircut for early retirement. That said, I'm also preparing myself for a 2nd career in a job I might actually like in a field I care about, so I'm really hoping for that early out!

Hope for the best, plan for the worst!

Here's my take.........she did not create the conversation. Women have been addressing it for years. But the high-profile nature of the work she does for such a high-profile company had made it more accessible. I don't like FB but I like her. And she gave a real gift when she shared the struggles of being a young widow.

Glad you learned from her. Now that she's part of the controversy about Facebook and data mining and the Russians and election tampering makes a lot of folks wonder about her leadership abilities. So there is that. 

Hi. My dad and his wife are running out of money in their retirement. Lots of warning signs over the years, but they were optimistic, I guess, that things would be OK. Now they are faced with selling their home, which is of significant value but which would require them to downscale their lifestyles and hobbies in a radical way, or leaving their heads in the sand and going down with the ship, as it were. I'm very sad about this. I want to help, at least pay a financial adviser to help them (it's too emotional for them to have the conversation with me), but I'm afraid things are too far gone to favorably impact their choices. Which makes me very sad for them, and also concerned about what pieces I may have to pick up later. Should I just wait and see on this, or push for the financial adviser? This aging thing is painful to watch. I guess it will be my turn to see what they're going through, soon enough.

Definitely get them to a fee-only financial planner. It's better to know than not to know how soon and if the ship will sink. Knowing allows for choices when those choices can be made. 

This stock market volatility is just killing me, because I just hate losing money more than I hate missing out on making more! I'm thinking about putting my 401k funds in a safer investment vehicle and making up the difference in gains I may miss out on by saving more another way, but there are so many funds in my 401k (Vanguard) that I can't figure out which one(s) to pick, plus I know nothing of other types of investments. I'm 50 and single with no kids, 15 years from retirement with 15 years left on my mortgage, and contributing the yearly max plus over-50 catch-up contribution towards my 401k. I've never done a Roth IRA because my income will be lower when I retire, but would consider it as I'm under the income limit for now. Time for a financial advisor? How do I find one?

You definitely need a fee-only planner. You could be making a big mistake by pulling out now. You lock in losses. You say you have 15 years to retirement. That's a long time for the market to go back up and stabilize. Keep in mind a lot of people did what you are thinking of doing during the recession and the market took off and they didn't get any of the gains because they pulled out. The key factor is you have a long time frame. Ask around for recommendations for advisors or go to napfa.org 

My daughter and her husband want to jointly buy a house. Her score is 814 his 700. They both make individually enough to pay for the mortgage. Is their rate going to be based on his lower or her higher? Oh and they are putting 20% down.

They should talk to their lender or lenders. They typically take the middle score of the three major bureaus. If they are going to cosign the mortgage -- and they should -- his lower side score if is is 700 may not qualify them for the best rates. But then that rate may not be that much lower than the top rate. Plus other factors are factored in such as income and the fact that they are putting down so much money.

The key here is for them to shop around. 

For the past several years (decade?) I've found our gift-giving list grow wider and wider. This year my husband is unemployed, so I forced myself to reach out to people and suggest not exchanging gifts. (We kept close family on the list, but eliminated friends, friends' children, etc.) I was hesitant to propose it but found that everyone agreed rather readily! While the reason that we trimmed our list is not good, I'm glad I did it. With at least 11 fewer people to buy for - we saved money and we're able to spend more time enjoying the season. It's only the beginning of December, and it's not too late for others to make a similar suggestion to their friends!

I would have but the list to zero if you living with just one income has been difficult. But the next best thing is what you did, which is TTT -- tell the truth. It's amazing when you let folks know you can't do such and such that they often respond with, "Please, we can't do it either." 

You give people freedom to not spend themselves. Good for you. 

It seems like the majority of articles, chats, etc. regarding retirement focus on accruing one’s nest egg, which certainly makes sense. But there is, in my opinion, a dearth of information (as far as I can find) on how to spend it once you have it other than talk to a retirement planner. Between my wife and I, we have pots from Roth IRA’s, traditional IRA's, DCP, TSP, SS, and a modest federal annuity. I would like to learn what are the rules of thumb for how/when/why/etc. to spend down these assets? Can you provide information or links to sites that specifically address this side of the retirement equation (including software that to help in running different scenarios)? I don’t want to rely solely on a financial planner to tell me these things. I want to be able to understand their rationale for their recommendations.

Read Michelle's column: If you don’t want to run out of money in retirement, follow this rule of thumb

You can start learning on your own by reading the link provided. 

Thanks Michelle. That was my original thought but I'm doubting myself --- if it doesn't change the outcome, let them stay happy a little bit longer. But you're right. Get all the facts. Thanks!

You are so welcome. Let me know how things turn out. Just stay proactive. 

Saying "oh, she's just rich, she has no idea" is really condescending. She *knows* she can have an impact, and has people listening to her, so she is taking advantage of that to help others. Why bashing her is okay I don't understand.

I think people are always concerned that those with money don't know what it's like to not have as much. But you are right. Rich or poor, we can learn from each other.

I downloaded budget software and am tracking my expenses. I know we've been spending less than we earn, because there's always something left at the end of the month, but now I will know how much, where I can improve, and I'll be able to plan how to save or invest the extra.

Exactly. The more you know, the better. 

So sorry I have to go. I promise I read everything you send. And some questions end up as columns. Or please come back next week. 

Thanks for joining me. 

In This Chat
Michelle Singletary
Michelle Singletary writes the nationally syndicated personal finance column, "The Color of Money," which appears in The Post on Wednesday and Sunday and is carried in more than 120 newspapers.

Read recent columns
Subscribe to Michelle's newsletter
Color of Money Q&A Archive
Recent Chats
  • Next: