Color of Money Live (July 25)

Jul 25, 2019

Michelle was joined this week by Cameron Huddleston, who is the author of the book club selection this month, "Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances."

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Thanks for joining me today. I'm super excited to have with me as a guest Cameron Huddleston author of "Mom and Dad We Need to Talk: How to Have Essential Conversations with Your Parents About their Finances."

She's here to answer your questions on the topic. And she'll weigh in on other matters too. 

So let's get started.

Hi--- Had a question on the book and some of the differing situations as to a parent might not want to open up about the financial situation. Right now I am running into my father's blocking tactics. He's 92 and still pretty with it. He gets all focused and wrapped around the axle about finance. When she was with it, my mom was the planner and strategizer. My brother and I are trying to navigate dad slowing down since Mom passed. This year with taxes, he was trying to get the necessary forms, and information over to his accountant that handles the filing. He will not use direct deposit or online banking which in many ways would simplify matters. He is bound and determined to stay in the house even though upkeep is getting to be a problem. Both of us live in other parts of the country and fortunately my son lives within half and hour of his grandfather so he checks up. My brother and I are planning a week where we sit down with Dad to have the talk and go over things to try and get a sense of where we are and how we can shift things to be more sustainable. I guess my question really boils down to how do you get someone who attempts to thwart any efforts to improve the situation, to listen? I don't know if you even attempt an answer to this in the book (I'm only on chapter 2.......) An example is when I offered this year to do a conference call with the CPA and dad to go over the tax forms and data. Dad flat out shot the idea down saying he did too many of those calls when he worked and hated it. We are met at every turn, it feels like, with a stout NO and a reason why something cannot be done. I do want to thank you for writing though -- I think it might help with my husband's parents, and our siblings to open the door so we all have a clear picture of what is going on.

I'm sorry to hear that you're having such a hard time getting through to your dad. You might want to try asking him about worst-case scenarios -- not as a way to scare him but to get him thinking about what information you would need to know if something happened to him. For example, you might say something like, "Dad, if something happened and you ended up in the hospital for a little while, how could I make sure your bills got paid? Have you named someone to be your power of attorney to access your finances if you can't, say, to sign check for you if you're in the hospital? Have you named anyone your health care proxy to talk to the doctors for you about your care if you can't for any reason? The bank won't let anyone sign checks for your or make sure you're bills are getting paid if you haven't named anyone power of attorney. And your doctors likely won't talk to me about your care unless you've named me your health care proxy." Or you could simply suggest that you make a plan for worst-case scenarios -- such as asking him to tell you what sort of care he would want if something happened, how to pay the bills, etc. Explain that having a plan and knowing some details will give you peace of mind and ensure that his wishes are followed.

I have 4 adult children and my spouse died recently. I have 2 small term life insurance polices on myself. The face amount is way less than 1/2% of my total net worth. Since they are term policies, the premiums do increase every 5 years or so. Since all my children are self-sufficient, I am really not worried about any inheritance for them. I actually expect that they would received something from the balance of my assets. I kept these as a ready source of cash in case I pre-deceased my spouse. Is there any value in keeping them now?

If your children are self-sufficient, the only real benefit of maintaining one or both of those term policies would be to help pay for the cost of a funeral and burial. If you already have funds set aside for that, you probably don't need those term life policies and could put that money toward something else.

Hi Michelle, I just wanted to thank you for your recent column on community colleges. I've taught at a CC for over 20 years, and just want to affirm two points you made in your column that are often overlooked. CC faculty, by and large, are not driven by the research requirements of 4-year schools. The focus is on teaching, first and foremost, and also supporting non-traditional students who may not be fully prepared for college right off the bat. As a result, class sizes are smaller, and courses are taught by the actual instructor, not a teaching assistant. Second, more attention needs to be paid to your point about two-year professional programs. A 4-year degree is *not* required to start out in a profession that pays a living wage. There are programs in engineering, cybersecurity, respiratory therapy, etc. that can be completed in 2 years. I've often seen graduates from these programs have jobs waiting for them starting at competitive salaries. I'd also add that I have many trade workers in my family who bemoan the lack of new workers entering the field. Folks, there are well-paying jobs out there if you commit to a training program! College isn't for everybody, and if the thought of an office job makes you choke, consider a trade. Sorry if I am rambling, but I have seen too many stories decrying the cost of higher ed as if students had no choice but to graduate deeply in debt. College is too expensive, and states should go back to subsidizing their public colleges, no question, but debt is not inevitable. Thanks again for your column.

I agree that college isn't for everyone. My husband is a college professor and has had far too many students who aren't taking their college education seriously. They take and fail the same class several times -- which is a waste of time and money. Those students might likely be much better off at a community college learning a trade at a much lower cost than a traditional university.

Thanks for your CC comments. I'm a big fan and really hope more families consider it seriously and not just as a backup plan. 

Hello Michelle--I just paid off my mortgage. I am a recent retiree, had the monies to payoff the mortgage in an account and just thought.. why not simplify my financial life and push that monkey off my back? The work you do is so important, keep up the good work. A loyal fan.

Read Michelle's column: Four pieces of retirement advice you should question

They will hear me on the moon when I pay off my mortgage. And for the record, I certainly don't suggest people clean out their retirement account to pay off a mortgage. I try to encourage people to pay down and then off the mortgage with current income if they can. My husband and I make monthly payments on our mortgage principal because we want to be mortgage-free when we retire. We also didn't start making the extra payments until after we had saved for the kids college funds so that they wouldn't take on debt. 

Anyway, congrats to you for getting that monkey off your back!

What is your opinion about IRAs? My spouse and I are mid-50's probably at peak earnings. We have no debt besides 7 more years on mortgage. We plan to retire in our late 60's. Given this scenario, is a Roth or pre-tax IRA (through work retirement plan) better? (We already contribute but with raises are going to contribute more.) We have non-work Roths already. Any guess as to whether it's better to pay taxes now or later? THANKS!

Financial advisors typically advocate for the Roth if you think your tax rate will be higher in retirement than now to keep down your overall tax bill. However, that's hard to know. But it is worth noting the other benefits of a Roth beyond tax-free withdrawals. You don't have to take required minimum distributions at age 70 1/2 as you do with a traditional IRA. You can withdraw contributions to a Roth before retirement without the 10% penalty. And if all your other retirement income is coming from taxable accounts, it's good to have a source of tax-free income.

Just FYI, my husband and I opted not to do a ROTH in our workplace retirement plans because we calculated our tax rate would be about the same in retirement. Also, we wanted the tax break now so that we would have more money in our paychecks to save for our kids college funds. Just something to think about. 

My young adult daughter is in a pretty good financial situation and has too much money in a regular savings account. As we know, this means her money isn't keeping up with inflation. She plans to put some in a 500 index fund, but wants to put some in a less risky place -- would you recommend a CD or high interest online savings account? Something else?

I've seen lots of surveys that have found that millennials are especially risk averse and are afraid to put their money in the stock market. It's great to keep money for short-term goals and emergency savings in a high-yield savings account so it's easily accessible. But you should encourage your daughter to put any money for long-term retirement savings into an index fund to take advantage of the higher return that stocks offer. If she keeps retirement savings in a savings account, the rate is so low is won't even keep up with the inflation rate. Then she's risking not having enough money for retirement.

Love Cameron's advice. If your daughter will allow sit down with her consider the following

-- Allocate  some of the money for an emergency fund. If she's in college this could be for books or whatever things she needs. If she's working full time and living on her own it would be at least 3 months of living expenses. This can stay in the bank account since she shouldn't risk it in the market. 

-- Allocate some money for a life happens fund for things like a major car repair. Aim for $500 to $1,000. This too stays in the bank account. 

Now, with those fund segregated talk to her about making he money grow so that it doesn't actually lose its value to inflation. With money tucked away safely perhaps then she will feel okay about opening a low-cost growth index fund. 

I got my first job out of college and one of my coworkers had picked up everything she owned and moved to Maryland. I think she got divorced, no children. She told me she had applied for public assistance. She was a college graduate maybe 25 with a car and some belongings leaving the Midwest and landed in Maryland not knowing anyone. She told me that she had been working and paying taxes since she was 14. She said she needed a little help to get back on her feet and that's why she applied for public assistance/welfare. Thirty years later our conversation stays with me. She needed help, not shaming, not put-downs, not grind her in the dirt. She was equipped with a college degree work experience a lot more than most people and she needed some help. A book I recommend is Nickeled an Dimed to Death by Barbara Ehrenreich and her other book Bait and Switch. "When someone works for less pay than she can live on … she has made a great sacrifice for you … The "working poor" … are in fact the major philanthropists of our society. They neglect their own children so that the children of others will be cared for; they live in substandard housing so that other homes will be shiny and perfect; they endure privation so that inflation will be low and stock prices high. To be a member of the working poor is to be an anonymous donor, a nameless benefactor, to everyone." Her books were published in 2001 and 2005 and describes 2019 perfectly.

Read Michelle's columnWhat my grandmother would have said about Trump’s food stamp proposal

Thank you for sharing this story. The misunderstanding of the poor or working poor is just astounding to me. And the recent proposal to so call "fix" the food stamps program is another example of treating the poor like they are criminals. 

I read everything you write. I share your information with my college-aged kids who, while not as savvy as your kids, still do a pretty good job of saving. Your comments today in my in-box about your grandmother and how she felt about food stamps was powerful. I hope those words go far. I am a single parent with 3 kids in college. They have gov't loans, but I am paying the rest. I don't get Pell Grants because I have saved too much money. My colleague, who spends all her money (and more), gets Pell Grants and I try hard not to feel frustration that I cut corners constantly and have to pay and she is given the gift of education for her kids because she is in massive debt. I know I'm better off, but ugh! People should be encouraged to save!!

Thank you. And, if I may, take your eyes off your co-worker. What you see may not be the total story. Besides the reward for your frugality is less financial stress in your household. You did the right thing by saving. Focus on that. 

Where do most people go wrong in starting the conversation with their parents about their finances? 

There are a variety of ways people can start off money talks with their parents on the wrong foot. They can choose the wrong time -- such as a holiday meal when other family members are present and don't need to be part of the conversation. They can be condescending to parents by pointing out what they're doing wrong with their finances and insisting that they get involved. They can come as greedy by trying to focus the conversation on what they'll get when their parents die. The biggest mistake, though, is assuming these conversations can wait until your parents have a financial or health emergency. At that point, it can be too late. The best way to start these conversations is when your parents are still healthy and relatively young. Do it at a time when everyone is calm and isn't rushed. You can start the conversation by sharing your own financial planning experience. For example, you could say you recently met with an attorney to draft your will and want your parents to know where they can find it if something happens to you -- then ask if they have a will and where you could find it if necessary. You could use a story about someone you know who had to get involved with a parents' finances or caregiving and share how they're planning -- or lack of planning -- affected them. You could use a life event to start the conversation. For example, you could mention that you know how hard your grandparents' death was on your parent and would like to plan with them to ensure they're wishes are spelled out and followed.

"We also didn't start making the extra payments until after we had saved for the kids college funds so that they wouldn't take on debt. " This was actually really encouraging! Important to say that we don't have to do it all at once to get it all done.

Nope, you sure don't. Or at all. We are very blessed to have good incomes. But if you don't please don't stress about making extra mortgage payments. If things are tight then maybe you can't save enough to pay for a 4-year university at the start. Your child could start at a community college and/or commute. I'm all about doing what you can afford. But this means planning, especially talking to your children in the case of paying for college. We told our kids that if we couldn't save enough to avoid college loans they would to to the community college and commute. I'm also all about managing expectations. Doing this will save you a lot of money and heartache.

Hi, Michelle. Do you know of a resource for finding an estate attorney, similar to the one you recommend for finding a fee-only financial planner? I found my financial planner through the latter and while she recommended two estate planning attorneys, one is no longer in that field and the other is not taking new clients. That one's paralegal said she'd find some names but I haven't heard anything. I'm mid-fifties, no children or spouse, mortgage paid off and no debt. So I assume it should be an easy thing to set up? Thanks!

The National Association of Estate Planners and Councils has a database of accredited estate planners.  Also ask friends or family members for recommendations. 

Bank of America's VISA has an option called "Shop Safe". When you want to use your credit card online or over the phone, you go to the BOA website and request a one-time use VISA number. You specify the maximum charge to it and how long it will be valid for. You use that number online or over the phone, It is linked to your account and appears as a charge on your bill the same way it would if you used your actual card number. It is one additional step when you want to make an online or telephone purchase, and you can't have a credit card number on file on the merchant's website, but I've used this for over 10 years and I've never had my credit card number stolen. A small inconvenience to save a much much bigger headache, I think. (There's also a version of ShopSafe that you can use if you have a recurring monthly payment charged to your account.)

Read Michelle's column: Security alerts on credit cards work. Just be sure to set them at the lowest amount possible.

I hate that you have to do all that but smart that you do. I also like the cards that ask you in a notification to approve a recent transaction before it's processed. 

I submitted last week but chat was cancelled. I am finally able to weigh in on the new tax law changes as I was finally able to finish my taxes a few weeks ago. We are a family of 4 in the DC area with two decent jobs and some outside investments. Between 2017 and 2018, our adjusted gross income went up by about $18,000. Our taxable income went up by about $44,000 (primarily due to the reduction in state/local taxes deduction). However, our federal taxes went down by about $12,000. We are not "job creators" nor will this tax reduction be used to spur the economy. This is just more money for savings and maybe a nicer vacation. We are far from rich but "benefited" from the new tax law. I used quotes on the "benefited" since while my family is financially better off, we (as part of the society) are worse off. Hate to think of how much the truly rich "saved" as part of the new tax law.

Such is the so-called break for the middle and lower income. I really appreciate your coming back to comment. 

You address this in the book but what can people do if their parents absolutely refuse to share any information. And how does this impact people who pretty much know their parents won't have enough money but aren't completely sure? 

Unfortunately, some parents will refuse to share any information about their finances with their children. These can be both wealthy parents who don't want to talk about money because they don't want their children to know whether they're getting an inheritance so they don't feel entitled. These can parents who simply think money is a taboo topic. And it can be parents who don't have much and are embarrassed to discuss their financial situation with their children. If it's the latter, there's a greater chance that those parents will need support from children as they age -- especially if they need long-term care. If you suspect your parents will need support from you as you age, start by deciding what you're willing and able to do. Knowing this before an emergency strikes will help you be prepared and avoid making decisions when you're emotional. You might decide -- if you're in good shape financially --  to start setting aside money to help your parents if they need it or to stay in your current home when the kids move out in case Mom and Dad need to move in. Or you might decide that you can't afford to help them without jeopardizing your own finances (which should be your priority). The decision is yours. Just clue your siblings in on what you decide so all of you can plan together, and they can step in if they're willing and able.

Remember, you will have to make the property tax and insurance payments - no more escrow by the bank. I recommend opening another savings account and every month, automatically have 1/12 the required amounts transferred in. That way, when those bills come, you'll have the money ready.

Thanks for the reminder! 

Hi Michelle, Do you have anywhere I can point people (mostly well-meaning, but nosy relatives) where it says you aren't going to live in financial poverty if you rent? We constantly hear about buying and people sent realtors our direction, but we aren't interested in buying. We would have to give up our location, lifestyle and more. Instead we save retirement and plan to buy a retirement home not in this area when the time comes. (We rent small in a desirable location in a high cost of living area. Our leases are often for 3+ years and we don't rent the most modern, snazzy place, so below the market average.) I point out that we have a roof over our heads and no costs for upkeep or taxes, so renting isn't wasted money.

I don't have a source right now but you actually have all the information with what you just presented. I've said time and time again in this forum and in my columns: You are not a financial failure if you rent. 

I've seen homeowners broke and renters rich. But remind your well-meaning friends and family members that owning a home can be a money pit -- taxes, maintenance, insurance, etc. 

But in the end you may not persuade anyone that renting is okay. However, you know and that's all that counts. 

That's the mantra of this administration. Let big business drill in our parks, over develop park land, pollute our water and our skies, but God forbid we allow a family that needs some help putting food on the table be able to feed their kids. It's like the school district in Pennsylvania threatening the parents who can't pay their lunch bills. Yes, try to collect the funds but don't threaten and certainly don't embarrass a hungry child.


I know this is a 'good' problem to have had: my parents (mostly my mother) managed their money well, had a solid financial advisor and were able to live comfortably in retirement. Had all of the proper powers of attorney and had two adult children as trustees. When one of them began exhibiting signs of substance abuse and mental illness, my parents took that person off and added me. By the time my mother died and dad's dementia worsened, we were already signatories on all their accounts. What we DIDN'T talk to them about was what kind of funds their money was in and what type of tax burden would their eight children be facing if there was an inheritance after Dad died? It has been an ordeal trying to straighten all of this out and get everyone educated about the tax implications. Sadly, financial advisor has been less than helpful to us and even provided some incorrect information (we have no concerns about how the money was handled over the years, nothing nefarious). So yes, have the talk, which is hard, but also be sure you understand how your parents' money is invested and in what vehicles.

I agree -- the more details you can get about your finances, the better. It's especially important to know what sort of accounts they have if you need to draw from those accounts to pay for any long-term care they might need because the tax implications can vary from account to account. Depending on the account, withdrawals can be taxed differently. You don't want to surrender too much of your parents' money to taxes if you're using it to pay for their care. Meeting with an accountant to create a plan can be helpful.  Ideally, if you can talk your parents into meeting with an accountant or financial planner while they're still healthy and mentally competent to create a plan and possibly move money into tax-advantaged accounts, that would be ideal.

I've decided to make a career change from government/politics to culinary and will be attending a culinary school that is part of a community college. I was a straight A student and only considered Ivy/Ivy caliber schools when I did my undergrad, so my natural inclination was only to look at the big name programs which also come with huge price tags (for an industry where pay isn't great, especially at the start). However, the technical curriculum at the program where I'll be enrolling is exactly the same as the big name schools (literally, they all use the same books and either way, there are only so many ways you can make a meringue), the school is well-regarded in the city where it's located, instructors are all working chefs, and it's A FIFTH the price of the fancy schools - and that's for out of state tuition! As a bonus, because it has all the resources of the CC, the curriculum also includes business and management courses that are very useful if you want to climb the restaurant ladder.

You had me at you did research! Good for you for realizing you could get what you need at a community college. The community college near where I live -- Prince George's Community College -- just opened a beautiful culinary school. In fact, my daughter is working at a day camp for kids at the school saving on lunch meals because they get to eat for lunch what they make!

what are some basic things one should know when asked to be an executor of an estate? Thanks

The most important thing you need to know if you're the executor is the location of the person's will so you can access it when the person dies. The more details you have about the person's assets -- what property he or she owns, what financial accounts and insurance policies he or she has -- the better. You don't want accounts to slip through the cracks and go unclaimed. If you're asked to be an executor, ask the person who named you executor to make a list of all accounts (account numbers, passwords, etc.) and assets and to put that list in a safe place with the will.

My home's central air conditioner broke last Friday, the first day of the weekend heat wave. I have a service contract, but the technician said it's 25 years old, it can't be fixed, and they can't install a new one until next Tuesday. I have enough money stashed in an online savings account to pay for it. Keep telling people about the Life Happens money!

Yes, the life happens fund rules!

My husband & I just found out we are due in late February. We're in our early 30s, have a mortgage on our condo, one large student loan (halfway through 10 yr FedService Loan Repayment track), and both currently contribute 15% to our TSP & 401K near the $18k mark. After all our bills and retirement savings, we usually save an additional $2k/month. While we are very excited, the thought of the costs associated with raising a baby in NW DC (looking around at $2,500/month for child care in early research) are giving me nightmares. We have a good sized emergency fund and I'm sure my parents would help out if we asked. Aside from cutting back in eating out and travel (a passion), my husband is thinking we should also reduce our retirement contributions - but given the benefits of compounding over the next 30 years, I'd rather cut where we can. Any tips on budgeting for a baby?

Congrats on the baby!

Definitely scan your budget for any and all cuts now. You might also start trying to live off what you would have once the baby comes. So for example, practice having to pay for daycare now (and then that money can go toward day care when you actually need it putting you ahead). If, after you really comb your budget to cut costs, you still need more for the care of the baby, I agree with your husband about cutting back on the retirement. Can I tell you something that will shock folks?

Only in the last few years have my husband and I maxed out -- meaning putting in the annual limit now at $19,000 -- for our retirement plans. The truth is we couldn't and still save for the kids to go to college without debt. 

And guess what? We still are on track to have ample funds for retirement. You have to live your life in financial stages. 

Soon you will be in the kid stage where you will  have to pull back on some things but only for a season. 

After four years in day care your kid will be in school. If you chose public than no more day care (excluding the cost of before or after-care). 

Being in your early 30s mean you have at least 30 more years to save for retirement. That's a fair amount of time to build up a good account even if you don't hit the 15% of income mark. 

Hi, my Dad is totally with it most of the time but goes on the internet in the middle of the night and buys lots of pills and junk. We have canceled the card but the bank keeps reissuing it. Dad is 88 yrs old and loves to buy stuff online and subscribe to just about anything. How do we get this credit card away from him.

This is tough if he's still mentally competent. He's an adult, after all, and has a right to spend his money as he pleases. That said, you might have a talk with him about his spending. You could tell him that you want to make sure he has enough to live comfortably in retirement and would love to go through his budget with him to ensure that he does. In doing so, you could suggest adding up credit card charges to see how much he's spending on nonessential items. He might actually be surprised to see how much he's spending. YOu could point out how it would be helpful to have that money on hand to cover emergency costs (health expenses, home repairs, etc.) instead. Unfortunately, if he's still mentally competent and you're not acting as power of attorney now, you can't force him to stop spending. You just have to point out the harm it might be doing to his finances.

We're doing the same as you. Renting works for us and we love where we live - you're not alone!

That's right!

Our father mainly handled the finances and a few months or so before our mom got sick it was clear how he was just unable to handle basic things, even though he thought he was doing a great job. Of course, when he made a mistake, he got aggressive and defensive sort of nasty about it when confronted. We did a tag team..........I played the heavy while two of the gentler siblings focused on specific activities (can I help you with this? why don't I come over tomorrow and we can do x?). It was emotionally draining. Eventually we found out he forgot to pay a MAJOR bill with immediate $$ consequences, we confronted him, he realized it, and we used that moment to buy his car, add kids to the accounts, set up automatic accounts. He ranted but we were used to that.

I love how your siblings offered to help your dad with financial tasks. That's a great way to get information about a parent's finances -- and to get involved, if it's necessary. Sometimes there are hard feelings when you have to step in as a child to help a parent with finances. But you can't just let them fall into financial ruin by avoiding the tough talks altogether.

Thanks so much for joining me today. And special thanks to Cameron. Great book. 

Take care and see you back here next week. 

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.

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Cameron Huddleston
Cameron Huddleston is the author of "Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances." She also is an award-winning journalist who has been writing about personal finance for more than 17 years.
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