Color of Money Live: 'Savings save you from the unexpected'

Nov 21, 2019

Welcome to a weekly discussion about your money hosted by Michelle Singletary, nationally syndicated personal finance columnist for The Washington Post.

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Thanks for joining me today. I know there's a lot of news and things going on - impeachment hearing for one.

Anyway, it's just you and me today. As always, would love to receive your Thursday Testimonies. 

Let's get started. 

How is your daughter doing? I've been thinking about you and your family.

Thank you for asking. I just got back yesterday from Houston. She is much better. Out of the hospital. Lung okay although she's in some pain still. So many of you have been so kind with your words of encouragement. Thank you!

It's not sexy or trendy but is a always needed and later appreciated Christmas household gift. I had a coworker's grandmother who always gave the Costco supersize pack of toilet paper and paper towels as Christmas gifts. At first it didn't go over big, until everyone had to reach for Grandma's gift in the later months. Then everyone began looking forward to Grandma's gift each Christmas. LOL!!!!

I love grandma's idea. Can I tell you a funny story? So, I was trying to save on toilet paper and bought a super discount big pack. But the reason it was so cheap was that roll was so thin and not very big. I had to keep yelling to my husband to bring me another roll. Sometimes we are pennywise and pound foolish. 

Anyway, love this story. If you haven't already read my newsletter for today:

Do not go shopping on Black Friday or Cyber Monday if you have revolving credit card debt

 

I missed last week's chat on out of network specialists. Our experience was that we spent months fighting the outrageous costs from an out of network anesthesiologist that was charging three times the Blue Cross fair and reasonable price. He was working in our "in network preferred" hospital when my wife had to have an emergency caesarean section delivering our son. The worst thing about this story is that this didn't happen recently. It actually happened 22 years ago and reading your chat, it seems that nothing has changed for the better. Now I worry that someone will be having the same problems in the year 2041.

Now that my daughter is out of the hospital, she's beginning to get the bills. She's scared. I'm scared (because of course we are going to help her pay the bills). She's got a high but management deductible but I'm afraid we will experience what you did. And yes, it's a shame this is still an issue in America. Just shameful.

Read: You get sick. Then the hospital bill makes you ill.


 

Hi Michelle, I'm in my late 50s, but don't expect to retire for another 15 years. I just did a ballpark estimator, and it said I have saved enough to replace 200% of my final wages. I know this is just an estimate, but does that suggest to you that I should scale back on my retirement saving? I save the max the IRS will allow in my retirement account ($19,000 this year). I currently have one child in college and another will be ready soon, so I definitely have other expenses I could be putting the retirement savings toward.

Wow. That's great. When I last did a calculation it said I had saved enough to last me until I was 100. But of course the calculations can't take into account everything such as long term care expenses, which are not covered by Medicare. But if you have other saving priorities and you are reasonably sure the calculation is on point, I would scale back and make sure you have enough for the college expenses so that you don't have to take out loans. 

My husband and I hadn't maxed out until this year (in 2020 you can save as much as $19,500 and $6,500 catch-up if you're over 50). We couldn't afford to max out because we were saving for college expenses for our three kids. But once we had all the money we needed for them without loans, we immediately increased our retirement contributions to max out. We already are very much on track so the extra is to hedge against healthcare expenses. 

Read: Retirement planning is a guessing game. Guess wrong, and you could lose a lot.

I've started a new job this week with a significant salary increase and a signing bonus. It has been a constant internal struggle between "WOOOOOO BUY THE THINGS" and "YOU HAVE TO BE RESPONSIBLE" and the timing with Black Friday sales is making it worse. Here's hoping I stay strong!

Here's hoping you stay strong too. 

And the way to stay strong is have a plan for the money. I'm assuming you don't have any credit card debt but if you do, clearly pay that off. Student loan? Make a dent in that debt.

Car loan? Drive that debt down too. (pun intended).

If debt isn't an issue look at your retirement savings. Could you save more? Got a home, maybe the money could be used to make an extra principal payment. Even one extra payment a year can know off a few years from your mortgage saving you a lot of money. 

Or, if you're doing very well then go ahead and splurge. It's okay to treat yourself if you've got all the financial bases covered. 

Here's something that might interest the folks who can't bring themselves to spend when they can afford it:

Rich retirees can’t switch off their savings mode

 

I don’t agree with your most recent column regarding a debt free college education. With the research just published from Georgetown University ranking 4500 colleges on their Return on Investment numbers, it is clear that where you go to school can have a lifelong effect on your earnings and needs to be taken into consideration. Unlimited spending. No. But no debt may be the wrong choice for some majors. Teachers and social workers should definitely aim for as little debt as possible. If you want to be on the Supreme Court, it currently appears that only East Coast Ivy League graduates will make it. ( As if Stanford or UCLA don’t produce students just as If not more capable). Also some schools have an amazing alumni network that provides opportunities others will never see. My neighbor’s who graduated from an Ivy newsletter looks completely unlike mine ( a large state university). Theirs has pages of alumni owned estates for rent to other alumni- apartments in Paris, secluded beach front estates in the Caribbean complete with staff, penthouses in San Francisco along with the usual congratulatory articles on student and faculty accomplishments. Crippling amounts of debt- absolutely not. Some for an extra $400-700,000 of earning power? It should be a consideration.

I really appreciate your viewpoint even if I think you are still wrong.  

Here's something that stood out to me in your comments. You mentioned your Ivy League neighbor. But don't you both live in the same place? So you ended up in the SAME PLACE -- or for some folks the same workplace, often doing the same job for the same money. 

I'm a columnist for The Washington Post. I went to inner city schools in Baltimore. No parents. Almost put in foster care. I went to a state school. Got to the Post the same time as the guy who graduated from Harvard. Different paths, ended up at the same place.

I saw the story about the Georgetown data and there are a lot of caveats to it. For one, how many people want to be or could be a Supreme Court judge? As for the college network newsletter, Gallup took a look at those "contacts" and most graduates said such networks did not make a big difference. 

As for the apartments in Paris, beach fronts in Caribbean surely you've heard of Airbnb and other such sites. And trust me those folks are not letting those places go for a song. If they don't know you, you'd likely pay the same as a stranger, because you are a stranger even if you went to the same school. 

No debt is good debt.

Read: The worst thing you can do for your college-bound teen is saddle them with student debt

someone once told me that if you can live on what you made last year, and bank the rest (or pay off loans) you will be able to live at that higher salary later.

This is a strategy I've followed since getting my first-full time job. I didn't incorporate the full amount of raises into my budget. Now, I have elevated my lifestyle but I also banked/saved/invested a large percentage of all my raises over the years. 

I am the mom who gives socks and underwear for Christmas and toothpaste and deodorant in my sons' stockings!

Love it. I need some socks right now! Where does that one matching sock go for heaven's sake!

I had the same experience with the delivery of my daughter, we were charged thousands because the anesthesiologist was out of network although I delivered at an in-network hospital specifically to be in network.

I just want to scream for you! It just makes no sense. How would you shop for an in-network doctor if you are in an emergency situation? 

I have somewhat of a unique situation: I am 67, retired two years, and finally am looking closer at my investments and portfolio. The recommendation, which I agree with, is to shift more of my portfolio into stocks… My only question is, I realize you cannot time the market, but I am hesitant about moving money out of a TIAA Traditional annuity account now into stock accounts because the bull market has lasted so long… Any suggestions?

I think you are at the point that you should seek the advice of a fee-only planner. You need a comprehensive plan for drawing down on your money in retirement. It may be that you could use more exposure to equities so that you have more growth. Or, could be that the annuity will give you enough growth to at least beat inflation. But please get some independent advice from a professional not trying to sell you on one fund or another. 

Read: What You Need to Know About Fee-Only Financial Advisors


 

saved up beyond what I need to get through the end of the year. No debt at all - credit card, car, student, whatever. I rent, so not even a mortgage. But, oops. My car and renters insurance renews in January. That's about $600. I have a family event to attend in February which will require staying in a hotel for two nights in NYC. There goes another chunk of it. Maybe I don't have as much "play around" money as it appears. Don't just look at the debt. Keep in mind up coming expenses that aren't part of the monthly stuff. If you think about it even a little, you know what a lot of them are. You can't know all of them. Emergencies happen. But a lot of them you know in advance.

Really good advice for extra money. Thank you!

You know you've reached adulthood when unwrapping socks transitions from your most hated gift to your most beloved!

Lol! Yup.

 

from Wikipedia "Since the Supreme Court was established in 1789, 114 people have served on the Court." That is 114 in the entire history of the country.

Exactly! Same goes for going a pricey college you can't afford to get that NY law office job or whatever. Limited spots. And the work load often is so heavy many people leave because they want a LIFE!

not for everybody but there are YMCAs in NY. you might have to share a bathroom but even if not, rates are much less than hotels, and they usually have a lovely, spotless gym. I like my creature comforts but I'd rather save $$

I hear you. But at this point in my life, I want my own bathroom. There are things that go on that I do not want to expose to others. Just saying!

you know what other doctor groups are sometimes out of network at hospitals? The emergency room staff. Just mind blowing. How can you even call the hospital "in network" if the emergency room doctors aren't.

Mind. Blowing!

Most or many of those students came from money and the money you think you see is family money. That's the way it is...but seriously, one can do well having gone anywhere to college (or nowhere). Thinking your pedigree is all that counts is pretty upsetting.

I just want people to realize that it's the kid, not the school that often makes the difference. 

Read: This college admission is sorely needed

It's my review of the book “Where You Go Is Not Who You’ll Be: An Antidote to the College Admissions Mania

 

 

I have a hypothesis that no anesthesiologist is in an insurance network. It always seems like that is the one bill you always get when you have surgery. And why would they be in an insurance network, everyone is looking at the hospital. Unlike us, the hospital chooses a practice based on price not insurance plan. And it's not like anyone is going to say, "I think I'll skip the anesthesiologist since he's not in network."

Interesting theory. New York has a law that prevents this. Other states should follow.

Hi Michelle! Going to stand and testify (Her/NJ for now) Earlier this year I started reading your advice to gain perspective on handling finance WRT elder care and found that your philosophy of not carrying debt or as little as possible clicked with the strategy we had used for years. When we could we paid cash for our cars, our mortgage was paid off and yes there were tough years. Fast forward to this fall and the rug was pulled out from under us and Husband's office was closed forcing us to decide to move or stay. Because we had a *poop* happens fund, we were able to weigh the choices and yes we are moving. Its not easy but I cannot fathom being in this situation and NOT having the fund to fall back on..... So I would encourage anyone to stop, think, set aside. Yes its hard but having one less thing to worry about? Win.

Thank you for your testimony!

You can also pay a little more for a private bath. just saying. https://app.thebookingbutton.com/properties/westsidedirect?check_in_date=21-11-2019&check_out_date=22-11-2019&number_adults=2

Definitely consider if you need to cut cots. But I also love room service, big king . . . Guess what I'm saying is it's okay to want luxury when you can afford it. 

Sure are out of network! Saw one that confirmed my foot was broken (so, 5 minutes?) and the 'negotiated' bill was $177.

Medicare for all?

I wish someone would explain why so many anesthesiologists are out of network? I just just checked my insurance and there appears to only be 5 anesthesiologists in network within 25 miles of me. As there are at least 5 hospitals in that distance, not to mention all the outpatient facilities, the likelihood of getting an in network one seems non-existent. And the hospital that I have used the most over the years doesn't even one on staff.

This is why we need a better health care system. 

A budget can be freeing just as it can be restrictive. If you have saved "enough" - and been honest with yourself about "enough," then that budget is your permission to spend. It takes a shift in perspective. You just look at the $$$ in your category and it tells you now that you can spend rather than telling you to wait. So you place that order!

Yup, place that order. Love it!

This is something I still struggle with but less and less as I get older. I do not want to be so frugal that I don't spend on myself. 

I'm the woman who found it difficult to replace my 13-year-old car but finally did, with your encouragement. I LOVE it! I hadn't really appreciated all the safety and convenience features that I would gain. I bought a two-year old, low-mileage Audi (because I still wasn't about to spend $60,000 for a car) and both my husband and I are so happy with it. Now we are saving $500 a month specifically earmarked for a major trip next year. It can be a little difficult to break the save, save, save habits of many years, but if we don't do certain things now, the next few years will fly by with who knows what effect on our ability to travel. It's a good problem to have, all in all, but we are in agreement that we can afford and appreciate more adventure in our lives.

Exactly. You just encouraged me! Because I've been traveling so much to care for my daughter, I decided to upgrade my position on Southwest so I have a better chance of getting an exit row. At first, I felt so guilty "wasting" the money. But being able to stretch my legs more was worth it. No regrets. The younger me would fuss. The older me just stretched out!

Whew. Good luck! Q re fidelity. Does the data include people who have 401k, 403b AND other accounts? I ask bc I don't have that much in my IRA (that i rolled over) but have other accounts that get me close.

Yes the data included other workplace accounts. Here's the link for my column and Fidelity report.

The number of 401(k) millionaires is rising — but there’s a catch. Some baby boomers are taking big risks.

Fidelity Q3 2019 Retirement Analysis

 

I went to a large state university. The data says we have more CEOs who came from there than any other school. One can be successful graduating from anywhere (bill gates and Steve jobs and Zuckerberg did not graduate).

Very true. 

My planner had a tool that would do a monte-carlo-simulation of your future; effectively running a bunch of different scenarios for lifespan, interest rates, inflation, etc. So you would get an idea of how effective your condition would be across a range of possibilities. It seems like the only way to get a grasp on the breadth of possibilities. It's also something that an individual, even a fairly technical individual, would be able to do on their own.

You can do this but trying different retirement calculators or just changing assumptions in the one or two that you use. 

We *hate* our fridge, so I was going to be starting to look for a new one, I have done a little research already. So I might go for one of those sales. Problem is my property manager just texted to tell me we need a new fridge for our rental! *sigh*. We have plenty in the account to cover it, but still, definitely wasn't planning on that AT ALL. Good thing we have savings and almost never take money out of the account for the rental.

Savings save you from the unexpected. 

I have managed group health plans for employers for years, and this issue comes up every so often. If you get a surprise bill like that, you can try working through your employer's HR/benefits rep, or the employer's insurance broker, if they will act as your advocate with the carrier. Sometimes brokers have leverage with their plan sales contacts that can work in the employee's favor. You also can try negotiating directly with the provider. Sometimes they'll write-off some of the balance bill as a courtesy if you explain the situation. That said, it's galling to me that we should even have to resort to direct negotiation, but that's how our system works now.

Really good advice. Thank you. Going to pass along to my daughter. I want her to take on the responsibility of going over her bills, even if we are going to help out. 

Last year I decided that I might not do Christmas stockings for my 21- and 23-year old sons. When I suggested it to them, they said, does that mean we have to buy our own toothpaste / new toothbrush / deodorant / razors this year??? So I filled a bag with those goodies they've come to count on from me.

Love this story. Thanks.

When I log into my retirement account website (Principal), it shows an estimate of how much it thinks I'll have every month in retirement assuming I keep saving at the same rate. But, in the small print it says that's including an estimated several hundred dollars in social security. I'm 31 and I seriously doubt that there's going to be any social security left for me to collect (super frustrating when I look at how much I'm paying into it now). Should I really be considering that in my how ready for retirement I am estimate, or is there another site or metric that's more helpful?

I don't think you have to worry about Social Security still being around. But there may be some changes. 

Read: Will Social Security be around when I’m ready to retire?


 

Kinda new here, so not sure if this qualifies - but, I recently inherited some cash when my mom passed. I find myself in the odd position of HAVING to take req'd minimum distributions (RMDs) from a couple of her funds because she had begun taking them. Not a big deal, but it is taxable income for me, and I don't necessarily need it. So, I have used this cash to defer more into my 401k, which reduces my taxable income (I defer more from each paycheck and add the after-tax cash to my checking account to offset the net reduction in pay). One way to handle a windfall!

First, welcome. So glad you could join me and hope you make it a regular thing. And I'm so sorry for your loss.

Finally, this is most definitely a testimony. Very smart move on your part. Thank you for sharing. 

But how do I get INTO the "save, save, save habits of many years"?

Follow me. Read me. Become me. Seriously, this is what I do. Sign up to get the columns and newsletter in your inbox.

I try to help people realize they can get into the save, save habit. But it takes time and discipline. But mostly keep coming to the chat because you will see testimonies of people who were you and know channel my crazy penny-pinching, have a life happens, emergency fund self. This is a community of folks who will cheer you on and push you to find financial security. 

Put your fridge that you hate in the rental apartment!

Lol! But could work. 

I'm the HR person who added the comment about working through HR / broker. Definitely have your daughter do this! She should check the EOBs from the health plan to see how things were covered and what's accumulating towards her deductible versus not. Also, go through the bills with a fine-tooth comb - insurance processors do make mistakes, even one digit error in a code can kick out a valid claim. Call the insurance company for clarification if you can't understand a bill. And don't take no for an answer until you've asked and appealed (there's always a multi-level appeal process). It's tedious, but worthwhile. Good luck.

Thank you. I'm so used to taking control over such things. But I'm going to heed your advice. 

I could stay another hour or two but unfortunately I have to go. Thank you for joining me today. I'm off next week for the holiday. Hope you all have a wonderful Thanksgiving.

And if you have credit card debt, do not go shopping!

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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