Is Your Brother-In-Law Going to Steal Your Money?

May 26, 2020 David Kennon

*This is a heartbreaking story of a missed opportunity. The story is based on actual events but the names and details have been changed. If one thing could be said about Betty Brown is that she was a hard worker.  At age 15 she started working at a drugstore counter, and for the next 43 years, she continued to work a hodgepodge of various jobs. Betty never went to college and never found employment that paid her a decent wage, but she was tenacious.  She worked overtime whenever she could, and would often work another job on the weekend. Besides a strong work ethic, Betty had also developed one additional habit.  She saved money.  Oh boy, did she save.  Throughout her entire working life, she meticulously put away as much money as possible.  She learned how to live on an incredibly slim budget.  Betty, financially speaking, had done everything right. I first met her in her late fifties.  She looked tired.  “My job is killing me,” she lamented.  “They expect more and more work each month without any more help.” “How much are they paying you?” I inquired. “$17 an hour.  I haven’t had a raise in three years.” “Betty,” I suggested, “You have nearly $750,000 saved up here.  Between social security and the investment income you can derive from the money, you will have plenty each month. In fact, you will have much more money coming in if you quit work and ‘retired’ than you do now.” “I don’t know Dave, it just doesn’t seem right,” Betty lamented.  “I guess I might be ok, but I think I should work a few more years just to be safe.” Four years later, Betty came in to see me.  “Dave,” she said grimly, “I have pancreatic cancer. The doctors are not optimistic, they think I only have a few months to live.” The doctors’ heartbreaking prediction came true, and within two months Betty passed away and went home.  Her $750,000 sat untouched, unused, and unenjoyed. As Betty had no children, she named her husband as the primary beneficiary of her accounts. But, during the last few weeks of her life, the inheritance became more and more important to her. She literally spent some of her last days on Earth perfecting her complex and generous contingent beneficiary list:  Nephews, nieces, the aunt, and uncle who raised her, friends in need… Bob Brown, her husband, was in full agreement. After he passed away, he wanted this money to go to the right people. Unfortunately, contingent beneficiaries don’t hold all that much importance when the primary beneficiary receives the proceeds from the accounts. Betty’s husband came in to see me shortly after her death. Bob and his wife had never seen eye to eye on their money. In fact, Betty hid most of her financial information from her husband, fearing he may wastefully spend it. When Bob showed up in my office, along with his brother, I knew Betty’s wishes were in serious trouble.  Not only did Bob change all the beneficiaries according to his wishes, but the questions his brother was asking caused me great concern. “Betty had some sort of hangup about spending money,” Bob’s brother scoffed. “Dave, how much do you think we should start spending now?” “We”? Since when was Betty’s brother-in-law involved with any of this? In fact, Betty and the brother-in-law had not spoken in years. Betty did not trust him and did not like him. And now her husband and, ostensibly, her brother-in-law, had her money. You can guess where this is going. The money was gone in less than a year. Bob, his brother, and a bunch of their buddies spent a couple of months traveling around the world. Classic cars were purchased, gambling losses were significant, bar tabs were large.  Good times.  They didn’t even have to look at the price. Betty. A lifetime of struggle. A lifetime of labor.  Gone.  In hindsight, it was almost like Betty existed as an indentured servant to provide funds for her in-law’s debauchery. Even as I write this, I feel anger welling up inside of me. Morals of the Story: Money brings people out of the woodwork. Life rarely moves in a straight line. If you don’t use your money, someone else will. And oftentimes heirs do not use the money the way you had intended. While running out of money in retirement can be a scary prospect, don’t forget that there are other possible conclusions. What Can You Do? Create a sensible and logical plan that allows you to spend more now, while not mortgaging your future.  I believe in this so strongly I wrote a book about it.  Check it out.  It might change your retired life. Be Blessed, Dave Kennon P.S.- I now have a webinar/online Social Security class available.  They will be ending next week at which point I will be going back to classes in my office.  This is your last chance to see it online if you want to sign up.

Are You Keeping Secrets From Your Spouse?

May 18, 2020 David Kennon

A Modern Day Fable: Frank, a retired police officer, met with his financial advisor several times right before he retired in order to ensure that all the pieces of his financial puzzle were put together in a smart and cohesive manner.  But there was a BIG problem: his wife, Barbara, never attended the meetings.  At age 65 Frank finally hung up his badge and settled into retirement. Frank thoroughly understood that a diversified portfolio of stocks and bonds was a powerful and consistent way for his money to make money.  Frank also understood that it was OK to start spending his hard-earned savings now that he was retired.  He had big plans.  He would buy an old boat and fix it up.  Next, it was time to take his wife to the Caribbean for a few weeks each year.  And maybe join the local country club where all of his golf buddies hang out. “Barb,” Frank said, one day as they were drinking their morning coffee together, “I’m thinking about checking out a nice bass boat I saw online.” Barb’s eyes widened and stared at her husband incredulously.  “What do you mean!?  We can’t afford that!” Frank responded quickly, “Don’t worry about it.  We are fine.  My advisor says that we can spend nearly $3000 a month from our savings above and beyond our budget.  They are only asking about $10,000 for the boat.  I have it all figured out.  We’ll be fine.” Barb shot back,  “Are you out of your mind, Frank?  It said last night on the news that the Dow Jones just went way down.  And you know what?   Nancy next door keeps talking about this scary stuff she’s reading online.   Frank, there is no way we can be spending money on stuff like this.” Frank saw the look in his wife’s eye and knew she meant business.  His dreams of trolling the Gulf began to fade away….. Moral of the Story:  If you are married, be sure to include your spouse in any financial planning discussions.  I don’t care if you usually handle “this kind of stuff.”   If you aren’t on the same page as your spouse, you may end up like Frank, sitting on the sofa, watching a show about fishing, dreaming of what could have been…. Here’s a question I get from time to time: What happens if I have my mutual funds and investments with a bank and the bank goes bankrupt?  (JP Morgan Chase, BofA, Merrill Lynch, etc.) Whenever you buy a stock or bond or mutual fund, that investment has to be “held” somewhere.  Back in the good old days, many people would actually hold stock certificates inside a safe in their house. Nowadays, with modern technology, stocks and bonds are held electronically at a “custodian.”  A custodian is simply a financial institution that holds your investments. So what happens if the custodian goes bankrupt?  First of all, this is an extremely rare occurrence.  In 2008, when Lehman Brothers went bankrupt, JP Morgan Chase purchased them and took over the custodial responsibilities.  Not a single account holder lost a penny due to the bankruptcy of the custodian.  It simply meant was that JP Morgan Chase started to hold the stocks and bonds instead of Lehman Brothers. But what you really need to know is the following:  whoever is holding your investments has no financial claim to your money.  Your assets are held separately from the bank’s assets. For most of you who work with me, you know that we employ TD Ameritrade.  This particular bank holds 540 billion dollars in client assets. So if TD Ameritrade comes out tomorrow and says they are going bankrupt (which they won’t), what happens to your money?! Let me answer that question, by asking another question.  Let’s say you purchase 100 shares of Disney stock, and you request the actual paper stock certificates.  You then place those certificates in a safety deposit box at a local bank.   If that bank went bankrupt, would you lose your stock certificates? Absolutely not.  You would go to the now-bankrupt bank, open up your safety deposit box, and take your stock certificates. The same thing applies to you and your investments now. There are actually several additional layers of safeguards for consumers, including SIPC insurance, but at the end of the day, you really have nothing to worry about. So if you are concerned about the bank holding your investments.  Please stop.  There is nothing to worry about. Be Blessed, Dave P.S.-  I am now doing my social security classes  online.  You and your friends can sign up at www.SarasotaClass.com

Are You a Gold-Digger?

May 11, 2020 David Kennon

A Foolproof Way to Protect Yourself From Gold-Diggers

The following story is based on actual events.  Names and details have been altered to protect the privacy of those involved.

Whenever I talk to people in their 80’s and 90’s I always ask them, “What advice do you have for people who are just now starting their retirement journey?”   I nearly always get the same answer, “Get them to spend more money in their 60’s and 70’s.”

I believe the following, harrowing true story may prove my point.

For those new to the Retirement Revolution my central thesis is as follows:

If you are part of the 50% of the people in this country who actually saved money for retirement, you need to start spending MORE of that savings in your 60’s and 70’s.

Those who have already joined the Retirement Revolution are saying, “I’m putting my foot down!  I REFUSE to worry the rest of my life about running out of money.  I am going to get educated, get my money working for me, and put together a plan that allows me to live the life that I deserve.  I am going to find the perfect balance between spending too much and spending too little.”

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Bob Hixon was a top-tier salesman.  During his career, he had actually ranked as the number one salesman in his entire company.  It was no small feat!  His company had thousands of salespeople.   Bob had hit the big time.

Bob was a kind-hearted, family man who lived to serve and help his clients, friends, and family.  During his long and successful career he had amassed a fortune of several million dollars.  After Bob retired, him and his wife moved to a house on the water in Florida, and planned to live their golden years in paradise.

After splurging on their dream home, Bob said to his wife, Shirley, “Well, we had better stop spending so much money.  I’m not working anymore, and while we have a few million in our portfolio, you just never know.  What happens if we go to a nursing home?  What happens if we have an expensive medical problem?  What happens if we go into a recession?  What happens if the currency collapses?  What happens if the banks fail?  What happens if inflation runs rampant?”  What if…. What if…. What if…..

Bob, as you can tell, watched WAY too much of the 24/7 News Channels.

Bob and Shirley stopped taking vacations and stopped going out to eat as much.  They lived a relatively simple life.   In fact, besides the nice home, their daily lives looked no different than retirees who possessed very limited savings.

Bob and Shirley rationalized, “Well, I guess the kids will get a nice inheritance when we are gone.”  But they still couldn’t shake the feeling that they were living like they were broke, even though they had millions in the bank.

Fast forward 20 years.  Bob and Shirley are now in their early 80’s. One of their 3 children had tragically died in a car accident, and their two remaining daughters were doing well in different parts of the country.

Shortly after Shirley’s 82nd birthday her health began to decline rapidly.  She passed away a few months later.

Bob, now age 83, was heart-broken.  He still had his millions (which had nearly doubled in value since he had retired), but he wasn’t sure what to do with his grief.

Bob lived for five more years.  During those years he traveled quite a bit and had a dozen girlfriends or so.  His family sometimes voiced their concerns to each other:  “What is happening to Dad?  It is like he is having a mid-life crisis in his 80’s.”

During the last 2-3 years, Bob had started to develop memory problems.  His mind was definitely slipping, but he stayed very active and continued to pursue multiple relationships with the ladies.

Behind the scenes, Bob’s two daughters, hated to admit, but were waiting for their father to die.  They knew he was sitting on a fortune, and they were well aware that they were the only remaining heirs.  Both of Bob’s daughters were facing financial strain in their own lives and they counted the days until the millions of dollars were theirs to use.

After Bob’s funeral, the finances were divided equally between the two daughters, but during the process of sorting out the will a shocking discovery was made.

Bob only had $200,000 left to his name.

Between the time his wife passed away, and his own death, Bob and managed to spend it all.  Had he been taken advantage of?  Had his senility made him a prime target for a gold digger?  Did he even realize how much money he was spending?

We will never know….

All Bob’s daughters knew was that a lifetime of work, investing, and savings had resulted in nothing.  They were furious at their Dad for blowing the money on a bunch of geriatric floozies.  In fact, sadly, to this day, they haven’t forgiven him.

Looking back, I can’t help but think that, while Bob had the resources to be a generous and carefree guy, he lived a small life that ended poorly.

Morals of the Story:

1. Spend your money with the people who you love the most, while you can.
2. Inheritances can create devastating family discord.
3. Don’t let someone else spend your money! (Your kids, the government, the nursing home, an 80-year-old gold digger).

Be Blessed,

Dave

Are You Throwing in the Towel Too Early?

May 4, 2020 David Kennon

I was reminded about something this week. You guys have it really tough.  By “you guys” I mean folks like you who are nearing retirement or retired.  You have it much tougher than my generation or your parent’s generation.

You are in a very scary and challenging situation.

Many of your parents went to work straight out of school and stayed at the same employer their entire lives.  As soon as they retired, a pension check started showing up, which continued to appear every month for life, guaranteed).   Your parents lived on a social security check, a pension check, and found themselves on a “fixed income.”

Easy.  Simple.  Understandable.  No need for anxiety.  You knew exactly what you could spend safely.

Now your generation is a whole different story.  You have probably worked for several employers.  A few of you have a traditional pension.  You may have 401k’s and IRA’s filled with investments that seem uncertain and risky.

You are being bombarded on a daily basis by the “financial media machine” who has realized over time that the best way to hook you in is to continually scare the heck out of you.

So, here you are, relying on a Wall St. institution for your financial security that you don’t really understand or trust –  sick with worry because it seems as risky as a roulette wheel in Vegas.

I want you to know that if you feel this way, you are not alone.  Nearly every single person I meet with is experiencing the same feelings.

I’m sorry you have to go through this, and I hope that in some small way I am able to give you some relief and perspective.

On that note.  It’s time for another history lesson.  For obvious reasons, recently I’ve heard, repeatedly,  “Dave, I understand that if the stock market goes down, it will recover, in time.  But I don’t have time!  I’m in my 60’s now.  I don’t have time!”

Having an anxious personality myself, I know that feeling of dread.  So I am making it my mission to help take away some of your financial worries.  How?  By showing you that things may not be as bad as you think!  Using history!

Take a look at this:

The point I’m trying to prove is this:  Markets rebound quickly.  Even if you’re in your seventies or even eighties, you have time to recover.

From 1939-1941, during World War II, we witnessed a market loss of about 23% in total.  Over the next four years, the market increased by 98%.

When Pearl Harbor was attacked in World War II, the market went down 7% in four days.  One year later, the market was up 15.8%.

During the Cuban Missile Crisis in 1962, the markets went down 10% over a couple of months.  One year later, the market was up 41%.

When Richard Nixon resigned, the market went down 13.4% in August of 1974.  One year later it was up 30.2%.

During the oil crisis in 1974 (which could be considered the worst economic period since the Great Depression), markets were down over two years by 40%.  In the following two years, you saw the markets increase by 60%.

In 1987 we saw a stock market crash in October, where the S & P 500 dropped 31% in a single day.  One year later it was up 27%.

After the U.S. invaded Iraq in 2003, the market was down 2%.  One year later it was up 35%.

When the housing bubble burst in September of 2008, the market dropped 39% over the next two months. One year later it had increased 49 years from it’s lows.

You are never too old to invest.  The old adage that you should become ultra-conservative as you get older makes no sense to me.  If you are 80 years old and your account goes down by 20%, it could be argued that it would have less of an impact on your life.

If you are 60 years old and the market has a few bad years right after you retire, it could affect your long term cash flow.  If you are 87 years old, and your portfolio drops from $500,000 to $400,000, I don’t see how it affects you as much.

Being ultra-conservative as you get older just means you are going to lose money (not keep up with inflation).  Plus, if you are in your 80’s, the reality is that your kids are going to end with the money.  Shouldn’t you invest it in a way that helps them- more than yourself?

Stocks and bonds work.  They are resilient.  They are based on human-spirit, innovation, and sheer determination.  Don’t sell yourself short- no matter what the age.

Be Blessed,

Dave