Three Simple Ways to Steal an Inheritance

Dec 27, 2021 David Kennon

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 on 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 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:   1. Money brings people out of the woodwork.   2. Life rarely moves in a straight line.   3. If you don’t use your money, someone else will. And oftentimes heirs do not use the money the way you had intended.   4. While running out of money in retirement can be a scary prospect, don’t forget that there are other possible conclusions.   Be Blessed,   Dave

 

Rocky Balboa was a Successful Investor

Dec 20, 2021 David Kennon

Couple #1: The year is 1978, Rocky and Adrian Balboa were nearing retirement. Rocky had worked his whole life as a bricklayer in Philadelphia and Adrian raised their five kids.   Couple #2: The year is 2021, Tom and Rita Hanks are also nearing retirement. Tom had worked his whole life in middle management at a toothpaste manufacturer.   One day, each couple, in their respective time periods, began to think about investing in the stock market.   Rocky remarked to Adrian, “I have a buddy who said I should invest in a few stocks he likes. I’m not even sure how to do that. Do I go to some sort of broker? My buddy said something about Smith Barney. I think that’s downtown somewhere.”   In 2021 Tom said to his wife, “I guess we need to invest in the stock market. You see it all over the news. I guess we just go to one of those websites and invest. It seems really easy. I even think that there are apps that let you invest from your phone in minutes.”   So, in 1978, Rocky santered down to his local brokerage house. “How do I do this exactly?” asked Rocky.   The broker told him, “Just tell us what you want to buy and we’ll make the trade and charge you a commission each time you trade something.”   Rocky went back home to Adrian. He told her how he had invested $100 into General Motors.   Adrian responded, “Ok, but don’t invest any more than that. I don’t want to mess around with this stuff. You have your union pension and Social Security. We will get those checks as long as we live. We have nothing to worry about.”   In 2021, Tom and Rita were sweating with stress. “All we have for retirement is Social Security which is not nearly enough. We need to take our 401k’s and invest them somewhere so that we can live off of the returns,” Tom said nervously.   Rita cried out, “This is crazy! Why do we have to stake our financial security on something that is inherently volatile and risky? I guess we have to do something. The bank pays next to nothing but we can’t afford to lose anything. I feel sick to my stomach.”   Tom started looking around the internet to get some ideas on how to best invest his life savings. He quickly realized that investing ideas are endless. Everyone has an opinion. He saw hundreds and hundreds of articles and websites. The more he investigated his options the more confused he became.   Yet there was one common theme to most of what he found; the market could crash at any moment. He slammed his head down on the table.   In 1978 Rocky was exercising in the gym when he heard a couple of guys talk about their investments. “Coca-Cola is up two points this week,” one of them commented.   Rocky wondered what they meant. He had no idea how to see how his investment was performing. A couple of days later he noticed that the newspaper had a section called “stocks.” He asked the two guys what to do. “It’s easy,” they said, “just look up your ticker symbol in the paper and it will tell you if your stock went up or down.”   The next time Rocky saw the stock section in the paper, he scanned down the page to find General Motors. When he found it, it showed +1.1.   “Is that good? What does that mean? I guess it’s good because it is going up.” Rocky never went through the hassle of finding the stock again. He figured General Motors was a good company and it would be worth more in the future.   The only other time he heard anything about the stock market was on Friday evenings when Walter Cronkite reported what the Dow Jones had done for the week.   All of this wasn’t especially important to Rocky. He had only invested a small portion of his savings. His pension and Social Security were paying the bills.   In 2021 Tom and Rita were in a panic. They had decided to invest their money in a “mutual fund” with which they were vaguely familiar.   “If this crashes we are done for,” bemoaned Rita.   Tom wanted to keep a close eye on this portfolio so that he would be able to protect his savings in case the market started going down. He installed an app on his phone to follow his holdings. He found himself checking it several times a day. He also noticed that the news talked about the stock market an awful lot.   “I guess I’ll need to pay a lot of attention to this,” Tom sighed.   Then it happened. The markets dropped 20% in the span of a couple of months. Tom and Rita were frantic. “This is all we have to live on!  What do we do!”   After an especially bad day in the markets, Tom relented and sold his portfolio and put it all in cash. Of course, the market fully recovered in less than a year but he didn’t know that at the time.   In 1979 the news for General Motors was bleak as well. After the Ford Pinto failed miserably, the stock price dropped forty percent. Rocky had no idea. Every once in a while he’d think to himself, “I guess I could go downtown and watch the ticker tape at the brokerage house, but who has time for that?”   Rocky and Adrian Balboa continued on into their retired years. They freely spent their monthly “fixed income.” It was guaranteed to pay out the rest of their lives, so there wasn’t much to worry about.   But Tom and Rita had a different experience. After realizing that no one could control or predict the stock market, they made a decision.   “Ok. We won’t’ spend anymore unless we absolutely have to. I refuse to die in the gutter if our investments falter,” Rita said.   When Rocky and Adrian passed away they left their home and some shares of General Motors to their kids. Their pensions stopped and the world moved on.   When Tom and Rita passed away they had more money in their accounts than ever before.   “At least we didn’t run out of money,” Rita remarked weakly as the beeping from the heart monitor slowly came to a stop.   Be Blessed,   Dave

 

Teachers and Cops Deserve Better

Dec 13, 2021 David Kennon

Lucy and Charlie Brown were a recently retired couple excited to start a new stage in their life.  They had big plans.   Over the next few years, they checked off most of the items on their bucket list. They took trips to Prague, Japan, New Zealand, Alaska, and they even took an African safari where Lucy hunted and killed a wildebeest. They fixed up their house just the way they wanted.  They bought new windows, resurfaced the lanai, put in a new kitchen, and even added a workshop in the backyard for Charlie to utilize his excellent woodworking skills. As they started to check off the list, they found themselves in their late 60’s with more income than they had expected.  After listening to David Kennon’s great advice, they understood that dying with a bunch of money didn’t make any sense.  They understood that with the $800,000 inside their IRAs, it was reasonable to spend $3300 a month without dipping into the principal.   “I can’t believe this,” marveled Lucy, “We always worried about running out of money. Now we are running out of things to spend it on.”   The next evening Chuck and Lucy went to dinner at a nice restaurant.  Lucy purchased a glass of wine that wasn’t even on the happy hour menu. As they ate dinner, they noticed a group of six teachers sitting at the table next to them.  The school year had just begun.   “That’s a hard job,” Lucy commented. “Teachers just don’t get the recognition they deserve.  They don’t make much money either.  Did you know a new teacher gets paid $38,000 a year?!”   “I’m going to pay for their meal,” Lucy pronounced. “We have the money.”  Chuck nearly fell out of the booth.   So they anonymously paid the tab.  The teachers were dumbfounded.  Their hearts swelled with the idea that the community valued their service.  This act of kindness stuck with them throughout the year whenever they faced tough times.   “That felt great!” exclaimed Lucy. The taste of generosity was much better than dinner.   A couple of days later, Chuck and Lucy were having breakfast at a small diner.  Their bill totaled $21. “These poor waitresses,” Lucy thought to herself. “They work so hard.”   Lucy left her a $20 tip with a note that said, “You are doing great.  We appreciate you!”  That waitress felt a warmness in her chest.  The rest of her day seemed a whole lot easier.   Now Lucy was hooked.  She began to realize that instead of banking the extra $3300 each month, they were going to be outrageously generous.   A couple of months later, Chuck’s niece went through a nasty divorce.  With four kids and a deadbeat Dad, she was in dire straights.  Lucy started thinking.   “Let’s give her a gift of $10,000.  That’s only three months of investment income and it will get her back of her feet,” Lucy said excitedly.  Chuck was really getting into this too.  “I never thought giving would feel this good,” he commented.   A month later, Chuck and Lucy read in the newspaper that hundreds of children in Sarasota did not even have a bed to sleep in.  They had to sleep on the floor of their home.  “This is terrible,” Lucy sighed, “can you imagine that this is happening in one of the richest areas in the country?”   So they joined forces with a local church to build inexpensive beds for kids.  Chuck got to use his woodworking skills and their money paid for the materials.  Not only did the kids get to sleep on their own bed, but their parents were amazed at the gift.  They started to realize that people out there cared.  They didn’t have to be alone in the struggle.   At this point, Chuck and Lucy were consciously looking for places to help.   “The police have such a hard job.  I can’t even imagine.  Not only do they risk their lives every day, but it seems like the country is trying its best to make them out to be the criminals,” Chuck said angrily. “Let’s do something nice to appreciate them.”  They contacted the police department to get the names of all the veteran officers.   They bought a small trophy, like that of a high school team.  On each one was inscribed: “Biggest Hero in Sarasota, 2021.”  The officers were deeply touched and many sat the award on their mantle.   Chuck started to get nervous. “This is great and everything, but we are giving away a lot of money.  You never know what could happen.  Maybe we should keep the extra money in our retirement accounts. Let’s not go too crazy here,” argued Chuck.   “Absolutely not,” Lucy responded, “I refuse to die with over a million dollars. Sure, our family would get the inheritance.  But this is our money.  I want to enjoy it.  I want to determine what it’s for.”   “And what could actually happen?  Between our bank account and IRA’s we still have $1,000,000.  Not to mention the $300,000 of equity we have in the house.”   “What if we need to go to a nursing home?  They are so expensive.  I don’t want one of us to be left destitute,” Chuck argued.   “Chuck, the chances of one of us needing years and years of nursing home care are incredibly slim.  Dave showed us the statistics.  There is only a single-digit chance.  Do we really want to stop our generosity?  I refuse to live in that kind of fear.  And do you really think, at age 85, we will look back on our life and say, ‘I sure wish we helped fewer people’?”   “I guess you’re right,” Chuck relented.  “I think we are doing the right thing.”   Chuck and Lucy lived into their eighties.  Their kids and grandkids learned the value of giving.  Their funerals were celebrations of lives well lived.   And at the end of it all, after investment returns, their IRA’s were still worth $800,000.   Be Blessed,   Dave   P.S.  I really need your help.  If you have read my book, please leave a review on Amazon.  It is INCREDIBLY helpful.  Click here.

 

75% Chance of Recession in 2022

Dec 7, 2021 David Kennon

So I’m going through my newsfeed this week and an article jumped out at me.  This is pretty common, actually, because the fake financial news drives me absolutely nuts.   The article proved once again why you guys are scared stiff.  The fear, the worry, and the sick feeling of believing that your life savings may evaporate from a global recession might really mess up your emotional health.   It makes sense, of course.  If you don’t have money, you can’t survive.  Running out of money is a terrifying prospect.  Studies show that people fear running out of money far more than dying.   The article I noted is titled: Majority of Americans say US will hit a recession in next year.    The numbers from the survey are haunting:   33% of Americans believe a recession is “very likely.”   42% of Americans believe a recession is “somewhat likely.”   7% of Americans believe a recession is “somewhat unlikely.”   12% of Americans believe a recession is “unlikely.”   This is a perfect example of how the general population is being completely manipulated by the financial media.   Those numbers absolutely floor me.  What kind of life is that?  Walking around believing a recession is “highly likely”?  What a miserable way to view our world.   A “recession” or a “bear market” is described as a 20% loss in the stock market.  Let’s look at history instead of pointless prognostication.  Since 1933, the stock market has lost more than 20% (total over a whole year) four times.     Let me repeat this for dramatic effect.  In 88 years, you would have lost more than 20% over that calendar year, four times.  Statistically, we have a 5% chance of a recession.  But statistics can lie.   So is a recession likely?  I have no idea.   “But Dave, the market has been going up for thirteen years!”    Bull markets do not die of old age.   “But Dave, the government is crazy!”     The economy and politics play a very small role with each other.  Historically speaking, it means much much less than you would expect.   “But Dave, what about inflation!  It’s going to make the markets collapse!”    Nope, there is no historical or academic evidence for this.   “But Dave, we are living in unprecedented times!  What about Covid?  What about supply chain problems?!”     The world is always crazy!  Times are always unprecedented!  Russians threatened nuclear war a few decades ago.  That was unprecedented.  The markets were fine.  Supply chain problems stem from all kinds of pent-up demand for spending.  Isn’t spending good for the economy?   The financial media has you so confused that 75% of you believe a recession is coming.  Based on what?  The world economy is incredibly complex.  The complexity is far beyond anything anyone can understand, or ever will understand.   If you are ever asked, “Do you think there will be a recession next year?” Please answer, “I have no idea. It doesn’t matter to my long-term financial health.  Stop asking me such dumb questions.”   For your viewing pleasure, here’s what was being said last year.  Remember the markets have returned over 20% during the past 12 months.   Economists fear a “double-dip” recession is coming soon  (CBS News, November 26th, 2020)   Why the Next Recession Is Likely to Happen in 2020, and What It Will Mean for Housing (Yahoo News/Zillow, July 25, 2019)   A Recession Is Coming. Government Needs to Keep It From Becoming Something Worse. (Barrons, March 18th, 2020)   The Next Global Depression Is Coming and Optimism Won’t Slow It Down (Time Magazine, August 6th, 2020)   How many people read this stuff, panicked, and moved all of their investments?  A lot.  This is why I get so upset.  This is not a victimless crime.  Real people are having their financial futures upended by stuff like this.   To review:  Don’t listen to your neighbor’s ideas about the stock market. Dismiss any article that contains financial predictions. Change the channel if the reporters start spouting this nonsense. If you start to get really nervous about your investments, buy “You Never See a Hearse Pulling a Trailer” on Amazon for $19.99.  (that is a subtle advertisement) Be Blessed,   Dave   Presenting: Ask Dave Anything I wanted to give back to the community.  So I’ve started scheduling short, free phone calls, where I will answer any financial questions you may have.  Spots go pretty fast.   Click here to get your spot