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Dianne Maley writes The Globe’s weekly Financial Facelift column.
Every week for the past 12 years, readers have anonymously shared the intimate details of their money problems with me – everything from how to manage competing demands on their pocketbooks to wondering if they will ever be able to retire. As The Globe’s Financial Facelift columnist, I take these struggles to one of our roster of financial planners, who devises a plan to help these readers meet their goals.
I’ve discovered that more women than men ask for advice, especially at critical turning points in their lives: divorce, job loss, death of a spouse. “Women as a group are more willing to seek help whereas men oftentimes stick their head in the sand,” says financial planner Barbara Knoblach of Money Coaches Canada.
I would add that women have not always been well-served by the male-dominated investment industry, focusing as it does on investments. I’ve found that women often prefer the more holistic approach of comprehensive financial planning – budgeting, borrowing, saving, investing, taxation, insurance and estate planning. And women still earn less than their male counterparts, making it critical that they understand their finances.
And so I offer the following three cautionary tales from my years writing the column, and the lessons every woman (and man, too) can learn.
With older, straight couples, I’ve found that the woman often manages the household budget and the man the investments. So it was with one woman in her late 50s. She and her husband worked hard and lived modestly, hoping to retire to their cabin one day. In search of higher yields, her husband invested heavily in U.S. second mortgages. When the U.S. property market collapsed in 2007-08, they lost most of their life savings. They had to move to their trailer, which was in her name. “Now he wants to sell the trailer and move to the cabin,” she wrote. “I want to keep it. It’s not worth much but it’s all we have.” I don’t know how the story ended because I never heard from her again.
The lesson: somehow, and it may not be easy, women need to keep tabs on their family’s investments, and make sure they attend every meeting between their partner and broker where joint assets are concerned.
Sometimes, people don’t fully understand what they own – and owe. I’m reminded of a middle-aged couple with a house, a big mortgage and four children. The economy had taken a downturn and the husband was working fewer hours. The wife was so stressed she could barely sleep. “I don’t know what to do,” she wrote. She was working but barely making ends meet. “I’m afraid we’re going to lose our house.”
Luckily, the column’s financial planner realized their mortgage payments were high so she asked for a copy of their statement. Turns out, the couple had chosen to amortize the mortgage loan over 15 years rather than 25, making the payments far higher. They didn’t realize they could change it. She explained the problem to the lender, who agreed to extend the amortization. Problem solved.
The lesson: read everything you sign and ask questions until you are sure you understand it.
One of the sadder inquiries I get is: “What to do with mom” – mom, who may be skimping on her own lifestyle to leave more for her children. I find it sad because I’m not always sure the children are doing the right thing for their parent, even though they would say they are. The potential for a conflict of interest in these situations is great.
So it was with one 90-year-old woman. Her health took a sudden turn for the worse, landing her in the hospital. One of her two daughters wrote in on her mother’s behalf, asking how much they could afford to spend on an assisted living home. Though she lived on about $30,000 a year, she was well-fixed financially, with a small pension and assets of $2.27-million, including a house valued at $900,000.
Even without selling the house, their mother had more than enough money for a top-of-the-line retirement home costing $100,000 or more a year, the column’s financial planner concluded. If she chose to, she could afford to stay in her own house and hire 24/7 caregivers costing up to $140,000 a year. She could do so to age 100 and still leave an estate worth $1-million.
But their mother was concerned about the upkeep of the house, so they began looking around. She settled on a studio apartment in a high-end retirement home starting at $3,500 a month, rising to a maximum of $9,500 a month for terminally ill patients. She’d be on a floor where the residents had more extensive medical needs.
But that’s not where she ended up. The family discovered she qualified for a government subsidized nursing home, probably because her income was low. Whether by consensus or nudge, that was that.
The daughter happily reported they had found their mother a “tiny room” for less than $2,000 a month, plus extras for TV and phone, where the staff was dedicated and there were plenty of activities. Her daughters were her executors and sole beneficiaries and it appeared that there was no disinterested party – no trusted friend or lawyer – who might have suggested an alternative.
The family celebrated Christmas, 2019, together, “then came COVID,” the daughter wrote. Their mother “had to stay in her tiny room most of the time for many months.” She caught COVID-19 but survived, only to die last fall – with her children by her side and her capital intact. “Isn’t it a happy ending?” the daughter asks. I’m not so sure.
The lesson: it’s likely this situation unfolded the only way it could. Still, I can’t help but think that had their mother chosen in-home care, or the expensive retirement home, she might have spent her final year more comfortably. She might still be alive today. There can be an inherent conflict of interest between what an aging parent needs and their family’s desire to maintain their inheritance. To help avoid it, estate experts suggest you name more than one party as executor and make sure you share your wishes about how you want to spend your final days with everyone involved. You could name a family member and a lawyer or trust company as co-executors. And the same approach should apply to your power of attorney for property.
What else we’re thinking about:
Economist Robert Shiller thinks he detects more to the housing boom than low interest rates. This is worth noting if you’re CEO of the “Bank of Mom” and thinking of dipping into your home equity to help your children with a down payment. You might want to wait awhile.
He’s co-founder of a unique home price index. “My data goes back over 100 years, so this is something.” What he detects is mass psychology driving the market, irrational exuberance if you will, a term he coined. Manias, or bubbles, tend to end in a steep reversal – but there is a silver lining.
“If you go out three or five years, I could imagine home prices would be substantially lower than they are now, and maybe that’s a good thing,” Mr. Shiller said in the interview “Not from the standpoint of a homeowner, but from the standpoint of a prospective homeowner.” If prices fall and more houses hit the market, “we’re better off.”
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