- Good evening.

You've got More Than Money.

You've got Gene Dickison, your host, your personal finance advisor.

I say the same thing every single show, because it's always true.

You've got More Than Money, you've got Gene, and you've got a half an hour where we're going to explore some very, very interesting questions from your friends, from your neighbors, perhaps from your colleagues at work, maybe even somebody in your own household.

That has happened.

That's pretty interesting indeed.

If you're a loyal viewer of More Than Money, then you know how this works.

So, you'll be patient with me as I explain to folks who are just joining us that this is a show that lays claim to being the most relevant financial show on television today.

And lays claim with no hesitation whatsoever, not because of my incredible persona or my deep academic background, although those two things are, I think, fairly obvious.

Bottom line is, that's not what makes us the most relevant, or even slightly the most interesting.

We are the most relevant, perhaps most interesting because of you.

Because you live interesting lives, because you have interesting challenges, you have interesting concerns.

You have done things that now you're trying to maybe undo.

You're starting down a path, you want to make sure you can avoid some of the pitfalls.

And that's exactly what a financial advisor should be able to do for you.

Investments, of course, there are countless investment-only financial advisors out there.

They are constantly on radio and TV, putting out commercials.

They're constantly mailing you things, "Hey, if you got half a million bucks, reach out to us.

"We're really good at managing your money."

Well, for the vast majority of the folks that we come in contact with from our audience, your visions are far bigger than that.

Far bigger than that.

Your objectives have little or nothing to do with making the most money you can possibly make in an investment, and far more interested in the impact that you can have in your life and the lives of those that you love.

The inclination on the part of so many of you to be committed to doing what's very, very best to benefit your spouse, your children, your grandchildren, your parents, the people around you, and the organizations around you.

The generosity of this audience is breathtaking.

And when I say "generosity", not just to PBS, but to nonprofits across our country doing amazing work to help people less fortunate than us, than we.

Bottom line is, it is a pleasure and honor to serve you and having your questions you send to me, Gene@AskMTM.com Every one answered back to you, whether they appear on screen or not is irrelevant.

We have an entire team of advisers answering questions back to you.

We are honored to do so.

Speaking of honored to do so, Megs, give them a demonstration.

How do we start this evening?

What question can we answer?

- Sure.

Well, our first question tonight, hopefully we can help out a family.

It says, "I'm 48 and have been married to "my wonderful husband, he's 49 for almost 20 years.

"We have one son, 18, who lives at home.

"We have three other adult children who now "live on their own.

My husband has two sons "that are 27 and 25, and I have a 29-year-old son "from a previous marriage.

"My husband and I are very open with each other "about our finances.

"However, the responsibility to manage our finances has "always completely rested on my shoulders.

"My husband is not fully engaged in our investments, "and I do not want to make a mistake with "our investment portfolio.

"We started with very little, but I researched investment "options and worked hard to grow our business.

"Now we've decided that I will retire and my husband will work "eight months a year for another five years "to let our investments grow.

"I wake up with anxiety, wondering if I made "a mistake retiring.

"The problem is that financial planners want to manage our "$2 million portfolio for a fee, and we are scared "that our retirement savings will be destroyed "if we hire the wrong advisor.

"We have not received the best advice in the past.

"What would you recommend we do?

"I would like to put together a solid retirement plan.

"Thank you."

- Well, goodness.

The inclination on the part of many of you, when you heard that email, was to wag your finger at the husband.

"Hey, you're not really involved.

"You're not really helping out.

"Hey, you should be more supportive."

I wish I could tell you that that's helpful.

It's not.

In this particular case, she is the member of this marriage, the person in this marriage that has taken the time, the effort, the energy, the commitment, the resource to manage the finances.

100 years ago, that never would have happened.

It would have been the man.

Undoubtedly, no matter how incompetent he may have been, the man was in charge.

Ridiculous.

So, now what we find is that often, the husband is in charge.

Oh, often the wife is in charge.

Oh, often they do it together.

There is no right or wrong.

There are some people that simply are not interested, or they don't feel they have any skills, or they have such trust in their partner and such respect for their partner's skills that they don't want to interfere.

There are lots of very valid reasons why this gentleman may very well have said, "Look, you're really good at this.

"You've been doing it for 20 years.

God bless you.

"Keep doing it."

So, let's not look to the husband here for either blame or for salvation.

That's not going to happen.

Leopards rarely change their spots.

It will be very unusual if overnight, he decides he's very interested and wants to dig in and help.

So, what we need to do is one of two things.

Number one, we need to separate the financial decisions from the investment management.

Many financial advisors don't do that.

They don't wish to do that.

Their business model is that they provide all of that guidance in exchange for managing the investments for the firm, or for the family.

And they charge a fee and, if they are good at what they do, and there are lots of very, very good financial advisors in the nation, if they're good at what they do, they not only are earning back their fee, but Vanguard, a number of years ago did a study, academic study, beautifully done that demonstrated that for every 1% that a financial advisor might charge, a competent financial advisor is providing about 3.5% of value back to the family.

A lot of that in investment return that the clients might not have gotten on their own, some of it on tax savings, some of it on strategic moves that the client may not have been aware of, Social Security ideas, etc., etc.

So, it is very possible that you might benefit from working with just such a financial advisor as a team.

Not as a substitute, not as handing it over and walking away, but as working, you, your husband, he can sit there and listen, even if he has nothing to offer, that's fine.

He'll pick up some things osmotically, that's fantastic.

But you and the financial adviser, as a team, you're worried about making the correct decisions.

You will gain the experience, the wisdom, the counsel of someone that you trust.

Finding someone you trust, I understand, is a challenge, but not an insurmountable one.

We'll circle back to that.

There is an alternative, however, there are a number of advisors, not nearly the percentage that manage funds as their compensation, but there are a number of advisors where their compensation model is a per-hour basis.

Or a retainer basis.

And you might very well find an advisor that you like, that you work well with together, who will not want to manage your money, will simply charge you, it could be a substantial sum of money, $3-500 not unusual, per hour to be your sounding board and to be your guide, your guide on this path of retirement.

So, that's an option.

That's an opportunity.

Finding either of these will not be necessarily easy.

Of course, one method you might use, send us your email, respond or follow up on your email, say, "We'd like a referral," and depending on your location, we may very well have an advisor that we know and trust in your area, that could happen.

Check with somebody that you really respect their financial expertise, their results, perhaps somebody that's already been retired for 10-15 years, and ask them, "Who do you use?

Are you happy?

"And if you are, could you get us a referral?"

Perhaps check with your estate planning attorney, or your accountant.

You're in business, undoubtedly, you have an accounting firm that has been helping you along the way.

Perhaps they have a financial advisor, or two or three that they could refer you to.

It will take some work, but it will also allow you to stop losing sleep.

And I get that you have 30-40 years of retirement ahead of you, maybe longer.

We're doing great things in health care these days.

So being prepared, being confident, not losing sleep, these are all very, very important traits.

Look for a financial advisor that will operate on a method that you find most accommodating.

But more importantly, look for one that you feel that chemistry that they're giving you the right information.

We covered a lot of ground there, Megs.

Wow.

Maybe the next one is shorter.

We'll see.

- We'll see.

It's definitely interesting.

It says, "I own a home in Colorado where I always "planned on retiring, but now I am not moving back there.

"I bought it for 200,000 and it was, "at the height of the market, estimated at 620,000.

"It has been a rental since 2004 when I was deployed, "then transferred.

"The couple renting it are interested in buying, "given that prices are falling.

"I'm wondering, could I be the lender?

"How would that work?

"Also, would my capital gains taxes on the sale be based on "the entire sale price?

"And how would a mortgage payment be taxed?

"I wouldn't want a loan to last 30 or even 20 years, "but ten years of steady interest payments around 7% "seems like a pretty good deal to me.

"What is your advice, Gene?"

- Well, goodness, yes.

It could be a very, very good deal for everyone.

For everyone.

If they bought your home and went to a traditional lender, they're going to have a significant amount of costs.

They're going to have to jump through a significant amount of hoops, and still may end up with a disappointing result that may or may not work for them, or for you.

If you are the lender, it's a very different thing.

Number one, you've got a long track record with them.

Apparently, you have found them to be very trustworthy, very reliable.

They have kept up their payments.

And by the way, if folks will do that renting, they will absolutely, in all likelihood, do that buying, using you as the lender, because they have so much more to lose.

Right now, if they miss a rent payment, you can get snarky and maybe evict them, and that can be really uncomfortable and not much fun, but that's about it.

It's going to be a few thousand dollars maybe.

If they decide to buy the home, we'll use 600,000, it's just a round number, they'll need a down payment, even if you are kind enough to let them skate by on only 10%, they will have $60,000 into this home that will come to you.

You are both the lender and the seller.

So, as a seller, you'll get the 60,000 right up front.

If they default, if they miss payments, if they don't pay their real estate taxes, they don't pay their insurance, they don't maintain the home.

as any bank as any lender would require them to do, they default, you take the house back, they lose their 60,000, and any other monies that they have paid in.

So, being a lender can be fabulous for them and for you.

If, for you, you think like a lender, you act like a lender, what would a bank do if this couple went to them and said, "We'd like to buy this house?"

They would certainly run a credit report.

You should, too.

They would certainly ask for all kinds of information about their employers.

How long have they been there?

How much do they make?

You should, too.

You should convince yourself, you should be able to document for yourself that these folks are worthy of your trust, because you're trusting them with a huge asset, and you're asking them to pay you off over a very long period of time.

Let's assume, for sake of our discussion, all of that works out beautifully.

They've got $60,000 to put down.

They agree to a $600,000 purchase price.

Mortgage rates recently have started to soften a little bit.

You may not end up with seven.

You may end up with six.

Still not a bad deal at all.

And bottom line, you will have a cash flow.

Now, you mentioned you don't want to hold for 25-30 years, but maybe ten years would be fine.

This is not unusual at all when an individual, a private mortgage is established, it can be done a couple of different ways.

The first way usually doesn't work.

Instead of lending it to them for 30 years, you lend it to them for ten.

The payments go up dramatically and often, the buyers cannot afford those higher payments.

If you offer them a 30-year payment, but require what's referred to as a ten-year balloon, at the end of ten years, there will be a principal amount still left owed and they must pay it off.

And how would they do that in ten years?

They would refinance.

They would go to a traditional lender, refinance.

By that time, if they borrowed from you 540,000. it has dropped way down to 500.

As most of you know, if you had a mortgage, principal goes down very, very slowly at first.

So they've paid it down, they refinance, at that point, they would hope ten years from now, a 600,000 home is worth 800.

They are only borrowing 500.

They would get a very good deal from the lender.

For you, taxes are going to be a little more complicated if you decide to do this, because you will be receiving two different types of payments.

Principal, part of the 600,000 purchase price, and interest, part of the mortgage payments.

So you will need to be very, very careful, have a very careful accounting... Having an accountant help with this is very, very useful.

Accounting of what monies are you receiving that are principal?

Those are capital gains.

And what monies are you receiving that are interest payments, on the money borrowed?

Those are ordinary interest.

Those are taxed at your ordinary tax bracket, your ordinary tax return rate.

So in any given year, painting a very simple scenario, they give you $60,000 as a down payment.

The payments that they give you total another $5,000 in principal, and $20,000 in interest payments.

The $20,000 is added as interest, as you would...

Taxable, as any interest would be, bank interest, CD interest, money market interest, taxable, whatever your tax bracket is.

And the 60, and the... What was my demo number?

5,000, 65,000 is a capital gain.

No, you do not pay tax on the entire capital gain when the sale occurs, you pay it in pieces.

So the first year, 65,000 of capital gains, the next nine years, probably 5-7 of capital gains.

The rest is interest.

It needs to be carefully split out, needs to be carefully documented.

But again, an accountant, 45 minutes, a little bit of computer work, easily done if you have done the hard work of being a proper lender, making sure they've applied to you as they would any other lender, and that you find their financial situation to be appropriate and reasonable for what you're trying to do.

In years past, many years ago, very, very common with recent memory mortgage payments being so very low, very uncommon, And now that they have risen rather dramatically over the last three years from, goodness, the last 30-year mortgage I saw before the current economic scenario was 1.99, and the highest I have seen recently is 8.25.

That's a huge jump.

And so, this type of opportunity for an owner to be the lender is much more prevalent today than it has been for years.

Do it properly, you should be just fine.

Speaking of just fine, Megs, you're doing a just fine job back there.

Where do we go next?

- Well, thank you.

So are you.

Our next question has a couple of questions sprinkled within it, but a lot of really good detail.

It says, "I am 47 years old and eligible to receive "my pension in four-and-a-half years.

"That pension will only give me $4,300 gross monthly "if I decide to receive a benefit before the government's "legal retirement age.

"If I suspend my benefit to the IRS retirement age, "I can increase my benefit to $5,000 gross per month.

"I only owe 180,000 on my house at 3.25% interest, "and I don't have a second mortgage.

"I have $419,000 in a high-yield savings account "that's only drawing a 4.9%.

APY.

"All of my credit cards have a balance of less than $25.

"I'm pretty healthy, though I have a pre-existing immune "disability that's under control.

"However, my condition has made it difficult to purchase "life insurance policies as an investment.

"All of my kids are grown and out of the house.

"My risk tolerance for investing is moderate to "aggressive because I have no problem working "another 10-15 years.

"My employer does cover all of my family's medical needs "as long as I'm employed with zero out of pocket cost.

"I hear so much about REITs, compound interest mutual funds "that only mirror the market, CDs, and Treasury bonds.

"Would I need actively-managed vehicles to reach goals "that outperform the market?

"Do I need a financial advisor, Gene?

Thanks."

- Wow!

That was a lot!

I wrote as quickly as I could, Megan, stand by in case I have to confirm some of these details.

But as I got it, 47 years old, could retire at roughly age 52 at $4,300 a month.

If they wait until age 65, that rises to $5,000 a month.

So far, so good.

$180,000 on her mortgage on the home, at 3.2, excellent.

Really, really good.

420,000 in a high-yield savings account, at earning 4.9.

Pretty good.

We'll circle back to that.

Kids are grown.

She's moderately aggressive...

I apologize, Meg, is this a male or a female?

- Does not say.

- She is moderately aggressive.

What the heck?

Obviously has a good job.

There's lots going on here that's really spectacular.

There's a couple of things that don't seem to add up.

$4,300 a month, at age 52.

If she waits 13 years, it only goes to $5,000.

That doesn't add up.

It doesn't make sense that it would grow so very little.

Second thing that doesn't add up, she's moderate to aggressive in her investment approach, but she has almost half a million dollars in a high-yield money market.

That doesn't match up.

Low, very low interest rate on her mortgage matches up.

It's beautiful.

Leave that right where it is.

There's no sense paying that off.

You'll pay it off over time with cheaper and cheaper dollars.

One of the benefits, sounds strange, one of the benefits of inflation, one of the benefits is dollars are cheaper in the future.

So a dollar that was paid this year, if next year, inflation is 5%, next year's dollar's only worth $0.95.

The year after that, it's only worth 90.

You get the point.

So, you're paying off your mortgage with cheaper and cheaper dollars on a very low interest rate.

So you don't want to mess with that.

The piece of the puzzle that we are missing, that would enable me to confidently tell her she either needs to be more aggressive, invest in the stock market, invest in real estate, investment trusts, REITs, as she mentions, where the stock market is an index fund or some other variation of that theme, there are lots of ways to make better returns long-term than what she's currently using, particularly in the moderate-to-aggressive investment platforms.

She doesn't appear to be there.

She does not mention a 401K at her employer.

That's a head-scratcher, because her medical benefits are really, really good.

It would be a little unusual for a company to provide such good medical benefits, and yet not have a 401K.

So there is the possibility that, in addition to all these funds that we've identified, by the way, and basically no debt.

Fantastic.

Well done.

Credit cards all under 25 bucks.

Amazing.

Good for you.

There's a very real chance there's more money here.

Whether that's the key or not will be answered by a fairly straightforward question, which is if you were retired today, I'm speaking to her, of course, if you were retired today, what monthly income do you need so that your bills are paid, you're happy, you're healthy?

Pretty simple question.

If the answer to the question is, "I think I need $6,000 a month," then you will be a very happy human being.

If the answer to the question is, "I need $10,000 a month," then we've got some real work to do.

If the answer to the question is anything under about $6,000 a month, you can do anything you want.

You're already there.

And the reason I say that is because someone who's got this kind of pension, this kind of a job, this kind of an income, is likely at the high end of Social Security benefits and, at normal retirement age, 20 years down the road, of course, but at normal retirement age, Social Security benefits for this person is going to be roughly $4,000.

She's got a pension of $4,300.

If she takes it now, that's $8,300.

And we haven't talked about her investments.

So, $8,300.

If she needs six, five, four, three, she's got it.

This is grand.

It gives her tremendous strength, financial strength.

And she can make nearly no return, take nearly no risk, and still make her goals easily.

Because even if she stayed right where she is, over the next 20 years, that 400, almost 500,000 is going to double.

If she has nothing else, her house will be paid off, she'll have $1,000,000 available.

She'll have $8,000+ coming in through the door.

And the only way this gets not great is if she says, "No, I need $10-12,000 a month," and then we have to dig in, figure out what rate of return on her investments is going to get her there.

In my opinion, even if those numbers are true, it's going to be relatively modest rate of return.

It's not going to be 20-40, it's more likely to be 6-8.

And she will be on track to be exactly where she wishes to be.

By the way, my opinion on the pension, if those are the real numbers, $4,300 at 52, and $5,000 at 65, take it at 52.

Take it at 52.

I know you're going to pay tax, take it at 52 and invest it, invest it, invest it.

And you will be far, far ahead, far more ahead than you would be if you waited to take a small increase at age 65.

Fantastic.

Well done.

Well done, you, very, very well done.

Speaking of well done, I hope you agree this show is pretty well done.

Well, Megan did a great job.

And me, eh, what are you going to do?

Bottom line is, I hope you learned a lot.

Hope you picked up some ideas.

I hope some of the questions were your questions.

I hope some of the questions were, "That's not exactly "my question, but I see where he went with that.

"I see that I can pick up some ideas."

And if he did, fantastic.

If you say, "Wait a second, my question's very different," please send it to us, Gene@AskMTM.com.

It's absolutely free.

We respond to every single question, the silly ones, the hard ones, the goofy ones, the snarky ones.

Those are kind of fun, too.

But we'll answer those back to you and you might see your question answered on a future show.

Speaking of future shows, I hope you learned enough that you want to return, because we'll be back right here behind this desk next week on PBS, answering your questions on More Than Money.

Goodnight.