Millionaire Interview Update 19

Today I have an update for you from a previous millionaire interview.

I’m letting three years pass from the initial interviews to the updates, so if you’ve been interviewed, I’ll be in touch. 😉

This update was submitted in September.

As usual, my questions are in bold italics and their responses follow…

OVERVIEW

How old are you?

My husband and I recently had our 43rd anniversary.

He’s 67, and I’m 66 now.

Do you have kids?

Our 38-year-old son works as an online game design lead in another country, and our 34-year-old son is an Indie film director in Los Angeles (where else?!).

They have significant others, but no marriages and no kids.

They both have great common sense about finances and keep their “wish lists” in check. Neither one blew the nest egg he had after graduating from college debt-free due to scholarships and a healthy college fund from their grandparents.

What area of the country do you live in (and urban or rural)?

We live in the rural Southeast in my hometown with a population of about 7,800.

We lived elsewhere for 35 years and moved here about 13 years ago so that we could help care for my mother who was 90 at the time.

What was your original Millionaire Interview on ESI Money?

My sister encouraged me to participate because you were looking for more female millionaires, so I became Millionaire 84 in August 2018.

I was one of that first wave of female MBAs to hit the workforce in the late 1970s.

Is there anything else we should know about you?

My husband and I have weathered the pandemic well so far.

I reread most of the hundreds of paperbacks in our basement, and he upped his purchases for his Kindle.

I do make decent biscuits and gained weight, and my husband just bought a sheepadoodle puppy.

NET WORTH

What is your current net worth and how is that different than your original interview?

Our current net worth has grown to $5.55M with just under $4M in investment assets from $4.4M back in 2018.

We are just under $4M in invested assets, not including real property.

What happened along the way to make these changes?

The bull stock market and inheritances have kept our assets growing.

My almost 101-year-old mother died in 2019 with an estate of ~$1.3M in invested assets, almost a hundred acres of land in various parcels, and a $250K house. As the trustee of her trust, I have distributed the invested/liquid assets between her three daughters and have sold several land parcels when the right buyers come along.

Fortunately, my mother’s trust terms do not force us to have a “fire sale” of the land, and my sisters and I are not depending on this inheritance to feed ourselves immediately. That’s a huge bargaining chip during negotiations.

I am ever so thankful our mother set up the trust, power of attorney, and healthcare directives when she was a competent 82-year-old, a couple of years after my dad died. The estate plan let us gently transition control of her finances as needed during the last ten years of her life.

What are you currently doing to maintain/grow your net worth?

With the market so high, I have wanted to reinvest my inherited land proceeds in something besides mutual funds.

We’ve looked at REITs, rental houses that are nearby, private loans, and more, but we haven’t pulled the trigger on any of the options.

EARN

What is your job?

I still work remotely a bit part-time providing marketing services to two clients. My volunteer work has grown to 35+ hours a week which is too much.

My husband continues to work 3/4-time as a lawyer. He enjoys the mental stimulation of the cases and the people he helps.

After one year with a paralegal employee, he has always maintained a solo practice with no staff so there were no layoffs required during the pandemic. In fact, he locks his door a lot unless clients have set appointments. Our LLC owns the building where he rents part of one floor, so his rental expense is actually an income to our LLC – self-financing, you might say.

What is your annual income?

• $ 71K Stock Market investment income from interest and dividends, not asset growth (we generally reinvest the income since most of it is in tax-protected retirement accounts)
• $ 40K Law practice income
• $ 8K Marketing income
• $ 15k LLC net rental income (two buildings, 5 renters). The gross yearly income has grown from $42K to $51K, but our net income has increased by some $8K due to paying off our final loan on one building.
• $3K subsidy for Medicare premiums and secondary insurance from our former employers

How has this changed since your last interview?

Nothing much has changed, and we were a bit embarrassed to qualify for the stimulus checks so we made sure that they were used for others in need, both family members and my husband’s legal wards whom he manages pro bono.

Have you added, grown, or lost any additional sources of income besides your career?

We no longer have any debt, so the income through our LLC is more profitable. We sold 7 acres our own land that we had had for years.

We keep a too-high bank account, plus three years of basic expenses money in money markets so that we can invest if the right opportunity comes along and avoid any investment sales under duress.

SAVE

What is your annual spending and how has it changed since your interview?

Our regular spending is pretty much the same $60-70K.

However, in 2021, we have splurged to buy 2 new/used SUVs (cash), a four-wheel vehicle (cash), and a new Sheepadoodle puppy (cash).

What happened along the way to make these changes?

We lost a niece who was like a daughter to us this year, and she was only in her 40s.

That has made me more open to spending to enjoy life now – carpe the heck out of that diem!

INVEST

What are your current investments and how have they changed over the years?

Our nearly $4M in invested assets are in high quality mutual funds managed by our wealth advisor whom we meet with annually in person and when needed via phone during the rest of the year.

Over the last three years, the investment mix has become more defensive due to the market’s quixotic highs. I am more aggressive than our wealth advisor, but I trust his team to keep me from being too greedy and assuming the bull market will continue.

• Cash – $58K
• Taxable investment accounts – $ 727.5K
• IRAs – $3.06M
• Roth IRA – $49K
• SEPs – $54K
• Health Savings Account – $14K
• LLC rental buildings $477K
• Law Practice Operating Account – $45K

Some assets do not produce income, of course:

• Cash – $58K
• LLC cash – $45k
• Law practice cash – $45K
• Home – $700K
• Inherited real estate – $137K
• Art, vehicles, and other personal property – $178K

If both of us wait until 70 to take Social Security benefits and we each live 25 more years, we may have a ~~$2M cushion. Longevity runs in both our families.

What happened along the way to make these changes?

Getting laid off 4 years ago was the proverbial blessing in disguise. I devoted more time to my mother’s final illness, and I’m still handling her estate almost three years later.

It did take me a couple of years to quit looking at full-time job openings though because big expenses still give me heartburn.

Frankly, we may have over-saved in IRAs, Roth IRAs, and SEPs, since we are tied to RMD rules of when the funds must be distributed. The required distributions will likely make more of our Social Security benefits taxable.

Also, if we die before expected, the IRA inheritance rules will be a big hassle for our heirs.

As a result, we may start withdrawing from our IRAs in order to “receive” the proceeds over more years. Even if we put the funds in a taxable account, it will not impact Social Security and will be easier and more flexible for our heirs to receive.

MISCELLANEOUS

What other financial challenges or opportunities have you faced since your last interview?

Both my husband and I are now on Medicare and secondary insurance which is partially subsidized by our previous large corporate employers. Between the marketing by for-profit insurance companies and government organizations, we were cross-eyed trying to figure out our best options. I’m sure we didn’t maximize our choices, but at least we can make changes during open enrollment each year.

I am also annoyed by the shysters who send direct mails offering to buy land. Just for grins, I responded to one. They made an offer that was 20% of the appraised tax value which isn’t actually the market value; their offer was 5% of what we received when we sold half of the land.

All future such offers are going straight into the recycling bin.

Overall, what’s better and what’s worse since your last interview?

I am slowly becoming more comfortable with the fact that I am not a “bag lady”, and that it doesn’t hurt as much to spend money as it used to.

My husband is delighted since he has always maintained a wish list, and my job was to hold spending in check.

Being very oriented to long-term goals, it is a challenge to adjust to shorter timeframes and to find new financial goals that are not just defensive to keep what we’ve been lucky enough to accumulate.

What are your plans for the future?

Our financial advisor has suggested that we consider plans for any charitable bequests other than naming our two sons as heirs. Since neither son lives in the same state, inheriting our real property could be a big hassle for them.

I keep reading about famous people who plan to give their heirs some inheritance, but not enough to do nothing (Warren Buffet, Bill Gates, etc.). Since both of our sons are set with homes and successful careers, I’m not sure what half our estate would mean for either of them.

An uncle is having fun endowing scholarships at his high school and university. His philosophy is that his only daughter has enough money and would likely only donate an inheritance to her favorite charities so he’s donating his funds where he prefers instead.

Previously, I reported that I was in line to be the executor of some seven estates and a long-term trustee for our adult niece. With both my mother dying at a ripe old age and our niece dying way too early, we will need to regroup. Three of the remaining estates are in two countries outside the U.S. which will be very complicated, and so we are encouraging those family members to find competent local resources to handle their estates.

Given that you have a bit more wisdom and experience, what advice do you have these days for ESI Money readers?

I know that no one dies with a cleared desk, but folks, keep your affairs in order!

When our adult niece died recently, we experienced a triple whammy. One, we considered her a niece/daughter, so there was the personal loss and the efforts to help her mother deal with the estate. Two, our niece was also the only part-time employee of the arts council where I volunteer; the council was left in a scramble to find passwords to the various systems and to un-link applications as simple as call forwarding that was set to go to our niece’s cell phone. Third, our niece rented an apartment from us, so we are very involved with distributing personal possessions to help my sister who lives out of state with clearing out our niece’s personal effects. Eventually, we will refresh the apartment to rent again.

All this upheaval makes me advise everyone to keep a digital identity file somewhere safe and to keep it updated in addition to a legal estate plan. The lack of that info has been a struggle for our niece’s mother, the arts council, and for us.

It’s a shame that an iPad that is only 4 months old is now a brick since no one knew her password and Apple won’t help.

Review your beneficiaries on all financial accounts and titles on an annual basis. People die unexpectedly from accidents and sudden illnesses such as COVID which could skew your estate plans if your plans are not updated.