Money on the Mind: Can You Save for Retirement ... and Save Your Parents?

0:04Felix Salmon: Hello and welcome to Death, Sex and Money. I'm Felix Salmon of Bloomberg.

0:10Anna Sale: Welcome to Slate Money. I'm Anna Sale.

0:12Felix Salmon: We have crossed over. We have changed our jobs. And for those of you who were here last time with Adrianna Adams of Domain Money, I can tell you you're in for a treat because this time we have Adrianna Adams of Domain Money.

0:27Adrianna Adams: welcome back thank you guys i'm so happy to be here again because we love you so much we cannot

0:34Felix Salmon: just have you on one show we need you back to help us even more with this intractable but fascinating subject of the sort of intersection of money and emotion and i have a kind of weird one for you this week which is you were talking about the bookends last time you were talking about do you have whatever liquidity you need to enjoy your life today and do you have the kind of savings you need to be able to be comfortable when you aren't earning money anymore and you're an old and then the other big thing that always winds up happening in between in that like fuzzy middle ground that we don't care about so much is looking after your parents and suddenly like after all of those years when they were looking after you you're suddenly like oh shit now i need to look after them and tell me a little bit about how people like how you People like you even think about that.

1:45Adrianna Adams: I'm a huge fan of taking care of yourself first, which can be shocking to some people, right? Like in order to take care of other people, you need to take care of yourself. I think this goes both ways for helping children financially and helping parents financially. Because if you don't take care of yourself, then you could likely end up being a burden on one of the other two if you don't have your own foundation set up, right? But there's so many ways to help family that what I always need to understand first is what are we trying to accomplish here, right? Are we trying to make sure that your finances are protected?

2:27Adrianna Adams: Are we trying to make sure that your parents are comfortable? Because there's so many different ways we can go about this. So I really need to get to the root of the question of like, what is the real thing that's stressing you out that I can help you with? Does that make sense? Okay.

2:41Felix Salmon: I love this. I love this answer so much because I think there are three different things that get confused. One is, like, I think that my parents are in some kind of a money problem and I should be helping them out financially or in some other way. and this is stressing me out. The second thing is just, you know, they think they're in a money problem and they are, you know, asking for my help or kind of like giving signs that are making me think that they could use my help. And then the third thing is like, well, they are just humans and they could use a call with Adriana from Domain Money and just like work shit out themselves.

3:35Adrianna Adams: Yes.

3:36Felix Salmon: And it's really hard to sort of disentangle those three.

3:41Adrianna Adams: It is. Anything related to finances. You have to ask some of the tough questions, but also in a way that makes people think they're not being asked the tough questions, right? So it's all about digging in. You should be a podcast host.

3:59Adrianna Adams: I'll leave that to you guys. I'm enjoying the guest part of it. But yet you have to really figure out how to be strategic about getting to the root of that. Because to your point, Felix, it's usually one big giant mess to other people in their own life. It's very hard to decide that for yourself, if that makes sense.

4:19Anna Sale: I hear you about make sure you're in a good place and that's your first priority with a client. What if I say to you, I've got my retirement savings humming along and here's what's going on. Here are the ages of my parents. I think that they could use a little extra money to be more comfortable in their later years. Can you help me figure out like what's what are the appropriate ways to share money across generations like going upward? Like what I feel like I have never had I talked about college savings with personal financial planners, but I've never talked about my parents and they haven't asked.

4:57Adrianna Adams: You can get so creative, which is one of the reasons I love financial planning, because I I consider it an art, not a science. There's so many ways to accomplish one goal. I'll give you an example of something I was helping a client with recently. Their mother is not in a great financial situation, but she's been fortunate enough that she's done very well for herself and has a surplus. So the exact example that you gave me, Anna, she knows she's already got enough saved for herself. And so one of the scenarios that made sense for her was actually to purchase a home for her mother to live in. So she owns the house that her mom lives in.

5:36Adrianna Adams: And in order to actually... This one's a very unique one. Because in order to keep her mom financially responsible as well, her mom actually pays her rent. And so she's paying the mortgage. She's financially responsible for it. And if anything ever happens... And her mom is paying under market value for the rent. So there's some gifting component to that. But it was just a very unique way to set things up where it's not actually handing money over to somebody, especially because I find when the younger generation gets to the point where they feel stable enough to help an older generation, there is some anxiety there around, well, I'm going to give them this money, but it's not actually going to do what I intended it to do.

6:18Adrianna Adams: So I love getting strategic and figuring out ways to do it that will provide the family member security or something that they need while still being strategic in a sense that we know it's actually going to long-term help because she owns the real estate that the roof over her mom's head right and and so i i mean as someone

6:37Felix Salmon: who on slate money we've had multiple episodes about this rent versus own question it like and and so often it becomes emotional like the reason why the united states has a 65 home ownership rate is not because on some kind of rent versus own calculator, it makes sense for 65 % of the population to own. It does not. Like probably half of those people would be better off if they were renting. But we are in this world of like the emotional aspects of money. And there is just this incredible feeling. I don't like whether it's rational or not, if you own, that is just reassuring in a way that like, If this client of yours was simply paying her mother's rent on a rental property and her mom was paying slightly less to her, that wouldn't create the same level of emotional safety.

7:34Adrianna Adams: Right. Also, we could talk for hours about the rent versus buy. That is my favorite topic to debate. So let me know if you have more time later. But exactly. And I think it goes back to the emotions of what are you trying to accomplish? So this specific person wanted not only to take care of their mom, but also continue to grow their wealth and make sure it wasn't just like she wasn't quite ready to just throw everything away and say, like, I'm never going to see a return on this money.

8:04Anna Sale: It was something where gift is another way to put that.

8:08Adrianna Adams: Yes, yes, yes, yes. Gift.

8:13Felix Salmon: A gift is just an investment with a minus 100 percent return.

8:17Adrianna Adams: Exactly. So she felt much more comfortable doing it though, because she knew that it actually is an investment for her, assuming the real estate appreciates, right? And it wasn't just a gift that was never to be seen again. And I think that's really important because I talk to clients so all the time that do feel comfortable. They're like, I know I've got my money set aside over here. I would be fine never seeing this money again. And then that opens the door for other scenarios, right that maybe are a little bit more flexible that's giving the money outright or you know contributing to education costs or college funds and things like that where you know you're not going to see the money again but it's still compounding maybe so it totally depends on what that person's comfortable with and what they're trying to achieve and then there's a million ways to accomplish it so it's a fun exercise to go through once your clients have adult children

9:15Felix Salmon: um never mind that you know decisions about how much money goes to whom when and all the rest of it but just in terms of information how like a huge number i would say the majority of my adult friends have basically no idea how much money their parents have you know at least until their parents get well into their 80s. Like if I'm in my 50s or 60s and I have adult children, like how much do you recommend I share about my own personal finances with my kids? Good question.

9:54Adrianna Adams: That is a really good question. So the first thing I would encourage people to share is just your money values. I think that's more important than the dollar amount actually, because sharing what you care about and how you think about your money, I think, allows the next generation to also understand not only how to potentially help you if the situation ever comes up, or how they can also best be a steward of your money if they end up in a position, whether they inherited it or are now in charge of managing your money because you no longer can. So I think that core understanding is actually the most important.

10:35Adrianna Adams: And then I do think it's important to talk a little bit about the numbers depending on the situation, because there are strategic ways to plan or to gift or to do things like that, that are important, I think, that can help your family overall and end up in a better situation. So I'm all for opening up those lines of communication. But I'm going to go back to, I feel like I've hit on this a million times. It all depends on what you as the parent are most comfortable with. Everyone does things differently. And if we understand that your goal is to make sure that they have an understanding so they know they don't need to worry about you, then maybe we want to share in a certain way.

11:16Adrianna Adams: Or if your goal is to just

11:19Anna Sale: make sure that they... I'm trying to think of another goal now.

11:24Adrianna Adams: I'm blanking. But you can have other goals, right? Like, okay, maybe you want to share with them that, hey, things aren't going as well and you may need help. Or just you want to help them be in a better position by not following in your footsteps, then we maybe don't need to share the dollars, but let's share like the principles of how you got where you are.

11:39Felix Salmon: I can, I can share because it's up to me that like one of the first questions that you asked me when we had like session number one financial planning was, you know, are you likely to inherit any money from your parents? And if so, how much? It's like a pretty important, it can be a pretty important chunk of planning the future. I'm sure you've asked this of countless people. Like, what proportion of them know how much they're likely to inherit?

12:19Adrianna Adams: Factually, probably 10 % of people. I think, honestly, most often when I ask this question, people say, I'm not going to inherit anything. It's not a talking point, not worth it. And then on the surprising side, you know, there actually does end up being something there. I would say that happens more often than not. But to your point, yes, there's definitely a cohort of people who know like they've got, you know,$10 million, like I'm going to get something, I'm not worried about my future. But I would say factually, very few people know exactly what's going on.

12:54Felix Salmon: And just from their point of view, like, would your life be easier with their life, your client's life be easier would everyone be better off if that number went up from like 10 to 50 that if people if just people were more dialed in i think so um but i would say also

13:15Adrianna Adams: that it's so hard to predict the future i don't know if you guys have ever tried to do that but i i had a really tough time trying to predict the future um so i try not to do it too often anymore. But knowing how long your parents are going to live, right? Or what's going to happen, or if they're going to have a health situation that actually ends up eating into that. I think the only time it really makes a drastic difference is if we're talking like multi-millions, right? If your parents have a million dollars, that could very easily be eaten away with health issues, or it could very easily triple and you end up inheriting a lot more.

13:51Adrianna Adams: So there's kind of like this gray area where it would help more than than other examples, if that makes sense.

13:58Anna Sale: That's interesting to me because I was thinking, like, let's spell out the downsides of giving more visibility. And what you're saying is if you have a conversation with a parent in their 70s and they say, I think I've got a million dollars that's going to be inherited, something that you all will inherit when I'm gone. And then it's either gone because of a downturn, like then you'll have a sense of loss that you didn't necessarily need to know. And then it could also be very different if things go differently with the investments. But have you seen concrete downsides of when people try to share with their adult children and then it goes way sideways?

14:40One example comes to mind, and that is the younger generation decides that they don't

14:47Adrianna Adams: need to save their money because they'll be taken care of. They're going to live their life a little extra today. and then I've seen this go two ways, either, like I said earlier, like a health situation or something, the money's gone and then now they didn't have a backup plan or there is a very unfortunate family fallout and the parent still has the money, but suddenly that child's no longer getting any of it. And so there's definitely a couple of downsides, right? But I think if you have open lines of communication and you are more honest about some of those downsides or what could happen, then maybe that child also would have continued to save for their future because they didn't rely on the fact that that might be coming.

15:27Adrianna Adams: So that's why we also need to have that conversation, not just about the number, but about the goals and what could or could not happen so that they don't feel overly reliant on it and end up in a worse situation, if that makes sense.

15:40Anna Sale: Yeah. And you just made me think about also like, what if mom is widowed and mom takes up with a new romance and they really enjoy going on cruises in their 80s and the kids all of a sudden are looking at the new partner with side eye if they get married yeah mom's in the south of france for two months suddenly your inheritance is gone yeah and then you're not welcoming this new love into your family unit because you're feeling like they're taking your resources which is related to

16:08Felix Salmon: my big worry which is that you know i am human and as a human i am going to experience cognitive decline as i get older and i don't have any kids to sort of like look over my shoulder and be like um no you should not reply to that text message and send that like nigerian prince all of your money. And, you know, I don't have like, yeah, what is, do you have any advice for those of us who aren't able for whatever reason to rely on our kids to look after us? How, how to get ahead of this inevitable cognitive decline and make sure that we are still going to be okay, even when we're not quite as on top of things anymore?

17:00Adrianna Adams: Yes, there are a few things that come to mind for me. The first one that I will say is I've actually seen technology evolve over the past decade, call it, where if you are using the tech, like if you use your mobile banking apps and those apps on your phone, they know what your behaviors are. And actually, banks will start to flag something that seems suspicious. And we'll reach out and say, hey, before we approve this wire, They will call somebody. And so if you've never sent a wire of that dollar amount in that situation, I really love that the tech can know that and flag it to a real person who can maybe step in and give you a call.

17:44Adrianna Adams: I've had real stories where that has happened and the representative has paused things and then gotten a trusted contact involved. Which leads me to another quick topic. A lot of firms now ask for a trusted contact on all accounts. It's an optional field and most people click skip. Don't skip it. I don't care if you're 25. I don't care if you're 85. Everyone should have a trusted contact on file because that essentially gives that institution the right to call somebody else and say, is this person okay? Or we haven't been able to get a hold of them. They can't disclose anything about how much money is in the account or what you're to do, but it at least lets them contact somebody who's actually in your life to make sure that that is or isn't a good thing or something's going on.

18:30Adrianna Adams: So to your original question, Felix, I think it's important to have people that you trust. And maybe it is helpful that they might be a couple years younger, right? So that their cognitive abilities don't go before yours, ideally. But I would also add in having a financial power of attorney on file and a healthcare power of attorney on file, something I often see missed. Again, even if you're 18, everybody should have these documents in place so that you have a trusted person that can step in. Because if you don't have the family line that will by default step in under certain laws, it can be really tough.

19:10Adrianna Adams: So I would prefer you have a very close friend or a niece or a nephew or somebody that you trust. It could be a coworker even, right, that could be contacted if needed, if you don't have that designated child.

19:23Felix Salmon: This is also a really yet one more reason, and I'm sure Anna agrees with me, that we should all be cultivating younger friends.

19:31Anna Sale: Yeah, I was going to ask you, do you have a trusted contact who's 35 or under right now that comes to mind?

19:37Felix Salmon: I kind of do. I mean, now you come to mention that. I don't know about 35, but definitely like under 40.

19:43Anna Sale: Okay, yeah.

19:44Felix Salmon: And I do think it's good to keep in with the youngs, you know? Yeah. It keeps you healthy in many different ways. And you get to know, you know, you get to understand what's going on in the world because otherwise you just lose touch and you disappear into a world of crossword puzzles and soap operas.

20:04Anna Sale: Yes. Being grumpy about the youth, yeah, instead of being amazed by them. Adrienne, I have a question. when you mentioned having all these things on file, how do you advise just regular people who are going about their regular daily lives? Like, when do you, how do you think people should manage making sure they've got the right paperwork sorted? Because I know I did it when I had my first child. And maybe I do it, I kind of take a glance when jobs change. And then I just set it and forget it.

20:40Adrianna Adams: I think that's perfect, Anna. If you don't change jobs frequently or you don't have a lot of life changes, then I would say every couple of years, these documents should just be glanced over. I personally like to make it an annual exercise because this happens to me with the car tags. One year I opted in to renew my license plate for two years. Well, then the third year I forgot because it wasn't part of my annual routine.

21:05Anna Sale: And then you get pulled over six months with like no yeah so that's always a fun time um but so i personally love for it to be an

21:12Adrianna Adams: annual exercise and i do it in either the beginning or the end of the year so if i have a really busy holiday season i'll be like i'll save that for january but ideally i love to make it part of that year-end checklist like let me make sure i'm heading into the new year with everything good

21:24Felix Salmon: this is also why jane dry january is so good because you can do it while you're sober headed

21:28Adrianna Adams: Yeah. Exactly. Exactly.

21:32Anna Sale: Another reason dry January serves all of us.

21:37Felix Salmon: Never mind the money you're saving on not buying whiskey.

21:41Adrianna Adams: You guys, I have a confession. I've never done a dry January.

21:46Felix Salmon: Just think how much better off you might be.

21:48Adrianna Adams: I know. Maybe this is the year.

21:51Felix Salmon: Yeah. Well, I think the lesson we are going to leave this week is…

21:57Anna Sale: Go hard in December.

21:59Felix Salmon: Go hard in December.

22:00Anna Sale: Anticipating January.

22:01Felix Salmon: And then in the midst of the enforced sobriety of January, that's where you start wondering about financial powers of attorney and other really, really interesting things like that that everyone loves spending time with.

22:17Anna Sale: And asking your 30-year-old friends for coffee, right? Yes.

22:20Felix Salmon: Exactly. Yes. Exactly. Top tip. If you're going to put someone's name on that field, it's probably worth giving them a heads up. first that you'll get putting their name in that field.

22:29Adrianna Adams: That's a really good point.

22:32Felix Salmon: Otherwise, they'll be like, wait, who?

22:36Felix Salmon: Adriana, thanks so much for being with us. This has been absolutely wonderful. You're a complete star.

22:41Adrianna Adams: Thanks for having me, guys. I'll come back anytime. I love chatting with you both.

22:45Felix Salmon: Brilliant. So yeah, thank you. Thanks to Shana Roth and the whole Slate team. And yeah, we'll be back with more of the Slate podcasts, not only Death, Sex and Money, but also Sleep Money. Sleep Money. I can remember the name of my own podcast. Okay. Cheers, guys.

23:04Anna Sale: Thanks.