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A Long Journey

Hank Bertsch

MY FATHER LEFT US—my mother, sister, brother and me—in 1951, when I was age 10. With the help of her parents, my mother managed to raise us three children until we each got married. I knew I wasn’t as well off as many of my parochial school classmates, but I never felt poor. Still, we didn’t waste a cent, and that became a lifelong habit.

It’s been a long journey since then—service in the Army and Army Reserves, and several decades in the uncertain world of private employment—but it’s all worked as it should, financially at least. The most challenging aspect: managing my late wife’s long illness, something many of us face later in life.

Where did my money journey begin? My first job was as a paperboy. With good intentions, I opened a passbook savings account, but still managed to spend most of what I earned. Much of the money was spent on clothes, so I could fit in with my classmates.

I paid all my college expenses by working nearly fulltime at a supermarket. As with the money from my paper route, I probably could have saved more. But I spent a chunk of my earnings on fraternity dues, among other things, which I viewed as part of my well-rounded college education.

I was an underachiever academically throughout high school and college. Still, with Vietnam looming on the horizon, I managed to get commissioned as a second lieutenant in the Army through the Army ROTC. I entered active duty in 1964. I was already married to Gail, whom I’d met in college.

In 1965, while stationed at Fort Dix, New Jersey, I made my first investment. I bought 10 shares of Budd Company, a metal fabricating company that supplied components to car makers. I don’t recall why I chose Budd, but I sold soon after. Such are the whims of active investing. More speculations were to follow.

Acting on the recommendation of a fellow lieutenant, I bought Manhattan Fund, a go-go fund started by Gerald Tsai. Big mistake. Tsai had built his reputation as a top-performing money manager at Fidelity Investments, before striking out on his own. I lost almost 50% of my investment by the time the fund collapsed in 1969.

I left active duty in 1967, but served in the Army Reserves from then until 1992. That allowed me to retire with a nice pension, plus the military’s health-care coverage known as Tricare for Life, which today acts as my Medicare supplemental insurance.

Becoming a convert. After leaving active duty, I began what would become a 36-year career in publishing. I joined a company with the first profit-sharing plan ever approved by the IRS. My employer contributed an amount equal to 15% of my taxable income to the account, which initially was invested 100% in company stock. In 1974, after the ERISA law was enacted to safeguard retirement plans, employees like me were able to choose other investments.

My only investment outside of the profit-sharing plan was several purchases of shares in King Resources, an oil exploration company. I was told it “couldn’t miss.” It did, costing me my entire investment.

During this period, I was able to go back to school and get my MBA. It was quite a change from my undergraduate days as an English major. I became a much more serious student, and was inducted into the Beta Gamma Sigma business honor society.

In late 1984, my employer became the target of a hostile takeover and, the following year, I was terminated. I withdrew all my money from the profit-sharing plan, paying hefty federal and state income taxes but, due to the nature of the plan, no early withdrawal penalties. I used the money to pay 100% of the college costs for our two children. But for Gail and me, that decision also meant starting over with next to nothing—at age 44.

My next employer, from 1985 to 1987, had an employee stock ownership plan (ESOP). Again, all contributions were made by my employer. That all ended when the company became the target of a hostile takeover, yet another time that my career was derailed by the corporate raiders so prevalent back then.

My employer fought the takeover attempt, winning the battle but losing the war. After declaring a huge dividend that put massive debt on the company’s balance sheet, it was forced to sell all of its assets and ended up going out of business. Employees like me lost everything—their jobs, the security of a regular paycheck and their ESOP investments.

Fortunately, in late 1987, I joined a firm with a 401(k) plan that offered Vanguard Group funds. That was when my financial life turned around. At age 46, I knew I had to be aggressive in my efforts to catch up. Every raise and every bonus meant increasing the percentage of my pay going into the 401(k).

In 1994, I was again out on the street as the result of a corporate reorganization. I took my 401(k) account and rolled it into an IRA, which I then invested 100% in Vanguard Health Care Fund (symbol: VGHCX). Not only was I depending on returns from active management, but also I was limiting myself to just one sector of the economy.

I know now that this was a dumb thing to do. But it paid off like a slot machine. I was in one of the decade’s top-performing mutual funds. Every so often, I’d take some of my gains and diversify into another Vanguard stock fund, including its S&P 500-index fund (VFIAX), Primecap (VPMCX) and Windsor II (VWNFX).

Eventually, I sold the health care fund, Primecap and Windsor II to concentrate my bets on Vanguard’s S&P 500 fund. I’d become a convert to the benefits of index investing—collecting the market’s return less rock-bottom costs. Later, I added small- and mid-cap U.S. stocks to my portfolio by swapping into Vanguard Total Stock Market Index Fund (VTSAX).

After a few more job changes, including leaving publishing for three years to be the business manager of a school district on Cape Cod, Massachusetts, I returned to publishing and retired in 2006. Throughout my publishing career, I held a variety of positions, including sales, sales management, marketing, editorial, finance and general management. I was never bored.

Caring for Gail. In 1991, my son, fresh out of college, joined an insurance company that sold long-term-care insurance. He advised Gail and me to buy policies through his company, and he said he could get us the employee rate. This turned out to be an incredible blessing. Gail was diagnosed with Alzheimer’s disease in 2010. She needed increasing levels of care until she passed away in 2018.

Long before Gail was diagnosed, we drew up wills, durable power of attorneys and trust documents with our elder-care attorney. As Gail’s condition worsened, the attorney advised me to lower our investment accounts to the limits set annually by Medicaid, and then use the funds to buy three single-premium immediate annuities, or SPIAs, that were deemed Medicaid compliant.

Why three SPIAs? I bought one each for my taxable account, traditional IRA and Roth IRA. To be considered Medicaid compliant, the SPIAs had to be term certain, with the minimum period being five years, but the payout period also had to be less than my life expectancy. The upshot: By buying the SPIAs, I was able to get my assets below the Medicaid qualification threshold, while simultaneously increasing my personal income, which didn’t count against Gail’s Medicaid eligibility.

Once Gail was deemed unable to perform certain life skills by her neurologist, I filed a claim under her long-term-care policy. An aside: My son advised Gail and me to purchase policies with 36 months’ worth of benefits. His employer’s actuaries determined that most of the firm’s long-term-care policy holders who claimed benefits died within 36 months of beginning benefits.

What about all the steps I took to ensure Gail would be eligible for Medicaid? In the end, they proved unnecessary. Four days before our attorney was to file her Medicaid application, Gail died.

 By then, I had purchased the three SPIAs. I invested most of the SPIA payments I received in Vanguard Total Stock Market Index Fund and Vanguard Massachusetts Tax-Exempt Fund (VMATX), a municipal-bond fund, both held in a taxable account. The rest of my investment money is split between Vanguard Total International Stock Market Index Fund (VTIAX) and Vanguard Total Bond Market Index Fund (VBTLX), both held in my Roth IRA. I no longer have to take required minimum distributions because my IRA was liquidated to fund one of the SPIAs.

I also have Social Security and my military pension, both of which rise each year with inflation, as well as two smaller private pensions that aren’t indexed for inflation. The shortfall between my reliable income and my expenses, which I’ve tracked to the penny for years, will be fully covered by the income distributions that I receive from my taxable account. My financial journey from here should be just fine.

Seventeen years into retirement, I have virtually the same amount invested as when I retired in 2006. Of course, because of inflation, my balance isn’t worth as much as in 2006. But so far, I feel okay.

George H. “Hank” Bertsch III retired after a 36-year career in publishing with a parallel 28-year Army career—both active and in the reserves—retiring as a lieutenant colonel. Born and raised in Akron, Ohio, and now retired on Cape Cod in Massachusetts, he has a bachelor’s degree in secondary education and an MBA. Although not professionally trained in financial planning, he takes great pleasure in helping friends with their financial planning questions, while hopefully avoiding any liability exposure as a noncertified professional. His remaining goal in life is to just learn a little more of what Bill Bernstein knows. He had the great pleasure of meeting Bill at the 2023 Bogleheads conference.

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