FREE NEWSLETTER
“I CAN’T GET DIVORCED.”
“But Randy, I thought you guys were moving toward one.”
“I mean, I can’t afford to. I just went to see my accountant and a lawyer.”
“And?”
“Remember, California is a community property state. Even though I made almost all our money, Sarah’s entitled to half of it. I know she was dedicated to raising Harris all those years, but wow, Steve, I’m cooked.”
“But you were such a sought-after internist. You must have had a fantastic income.”
“Yeah, usually almost $250,000.”
“So, what’s the problem? You own a beautiful home and a spiffy ski chalet, and I know you have a Roth IRA. My guess is you have about $5 million in net assets. So what’s wrong with 2.5? You planning a swinging retirement or something?”
“Steve-o, it’s not 2.5. I’ve got just $2 million total in cash and mutual funds and some bonds.”
“But what about your house here and that luxurious A-frame? There’s got to be some major bucks there.”
“Not really, even though that mountain retreat is paid off and would go for about a million. But I want to keep living in it myself, at least for as long as the separation goes on. Sarah will stay here.”
“Okay, and that house is in a primo neighborhood and worth maybe another full million.”
“You’re right, Steve. We just had it appraised for $950,000. But there’s a catch, a big one. It’s got a $450,000 loan on it. So, if I get the chalet, I’ll have to come up with half the difference in equity between the chalet and Sarah’s home here.”
“So, your take would be half of the $2 million that’s liquid, minus maybe $250,000.”
“Yup, so I’m left with $750,000 in cash. I’m 73 and fairly healthy. My parents both died at 91, so I could have almost 20 years left.”
“And the most income you can safely get on the $750,000 is about $30,000 a year. Even with Social Security, you’ll need to cut way into your principal.”
“It’s worse than that. The $750,000 will only give me a few years of a decent retirement. Don’t I deserve one after doing a thousand physicals over 40 years?”
“Yeah, Randy, you do. But you’ll eventually have to tap into the equity in your chalet as the last line of defense for a rewarding retirement. And if you don’t cool it with your lifestyle, there may even be a part-time job waiting for you. How did everything get so out of hand?”
“It wasn’t any one thing. It was a pattern. Although my parents were well-to-do, they were stingy. I didn’t live in as good a neighborhood or have the kind of clothes the kids in my high school did. Mom and Dad drove two clunkers. When I became a doctor, I decided it was going to be my turn. We purchased a charming old Normandy home and did a fabulous remodel of our kitchen and master bath. Sarah likes antiques, so we bought period furniture and invested in some art. You know I’m into high-profile cars, like my Jag. We always flew first class, stayed in four- and five-star hotels written up in Conde Nast Traveler and we ate in Zagat-rated restaurants. Steve, I have my suits custom-made.”
“I get the picture, Randy. You overcompensated for your parents’ penny-pinching with lavish spending on yourself. Now, you’re paying the piper. What can I say? I’m sorry about the mess you’re in.”
“Yeah, thanks Steve-o.”
“But what happened with you and Sarah?”
“It was just a gradual fizzle. We went from lovers to friends and then to mutual alienation. The killer for me was her dog fetish. Her obsession with breeding them required a ton of caretaking and over-the-top expense. It got to where I felt she enjoyed walking the dogs more than she wanted to walk with me. That’s when I decided to leave and live at the resort.”
“And you can’t get divorced because you’ll be left hanging financially.”
“Yup, and that’s not all. I’ve played drums in a local rock band ever since I moved up to the chalet three years ago. About three months ago, we got a new guitarist. Heather and I became friends, and now we’re really close and thinking about living together. I feel badly about not telling Sarah about all this weeks ago and plan on calling her tonight. But, Steve, I’m afraid she’ll file. I’d be broke and, frankly, a little scared. But unless I divorce her, Heather won’t live with me.”
“Oh my gosh, what a dilemma. Your money and your relationships are spinning out of control. And then there’s the whole guilt thing.”
“You’ve got the program. I can tell Heather I’m unwilling to get a divorce, and get back together with Sarah. The marriage would be very compromised, but at least it would rest on years of devotion. It would be safe and spare me from financial Armageddon. Heather is a blast to be with, but I’m afraid the honeymoon phase will fade, and I’d be left unhappy and with a barebones retirement. All this is dragging me down and my old college shoulder twitch is back.”
This conversation is a small embellishment of a recent phone call with a close friend, whose identity has been protected. Feeling materially deprived and humiliated in his youth, Randy chose to live above his means. Instead of the extravagant retirement he once imagined, he must now contend with the powerful and often conflicting forces of love, devotion, money and morality.
Steve Abramowitz is a psychologist in Sacramento, California. Earlier in his career, Steve was a university professor, including serving as research director for the psychiatry department at the University of California, Davis. He also ran his own investment advisory firm. Check out Steve’s earlier articles.
Want to receive our weekly newsletter? Sign up now. How about our daily alert about the site's latest posts? Join the list.
This tale just goes to show that intelligence (smart enough to become a doctor) and emotional intelligence are two different things. Literally everybody has things from their childhood they need to deal with to become mature adults. Sounds like your friend still has some growing up to do.
Very much so. Too much CNBC, too much financial “advice” and a physician’s exaggerated sense that acting irresponsibly will be without consequence.
This reminds me of something I read once: The secret to a peaceful retirement is one house and one spouse.
From now on I will remember your quote. It is true. I’ll choose one house and one spouse over income always. And I am thankful to have all three
….and a lot of passive income.
If he’s 73 he’s presumably already drawing Social Security at the maximum rate – say another $40,000? So, he’s looking at an income of $70,000 and a paid off residence worth $1 million? Looks pretty good to me. If he can’t live on that in California there’s a lot of the country where he can. So he can’t afford first class flights and five star hotels? Many people travel very happily without those luxuries.
No sympathy here.
Really depends on his lifestyle. Fixed costs add up in a hurry, real estate taxes, utilities, upkeep on the home, cost of living in CA. Even without a divorce 2 – $1million dollar homes, a 450k mortgage combined with his lifestyle may not be sustainable with a 4% withdrawal rate on $2million in saving and social security.
To note, CA does not tax social security, so it’s 70K of tax free income.
The 30K of safe income is most likely taxable interest and 85% of his 40K of SS income is taxed at the federal level.
You agree with Dick! Sure, California is a small problem, but the real problem is that Randy doesn’t understand and can’t get beyond the childhood experience that left him feeling deprived and needing external trophies to allay the injury.
Well, tough. Talk about an issue of privilege. Lots of people with deprived childhoods are still deprived.
I am with you on this one, add to that he has a new seemingly lovely GF, 73 and in good health. I would even suggest that at 73 he may do more than a 4% withdrawal.
He is so far above the mean he should really appreciate that for what it is
I would just say in Randy’s defense, that the pathway between overspending and excessive thrift is narrow. Both are examples of the mental thinking habits that can negatively affect life.
As the old knight said I’m one of the Star Wars movies “he chose poorly.”
Which one, it could have been either Sarah or Heather?
My apologies, I have my movies confused!! I was thinking of the Grail Knight in Indiana Jones and the Last Crusade.
Interesting story Steve. I did the tax returns for a number of people who had been divorced. From a purely financial perspective, divorce, especially later in life, can lead to financial hardship. It especially show up if one of the spouses has not been involved in the finances, and has limited financial knowledge.
It would be interesting to hear Sarah’s version of events.
Rick – both of your points are insightful. After my divorce I realized I had to aggressively save for retirement to make up for the compromises required during the property settlement negotiation. Sarah’s side of the story would be interesting, too.
Rick, I know Sarah’s story only too well. She sees Randy as narcissistic and desperately needing a “last fling” after 34 years (!!!) of marriage. In her view, he was actually jealous of her love of dogs. To me, at a deeper level, perhaps he had to abandon her in response to feeling abandoned himself. Sarah has now adopted a strategy of “waiting things play out,” which many people may feel only gives him license to test out his relationship with Heather.
Does Andy have any valid excuses or is it just a lack of common sense?
I can see the desire to live better, but no excuse to not do it realistically and prudently. His income should easily have allowed both. No sympathy.
Dick, being just his childhood experience, I see Randy’s predicament as partly do to the failure of the medical profession to provide personal finance education in how to run a practice and plan realistically for retirement. Think about how your internist’s office looks when you arrive for your next appointment. Is there a large support staff and fancy furniture? Many physicians overcome their lack of money knowledge, belief that patients equate elegance with ability and success and their own need to flaunt their (well-earned) status, but many others do not. Often, a quarter of a million in gross income comes down to a far less princely net take away.
And definitely not enough to “always fly First Class.” Having been upgraded once for a 14-hour flight (!😀), I can appreciate how great it is to stretch out in something like a bed, but to pay for it every time on that income? No way!
Name me a profession that does babysit its employees finances! Mine certainly didn’t, nor did my school teach financial planning. Whatever I know about prudent financial behavior I learned on my own, I grew up without a big house or flashy cars, but I haven’t felt any need to acquire them. I do often fly business class, but I do it on FF miles and I actively avoid posh hotels.
Some people save while they’re working so they can enjoy their retirement, seems he chose to enjoy his working life instead of his retirement. Too late to complain now.
Thanks for another travel tip, Kathy, about using miles to upgrade. I’ve got a few more trips to Asia in my future, I hope, and I’m thinking that Business Class on the Asia-bound flight might save me a day or more recovering from jet lag. For the homebound flight it wouldn’t matter so much.
I’m on the US east coast. I’m OK in economy – or better, premium economy – to Europe. For Asia going west I usually stop off in Vancouver but then I definitely want business class across the Pacific. It’s been a while, but I would recommend Qantas or Cathay Pacific. I have an affinity credit card for miles with American and OneWorld carriers but thepointsguy.com has all you need to know about credit card points.
We use miles for business class on really long flights for the reason you said. If it’s a shorter flight, we can deal with being upright. Also, even on a long flight, if it’s mostly or all during hours you’d be awake anyway (for example, a 10-hour flight that leaves at 10 a.m.), it’s not worth getting business or first class. You’ll be eating and watching movies, not lying flat to sleep, so you might as well stick with economy (maybe premium!).
What professions adequately prepare one for personal finance? It’s not like he didn’t make enough. He just overspent and under saved.
If he had managed to make more in his medical practice, do you really think he would have saved more?
I learned nothing about the business side of medical practice during my training, not to mention personal financial planning. While often accused of “trying to keep up with the Joneses” many of us fresh out of training noticed what houses our peers of similar age bought and what cars they drove, and assumed those would be reasonable purchases for themselves. I mentioned in this space before that when I joined a private group practice in 1988, I had purchased a reasonably priced home in a nice neighborhood, while many of my peers lived in homes which went for 3-4 times as much. I assumed my wife, two sons and I would live there for 5 years then trade up to a “doctor’s house”. I asked my mentor for his advice and he simply said “don’t buy a big house”. I gradually figured out that he was advising me to avoid the trap of increasing my cost of living. “The Millionaire Next Door” elaborated on this. We are happy living in that same home 36 years later. The advertising industry employs brilliant people who coax many of us to spend beyond our means, to the possible detriment of financial insecurity in retirement.
That sort of education is more available now. The AMA has a financial planning resource center on their website, and a bunch of private advisory services specifically for physicians have popped up as well.
Good for the newer members of our profession!
Good point, the appearance of success in a doctor is a “quality” factor for many people as is high fees. My wife used to work in a doctors office years ago. It was very inefficient.
Yup, and it’s not only true of doctors. So many businesses are run inefficiently. I recently was in a small yogurt shop. It had no customers but 4 employees, two of were rehashing their dates from the past weekend.