“UNCLE” PHAN, MY father’s closest friend and my godfather, committed suicide a few years ago. I regret not seeing him often enough when he was alive and not letting him know how much I appreciated his humor and generosity. I also regret not knowing his financial and emotional situation. Uncle Phan retired as a surgeon 20 years ago and took a lump sum distribution instead of a lifetime monthly pension. It should have been enough to last the rest of his life, but he became a victim of financial scams by close relatives and supposed friends. He also suffered depression and it all proved too much for him. At the time of this death, Uncle Phan was penniless and living alone in a small shack. Earlier this year, my father had a stroke that forced him to shutter his own medical practice. Working with my brothers, we went through his financial records, as we wound down the business. We discovered that he, too, was a victim of financial scams and exploitations that had been going on for years. He had been paying out large sums to current and former employees, each with a sob story of need, including his assistant to whom he had been a mentor. My father had always been a diligent saver and careful spending. Maybe that’s why we didn’t notice for so long. He was the one who taught his four children to favor saving over thoughtless spending. Yet, in his later years, here he was doling out large sums without thorough recordkeeping and, worse still, without regard to preserving the savings he and my mother needed for the rest of their lives. Luckily, my parents had a financial backup, in the form of a monthly pension my father continues to receive. My mother also has her own savings from the medical clinic. Through these experiences, I’ve learned some unfortunate truths: Studies show that, as we age, our brain becomes less able to detect fraud. Changes occur in the region of the brain that helps us decide whether or not to trust someone. A majority of financial exploitation is carried out by people the victim knows. One study found that financial literacy declines by about 2% every year after age 60. Confidence in financial decision making, however, doesn’t decline with age. That combination—reduced ability but continued confidence—helps explain poor financial decisions by older adults. My father’s and Uncle Phan’s financial decision making had been deteriorating for years. That made them easy targets for their abusers. Perhaps those who took their money weren’t even aware they were asking for money from people with a diminished capacity. I now see that it can happen to anyone, in any family. In my father’s case, two things helped to lessen the impact of the money squandering. First, while Phan took his pension as a lump sum, my father took his as a lifetime monthly pension. He could only give away what he had on hand, so the financial damage was limited to his past monthly pension payments, while his future distributions remained protected. Second, while Phan had no children to safeguard him, we were able to catch my father’s spending habits before he made himself and my mother destitute. In the end, there’s no substitute for a family support system. These experiences have caused me to take precautions now to protect my and my husband’s retirement savings. While we currently manage our own portfolio, I’ve laid out three steps to implement in the next five years: We’ll arrange to have our money managed by either a low-cost financial company, such as Vanguard Group, or a fee-only financial advisor. We will build on our already good communication with our adult sons. Today, they have a list of all our financial accounts, in case something happens to us. In future, I want to make sure they are kept apprised of our financial status on an ongoing basis. We’ll include both our sons in the discussions we will have with our financial advisor, especially when we review our assets and how our annual withdrawals are impacting our portfolio’s likely longevity. Jiab Wasserman recently retired at age 53 from her job as a financial analyst at a large bank. She and her husband, a retired high school teacher, currently live in Granada, Spain, and blog about financial and other aspects of retirement—as well as about relocating to another country—at YourThirdLife.com. Her previous articles were Why Wait and Won in Translation. [xyz-ihs snippet="Donate"]

DURING OUR TIME in Spain, we came to admire the water fountains common in mudejar architecture, the Moorish-style homes of Andalusia. During the lockdown, while I tried my hand at creating art, Jim picked up the hobby of making water fountains using a few basic items, including a small water pump and terra cotta planters that he found around the apartment. As the lockdown dragged on, Jim progressed to building more complex fountains. He built an indoor one in a Zen-like style, with water flowing through bamboo pipes into a big terra cotta bowl. The cats claimed this as their drinking fountain. He built another small tabletop fountain for my office. The water bubbled over rocks, so I could enjoy the sound of flowing water. This was also claimed by the cats. Still, although the cats enjoyed the fountains, I think it’s Jim who got the most joy—from making them. About a month ago, we settled back into our townhome in Dallas. Jim wanted to build a fountain to remind us of our time in Andalusia. We already had a large ceramic planter that I’d purchased for $5 at a garage sale, along with a pump given to Jim as a gift. The pump, however, was too powerful. The simplest solution was to buy a smaller $10 pump from Amazon. With the smaller pump and the ceramic pot that we had, Jim could have built a basic fountain in under 30 minutes for $15. But basic wasn’t the type of fountain he wanted to build. It was a classic example of scope creep—a problem not only in the corporate world, but also in the world of remodeling, as Dick Quinn has written about. Long story short: Jim tinkered with the ceramic pot so much that it ended up damaged. That meant we needed a new planter. After several days of redesigns and searching for parts, the tab for our $15 fountain is now at $100, and it’s still a work in progress. The cats are getting impatient.

HOLDING DOWN LIVING expenses is one part of the equation in achieving financial independence. But the other part is diligently and consistently saving and investing money. On that score, my husband Jim and I enjoyed four “lucky breaks” that accelerated our push for financial independence. Together, they helped catapult us into early retirement in just 15 years. 1. The Great Recession may have caused much short-term financial harm, but it also offered a great long-term opportunity. When the stock market crashed, we continued to max out our 401(k) and 403(b) plans, as well as contributing to 529 plans for our two boys’ college costs. We put these various accounts 100% into stock mutual funds, taking advantage of the lower share prices. In 2017, as we prepared to retire, I moved some money out of stocks and into bonds. I was stunned by how much we had earned. 2. During the Great Recession, I mentally prepared for the possibility that one of us would get laid off—most likely me, because I worked for a bank. That never happened. Both of us kept our jobs. Still, we strove to live as though we had just one income. When I got a raise or Jim earned extra from teaching summer school, we saved the money. We didn’t starve ourselves or skip family vacations. But we also didn’t pony up for a new car or new bathroom or new kitchen. 3. One of our sons received a full scholarship to one of the top public universities in Texas. That made college far less of a financial burden—and, as a result, both our boys were able to graduate from university with no debt. In fact, we even had some money left over in a 529 account. We owed taxes on the account’s earnings, but we were able to withdraw the original contributions with no tax cost. 4. While visiting an estate sale, we discovered a townhouse for sale next door. It was our good fortune to see the realtor putting up the sign. Our boys had just moved into university dorms, so there was no need for us to keep our current house. We decided to take advantage of the hot Dallas real estate market by selling the house and buying the smaller townhome. That allowed us to pay off our mortgage earlier than planned. While our four lucky breaks helped us achieve financial independence that much earlier, I suspect we would have got there soon enough. It all comes down to the same basic strategy: You need to save diligently, while minimizing unnecessary expenses, by always focusing on the difference between needs and wants. Just as money compounds in the stock market, the benefit of living beneath your means also compounds over time—and, with surprising speed, you can get your reward. Last year, at age 53, Jiab Wasserman left her job as a financial analyst at a large bank. She's now semi-retired. Her previous articles include Living for Less, Courting Success and Buen Camino. Jiab and her husband Jim, who also writes for HumbleDollar, currently live in Granada, Spain. They blog about downshifting, personal finance and other aspects of retirement—as well as about their experience relocating to another country—at YourThirdLife.com. [xyz-ihs snippet="Donate"]

I WROTE PREVIOUSLY about my parents being victims of financial abuse by one of my brothers. Recently, I returned to Bangkok, which gave me a chance to discuss this situation at length with the entire family, including my other brothers and my uncle. When the financial abuse of an elderly person is committed by a stranger, the rest of the family often has no chance to see warning signs. But 90% of abusers are family members or trusted individuals. In these cases, there are often warning signs, but the family may subconsciously not want to acknowledge the problem. In my brother’s case, my uncle said he’d noticed his free-spending lifestyle. He’d purchased new luxury cars for himself and his wife shortly after gaining control of half my elderly parents’ money through a guardianship. In many ways, however, this financial abuse was part of a pattern that could be seen going back to his youth. He was the only child, out of four, who’d continued to get substantial support from my parents throughout his life. While the rest of us have been supporting ourselves since we graduated from university, he continued to depend on our parents to make ends meet. It got to the point where he considered their financial assistance to be a normal part of his personal finances. It’s common for Thai families to have multiple generations living together. What’s uncommon is a son who doesn’t give part of his salary to his parents, or at minimum pay his own expenses, while living with them. My brother not only didn’t pay expenses while living with our parents well into his 40s, but also he lived there with his wife and two children. He relied on my parents to pay most of his family’s living expenses: cars, gas, food, mobile phones and even part of the school tuition for his two daughters. Six years ago, we were happy when he finally bought a home of his own. But he did so by selling two of my mom’s plots of land and using the proceeds for the down payment. I objected to this, but my mother said the gift would be offset later through my parents’ wills. Since then, she’s backed off that commitment. [xyz-ihs snippet="Mobile-Subscribe"] Subsequently, my brother borrowed the rest of the money he needed to build his new home from my parents—a loan he never finished paying off. In other words, my parents paid for him to live with them and then paid for him to move out. My other brothers, uncle and the rest of our family agree that it was partly my parents’ responsibility to stop the support—to say “no” to him. But they were always generous with family, having taken in siblings at times when money was tight and they had nowhere to go. Their generosity had never endangered their savings, however, until my brother started taking. Even worse, my brother began to surreptitiously take without even asking. As our father was dying in the hospital, my brother—supposedly helping to oversee his expenses—maxed out my father’s credit cards for personal use. It was a perfect storm. My parents’ generosity and kindness, and my brother's pilfering, now leave my mother at risk of not having enough to support herself in her widowhood. I confronted my brother when I was in Bangkok and was shocked by his attitude. He admitted no wrongdoing, although he acknowledged our parents didn’t consent to his spending. He claimed that he just meant to borrow the money temporarily. My other brothers and I failed to see the warning signs that were there all along. We and my uncle agreed that we should have sensed there was something off. Perhaps my brother’s early habit of living off my parents made his later taking seem normal. It created a blind spot for us—even as he went further than we ever thought he would. I honestly didn’t think this could happen in a family like ours, one that includes two bankers. Now I regret that I wasn’t more insistent with my parents about my brother’s habit of living off them—and that I didn’t confront him sooner. In the end, my abusive brother took advantage of our parents’ generosity. The responsibility lies on his shoulders, as it does on the thief more than the sleeping security guard. Not everyone who lives at home, and receives financial support from their parents, are abusers. But when parental support grows from occasional to constant, creating a sense of dependency and entitlement, the groundwork is laid for grotesque abuse. In my brother’s case, he came to see our parents’ money as his own, to be spent as he wished, especially when he had access to half of it. Even with the clear evidence we’ve discovered of my brother’s theft, my mother still has trouble understanding. Her mental decline, combined with a motherly denial of the idea that her son stole from her, keeps her from taking action. We, the remaining children, now are doing what we can to minimize the financial impact. But we also have to protect our mother from the full reality of what has happened—a reality that might be too much for her. Jiab Wasserman, MBA, RICP®, has lived in Thailand, the U.S. and Spain. She spent the bulk of her career with financial services companies, eventually becoming vice president of credit risk management at Bank of America, before retiring in 2018. Head to Linktree to learn more about Jiab, and also check out her earlier articles. [xyz-ihs snippet="Donate"]

THERE ARE A GREAT many terrible problems. Having too much cash typically isn’t seen as one of them. Yet that’s where we are. Following our move back to the U.S. from Spain, we found ourselves with an abundance of cash sitting in our brokerage account. And these days, with interest rates the way they are, that cash doesn’t do much more than sit. The upshot: We decided to purchase some rental properties. We have one rental unit already—our former home—but we plan to make it our home once again. With the help of our property manager, Jeannette, who is also a realtor, we searched for and found one property we liked, and with a price that was already reasonable but which we hoped to negotiate lower. We thought we could jump to the front of the buyer’s queue by offering cash. Jeannette said we would need to show the seller proof of sufficient cash on hand. That’s when the problems arose. We didn’t want to just show our Vanguard Group brokerage statement, because that would tip the seller as to how much cash we had available, likely making her hold firm on the price and reject our request to pay for improvements in the heating and air conditioning system. Jiab called Vanguard to inquire if the folks there would issue a “line of credit” letter for the amount we wished to offer. We had more than enough cash to buy the property three times over and we could have borrowed the necessary sum using a margin loan—and yet they declined. They didn’t want to take the risk of backing us, despite the cash they were so graciously holding for us. Not to be thwarted, Jiab called around to see if we could quickly qualify for an investment loan for the amount we wished to offer. We didn’t need the loan, but we could use a preapproval letter to show the seller our ability to pay. We didn’t qualify, even with our 800-plus credit scores. Apparently, real estate loan systems are set in formulaic stone, where the key factor is the loan-to-income ratio. As retirees, our income is low. Wealth—as in cash on hand—apparently doesn’t factor into the formula. Our sons, who are just starting out in the work world and so have a solid income but no accumulated wealth, could better qualify for a loan than we could. It seems you could win a $1 billion lottery, but—if you then quit your job—you might nix your ability to get a loan. [xyz-ihs snippet="Mobile-Subscribe"] Why didn’t we simply open a financial account elsewhere and move part of our cash into that account, shielding it from the seller’s view? That would have taken longer than our five-day option period. Don’t get us wrong. We’re not advocating going back to the purely subjective It’s a Wonderful Life days when George Bailey gave a loan to his friend Ernie because he believed him to be good for it. In that sort of world, totally inappropriate factors—such as race and gender—became systematically factored in. We must continue to guard against such biases in lending and, when we do see them, address and eliminate them. On the other hand, the cold, formulaic real estate lending analysis of today seems geared solely toward people who want to leverage their income into accruing debt to gain housing. Jiab spent years in credit risk management for a major bank. She, of course, looked at debt-to-income ratios to assess risk, but she also considered other mitigating factors, including wealth and credit scores. Such factors should be included as well. Jiab found another lender who was willing to give us a preapproval letter, but it took time and searching on her part. Evidently, this second company did factor in credit scores and assets into its loan approval logic. Meanwhile, our realtor also suggested depositing the money with the title company as a neutral third party to verify we had the funds. This could have triggered more fees, plus it would have locked away the money prematurely before closing. In the end, we showed the seller an email confirming a wire transfer from Vanguard to our bank account for the amount of the asking price. This seemed to satisfy the seller and her realtor. There are more and more retirees who, by luck or hard work, rely less on income and more on the nest egg they’ve built over the years. Maybe the lending system should stop punishing them for finishing the rat race early. Jiab and Jim Wasserman just returned to Texas after spending the first three years of their retirement in Spain. Check out earlier articles by both Jiab and Jim. [xyz-ihs snippet="Donate"]

BACK IN 2002, I WAS part of a three-person financial analysis team at a major mortgage lender. I was better qualified than my two male colleagues, thanks to my master’s degree and greater years of experience. Imagine my surprise, then, when I compared my performance review with one of my colleagues. I discovered that, while we both received the same rating, he got a year-end bonus and I didn’t. Like many women, I was aware of the gender pay gap, but thought of it as an abstract idea. The bonus revelation was like a slap in the face. My manager and I discussed my salary in general, agreeing that I should be paid more, given my education and experience. But agreement isn’t action. Nothing was done. I felt trapped. Back then, I was a single mother and the family’s sole breadwinner. If I made an issue of my compensation, would I be seen as a troublemaker and would there be repercussions? Would I be better off starting over at another company—and would the situation be better elsewhere? I felt powerless, forced to wait for my compensation to be adjusted. It never happened. After a year and a half, I decided to look for another job and was fortunate to find an opening in a different department. Chances are, if you are a woman reading this, you’ve faced similar situations where you’ve felt discounted and yet trapped. It’s also likely that, as with me, it wasn’t a onetime event, but a scenario that repeated itself throughout your career. When you’re a woman, you automatically inherit social and financial disadvantages in our “equal” society. No matter how you slice and dice the data, the gender pay gap is real and persistent. In 2017 in the U.S., a woman, on average, earned 80% of a white male’s income. The gap is so institutionalized that salaries adjust depending on whether an occupation is seen as a “male job” or a “female job.” Researchers reviewing data from 1950 to 2000 found that when occupations change from male-dominated to female-dominated, average pay drops, even for the men. But when men enter an occupation, pay increases, even for women in that occupation. The gender pay gap exists across all demographics, in every age group, in all states, in high- and low-paying occupations, and for those with and without advanced degrees. It exists in nearly every line of work, including female-dominated professions like teaching and nursing. The gap is even greater for many women of color: Latina women earn 53% of a comparable white male’s earnings. Asian women fare better, but are still at just 85%. Women start off with this disadvantage as soon as they enter the workforce, and it grows exponentially throughout their careers. The compounding effect of the pay gap makes it harder for women to get out of poverty. It also makes it harder to pay off student loans. Women experience the negative effects of the pay gap from their very first paycheck to their very last Social Security check. They often need a bigger retirement nest egg, thanks to their longer life expectancy. Yet the career wage gap makes it harder for women to save as much as men do. Result? Women retire with two-thirds of the money men have, and receive less from Social Security and pensions. White men over 65 have average annual income from Social Security, pension and other sources of $44,000, while white and black women over 65 get by on $23,000 and $21,000, respectively, and Latinas on $15,000. The upshot: Women are 80% more likely to be impoverished in retirement. Jiab Wasserman recently retired at age 53 from her job as a financial analyst at a large bank. She and her husband, a retired high school teacher, currently live in Granada, Spain, and blog about financial and other aspects of retirement—as well as about relocating to another country—at YourThirdLife.com. Her previous blogs for HumbleDollar were Taking Their Money, Why Wait and Won in Translation. [xyz-ihs snippet="Donate"]