Today, we’re continuing our tale of two twin Grandmas:

Margaret & Mildred, and how they both took different forks in the financial road later in life, and how this decision drastically altered their future personal finances.

If you missed part one, click the link below to go straight there and get up to speed:
Click here to listen to part one of our tale

Here Are The Show Highlights:

-The 4% Retirement Rule: How it works and why it was a serious problem for Mildred ([5:00])
-Why an Annuity could be a great investment for you…and how you can still have money distributed for you, year-after-year, even with an account balance of zero ([8:00])
-Who came out financially better off, Margaret or Mildred? Here’s the answer ([12:20])
-The most important question to ask yourself when it comes to writing your own ‘money story’ – this question alone has the power to dictate your financial future ([13:30])

Remember to download Grandma’s Top Tips by dropping into grandmaswealthwisdom.com/toptips. Time-honored wealth strategies served with a helping of balance and trust.

If you’d like to see how Grandma’s timeless wealth strategies can work in your life, schedule your free 15-minute coffee chat with us by visiting https://www.grandmaswealthwisdom.com/call…just like Grandma would want us to do.

Read Full Transcript

A hearty welcome to Grandma’s Wealth Wisdom with your hospitable hosts, Brandon and Amanda Neely. This is the only podcast for strategies to grow your wealth simply and sustainably like grandma used to. Without further ado here are your hosts.

Amanda: Hi, I'm Amanda and welcome to Grandma's Wealth Wisdom where we work with you it to build wealth grandma would be proud of.

Brandon: And I'm Brandon. So before we jump into today's episode I want to add a segment to our podcast, all about reviews. First I want to share a review that we got from one of our listeners. The title was "Great Concept and Quality Content" by Steph 0385. She says, "I just listened to the first episode, it was great. Very cool, the dynamics between you and your wife. [0:01:01.8] Great conversation and love the concept of Grandma." Thanks, Steph 0385 for your review.

Amanda: Yeah, as you know, ratings and reviews and subscribers are super helpful, they help us know that we're making an impact through our podcast and reviews also help the various algorithms to get the podcast to more people.

Brandon: Those crazy algorithms.

Amanda: Yeah, iTunes, Google, they look at these kind of things and they'll share it with more people the more reviews and ratings and subscribers that you have. So we decided that we're not beyond bribing you, we have a deal if you leave us a honest five star review, we'll share it on the podcast. But we also want to make the deal little bit sweeter. All you to do is take a picture of your review and send it to our email, hello@grandmaswealthwisdom.com, and then we'll send you a copy of the bestselling book by Pamela Yellen. [0:02:00.4] The book's called The Bank On Yourself Revolution. So as long as you're in the United States we'll send you a copy in the mail or the Kindle version, your choice. You just have to write that honest five star review and send a screenshot of that review to hello@grandmaswealthwisdom.com and you'll get the book for free.

Brandon: So today we are continuing the tale of the two grandmas that we started in the last episode. So we encourage you to go back and listen to that episode to get the full details if you want their back story.

Amanda: Which you do.

Brandon: Yeah, you want their backstory.

Amanda: Please go listen to that episode if you haven't listened to it yet.

Brandon: But we will refresh your memory a little bit if it's been a while since you listened. So the grandmas are Margaret and Mildred because you know when you have twins you name your twins the same time M's or T's or whatever.

Amanda: Sometimes. Not everybody.

Brandon: So Margaret and Mildred. They're twins born in 1930. [0:03:01.9] In the last episode we told the story up to 1980, the first 50 years looked about the same for them. So they both in their story, everything looked about the same for the first 50 years. They both grew up during the Great Depression and learned how to live simply. They both also I think married twins, Tim and Ted.

Amanda: Brandon added to the story.

Brandon: It's weird how twins marry twins and they lived next door. I don't know if they were strange, Margaret and Mildred. Also they both had steady jobs and worked their way from secretary to executive assistant.

Amanda: As we shared on the last episode, the big change came in 1980 when their employers started to offer the 401K. Margaret decided to increase her savings. She had been saving 30%, she increased her savings to 33% and she put that extra 3% into the 401K so that she could get the 3% match offered by the law firm that she worked at. [0:04:07.8] Mildred decided to shift her savings. Just like Margaret, she'd been saving 30% and she decided 10% percent we're going to leave that where it is, just going into regular savings account for short term expenses, but the other 20% she wanted to move into this 401K. The place she had been saving it was a whole life insurance policy. So she shifted that savings of her income and she even cashed out that policy, just totally decided to close it out, take the cash that have built up there and with that cash she opened up a brokerage account, put that money into the stock market as well. She wanted to play in the big leagues like the wealthy clients of the accounting firm for which she worked. She had seen how they do this kind of thing and she wanted to do the same thing, so she changed her strategy. [0:05:00.2]

Brandon: So today we're starting to look at how this actually worked out for them, how did it work out for both Margaret and Mildred. So at first, Mildred was doing great. Lots of other average Americans were getting into the stock market through the 401K and other plans like it. So stock seemed to be climbing in value like crazy. It's what we've referred to in a previous episode as the roaring 20. The stock market acted like it never had before during the time between 1980 and 2000. Margaret saw a little bit of this spectacular growth because of her 3% percent and her employer's match, but definitely not as much as Mildred. It seemed at this point, Mildred was the winner here.

Amanda: Yeah, Margaret and Mildred, they decided to retire the same year, so did their husbands. Tim and Ted, yeah. And both of their families, Margaret and Mildred, Tim and Ted, they decided to downsize and move next door to each other so that they could do fun things together in retirement, they're super excited. [0:06:10.7] And at this point Margaret and Mildred were both 65 years old, and it was 1995. They both started to get social security, but of course the security wasn't enough, even back then wasn't have to give them the lifestyle they wanted. And as you expect that Margaret and Mildred both sat down with their financial advisors. Mildred with her 401K and her brokerage account, she sat down with her financial advisors and she actually had a lot more money there than Margaret had and her 401K that she'd only been contributing the 3% plus the employer match 3% and the cash value of her whole life policies. So when Mildred and her husband, when they sit down with their financial advisor, they were talking about, they love the market, they've seen a lot of dramatic things happen, their money has skyrocketed in the last 15 years since they started doing things in the market, and they loved it. [0:07:07.2] So their advisor recommended that they follow this 4% rule that a lot of advisors follow, and basically that meant that they were going to start to withdraw 4% percent from their 401K account each year to cover their expenses. And then the brokerage account could be their emergency fund in case of emergency. This worked out really well, they'd have the social security, they'd have that 4% from their 401K that they felt good, that they were able, they could do the things that they dreamed about in retirement.
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Amanda: Similarly Margaret and her husband met with their financial advisor as well and they had a little bit in the market through their 401K, but most of their funds were in this cash value whole life insurance policy. They expressed to their advisor that their concern is for safety, that's why they liked how they had set things up, they wanted to make sure that their money was safe, that they wouldn't lose it. So their advisor actually recommended that they move their 401K outside of the market. So they had their life insurance policy already and they could use that for some income and distributions to help do some fun things retirement, and it was there for the original purpose of life insurance, the death benefit, that kind of thing. But that 401K balance they actually used to purchase an annuity. [0:09:00.9] Which if you're not familiar with annuity, is the basic summary of it is that it's insurance for living too long, but the other way to think about it when you comes to retirement income is that with an annuity you can continue to get money distributed to you year after year even when your account balance reaches zero. I'm going to say that again because it's kind of like hard to believe. That even when Margaret's account value would reach $0. she has $0 left in her annuity, she could still have money distributed to her every single year after year after year, and that amount could actually increase over time too, even if their account balances at zero, that's how annuities work. We can talk to, if you want to learn more about annuities, there's plenty of ways to do that. We would also love to share with you what we learned about them, but that's not the point here The point is...

Brandon: The story.

Amanda: The story. Let's go back to it. [0:10:00.5]

Brandon: So fast forward 10 years later to 2005. Margaret and Mildred are 75. Unexpectedly their husbands both passed away within a couple years of each other.

Amanda: Weeks.

Brandon: Weeks of each other, not years, weeks. They were twins and twins kind of follow suit with each other.

Amanda: Sometimes.

Brandon: Sometimes. So Tim and Ted both passed away and Margaret gets a big lump sum payout from the whole life insurance policy that she had on her husband. She was able to use this money to cover his final expenses and then to continue to cover her own living expenses, living costs. Mildred only gets a few hundred dollars from Social Security to cover her husband's death and then loses the Social Security income he had been receiving because she had too much income of her own. [0:11:00.4] Both her own social security and the required minimum distribution from the 401K. Oh, and by the way, Mildred's 401K is much smaller than it used to be. And not just because she'd taken money out of it to live, all those gains she got in the 1990 were erased during the . com crash in the early 2000.

Amanda: So that's 2005, they're 10 years into retirement and then over the next 13 years Margaret and Mildred as widows live very different lives. Mildred is afraid to spend much of her money at all because she has no clue what's going to happen in the market, and she has every reason to be scared too. We all know what happened to her 401K and brokerage accounts in 2008. They were almost cut in half and she still had to take money out of it at that low point in order to cover her expenses. Mildred's financial life is stressful. She has money in her 401K and brokerage account, there's still money there, but she's always afraid to use it, she's always worried if she uses it. [0:12:06.7] What if the stock's crumble, what if she needs more income due to inflation or if she gets a chronic illness, what is she going to do? That's a life that Mildred is living between 2015 and 2018.

Brandon: I'd love to hear about Margaret though. How is she doing?

Amanda: Margret, very different. She knows exactly how much she can work with, and proceed with her lifestyle without a worry. No matter what's happening on the stock market. Her annuity is guaranteed to send her money every single year without fail, she's able to use the cash value of her life insurance policy, she has a lump sum from her husband's death benefit, she's still getting social security and actually she gets more because less of her income is reportable on her taxes, you know that kind of thing. In fact, Margret has so much money, she isn't quite sure what to do with it sometimes, especially because she keeps inviting Mildred to go do fun things but Mildred keeps saying no because she's not sure she can afford to do those things, and so Margaret doesn't want to do them on her own and is this constant tension between the two of them. [0:13:12.4]

Brandon: So another cliffhanger here, this concludes Margaret and Mildred story with money. There are two different lives here. You might see similarities in their stories with your own parents' or grandparents' stories, or even possibly your own story. The most important question to ask of this, what can I learn from Margaret and Mildred, as I am writing my own story on money. I mean you're in the midst of writing your own story right now. How would you like your story to be told? How would you like it to be different? Our encouragement to you is that it's never too late to close one chapter of your story and start a new one. In other words, it's never too late to make a course correction. [0:14:02.8] Your story with money will continue being written, whether you do something to start a new chapter or further the wealth building story line, or not, whatever you do, it's going to continue, and we'd love to see how we might be able to help you write your story more proactively. It starts with a simple phone call to chat a little with no obligation or sales pitch. So to schedule a call visit GrandmasWealthWisdom.com and click "request a meeting".

Amanda: We honestly look forward to talking to you more and the learning more about what your story looks like so far and what you'd like your story to look like in the future. And of course, there's a way more to Margaret and Mildred stories as well, including what happens in the aftermath when these twins get their wings in 2018, so we're going to be telling the story of a tale of two grandchildren in the next two episodes, so be sure you subscribe and tune in next time to hear what happens to Margaret and Mildred's grandchildren, Michael and Matthew. [0:15:07.2]

Brandon: And they're not twins.

Amanda: They're not twins, one is Margaret's grandson, the other is Mildred's grandson.

Brandon: Gotcha. So until next time, keep building your wealth simply and sustainably for your own future and the future of our grandchildren's generation.

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