Questions About Sneaky Fees, Upgrading, Lifestyle Inflation, Eating at Home, and More!

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to summaries of five or fewer words. Click on the number to jump straight down to the question.
1. Struggling while near financial independence
2. Sneaky fees from investment firm
3. Ailing mother and financial struggles
4. Service work for lifestyle funk
5. Depositing checks
6. Investing and market timing question
7. Landlord unexpectedly not renewing lease
8. Getting into home eating routine
9. Buy now or next model?
10. Encouraging frugality in teenagers
11. Net worth as family?
12. Retire tomorrow?

It’s raining, one of those short little light rains that sometimes happen when the weather is a lot warmer in the last few days than it has been for a while. The crashing of a heat wave.

I’ve spent a lot of time outside lately. I’ve wandered in the woods. I’ve went on long walks. I’ve worked on a spring garden, getting it ready for planting. I’ve played baseball and soccer and Frisbee. I’ve looked for hidden eggs and hidden a few myself.

Right now, I’ve got the window open and I can actually smell that fresh rain. To me, it’s the smell of life. It’s the smell of plants opening up to that water from the sky, drinking it all in, and preparing to grow.

I feel good. I’m a little sore here and there. I’m sipping some coffee. There’s a gentle moist breeze on my face. It’s really early but it’s still warm enough that I don’t feel cold. It feels like there’s a big breath of summer out there, but it’s not quite there yet. Things are in bloom.

I love the springtime.

Q1: Struggling while near financial independence

I am struggling with what I should do for the next phase of my life financially. I am a single 52-year-old mom with 5 kids under age 10. I have a job I love, but it is 40 hours and the option to go part-time isn’t really there but might be available down the road. I work for the state so I have a state pension. We are allowed to contribute to both a 401K and a 403B; so I have been putting away 24K in each for the last 2 years (48K before taxes). My mother left me stocks and savings bonds. I have some of my own stock investments, and I signed up for a private annuity a few years ago through Transamerica. These investments total just shy of $1 million. I have 18 properties, 4 are not rented (my personal residence and vacation places) the other 14 are rental properties. I own these free and clear. Conservatively, the are worth 1.3 million and general approximately 7,000K a month before expenses. I have a coin collection I inherited that was appraised at S20,000 a few years ago. I have approximately S100,000 in cash in my bank accounts, and i also have $300,000 in my fidelity retirement accounts and $190,000 in my 403B account.

I am also a COL in the Army reserve and have served 29 years. I will get a pension from them at retirement. Right now I am juggling my career, military, parenting and rentals. I am TIRED! A huge part of my questions why am I doing this. My mother died 3 years ago (I took care of her the last 6 years of her life) and she scrimped and saved, and basically passed her wealth to me and my 2 siblings. I did my taxes this year and had a huge hit. I had received 18,000 from due savings bonds, and the military gave me a $25,000 bonus, so between those things and doing 20K of overtime, I made about $150K. I had to pay the federal and fix the Roth I paid into last Spring since I was no longer eligible. I had decided to not work overtime anymore. I am due to max out of the Army in May 2018, unless I extend which I have toyed with.

My children all have 457 accounts for college with about 10k each. We live in a city that has Say Yes program so their college tuition is paid for if they graduate. This has kept me living in a modest house in the city. My home is a 3 bedroom and while it is congested, it feels like home to me.

I am afraid to change my work routines and I am not sure why. I sometimes feel like I am just repeating what my mom did, not using the money she saved. I would just like your advice. One thing I would like to do for both me and my children is dual citizenship to Italy, since we are eligible. I imagine this will cost between 10-20K. And a Disney vacation. I don’t spoil my kids and want them to learn life isn’t about possessions or money. Thank you for reading!
– Nina

According to my back-of-the-envelope calculations, you have enough wealth in assets and guaranteed income to easily retire provided your lifestyle isn’t extremely affluent. If you commit to a 2.5% annual withdrawal rate, or commit to mostly just living off of rental income (and put it all under a management company), you can basically just sit back and not work any more. You’re effectively financially independent, provided you don’t splurge constantly.

The question you should be asking yourself is what exactly you want out of life moving forward. What is the most worthwhile thing you can be doing with your time, given that you have no need to earn an income?

You sound like you have a strong work ethic but that you feel almost on the verge of burning out. You likely want to be doing something with your time, but you’re doing too much. You might want to start by stepping back from one of those major commitments you have listed. Maybe you could hire a management company and step away from the effort of being a landlord. Maybe now is the time to retire from the Reserve. Maybe you could step back from your primary career. You easily have enough assets and income to do any of those things.

My guess is that you don’t want to change your work routines because you have a really strong work ethic and it feels somehow wrong to not be busy. I can completely sympathize with that, but at the same time, what is the point of having so many assets if they don’t afford you the freedom to step back and focus on a small set of true key things in your life instead of running yourself ragged?

Q2: Sneaky fees from investment firm

I have just noticed a fee on my wife’s Merrill Lynch Simple IRA that I never noticed before it is an Advisory Program Fee. This seems to be for additional “services” they provide although I don’t know of any recent services they provide and most of the time her contributions just sit in a cash account earning and estimated annual yield % of 0.02. Overall I have not been very happy with Merrill Lynch but I’m unsure how to proceed. Is this advisory program something she can opt out? The fee seems pretty substantial 160.61 for March with a mutual fund rebate of (9.21). I really think we need to change the direction of her employee contributions and just contribute the amount that her company matches (3% I think) and then open a Roth IRA for her probably at Vanguard. If she can opt out of the advisory program can she decide how the funds are allocated or are they just stuck where they are? Any advise in the right direction would be appreciated.
– Fred

It looks to me that the Advisory Program is a default part of a Merrill Lynch Simple IRA in that you’re signed up for that right off the bat. It does appear to be something you can opt out of, but my guess is that you’ll be met with some resistance in opting out as it’s a way for Merrill Lynch to earn some easy money off of you.

It’s practices like this that give financial services a bad name. They’ll tack on fees for services that customers don’t even know about and will never use and wouldn’t even use even if they knew about it. They might mention it along with 89 other things when you sign up, but it’s rarely something that anyone will take advantage of or even need and it just becomes a drain.

My advice to all readers is to look over their statements from financial institutions very carefully and question any and all fees and whether they’re necessary and can be waived. Of course, financial houses do need to earn some revenue from the services they provide, but they don’t need to weigh you down with unnecessary services either.

Q3: Ailing mother and financial struggles

My husband and I are just starting to get our financial footing after several major financial mistakes which led to bankruptcy. We are living essentially paycheck to paycheck while we work on keeping up with bills and trying to make better financial sense of our budget. Here’s the catch – my almost 80-year-old mother with beginning dementia and advanced Type 2 diabetes is now moving in with us. She cannot live on her own as she “forgets” to eat or take medications, etc. Unfortunately, I learned my lack of financial knowledge from my parents. Mom won’t pay off a re-fi on her house until she is 101! We are moving her from her 50 years to a new state, etc. Do you have any recommendations for resources to deal with transitioning Medicare and coverage from one state to the next, trying to work with her mortgage company to do something with the house, closing and opening new banking accounts, etc.? Everything I can find is either Federal and is so general is it not helpful or strictly local and doesn’t cover the state to state aspect of the transition.
– Sara

Your solution for working with her mortgage company to do something about the house is likely to simply involve selling the house and using the proceeds to pay off the mortgage. This likely involves cleaning out the house after your mother moves, then getting a realtor involved to sell it, then using the proceeds to pay off the mortgage.

As for the other programs you mention, just handle them one step at a time. For a new bank account, select a bank in your area (perhaps your own, for convenience) and ask them for help in transitioning. For Medicare, look at a guide for transitioning to a new state, like this one.

In general, if you’re unsure what step to take next, talk to someone who is an expert on your situation. You should always start by communicating with whoever it is your mother will be doing business with in her new location and talk to them about transition advice. They’re usually much more likely to help than the people in the state you’re leaving because it amounts to acquiring a new customer.

Q4: Service work for lifestyle funk

Your advice to the guy (‘Craig’) spending way too much money in a post-divorce funk was just fine – but there is another way that might work better for him.

Service work. On the weekends he does not have his kids or on days after work if he is at loose ends, he can find a place to volunteer. All kinds of places need help but can’t afford it – from walking dogs at the humane society to driving for meals on wheels to building houses for habitat for humanity. If he has ties to a faith home, he can look there first.

And, on the weekends he has his kids, he can do them a favor by including them in his service work rather than spending a lot of money on them. He can involve them in helping out at a local shelter, picking up litter, mowing the lawn of a sick or elderly neighbor, or cutting down invasive species (honeysuckle is one in these parts) at local parks.

He can still do other things with his kids, but directing them toward service work will also help them through the divorce process. The very best way to feel better about your life is to help improve someone else’s.
– Jed

I completely agree with you in regards to the value of service work. Community service projects have been some of the most valuable things I have ever done in my life.

If you’re struggling to find meaning in your life, look around your community for a service project to be involved with. I highly recommend starting with a local food pantry if you don’t know where to start. They almost always need helping hands and they provide an invaluable service to the community. The realization that I was helping to make sure that many schoolchildren in my area had food on the table was incredibly powerful to me.

There are many such organizations in most areas and many of them probably fly right under your radar. Look into food pantries and soup kitchens and Habitat for Humanity and other civic groups like the Lions Club. If you’re lost, knowing that you’re doing something that makes the lives of others better can really bring some meaning to the table that may not have been there before.

Q5: Depositing checks

I have a 19th century problem – I get paid (sometimes) with checks, and need a prepaid debit card that will allow me to deposit them without a smart phone app (I don’t trust banks or their software on my phone). Seems to me any card that uses ATM’s (American Express Serve for example) should be able to do that, but no. Do you know of any card that has a non-smart phone way to deposit checks?
– Cam

Most prepaid debit cards don’t offer an easy way to deposit checks because the companies behind them are not really banks in the traditional sense of the word. They typically don’t have the processes in place to handle paper checks, so they simply don’t allow customers to do so.

In general, use of an ATM to deposit checks is a feature of a traditional checking or savings account through a bank or credit union. Companies that offer prepaid cards may have arrangements with certain banks or credit unions to use their ATM networks for withdrawals, but generally don’t allow for deposits.

What you’re hitting on is a limitation of prepaid cards as they currently exist. They simply aren’t as feature-rich as a checking or savings account at a bank or credit union.

Q6: Investing and market timing question

Would you recommend that I invest in the Vanguard low-fee index funds now? I know it’s a bull market right now and stock prices are high. They’ve got to come down sometime. On the one hand, I’m anxious to put my money in investments, because sitting around in savings at a 1% interest rate isn’t really getting me much. But on the other hand, I’m worried I’m going to put pretty much all my money into a stock market that’s likely going to come down from the high it’s at. Should I wait? Or what would your strategy around the timeline be?
– Sammy

I don’t believe market timing works unless you have a crystal ball that can foresee the future. The reason for that is that we never, ever know when an unexpected event is going to occur. When will the next huge industry-creating technological breakthrough happen? When will a major political or diplomatic crisis happen? When will a few large-scale investors read the tea leaves and get cold feet? Or when will they read the tea leaves and get excited about something?

The truth is we have no idea. No one does. The market has certainly gone a lot higher than this in the past in relation to general economic indicators, but it’s also been a lot lower. Even if it were at an all time high, that doesn’t mean that it’s necessarily headed straight for a drop.

Investing for individual investors should be centered around individual needs. None of us have the resources or the ability to invest in ways that might shift the market and we’re not able to predict the general future. However, we can predict to some extent our own future, so we should invest according to our own plans and our own sense of risk. If stock investing in general feels too risky for you, find other avenues for investing.

Q7: Landlord unexpectedly not renewing lease

My wife and I live in a house with an annual lease. For six years we’ve renewed the lease with no problem. This year, I didn’t get around to renewing it in Feb. or Mar. like I usually do and so when I called the landlord a few days ago he said that he thought we weren’t staying and had already leased the house to someone else. We’re basically out at the end of the month. This is very upsetting to both of us as we really like this house and have done lots of little things to make it our home. What can we do?
– Dan

There isn’t much you can do in terms of staying where you’re at. If the lease is ending and there’s no clause about renewing or continuing the lease, then the property owner has fulfilled his obligation to you. They can move on for almost any reason and usually have no reason whatsoever to tell you about it.

Most landlords do typically contact reliable tenants well in advance of a lease termination to either discuss renewal or to give some advance notice of ending the lease, but they’re generally not required to.

Start shopping around, in other words. If this landlord and/or management company didn’t handle things to your satisfaction, avoid them in the future and consider a negative review of their performance (but do take note of other things they may have done well – or not so well).

Q8: Getting into home eating routine

How did you establish a routine of eating at home? Husband and I trying to break habit of eating out or getting takeout each night. We do good cooking at home but then there’s a busy night and we immediately fall back into old routine of just getting takeout. How did you break this routine with two busy people?
– Tomi

Honestly, we used our slow cooker a ton. Whenever a night appeared to have any chance of being busy, we would prep a meal for the slow cooker before leaving for the day. That way, the meal was already done when we came home (or close enough so that all we had to add was pasta or some other simple ingredient and wait for just a bit longer).

We also kept a few very simple meals on hand to use in a pinch. We often fell back on very simple pasta meals and grilled cheese sandwiches with tomato soup, so we kept the ingredients for those things on hand.

We still use these tactics, to tell the truth. “Spaghetti night” is usually our fallback when things unexpectedly get busy. We always have a jar of pasta sauce, a box of pasta, and a bag of flash-frozen vegetables, from which we can put together a pretty decent meal in ten to fifteen minutes without much thought at all.

Q9: Buy now or next model?

Is it better to buy the current model of something now or wait until the next model comes out and limp along until then?

Cell phones for example. I have an older phone that is no longer capable of receiving OS updates. Trying to decide whether I should upgrade now or wait until the next round of models comes out so maybe the latest ones right now receive a price drop.

– David

My philosophy is to keep using a device until it no longer meets your needs, then replace it with a device that seems to be a consensus quality choice for that type of item.

Take your cell phone. Is it no longer doing what you want it to do? When it ceases to be able to do those core functions, then replace it with a consensus “bang for the buck” phone and repeat the process.

Don’t choose to upgrade based on what’s on the market. Choose to upgrade based upon your needs no longer being met. Control your own destiny. Don’t let the market control it for you.

Q10: Encouraging frugality in teenagers

How do you encourage teenagers to be more frugal? My kids seem to have really expensive tastes and request that I buy all kinds of expensive foods and expensive stuff. They won’t even look at secondhand clothes stores and insist that I buy stuff at expensive stores at the mall. Getting tired of it.
– Terry

My approach in situations like this would be to buy them low-cost staple clothes, then give them a very small budget for items beyond that. Serve them simple meals that meet their nutritional needs and only go beyond that on your own terms because it’s something you like.

If you want to “treat” them, make it a rare occasional treat.

If they complain about it, show them some job listings, or come to some sort of agreement where they put forth effort to earn what you give them.

They’re teenagers. It’s time for them to start taking the yoke of responsibility for their lives. Cover their minimum needs and let them address things beyond that.

Q11: Net worth as family?

Is there a big or any real difference between calculating net worth for a family unit vs individual? All of our banking and budgeting is done on together on a family unit level so when I sat down to calculate our net worth for the first time, it was as a unit. However, all the literature seems be about individual net worth…
– Eileen

There’s absolutely nothing wrong with calculating net worth on a family level. Sarah and I do this, in fact.

The deciding factor on whether to do this jointly or individually, in my eyes, would be whether you consider your assets to be shared with your spouse or individually yours. Different marriages and partnerships operate very differently in that regard. I know some partnerships where the two members are completely individual in terms of finance, while others are completely fused with all assets shared.

Your net worth calculation should reflect the nature of the relationship you share with your partner.

Q12: Retire tomorrow?

Let’s say you suddenly had enough money to retire tomorrow. What would you do?
– Charlie

For me, enough money to retire early means that I have enough money in the bank to match our current income at a 2% withdrawal rate, plus enough money to fully pay for our children’s college educations and a starter home for each of them without touching the money needed for the 2% withdrawal rate. Anything less than that would probably not lead me to immediately retire.

So, what would I do if I had that? For starters, I would not destabilize my children’s schooling, so I’d not move anywhere. I do not feel I would be a good homeschooler, but I might consider looking around for the best possible school for my children. I am slightly biased against private and preparatory schools unless they have exceptional academic and social track records. I would probably move to another home, however, with more land on which to work on projects. I’d love to have a giant garden and a barn.

I would probably spend most of my time during the school year doing community work and trying to be the best possible parent. I would have a big winter garden – meaning I would plant stuff in the fall that would be harvested in the spring. I have a few creative projects I’d love to do that I don’t think will produce a whole lot of income, so I’d probably dive deep into them.

Our summers would be filled with adventures. We’d camp a lot. We would visit every major city in the US as well and travel abroad some, though we’d return to our home in the fall for schooling. I’d like to spend a few summers actually living in another country for a few months.

After the kids have grown up and left the nest, I’m honestly not sure what I would do. I would probably start a nonprofit that I’ve long thought about, but I don’t want to do it until I can truly throw a lot of myself into it without the commitment to parenting that I currently have.

It’s a fun thing to think about, but honestly, I do a lot of the elements of that dream in my life right now, so it just feels like a “more of the good stuff” kind of dream.

Got any questions? The best way to ask is to follow me on Facebook and ask questions directly there. I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive many, many questions per week, so I may not necessarily be able to answer yours.

Trent Hamm

Founder & Columnist

Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.