Nest egg could use help from a planner
Dear Liz: I am 68 and not in good health due to heart disease. I’m not sure what do with my savings of over $1 million, which sits in online bank accounts, earning 1.25 percent to 1.35 percent in 18-month certificates of deposit. (No account contains more than $250,000 to remain under the FDIC insurance limits.) I don’t have the appetite for market swings. What should I do with my money?
Your money currently is safe from just about everything except inflation. If you want to keep your nest egg away from market swings, you’ll have to accept that its buying power will shrink. There is no investment that can keep your principal safe while still offering inflation-beating growth.
If you do want a shot at some growth, you could keep most of your savings in cash but also invest a portion in stocks — preferably using low-cost index mutual funds or ultra-low-cost exchange-traded funds.
Before you know how to invest, though, you’ll need to think about your goals for this money. A fee-only financial planner could help you come up with a plan. Find a planner at www.garrettplanningnetwork.com. Dear Liz: You recently told a husband who wanted to spend his wife’s expected inheritance that the money would be her separate property. Is that true of all states or just community property states like California? Even if it can be kept legally separate, should it be? Isn’t it better for couples to share their money?
Inheritances and gifts are considered separate property in every state. Where community property and equitable distribution states differ is in how other assets and debts acquired during marriage are treated.
For inheritances and gifts to remain separate property, though, a recipient must be careful not to commingle them with joint funds. Recipients would need to keep such windfalls in separate bank or brokerage accounts in their names alone, for example, rather than storing the money in jointly held accounts, using it to improve a jointly owned asset such as a home or paying down a joint obligation such as a mortgage.
Why would people want to keep funds separate? There are good reasons, even in marriages where all other money is shared. The couple could divorce, or the wife could die before her husband. If she commingles her inheritance with joint funds, the money her mother intended her to have could get spent by her husband’s next wife.
The wife might decide to share some or all of her windfall with her husband. But she shouldn’t be pressured into doing so. She would be smart to talk — alone — to a fee-only financial planner before she makes any decisions. Dear Liz: I have contributed to Social Security for 40 years and have no government pension. My husband selected a reduced teacher’s pension so I would receive that same amount should he predecease me. Will my Social Security be reduced in this scenario?
No. The provisions that may reduce Social Security payments such as the government pension offset and the windfall elimination provision apply only to the person receiving the pension, not the spouse. If he dies first, your income would remain the same. If you die first, his survivor’s benefit from Social Security could be reduced or eliminated.
Walk into a Sears store these days, and you’ll see an icon of American retailing collapsing before your eyes.
On a recent visit to the Falls Church, Virginia, store, the floors in the refrigerator aisles were splotched with brown stains. Over by the exercise equipment, the walls were scuffed and had wires hanging out of them. There were empty shelves in the shoe department. And in the tools section. And the men’s clothing area.
The place is in decay — much like Sears’ once-dominant business model.
After six straight years of plunging sales and profit losses, the company is shuttering stores and selling off crown jewels like its Craftsman tools line.
Decades of missed opportunities have brought Sears to this. It lost its focus with ventures into Discover credit cards and Coldwell Banker real estate in an attempt to diversify. Then big boxes such as Home Depot and Best Buy chipped away at lucrative product niches. But maybe the biggest whiff: Executives knew as far back as the early 1990s that they had to wean Sears off its dependency on shopping malls — but its many forays into other store formats never quite worked.
Sears Holdings’ stock price peaked in 2007 at $195.18, when it was an empire with more lines of business. Today, its stock trades for less than $10. In 2006, it had 355,000 employees; today, it has 140,000.
In this war of attrition, CEO Edward S. Lampert has said, “We’re fighting like hell.”
Lampert, a controversial hedge fund billionaire, has invested heavily in bolstering Sears’ Internet business but has let the retail stores languish. He’s now propping up the company with loans and other feats of financial engineering.
Sears is hardly alone. Retailers have announced the closures of more than 2,000 stores this year alone. Big retail is on pace to see more bankruptcies in 2017 than in any year since the recession, according to research by the consultancy AlixPartners.
And Sears dismisses the idea that it has run out of options. The company says it is confident in its financial position, even as it acknowledged in a March regulatory filing that there is “substantial doubt” as to whether it can survive.
“The folks who are playing taps at our funeral, we’re not in the box,” said Chris Brathwaite, a company spokesman.
Sears Roebuck & Co. began in the 19th century as a mail-order business for selling watches and
Yes, you should. I don’t agree with experts who say college graduates should “live like a student” to save money — at least not forever. Sure, your starting salary could require some financial sacrifices. But once you’re able to save wisely for the future, you should also be enjoying some memorable experiences in the present.
Go ahead and spend some of that newfound cash.
The crucial word there is “some.”
Lifestyle creep, or lifestyle inflation, is when you spend more as your income grows. It’s not inherently bad. The trouble comes when you move to a bigger apartment or buy a newer car that eats up all the extra money your raise provides. Making more money quickly grew into a catalog that sold saddles, sewing machines and buggies to a largely rural nation. The prices were low and the selection vast — a model made possible as the ramp-up of mass production was making it cheaper and quicker than ever to churn out goods.
Where America went, Sears followed: As consumers migrated into urban and later suburban areas, Sears swooped in and built an empire of department stores.
In 1925, a visionary executive named Robert E. Wood pushed the company to open its first outpost. Wood gambled that these emporiums would appeal to consumers who were discovering the new mobility that came with the automobile.
Within four years, Sears had 324 stores, and it could hardly open them fast enough. By 1931, store purchases accounted for a bigger share of its sales than the catalog did.
Sears became the country’s largest, most powerful retailer. Generations of shoppers outfitted their homes with its Craftsman tools and Kenmore appliances.
“Sears was regarded as a national institution, almost like the Post Office,” said Gordon Weil, a writer who chronicled the history of Sears in a 1977 book. “Everybody went there, everybody did business with them. Everybody believed they were a permanent part of the landscape.”
By the early 1990s, the portfolio of Sears had grown to include Discover, Coldwell Banker and stock brokerage firm Dean Witter Reynolds, financial services businesses that it hoped would provide more diverse revenue streams. But ultimately, they became distractions from the core retailing business.
When Sears posted a loss of nearly $4 billion in 1992, investors began worrying about its durability.
And then came those “softer side of Sears” commercials.
The campaign was part of a broader turnaround strategy hatched by Arthur Martinez, an executive who took the helm of the Sears retail division in late 1992. His idea was simple: Women were the primary shopping decision-makers in most American households, and Sears was not doing enough to win them over.
Martinez made other key moves: He axed the catalog, which was losing more than $100 million a year. The company sold off its Sears Tower headquarters in Chicago and its financial services businesses.
It was a shot in the arm, but it only lasted so long.
After Martinez retired in 2000, Chief Executive Alan Lacy pushed forward with the idea to wean Sears off the suburban shopping mall by creating a brand called Sears Grand, a concept that was something of a hybrid between a department store and Walmart. But it was too little, too late.
By 2004, it was hedge fund chief Lampert’s turn to try to revive the chain. He engineered a takeover of Sears by Kmart, another troubled retailer. Lampert undertook a number of initiatives, slashed costs and put more resources toward Sears’ online shopping firepower.
But critics say Lampert just does not have a merchant’s instinct, and his tenure has seen a revolving door at the highest levels of management. Several former Sears executives say stores have suffered because Lampert did not pour more money into their maintenance or growth. Lampert himself has lamented the sluggish progress.
“If we were making a meaningful amount of money,” Lampert said, “it would enable us to move much faster in our transformation.”