Afford Anything - Q&A: What Nepal Reveals About Wealth and Safety

Episode Date: September 1, 2026

#746: We begin today’s episode with a discussion of the disastrous flash flooding in Nepal, a personal topic for Paula given her family there. There’s both a human story, one of the resilience of the Nepalese people and the strong community bonds there, and an economic story, where poor infrastructure and a lack of economic development have hindered disaster response and exacerbated the tragedies of recent events.  Listeners can donate to help the victims here:  The Prime Minister Relief Fund: https://pmdrf.nchl.com.np/ Caritas Nepal: https://www.caritasnepal.org/donate-now/ Learn more about the ongoing rescue efforts at https://help.ekantipur.com/ A caller wants to put part of her mom's $80,000 home-sale proceeds into an annuity — and it left her financial-planner co-host doing a double take. Turns out it might be the first caller in the show's history the product was actually built for. This week's Q&A tackles two retirement questions from listeners: when it makes sense to ease off maxing out a 401k in favor of a more flexible brokerage account, and whether a guaranteed-income annuity is the right move for a retiree who isn't great at managing money on her own. In this episode, we discuss: How to know when to stop maxing out your 401k and start filling a taxable brokerage account instead The real "deal" you're making with the government every time you use a tax-advantaged account Why an insurance company can keep 100% of the money if the annuity holder dies too soon — and how to avoid it The one type of person a guaranteed-income annuity is actually built for A simple daily habit trick for building consistency, borrowed from a world-class choreographer Why doing everything right doesn't guarantee a good outcome, and what that means for your own decisions What Nepal's disaster response reveals about the real payoff of economic development Whether you're mapping out an early-retirement bridge or helping a parent build guardrails around a windfall, this episode will help you think more clearly about the trade-offs each option carries. 🔗 RESOURCES MENTIONED 👉 Not sure which investments belong in your 401k, your Roth, or your taxable account? Grab our free guide to figuring out where each one goes: https://affordanything.com/assetlocation 👉 Morgan Housel on the split-second decision that changed everything: https://affordanything.com/488-gut-instincts-and-big-decisions-with-morgan-housel/ 👉 Our interview with retirement researcher Dr. Wade Pfau on annuities and retirement income: https://affordanything.com/271-retirement-planning-in-2020-with-dr-wade-pfau/ Learn more about your ad choices. Visit podcastchoices.com/adchoices

Joe, this is a very special episode today. Oh. We're going to talk about retirement, which is our favorite topic. We're going to answer a question about 401K contributions and money should scale back. Another favorite topic. We're also going to answer a question about building an ongoing stream of income. There are certain products out there. Also, my favorite topic.

Exactly. So we're going to address all of that. But before we do, I want to first talk about the elephant in the room. Oh, wait. First, I should intro the show. Hi, welcome to the Afford Anything Podcast. We know that you can afford anything but not everything. So this is a show that's all about making choices and tradeoffs. I'm your host, Paula Pant. I trained in economic reporting at Columbia. And most Tuesdays, except for when we don't, most Tuesdays, we answer questions from you with my buddy, former financial

planner, Joe Salcie. Hi. What's up, Joe? Well, I've got the rugged voice going today, Paula. So I hope people can hang with me. I hope my voice hangs with us. Just coming off the flu. When I do the flu, I do it right. My spouse gave me the at-home test a couple days ago. And I flew A, not a B or not a C, but I got an A in the flu. Oh, hi-five.

Congratulations. Yes. You had 102-degree fever. I did. And it had said more cowbell. I forgot. I don't watch things. You don't know.

That's a Saturday live skit about I've got a fever and it says more cowbell. Speaking of cowbell. That's the weirdest transition ever. That is the strangest transition. I want to address the elephant in the room, which is what has gone on in Nepal, the tragedy that just unfolded there. Long time listeners know that I am from Nepal. if you're not acquainted with me or with my backstory.

I am Nepalese. I was born in Kathmandu, came to the United States as a baby, but my whole family remained there. Grandparents, uncles, aunts, cousins. My sister is there along with her husband and my niece. So the whole family's back there. I was a citizen of Nepal for nine years.

Technically, my first language was Nepali. It's a technicality. People use the word, the phrase first language as a proxy for language you know the best. for me technically my first words were said in Nepali, but I've since largely forgotten how to speak it. I speak it at the proficiency of a drunk toddler. There's a lot of those, a lot of them walking around. Exactly. But I do still understand it. And I spent many of my childhood summers in Kathmandu. Over the past several days have been, well, I wanted to address it because so many people have reached out.

I've heard from people who I haven't heard from in years. On the day that it happened before I even saw the news, that was how I found out as I looked at my phone and there were like five people who had messaged me within the first hour after the news broke. And I was like, what the heck is going on? And so I reached out to my sister and couldn't get a hold of her and then reached out to my dad. He had been working the phones. And so anyway, my family is fine.

everybody is fine and thank you so much to everybody who has asked for the last several days i've been thinking a lot about Nepal a few things come to mind and i'm going to do a very in eloquent job of talking about it but thank you for bearing with me so number one i thought about the fact that nepal doesn't have a ski industry i know that's a strange thing look at joe's face a very strange thing to think, but we are the nation that has the highest mountains in the world. We are the country of Mount Everest. We are home to the top peaks on earth. Why do we not have a ski industry? Why is it that people go skiing in the Rockies, in Japan, in Switzerland, but not in Nepal, which is home to the Himalayas. And it is because we have such poor infrastructure, such a lack of development,

that we have not been able to develop one, despite having all of the natural infrastructure, natural infrastructure, mountains, despite having mountains, despite having the geography that would lend itself to a ski industry, we have not yet had the type of political organization or infrastructure or economy that has allowed us to build one. And that tells you everything about, well, it gives you a strong hint of what the rescue efforts are going to be like. You know, the same challenges that have prevented a ski industry are the same challenges that are going to prevent rescue efforts. And in that regard, it underpins why economic development is so important because economic development creates infrastructure,

both physical infrastructure as well as lines of communication and patterns of coordination that in the best of times create jobs, but in the worst of times, can then be used for disaster response. because here are the things to remember about the rescue efforts. First, this is some of the hardest terrain in the world to navigate. It's the Himalayas. These are the highest peaks on earth. Many of you have probably hiked 14ers in Colorado, a 14,000-foot peaks.

If you've ever seen the Colorado 14ers, imagine standing at the summit of one. Imagine standing at 14,000 feet and then looking up another 14,000 vertical feet to the summit. That's how high these mountains are. The peaks are at the same level of the cruising altitude of a commercial aircraft. And specifically the mountain where the glacier formed, the glacier was at about 16,000 feet. the USGS registered that collapse at 1052 and 10 seconds. And the border crossing checkpoint, which I think you've all seen the video. And if you haven't, if there's one video to see, it's that one.

But the border crossing checkpoint was 13.4 miles away at a 10,500 foot vertical drop. And that drop happened, that glacier melt. Like we have the surveillance camera footage of when that water, that wall of water, came across the border crossing. And that was at 1059 and 50 seconds. So what we know is that that water traveled 13.4 miles down a 10,500 foot vertical drop in seven minutes and 40 seconds. That means the water was traveling at 105 miles per hour. and at its peak that wall of water was 300 feet tall. I guess I give all of those numbers to underscore mountains high, slopes steep, water big, and traveling fast, rescue hard.

Like those are the main points in the midst of such a hard rescue. Even if we had the best infrastructure in the world, even if we had like U.S. level or Switzerland level, infrastructure. Under those conditions, it would still be tough, but here's what we're facing. There was a photo that went viral of a rescue worker who didn't have a flashlight and was just using his smartphone flashlight. This is a rescue worker who is doing that. There are a lot of areas that helicopters can't go to for one of two reasons. Either the helicopter doesn't have a place to land because there's no flat helicopter landing area or, you know, there are certain parts of Nepal where the air is too thin. And that wouldn't happen down at the border

crossing area. There are parts of Nepal that helicopters can't fly to because the air is too thin for the chopper blades. That often is an issue in high altitude mountain rescue. All of that to say that there are areas that helicopters can't go to where we need cargo drones, but we don't have a supply of cargo drones. We don't even have an adequate supply of flashlights. You know, we need excavators. We need bulldozers. We need heavy machinery.

We need a lot of the supplies that economically developed countries have on hand. And that's why I tie this back to, why don't we have a ski industry? that to me is symbolic. It's emblematic of the development that we lack. I say this because sometimes the discourse in the United States can be flippant about economic development or can be flippant about, you know, oh, it's just capitalism. It's just greed. It's all about money. No. And I think in a poor country like Nepal, it's quite clear to see how many people need jobs. you get that criticism a little bit less. But there is a bit of like money negativity that expresses itself whenever the concept of major development comes up, where, in which people will say, aren't there things that are more important than money?

You know, aren't there things that are more more important than a big developer, creating a big resort that creates more conspicuous consumption? Right. You hear that critique. But on the other side of that, the infrastructure that is required to make that possible is the infrastructure of a healthy society. So I've been thinking a lot about that for the past several days. You can tell how far away Nepal is with the recent issues in the government just a couple of years ago, right? The videos that I saw were of government officials being helicoptered out because. students had the parliamentary buildings surrounded and these people were afraid for their lives because when they decided to shut down social media on Gen Z and you weren't allowed to say negative things about the government, well then the people had had enough. But that shows how fragile things are when you have a society where that happens. I feel like, you know, and I'm a total Nepali expert because I was there once for 10 days.

The Nepalese people are very, very strong. Like we are mountain people. And you don't have to be a mountaineer. You don't have to be a skier to understand the strength of the mountain. Like mountain people are rugged because the mountain forces you to be rugged. But mountain people are also humble because nothing will humble you quite like a mountain. Mountain people are strong and humble both. We see that throughout Nepal's history.

Like, we are the people who will lug your tank of oxygen to the top of Mount Everest. We are the people who toppled our own government in 48 hours. We are people who picked a prime minister on discord. Can I tell you about toppling the government in 48 hours? Sure. You toppled the government in 48 hours and generally in a lot of regimes. This is the time that the military commanders get a little itchy. And they decide this is a great opportunity for them to just jump in.

and take control. But this, I thought, was amazing that that didn't happen, that there was not even a hint that that would have happened. And yet, during my lifetime and throughout history, during these times when the government is struggling, the military steps in. So the fact that the military sat back and let citizens change the government, it's pretty powerful. statement as to the feelings of the Nepali people. Yeah. When I heard the news about what happened in Nepal last week, of course, after thinking about family and friends, the first professional contact that I thought about was Morgan

Howsell. Morgan Howsel has told the story on this podcast. He in his youth was a competitive skier. One day, he and two of his friends decided to go backcountry skiing. And in order to backcountry ski, they had to hitchhike up to the top of the mountain, and then they would ski down, and then they would hitchhike back up. Morgan and his two buddies went to the top of a mountain, skied down. And Morgan Housel, for no particular reason, and he's thought a lot about why, and he didn't really have a strong reason, he was just like, eh, guys, I don't really feel like doing this. the next run. Tell you what, you guys go do one more. I'll go grab the car and bring it around so that

when you're done with the next run, I'll be here to pick you up. And he's not sure why he said that. He never really liked the hitchhiking piece of it. Maybe that was a part of it. Maybe it was just random. He's not sure. But his two friends went back up to the top of the mountain. He got the car and was ready to pick them up when they skied down. And then he waited, and he waited, and he waited, and he waited, and they never came down. There was an avalanche. He has devoted his entire professional adult life to decision-making,

to thinking through wise decision-making. And yet the single most consequential decision of his life was entirely random. Again, Morgan Housel was the first person I thought about when the news broke in Nepal, the first non-Napali person I thought about when the news broke in Nepal. Partially, I think it's because

when he tells us the story about the avalanche, every Nepali person, whether or not you're a skier, has a very, I think, visceral and innate understanding, of the power of the mountain. And we understand that we come from the mountains and ultimately we go back to the mountains. A piece of the story that he tells that I think in a very blood and bones sort of way

resonates with people of the mountain, as Nepali people are. But it also, his story really underscores randomness. You know, it underscores the, we can spend our entire lives studying better decision-making, studying heuristics and mental models and frameworks and first principles thinking, all of the things that we talk about on this show. And I think it's important to do that. And it's also true that fate can be incredibly random.

And wisdom is holding both of those truths simultaneously. That's why I think I really liked both your and my interviews with Annie Duke. Because when you think about poker, you can do all the right things and still get beat. You can do everything right. So you have to fall in love with the inputs, not the outcomes, and spend time working on the inputs and not the outcomes. And in my financial planning career, my financial planning career showed me the importance of getting your risk management piece right. because you just never knew when something was going to come at you out of the blue, when something was going to go wrong. Everything is going right until all of a sudden it isn't. And you never knew when that was going to happen.

Just getting that piece in place, the emergency fund, the disability policy, the life insurance, the auto insurance, the renters coverage, the homeowners, whatever it might be. And not just, yeah, I've got it, but having the right amount, I think becomes an incredible, this becomes an incredible reminder to just think about the risk and have that plan B. And you know, the other piece of it is the way that you are affected, it may not be immediately apparent. So this, for the past several days, so many people have reached out to say, hey, is your family okay? Is your family safe? physically, yes, they are. But my sister, she was in Nepal in 2015 when we had a massive, massive earthquake. Death toll is over 10,000. She was actually hiking. She was trekking during that earthquake and was right in the ground zero of it. And for her, that was an incredibly traumatic experience. And there is a certain emotional resonance. when you think that the earth could just shake you at any time, when literally nothing ever feels stable again.

So the after effects of, even though physically she's fine, the psychological after effects of having lived through that earthquake is for her very much still there. So anyway, she's a journalist based in Kathmandu. And so a lot of news organizations have been contacting her asking her to be their stringer, their on the ground reporter who can cover this. Yeah, I can't call it a flash flood. The phrase flash flood is just does not, it's like a super tsunami. You've seen the videos. It looks like one of those world is ending type of movies.

Anyway, all of these news organizations have asked her to be their on the ground stringer, even though she's a journalist, she's professionally trained to do this, she just can't. She butts at me the other day and she was like, I can't go see pieces of bodies that come up. She made a documentary.

She did, yeah, on Netflix. It's a three-part series about the earthquake in Nepal in 2015. Excellent, excellent three-part series. The name of the three-part series is aftershock. For her, making aftershock was a big part of how she processed the earthquake trauma. You know, now once again, these news organizations are like, hey, can you go report on this? A lot of the bodies are not intact because it's not just water pressure, it's boulders and

people got struck by a lot of things. It's boulders and debris and all of that. Yeah, it's, It's just not something that she's ready to look at. I have another friend. He's a war reporter. He spent 20 years in a war zone. These reporters who go to sites of devastation, there are certain things that reporting from those areas, and I think this is something that's not talked about very often,

there are certain things that, like, just scars that reporters have, emotional scars that reporters have that they carry with them for life. My friend who's a war reporter, there are certain things he can't look at anymore. And that's the thing in terms of who's going to be on the ground, you know, we've got these stories coming out of Nepal right now about, like there isn't enough refrigeration in the morgues for all of the bodies or all of the parts of bodies. You know, you can't keep the bodies cold long enough for families

to identify who's who, and there isn't going back to infrastructure, there isn't enough communication capability, there isn't enough communication infrastructure to convey proper identification and tagging and coordinate. That's why this infrastructure matters so much. That's why I'm upset that we don't have a ski industry. So those are my thoughts on Nepal. as a Nepali who gets to sit in the comfort and safety of New York City.

When you told me you were upset they don't have a ski industry, I'm like, okay, we're talking about a tragedy here. What does that have to do with ski? Oh, I'm skiing. And it turns out it has a lot to do with it. Canary in the coal mine. Yes. Well, I don't know how to segue out of that. Me neither.

Speaking of Cowbell. You think we just take our break here? Yeah, I think we do. I think we're going to take a moment hear from the people who pay our bills. And when we return, we're going to talk retirement planning. When we return, we're going to answer two questions. One about 401K contributions. When do you start backing down on some 401K contributions? And the next will be on a stream of retirement income and annuity, the pros and cons possibilities. That's coming up next. Welcome back. Our first question comes from Anonymous. Hi, Paula and Joe. This is Anonymous. I called back in November 23 on episode 471 about helping my mom find a beach house that worked for her retirement, how much she could afford and whether she should pay in cash or get a mortgage. You all went through the pros and cons of both and said that $1 million was a good rough budget given her financial situation. Quick update on her. She wanted the security of owning her home outright. So she bought an older home in cash for about $800,000. and spent some additional money renovating it over the last couple of years. She's doing really great. This time I have a question for my husband and me.

I'm 36 and he's 40. And to give you our high-level numbers, in my accounts, I have about $625,000 in a 401k, $172,000 in a Roth IRA, $30,000 in a Brookridge account, and $50,000 in an HSA. In my husband's accounts, he has about $650,000 in a 401k, $17,000 in a Roth IRA, and $82,000. in a brokerage account, and we have a joint brokerage account with about $88,000 plus about

$70,000 in cash. We've been married for three years, and our strategy has been to max out all available retirement accounts, and then we automatically put $2,500 a month into our joint brokerage account. I started a new job last year that offers RSUs totaling about 25% of my salary, which right now is $210,000. The RSU's best over four years and refresh yearly. In a few years, once I'm fully stacked, I expect roughly $50,000 a year to best. with obvious huge asterix to that depending on my company's stock performance over the

besting period. Regardless of the number, though, once they best, my plan is to sell immediately and direct the funds into our joint brokerage account in line with our asset allocation, which is 60% large cap, 20% small cap, and 20% international. We work with a flat fee financial advisor who we really like. Her thoughts on index funds align with ours, and she hopefully pushes us to consider things we might miss. One of our goals is to retire early, maybe in 10 to 15 years. We have a large percentage of our net worth in our 401ks and Roth IRAs, though. I know strategies like a Roth conversion ladder or 72T exist to full money from retirement accounts early. However, our advisor recently suggested we consider putting less into our 401ks

and more into our taxable brokerage account to help bridge the gap between when we retire and when we reach traditional retirement age. I've always maxed out my retirement accounts and honestly never considered not doing so. Given our early retirement goal, though, I see why funneling money toward a brokerage account could make sense, even if it's technically less tax-optimized up front. I'd love to get your thoughts. Given that the standard advice is always to max out tax advantage accounts first, is there a point in an early retirement timeline where it actually makes sense to

intentionally scale back 401K contributions towards more easily accessible accounts? Thanks for all your advice. I love the show and hearing how you each think through people's unique situations in a way that is accessible for everyone. Thank you. Anonymous. Thank you for the question. I am personally a fan, and Joe and I have not discussed our answers beforehand.

I am personally a fan of taking the taxable brokerage account strategy for the sake of simplicity. Yes, SCPP 72T is an option. We can talk about that. But the simplicity of just being able to tap a taxable brokerage account, the flexibility that you have by virtue of splitting money in. into different angles of that tax triangle. I am a fan of that. You're getting so far ahead of this game.

I know. We haven't given her a name. I know. Right? No. What are you doing? Answering the question. I see Joe shaking his head and I'm like, oh.

She had a name, but I don't remember what her name was. And we forgot to look it up ahead of time. She gets to have two names. Wouldn't it be funny if we accidentally gave her the same name twice? Well, I don't think we will if you go with mine because I have a possibility right here, my hands. Oh, what is it? The real question here is, when do I really start to get creative with my financial plan?

Because like she said, most of the time you will fill up your retirement accounts first. And when we talk about the tax triangle, the three types of taxation, you can really balance two of them for ages after 59 and a half, which is if you just balance it. the Roth and the pre-tax, you're good, right? But before that is really when you need that flexibility of that. So I think there's some creativity involved. I have been reading, and you'll see that I've got this all dog-eared, but I've been reading a classic book by a woman who works with a lot of creative people, Twyla Tharp. And it's the creative habit. Twyla is one of the world's greatest choreographers. She has done so many different dances.

that she's created. It is amazing, all the cool creative stuff that's in this book. So if you're worried at all about creativity, not something we talk about a lot on afford anything, but Twyla Tharp's book is really good. Early in the book, Paula, one of my favorite piece of advice, she said, you need a routine, right? You and I both talk to James Clear about atomic habits, but she's like, you need a routine. And to get a routine, you need to get your butt out of bed in the morning. and you've got to convince yourself to get out of bed in the morning. So she goes, I have a workout scheduled at 6 a.m. Because she lives in Manhattan.

She goes, I have a cab scheduled every day for 5.30. Do you want to know what my morning routine is? And then you turn the page and she goes, my morning routine is to have the cab scheduled for 5.30. Because if I have the cab scheduled for 530, I will not miss it. If the cab picks me up, the cab driver already. knows where we're going. If he drops me in front of the gym, I will go to the gym. If I'm at the gym and I'm in this group of people, I will work out. And my workout is done before I even have time to think. The whole thing is just schedule the cab. And I think about that with the morning.

Just schedule that thing that you can't miss first thing. So anyway, I thought maybe we call her Twyla. So the lesson there is essentially create a forcing function. Yeah. Yeah. Really good advice. Creative forcing function. I used to have, not anymore, she moved out, but there was a friend this girl named Madeline who lived on my floor. Every morning at 6 a.m., she would knock on my apartment door. Oh, that's great. Because my apartment is literally in between where she lives and the elevator bank. So, like, she's going to be walking by my apartment no matter what anyway. So she just stopped and knocked on the door. And I was in the best shape of my life because I knew Madeline was to be showing up at my door at 6 a.m.

Wonderful. Yeah. So I do think, though, Paula, you are right on. I think she's clearly at the point where the brokerage account makes a ton of sense. I think her advisor makes a lot of sense here. Wow. You, me, and her advisor are all in agreement. That makes for some boring radio.

Well, I think we can still, the real question was, when do you know? when do you know that this is the point? And I can tell you what I think about that. I like backfilling. So when I take the plan, I take my later years and I make sure that I'm filled up for my later years and I work back to front. And once I get to 59 and a half, then I know and I know those years are going to be okay, then I know it's brokerage time. And maybe even before that, if I see that I'm on pace, where that's going to happen, right? Where I'm going to get to that point, just based on some fairly conservative numbers that I'm going to be filled up. I'm still going to want to develop that brokerage account for to add in flexibility, which is the secret sauce. And you won't get

locked into a lifestyle that you don't like. You won't get locked into having to take money out that you're not going to spend. You can take out extra money in a year that you want to. There's so many advantages to having that brokerage account available. So I like working back to front. The other reason I like working back to front is also the things that you develop on the back end, the Roth, the traditional, whether it's IRA or 401K, those take a little bit of discipline and a little bit of delayed gratification. And if you develop those first, you get used to having money on a statement that isn't

yours. What I found is people often do it the opposite way. They're like, well, here's what I'm going to do. I'm going to put money in my emergency fund first. And then once that gets filled, then I'll start saving and do a brokerage account and then I'll start saving in my 401k. That never works because you're making money too accessible and you still, you haven't developed that muscle of saving money and delay gratification. If you work from the back end and put away money that you don't have access to and you get used to that. And you get used to that. then you can trust yourself with that brokerage account that's going to give you flexibility later on. That's my thought.

Twilett, you mentioned that, you know, the thing that you often hear is like, oh, Mac, you know, max out all your tax advantage accounts. Sure, that's standard boilerplate, you know, when you're talking to a mass audience and you have to give broad generalized advice. Sure, it's a standard boilerplate. It works until it doesn't. When you dig a level underneath and you ask the question why, the why behind that is, all right, all else being equal, tax advantages are better than not tax advantages. Again, that's all else being equal.

But what is that tax advantage? Where does it come from? Because it's not something for nothing. It is a deal that you make with the government in which the government gives you a tax benefit in exchange for. for you promising not to touch that money until a certain age. And yes, there are methods. There's SEPP 72T. Yeah, the one she talked about, right?

Yeah, like there are certain methods to get at that money at a younger age. But fundamentally, when you put money into a tax advantage to count, at your core, at your essence, you are saying, I accept the terms of this deal. This is a mutual exchange between myself and the government in which they are giving me a tax benefit in exchange for me making this promise, this age-restricted promise. If there's a bucket of money that you don't want to be subject to that promise, then simply don't make it subject to that promise. That's the way that I view a taxable brokerage account. And again, absolutely you could 72-tie it, but the issue with 72-teeing is, suddenly things get more complicated and your relationship with that money gets more restricted. Whereas with a taxable brokerage account, you have flexibility.

That delta in taxes, what that buys you is added flexibility. Yeah, I really love her advisor's direction on this one. That is a great person to have in your corner. I love that idea. But you can find a good person and the key here is on good person. And I think for some of us, we don't do enough research before we bring people into our corner. But when we find that good person that can give advice like this, Paula, it takes some great planning that she and her husband have already done. Look at the nice savings they've done.

They've done some really good saving. And when you can take that and you can now add to it, this thing that isn't about what a lot of people complain about it. My advisor doesn't beat the S&P 500. This advisor gave advice that had nothing to do with beating the S&P 500. What's the other one? I can save money on my own. This isn't about saving money. This is about directing it in a way that's going to help you meet your goals better that might have been a blind spot before. Love that. Love making sure that all of your accounts dovetail with what your goal actually is. Beautiful. Excellent. Thank you, Twyla, for the question. See, it could have been boring radio, but we made it fun.

And by the way, congrats to your mom. Glad she's doing very well. And it was probably Paula, based on the advice that I gave. Ah, yes, the beach house, the beach house. Yes. I would have to guess it was probably based on something I said. Ah. Congrats to you, Joe, for taking credit for her mom's beach house.

You're welcome. I have no idea. All right. We're going to take one final break to hear from the sponsors. who make the show possible. And when we return, speaking of mom, we're going to hear from a caller who's calling on behalf of her mom with a question for her mom. She's thinking about a potentially an annuity. So we'll talk through whether or not you should buy a product that would create an income stream as part of your retirement plan. That's up next. Welcome back. Our final question

today comes from Marie. Hi, my name is Marie. And first, I want to thank you, Paula. I've been a fan for about a decade, and you are by far my favorite podcaster. So thank you for being such a wonderful part of the financial community. My question is actually for my mom. She retired last year and lives mostly off her Social Security income of about 1,800 per month. When she retired, I helped her roll her 401k over to a roll over fidelity IRA with a value of around $54,000 that so far she hasn't touched. When needed, she takes money out of her separate high-yield savings account to supplement her income, usually in increments of about $1,000. The high-yield savings has a current value around $14,000. My mom is in the process

of selling her mobile home and should net around $80,000 after fees. Her plan is to move into a house that my sister is building on her own land with a capped rent at $1,000 per month. As my mom turned 73 in January, I will help her set up her RMD starting next year. My thought was to set up a monthly distribution so she can increase her currently monthly income stream. Are there any downsides to set this up monthly other than having to adjust it annually? My second and more important question is what we should be doing with the proceeds from the sale of her home. Historically, she hasn't been the greatest at managing money, so one thought was to take a portion of the 80,000 and set up a spia. Initially, I was thinking of 25,000 with a 10-year

certain payout option, as this would give her a small guaranteed income stream for. for life. I don't think an annuity is a great fit for many people, but my fear is that she will see this large sum of money in her account from the sale of her home and feel like she can really loosen her purse strings. By putting some of the money in an annuity, at least a small portion will continue to provide income for the rest of her life. Do you think this is a bad idea? Or she'll be looking at another payout option like Life Certain? What other investment vehicles might be a good option for somebody who isn't the greatest debt managing money? And what do we do with the balance of the $80,000? we invest it for future growth or look at something safe like CDs. I want to make sure she has

enough money to feel comfortable, but also make sure she isn't blindly spending money and make sure she has some guardrails in place. Any thoughts and ideas are greatly appreciated. Thank you again for all that you do. Ria, thanks so much for the call. This call, Paula, completely took me by surprise. You and I, before we hit record, we listened to this for the first time and I was running along as Paula saw taken notes and then she said spia and Paula I think laughed out loud as she saw my head go what? I did. Yes. Joe was not expecting that.

Plot twist. Yes. I did a complete double take. So if you did too, if you were listening and maybe some of you didn't do a double take because you don't know what a spia is. So maybe Paula, we should start there. Yeah. Let's do it.

So a spia is a single premium immediate annuity. and what that means is you take some money and you turn it into a pension that you can't outlive. So what happens is Maria and her mom will solve for X amount of money they want to get per month. That's their goal is to get so much money per month. They put that into a calculator with an insurance company and the insurance company then says, this is how much money it will take for us to give you that payout forever. what the insurance company is doing is really the same thing actuaries do for life insurance. They are calculating that.

So let's say, Paul, we're doing it on you. They are calculating how long they think you're going to live. And then they're going to, in a broad number of cases, have their mathematics work out that they're able to guarantee that everybody gets money for the rest of their life. they don't go bankrupt and even better they make a profit, right? So it ends up being good for the person. They get a pension they cannot live. Good for the insurance company because they're able to do what they do really well, which is guarantee this income stream.

So there's a lot of winners. So who loses in this deal? Well, there's a lot of afforders right now screaming at their device going, annuities suck. I've always heard that annuities suck. annuities are horrible. And the answer is yes, and they can be horrible. But all annuities are not created equal. So let's just dive into who loses in this deal. And the person who loses, the people who lose, and Maria mentioned a sister. And if it's just Maria and her sister,

Maria and her sister are the ones that lose. Mom cannot lose in this deal. Mom will win in this deal because mom's going to have income for the rest of her life. However, when mom dies, if they don't pick a period certain payout period, which we'll get back into that, if they don't pick a period certain payout period, no money goes to any survivors. That income stream dies when she dies. So let's say they set this up and they set it for lifetime only, Paula, which is going to give the highest payout of any of the choices. Mom has a heart attack two months from now and dies. Let's say they put the whole $80,000 in.

The insurance company keeps the $80,000. They keep all of it. That's the deal when it comes to setting up this pension program. So that is the risk. And that's why she mentioned going with a 10-year period certain. And that means with mom's age now at 74, this will be guaranteed to last until mom is, excuse me, 73. So 83. So this will last at least until 83. Now, if mom lives past 83, the way a 10-year period certain works, is that the payments will continue as long as mom lives. Mom lives to be 120.

Mom will continue to get payments from the annuity company. Well, I got to take that back. Maybe, maybe not. Because in many cases, the annuity company has kind of a cap out like you win, where they just give you a bunch of money at the end. They might give you money when you reach 100. But regardless, if that's not the case, in most cases, she lives to 140. She lives to be 210 years old. She will still get paid. But if mom dies three months from now, the sisters will continue to get that payout for the next nine years and nine months.

So they will get the full 10 year period certain. So at the very least, you'll ensure that some of the money will be returned to the family, even if mom passes away before the 10 years. I like the 10-year period, certain option on that. The alternate to this whole thing, by the way, is can you take this money that you were going to give to an insurance company and invest it instead and then create an income stream off of that. And the answer is, you certainly can. And there are many times when, and you take the last 10 years as an example, many self-invested people, if they just picked the total stock market index

or the S&P 500, they would have probably done much better than what the insurance company had projected. Because we had this upcycle. We had this great. up cycle. The bad news is, number one, if you don't have a pro helping you do this, I think it's a mistake. There's a propensity for people to bet or to not set up a really good asset allocation. The second thing that happens is what you are worried about, which is mom might have trouble with, it sounds like maybe wanting to access money too quickly. And so she might run out of money if she has too much money available. I don't know if you and an advisor and your mom can create a kind of a wall. Because I had this happen before where I would have clients where they're like,

listen, I'm not really good with money. So I want you to invest it under your guide. And by the way, I might call you for money and I really want you to talk me off the ledge. And so it was great because people would not want to call me and they would leave their money invested for that reason. This is why when I hear people talk about how horrible assets under management advisors are, there is a certain type of person and your mom might be the person that is perfect for the assets under management advisor. And again, it's got to be the right one. It's got to be somebody who's going to be a good wall between mom and her money. That said, would I do that? I think there are a bunch of people, Paula, the personal finance industry, not industry,

the personal finance community, a people that are really good at this forget exist, which is there are people who came into my office that no matter how much, much I tried to teach them how this worked and how much they needed to keep their hand out of the cookie jar, they weren't going to do it. And they were never going to learn. It just wasn't going to work any other way. For those people, and Maria, you can kind of tell the questions I would ask you. If your mom is one of those people, this is who that annuity is built for. It's 100% who was built for because then she can't outlive the money. The whole family gets freedom from worry. You know ahead of time that this isn't going to be part of any inheritance. It is a decision that the

family makes together to give mom peace of mind. I think it's a difficult decision, but for a lot of people, it's the right decision. Let me tell you how I'm not the only one that feels this way. there's a gentleman and economist who is also a little bit of a movie star, Ben Stein. Ben Stein was a character in Ferris Bueller's Day Off for people that saw it. He was the teacher who would say anybody, anybody, anybody, Bueller. He also had a game show for a while called Win Ben Stein's Money, where people would compete and he would ask a bunch of questions because he's a super smart guy. Ben Stein's parents, Paula, he recommended a single premium immediate annuity for them.

He said, I know money so, so, so well. My parents are never going to get it. My parents will never get it. A guy as smart as Ben Stein putting his own parents' money into a single premium immediate annuity, I think shows that this product is not always the ogre that we make it out to be. Marie, the most important word in your question was the word guardrails. I know a few people who it doesn't matter how much you try to teach them a concept, their psychology gets the best of them. I'm thinking of two people in my life in particular. One is someone who I sat down with him and tried to explain the concept of risk and reward and risk-adjusted return.

but he cannot stop himself from making incredibly impulsive investing choices, you know, investing that's the type of investing that is borderline gambling, betting his entire retirement balance, which is not much, especially relative to his age, on a single stock. And no matter how much education I try to give him, it just doesn't solve that gambler impulse that he really has. And I know somebody else, she's the opposite. I just had dinner with her a couple nights ago where it doesn't matter how much I try to

explain certain financial concepts to her. It's not going to happen. There are some people for whom, like, I think financial therapy would be a very good idea, but in lieu of that, guardrails need to be put in place. It just shows you, Paula, that these products, types, I'm not going to talk about the individual products like Lincoln Nationals versus Northwest Mutuals insurance policies, but these different types of products were made for a specific person and a specific reason. When they came out, there is somebody that it fits. I don't think when I look over the vast array of these products that there is no use case for them until we get into some of the hedge fund kind of weird stuff. stuff. But some of these basic lines of insurance that people call the devil, there's use cases. I'll tell you who's the devil. It's the salespeople who fit square pegs into round holes,

try to shove people into these products that don't fit. But the product itself is not the devil. I think this guardrail could be a blessing for everybody. Right. So the issue is not the product itself. It's that people who are poor fits. It's the fit. There has to be compatibility between person and product. And when there's incompatibility, then that's the thing that's bad. So the compensation incentives in the insurance industry is where I point the finger to all of the people yelling about annuities that stink.

I will say, Joe, to what you said about the assets under management model, I guess it depends on Marie, how much. much of guardrails, like, because if we talk about an annuity versus, let's say, the asset center management model, those are both iterations of guardrails. They're just different on the spectrum of like how guardraily is the guardrail, right? They kind of exist along a guardrail spectrum. And so the question for you is, how strong of a guardrail does your mom need? Because if she only needs a little bit of a guardrail, the assets under management model might do that. If you find a person, the right advisor, who, you know, the understanding with that advisor is,

listen, here's why we're working with you. Here's the objective. This is the reason that we're coming to you and this is the reason that we're putting assets under management. And this is, this is what I want from this relationship. Like, I want babysitting, essentially. Like, I want you to be the adult in the room who says no. And if you go to an advisor and establish that as the relationship, then I think that could be a great fit. And it might be that you don't need a guardrail that's stronger than that. It might be that that is a sufficient enough guardrail that you could get,

you could achieve the guardrail that you're looking for and get better returns with lower fees by virtue of going the assets under management model. That, I think, could be a very viable option. And then to what Joe is talking about, the annuity is there if you need a stronger guardrail. So then the question goes back to just how strong of a guardrail do you need? It's a great question, though. And it is the first time in the history of answering these questions that we've found the person that the annuity was specifically built for. I cannot remember an episode where an annuity might be the right answer, Paula. I don't recall somebody bringing this particular thing to the table. So what a great question.

Yeah. We're going to link in the show notes to two previous episodes that we've done. One is Morgan Housel. He's been on the show several times, but we'll link to the episode in which he talks about the avalanche. But also, I want to link to an episode with Dr. Wade Fow. He is a retirement researcher. He's a professor who covers retirement planning. He has come on this show and talked about annuities. I actually was anti-annuity until I heard Dr. Wade Fow speak. And he laid out a case for when it can be a good idea under what circumstances, what types of annuities. Wade Fow, whenever I think annuities, I think Dr. Wade Fow.

And so we will link in the show notes to our interview with him as well. I would, if you do go the annuity route, please, please listen to Dr. Wade Fow before you make any purchases. When it comes to the topic of annuities, Dr. Wade Fow is the voice that I trust the most. Fow is P-F-A-U. So we'll link to that in the show notes as well. Joe, I think we did it. How about that?

And my voice made it the whole way. Although I see a nap in my near future as I look in the crystal wall. Do you know what I was supposed to be doing tonight? Like true story. Okay. Today is Sunday. We're recording this Sunday, August 30. Three hours from now, I was supposed to be standing on a stage at the comic strip.

Oh, no. Yeah, the comic strip. It is a comedy venue in New York. City on Second Avenue. And I was supposed to be delivering what's called it a tight five, which was a five-minute set. So I've been taking stand-up comedy classes since January. This particular bit I have been practicing literally for months. I had a type five written scripted.

It was doing so well. I was going to comedy classes weekly and workshopping it, and it was doing really well. Do you know what my freaking type five? Do you know what the subject matter is? Oh, no. Nepal. Oh, no. Yeah.

I have a five-minute comedy set about being from Nepal. The whole thing, it starts with, my name's Paula and I'm from Nepal, so you can call me Nepala. And then we go from there. I think now you could just open it up with, hey, so the last six months, I've been working on this set about being from Nepal, which really was like, wow, neat until like a week ago. Right. Yeah.

And now this is like I emailed the, uh, my comedy teacher, a couple days of, a couple days of ago and I was like, this is probably a really bad time to stand on stage and crack a bunch of Nepal jokes. All of my classmates are going to be there. I'll be in the audience, but I had to pull out of the comedy show. A few weeks from now. Now people have to wait until October, November. Yeah, no, I'm going to just retool. Yeah, I'm going to put it on ice for a while because the premise of the whole bit is coming from a country that no one has ever heard of and how funny, you know, how strange that is. There aren't a whole lot of stereotypes

about Nepalese people. And if there aren't stereotypes, then you're the prototype. And so every time that I talk to somebody, I recognize that I am the one and only, probably the one and only Nepalese person they've ever met. Right. All my Nepali's stereotypes are based on Paula Pan. Exactly. Exactly. Yeah. When there's no stereotype, you're the prototype. With great obscurity comes great responsibility.

You're a bunch of Momo eaten Yeah Yeah So I talk about that About the pressure of being the prototype I talk about the fact

that in 2017 President, and this is true, President Trump in 2017 referred to Nepal as nipple. Anyway, so that's what I'm not doing this afternoon.

You can't really play a tiny violin for me. No. I will be dreaming about you not being on stage. as I'm crashed out again. Yeah, as you're napping, as you're napping off your flu. Yes, yuck.

Joe, where can people find you if they'd like to know more? You can find me Monday, Wednesday, Friday this week, at stacking Benjamins. And when you go there on Monday this week, we have all of August we've called Financial Action Month, Paula, because, you know, April is financial literacy month, but who cares about literacy if you don't do anything with it? So we created this old bingo card. Well, it's graduation day.

So we're going over greatest hits. What are the greatest, like some of the greatest, coolest things that you should be putting in action in your financial life to automate, to make things easier to make them run. On Wednesday, it is going to be the one and only Wes Moss joining us. Oh, very cool. Who talks about, you know, my favorite topic, Paula, is what builds happiness in retirement. And Wes has a new project. around that and I can't wait to chat with Wes and then on Friday a special episode we have

Angelo Polly from MetPro on who's kind of our health and wellness expert, health and fitness. And he comes by a couple times a year because what good is your money if you don't have any health? He always answers some of the best questions the community has about health and wellness. But in this one, we already recorded it. He made me tell my own story. We literally got together to record. We get together to record and I told him what had happened with me and my ankle. I'm having ankle surgery at the end of September. And I told him what happened, which is a long story. But at a point when I thought I had no hope of walking correctly, I gained almost 20 pounds overnight, like almost immediately. He talks about the relationship between hope,

wellness, our mental ability to stay in the game, and what the lack of hope does. And when hope was renewed, and now I feel like there's a light at the tunnel, how I've been losing weight rapidly again and getting back in shape, which is very cool. That's amazing. He's like, we can answer your listener questions later. I think everybody wants to hear this story. So we're actually going to play that story, which is a little tough for me to tell. But that's this week on Stackin' Benjamins.

Wow, that sounds incredible. I can't wait to hear it. All right. Well, thank you, Joe, for joining us for answering these questions. Thank you to all of you for being part of this community. If you enjoyed today's episode, please share it with the people that you know. Share it with your mom who has beachfront property. Yeah. Beachfront property, mom. Share it with Dr. Wade Fow. And, please. I got to hit the cough button again. Joe, it wasn't that funny.

It just caught me. Share it with stand-up comedians. Yeah. Share it with the annuity expert. Share it with your cool, fee-only financial planner. Oh, yeah. Share it with all those people and more, because that is a single most important way

that you spread the message of financial psychology, increasing your income, investing real estate and entrepreneurship. Double I fire. All right, I'm Paula Pant. I'm Joe Solcii. And we will meet you in the next episode.