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Links and resources mentioned in this episode:
- A Kiplinger Special Report: Roth Conversions
- Your Guide to Roth Conversions
- Marguerita M. Cheng, CFP®, RICP® (opens in new tab)
- Kennet Lyle Block (opens in new tab)
David Muhlbaum: The COVID-19 pandemic and accompanying recession have been hard on women with millions of jobs lost. What does this mean for future earnings and retirement savings? We talk with financial planner Marguerita Cheng about how she's helping clients adjust. Also, what dad taught us about personal finance. Coming up on this episode of Your Money's Worth. Stick around.
David Muhlbaum: Welcome to Your Money's Worth. I'm kiplinger.com senior editor, David Muhlbaum, joined as ever by my co-host, senior editor Sandy Block. How are you, Sandy?
Sandy Block: I'm doing great, David.
David Muhlbaum: I have one single financial trivia question for you. I'm going to give you someone's first and middle name and you're going to give me the last name. Okay?
Sandy Block: Okay.
David Muhlbaum: William, Victor...
Sandy Block: Roth. William Victor Roth, Senator from Delaware. Last Republican the first state elected to the United States Senate.
David Muhlbaum: Yep. That is some crazy detail you got there, but it wasn't what I was expecting. Come on. Why do you know who he is? Because his name is on...
Sandy Block: Obviously David, the Roth IRA.
David Muhlbaum: Well, I think we'd be hard pressed to find another product known for a politician. No, seriously. Like, there are laws that sometimes carry the names of their sponsors. I'm thinking of Sarbanes-Oxley or McCain-Feingold or my old favorite, Dingell-Tauzin. It's all very Washington stuff, but Roth, he lives on.
Sandy Block: Yeah. Well, that's partially because he created a framework that has held up really well. Those laws you mentioned... Well, they've been superseded by court decisions and new legislation and whatnot, but the Roth IRA is still soldiering on more than 20 years later.
David Muhlbaum: Right. Now, why do I want a Roth IRA again?
Sandy Block: Because it's simple and there's a very good chance it will reduce the amount of taxes that you have to pay on your savings, which everybody likes. When you put money in a Roth, as long as you've owned it for at least five years, and when you're 59 ½ and you take the money out, all of your earnings, everything that's in there, your contributions are tax-free. You can take out a little bit, you can take out a lot, you can leave it to your kids. But compared to traditional IRAs, which are subject to all kinds of rules and taxes, sometimes 100% of the amount that you take out, a Roth is really, really nice thing to have in your portfolio because it's so easy and it's so flexible. But David, you didn't bring up William V. Roth Jr. just to make sure people remembered his name.
David Muhlbaum: No. William V. Roth Jr. No, you're right. My interests are not purely historical, they're partially promotional, because I want to push a link to a special report Kiplinger's just published about converting an existing IRA to a Roth IRA, which is one of the main ways people get on the Roth track, but it's not super easy and it has potential tax consequences and social and Medicare effect. So, you want to get it right and that's the point of this report: helping with that.
Sandy Block: And it's a really good report, David, but what's the catch?
David Muhlbaum: Well, you'll have to give us your email address, but don't fear, it's an opt-in situation. So if you want to hear more from Kiplinger beyond this report, you have to check to do that. And frankly, if you don't want to play around with that at all, you can just search, Your Guide to Roth Conversions. I'm proud to say our content dominates that search.
Sandy Block: I know, and I wrote it.
David Muhlbaum: Exactly. You're welcome, Sandy. When we return in our main segment, the shecession, what women and men can do to cope.
David Muhlbaum: For our main segment, we're joined by Marguerita Cheng, the CEO and founder of financial advisory Blue Ocean Global Wealth. She's a certified financial planner who has contributed to a variety of outlets, including well, Kiplinger. You'll find her content in our Building Wealth channel. Welcome, Rita.
Marguerita Cheng: Thank you so much for having me. So excited to be here.
Sandy Block: You've got an impressive array of certifications, Rita, but the one that stood out to us for today's discussion, was your work on women's initiatives at the Certified Financial Planners board. This episode is going to air on International Women's Day and personal finance issues affecting women is what we want to talk to you about.
David Muhlbaum: Yes, and notably, this women's day comes on what's been an extremely difficult year, specifically in the economy. Coming into 2020, women had just hit this milestone of making up the majority of the workforce and then wham, pandemic. Who's losing the bulk of jobs? Women, and this is quite different from 10 plus years ago during the Great Recession. Now, we're not a think tank and you're not a labor economist, but you do know the topic and you have clients, which puts you closer to the situation. So, what are you seeing out there?
Marguerita Cheng: Sure. Well, the one thing I can say is I am based here in Maryland and of course I love the Washington Post and there was an article in Sunday's paper that talked about childcare and infrastructure. And when people think infrastructure, they think roads, bridges, public transportation, and that's true, that is infrastructure, but we need infrastructure to support women in the workplace. And that means childcare. So what I'm seeing is particularly for women, especially those who have school-aged children, it has been challenging. You can't just leave your eight-year-old in front of the computer all day, but first of all, Child Protective Services might come. You can't leave children under 13 unattended and it kind of violates everything that we've told ourselves... Limit your screen time. So it has posed unique challenges.
Sandy Block: So Rita, you're talking about... We were talking about this off mic about women who still have jobs -- and for some people that's a problem they'd like to have -- and maybe they even have above-average family income and savings. And it's the nature of a lot of the news coverage of this so-called shecession to focus on the hard luck stories. People have trouble getting food on the table, but it sounds like you're saying this is kind of tough for everybody.
Marguerita Cheng: It is tough for everyone. I would be remiss if I didn't acknowledge that people of certain communities are more affected than others and certain occupations. Women have experienced either loss of income or income volatility and in some situations I did tell clients it's okay to cut back on your retirement plan contributions. This is last year, they were furloughed. So they were glad that they still have a job and they have healthcare, but they did have to cut back. Now, things are a little bit better for them and they're able to increase their contributions, but it still is nonetheless challenging. So I think being a certified financial planner, I don't just help people manage their portfolio, I'm helping them manage their financial plan and ultimately manage their financial lives. So sometimes hearing from somebody, that it is okay for you to temporarily suspend 401(k) contributions or reduce them, that way you can have your cash flow to make sure you're able to pay your mortgages and other bills.
Marguerita Cheng: Sometimes it's good for people to hear that that is okay. These are extraordinary times and sometimes it's okay to just pause and just focus on the more short to intermediate-term priorities.
David Muhlbaum: But at the same time, that's the sort of fundamental risk or that's the fundamental issue of women having a harder time building up retirement savings. That's one of those long-term challenges that women face.
Marguerita Cheng: Absolutely. With retirement, there are challenges. So we talked about how there is a wage gap or income gap, which actually then leads to the wealth gap, because women who do work part-time or who are independent contractors are less likely to have access to a retirement plan. And if their earnings are less, that means their Social Security benefit will be less. And if their earnings are less, they may not be able to save as much and they might not have access to my goodness, a pension or a defined benefit plan. And then you couple that with longer life expectancy and living longer isn't necessarily a risk or a liability, it's just something that we need to be aware of. So we have smaller guaranteed lifetime income, smaller asset bases to fund longer goals. So, it is very important that we are being aware of this challenge and doing our best to address it.
David Muhlbaum: Those are concerns women have faced for well, a while. What I'm trying to wrap my head around is why is this recession, this shecession, why is it different from 10-plus years ago? Why is it women who are taking the hit, losing so many jobs in the workplace?
Marguerita Cheng: So this is what's interesting and I do remember the Great Recession, 2007 to 2009. It seems so long ago, but it's like one of my clients told me, "Today I am 60. During the great recession, I was 48. Oh my God, I'm 60." This is my client talking, not me. Back then, education... Like the jobs that were not affected then are almost like jobs that are affected today. Service, more human contact. Also, if you're in healthcare... I actually have a client who is a registered nurse and one would think, "Oh my goodness, your job is secure." She's a registered nurse at Children's Hospital. Some of the sickest patients and some of these procedures have actually been canceled. So even though she's a registered nurse at Children's Hospital, like she didn't lose her job, but the opportunity to pick up extra shifts is just not there.
Marguerita Cheng: So, she did say this to me and I did help this family refinance their mortgage. They were able to save a lot of money, like almost $600 a month. She said that that savings came at a great time. She's blessed because she has a job and she has health insurance, but she's not able to pick up those extra shifts.
Sandy Block: So Rita, we're talking a lot about some macroeconomic issues, but Kiplinger is all about actionable advice. And I know a lot of your clients are women. Given the challenges that women face, not just now, but ongoing because of lower wages, longer lifespans, divorce, I just wonder when women come to you, how do you advise them to sort of overcome some of these obstacles that we can't solve on this podcast? But we know they're out there, particularly with respect to retirement, because we know that a lot of women really struggle in retirement, that there's a big fear that they'll outlive their money, require long-term care. I'm just wondering, some of the basic advice you give to women to overcome some of the obstacles that they're facing?
Marguerita Cheng: So the first thing that I do is I always start with financial planning. I actually do not accept money management-only clients. And the reason for that is I want to understand their assets, their liabilities, their income, expenses, as well as insurance they have. So, that's their baseline. And sometimes even if your baseline is bad, sometimes people don't even know their baseline. So we start there. Then we look at their employer benefits. We take the time to explain Social Security and discuss claiming strategies. And I think because I focus a lot on financial planning and the process, it's very educational. So people start to feel more comfortable and confident about their situation and taking action. I think for women... It doesn't mean this is not important to men. I want to be very clear, but women really value that integrated approach or holistic approach
Marguerita Cheng: And I can make sure I quantify that. So if a woman comes in and she doesn't have enough for retirement, but she has the cash flow and you tell her to save for retirement, it doesn't mean that she doesn't want to save, she may be thinking four or five steps ahead. "So, Rita, if you tell me to save more for retirement, I know that's pre-tax or post-tax and that 59 and a half, I might not have enough money in my cash reserve. So how does that decision affect my other decisions?" And so I think that that is particularly helpful for women understanding where they are and then based on action steps, how that affects their current situation and what they can do to improve it. And that way, it's not me telling them what to do, it's me guiding them and providing options.
David Muhlbaum: You're obviously in touch with your clients and adapting your guidance to them for the current circumstances, but you're also very much connected to the Certified Financial Planner board, the CFP board and the community more broadly. So, I'm wondering what's the buzz internally? Like what are planners talking about, both among yourselves and as policy, to help women cope?
Marguerita Cheng: So, we have known for some time that women are underrepresented in our profession, and that has consequences for the public because then if they are underrepresented in our profession, they may be underserved. Now, people say, "Marguerita, women represent more than 51% of the population. Women are not a niche." I understand, but broad-based, women are not served. And then if you have women of color or women of more diverse populations, the gap is even more severe. So what CFP Board is doing, and I am part of the WIN, the Women's Initiative, as well as the Diversity Advisory Group is we are making sure that we make room for women in the profession. How we do that is as a certified financial planner, CFP Pro, I take the time to make sure that I'm available to answer questions of what it's like to be a certified financial planner, how I prepare to be a certified financial planner and what the profession is like. Unfortunately, when people hear financial planner, they have a vision of like Wall Street or Boiler Room, and that's not the case. So, it's overcoming those perceptions and building awareness and then creating opportunities.
David Muhlbaum: We know the percentage of women in CFP, it's like 25%?
Marguerita Cheng: It's about 23%. Now what is interesting about this number, some people say, "Well, that number has been flat." It was 20%, 21%, 30 years ago when I entered the profession. The number of female or women CFP certificants has increased, but so has the proportion of overall certificants. So, there are more certified financial planners certificants who are women in 2021 than 2015 and 2016. That is a good thing. The percentage has increased slightly, maybe not as much because the overall population of CFP professionals has also increased.
David Muhlbaum: Got it.
Marguerita Cheng: But I am on a mission to create awareness because it's not enough to just recruit women. Retention is very important.
David Muhlbaum: Which brings me to a question about... I'm sure there are plenty of women who want to have a woman as their CFP, but given the numbers, that may not always work. Is part of these initiatives you're doing helping male CFPs be better in some way or more responsive to women's concerns?
Marguerita Cheng: Absolutely. The reality is some women do want to work with a women's CFP and other women say, "You know what? I don't really have to have a woman CFP, but I want to make sure my CFP understands that I'm not just a woman. I have many roles. I'm wife, mother, daughter, caregiver, employee, entrepreneur." So, understanding that their lives are multifaceted, but it's absolutely true. We need to make sure that as a profession, we are sensitive to the needs of women.
Sandy Block: Rita, we have a lot of listeners and a lot of them are men and we don't want to rule them out. So I guess my question to you is we know the obstacles facing women, that they live longer, that they earn less, that often they're able to save less. What should men be doing to help their partners succeed, to prevent them from running out of money? What should men be doing?
Marguerita Cheng: Sure. So, I think that it is certainly okay if one partner or spouse takes a lead in the financial planning or financial decisions for the family. However, it is important that he, she, or they invite the other spouse, partner to the table. And here's exactly what I mean. It is never too late and it's never too early. My client today, she is 51. And she started planning with me when she was 36. And her parents had a planner, I never solicited. But one day her dad realized at this time he was 70. And he's like, "You know what? I think I need to work with your planner," talking to his daughter. And she's like, "Why? I thought you like your planner." "I realized..." This is the husband talking, "... that our planner doesn't really talk to your mom." And so, they became clients when they were 71 in 73.
Marguerita Cheng: And when I first met them, the wife was a little bit shy. But then in subsequent meetings, she'd come to the table and bring a notebook. And her husband, he wasn't being sexist. He's like, "You go girl, look at you being all prepared. Are you really taking an interest in personal finance?" This was so profound for me. She's like, "You know why I'm taking an interest? Because Rita actually takes an interest in me." She was 73 at the time and she's still alive and she's 78 today. So, the conclusion our story connect is it is certainly okay to be the lead, but at least invite that person into the decisions and conversations you're making particularly about when you decide to take social security or healthcare or long-term care issues, because this is something that's near and dear to my heart.
Marguerita Cheng: My parents were 14 years apart. And even though sometimes my mom might not have been interested in the details, my dad is no longer with us, but my dad made sure that my mom and I made sure too, was aware of what was in place to protect her so that... I know she misses my dad, but she is going to be okay in retirement.
David Muhlbaum: We were talking a couple of weeks ago with Mari Adam about couples and money. And one of the things that came up, one of the topics we discussed was spousal contributions to retirement plans, particularly when you had a differential of income between one of the spouses. This seems to me like it could be something that's become entirely topical because if you have a couple where one partner is now suddenly, and perhaps surprisingly out of the workforce, it could be time to reassess how their retirement is being funded. If they are no longer contributing to the retirement, maybe it's time for the spouse and in this case, it could be the husband, because we're talking about the shecession, to step up and make contributions to their retirement fund for them. Am I on to anything there, Rita?
Marguerita Cheng: I think that's a fantastic strategy. So I was talking about as you're in retirement being involved, but I like this. This is proactive and I've actually implemented that strategy. I really approach it with sensitivity because let's just say one spouse or partner is at home because it was their decision maybe to care for the children, or it could be a situation where maybe they lost their job. It's important and I've never had anybody be angry at me about this. I tell people that it's important that we are planning as a couple for your retirements. We want to take advantage of the tools that are available to us, right? And so, you don't have access to a retirement plan, but that should not preclude you from not being able to save for retirement. And I know you love your husband or wife, spouse, partner. That's not what this is about, but it's important that you have retirement set aside in your name. Not because he or she's going to take it. That's not what I'm saying, but it's important that just because your circumstance has changed, that your need to save for retirement has not.
Marguerita Cheng: So yes, I think it's a fine strategy, but it's always important that you approach it with sensitivity. You don't want the person who's not earning an income to feel that they're any less worthy and you don't want to feel like there's an issue of distrust or mistrust. I understand that can happen, but for purposes of conversation. So, David, I think it's a fantastic strategy.
David Muhlbaum: Thank you. And Rita, thank you so much for joining us today with your insights here for International Women's Day. We appreciate it very much.
Marguerita Cheng: Well, thank you so much for having me.
David Muhlbaum: So, Sandy, last week when we were talking with Cameron Huddleston, you mentioned that your father had died a few weeks ago. And my understanding is you're going to hold a memorial celebration for him in the next few days.
Sandy Block: That's right.
David Muhlbaum: Obviously again, my condolences and I'm sure you'll hear condolences from our community as well, but I thought maybe this would be an opportunity for while you're thinking about him, his life, his legacy, maybe to share something with us about what you learned from him about personal finance.
Sandy Block: Well, David, the thing I learned most importantly, and this is really striking me now because I'm settling his estate is that my dad really lived below his means. And he saved before everybody sort of realized that they needed an IRA or a 401(k). His company offered him stock at a discount and he thought that was such a good deal that he bought a lot of it. And as a result, I graduated from college debt-free. His house was paid for years ago. He pretty much lived off Social Security and a modest pension and his savings were there when I really needed it for his care. So, I think about the thing I learned most about my dad was just living not just within your means, but below your means. He would drive his cars until the wheels fell off.
And I'm sure other people thought we had a lot less money than we did, but in the long term it gave us so much more freedom and so much more flexibility to do the things that we wanted to do and to take care of things that we really needed to take care of. So, I really respect that. We weren't millionaires, but I think he lived a lot like the millionaire next door, which as the story goes, this is the guy who drove the oldest car, had the smallest house on the block, but probably had the most money in the bank.
David Muhlbaum: Right. What jumps out at me there is the idea of having freedom and flexibility and being able to take care of the unforeseen. Those are the upsides, the payoffs of that thrift your dad demonstrated. And I think that's what some people would describe as living comfortably, not the comfort of owning this or that thing, but the comfort of having reserves and knowing you're prepared.
Sandy Block: That's right. When he was getting older and medical expenses started going up or we needed to do things with the house, there was always money there for that. And I even remember him telling me, this is in his later years. He says, "When I go down to Walmart, I don't care what the grapes cost. If I want grapes, I buy them because I can afford that." So to him, that was the idea that was wealth, that he didn't have to check the price of grapes so he could just buy as many as he wanted, but I think that came from a lifetime of frugality. And the other thing it enabled him to do, which was really important to him, and I hope passes on to us, is he was very generous. He gave to a lot of charities. He had a lot of causes that were very important to him and he was able to help them out. And I think that enhanced his life. It was a very important thing to him and much more important than having a new car every couple of years.
David Muhlbaum: Yeah. That's the reward of giving, right? And I love the part about the grapes. Part of the trick of being thrifty is not letting it dominate you. To have those things where you can say, "What the heck, that's what I want, whatever." You need discipline to get to that place. But you also need self-awareness to remember to treat yourself and treat others. And please tell us something about the dogs. I understand that everyone knew him as the guy with the dogs.
Sandy Block: They all knew him as the guy with the dogs. My dad, when he retired fairly early, and that was another advantage of him having lived below his means, so he was retired on his own terms and he also had a pension. And his project, he adopted a Golden Retriever and trained that dog to do everything. And he got really interested in therapy dogs. His dogs were so well-trained that he took them to hospitals and nursing homes all over our area. The number of people that he... said he visited kept going up as he got older, but he claims he made at least 10,000 visits with these dogs. And he would just take them to visit people. Sometimes people who're very isolated, sometimes people with Alzheimer's who had never spoken, but just totally lit up when they saw the dogs and would react to them and respond to them. And the dogs were so well-trained that he could put treats on their paws and have them do little tricks and things like that. And they were very calm and really good with the old people.
Sandy Block: And that just gave him so much satisfaction. And that's what people remember about him, that he was the guy with the dogs. He would take them to Walmart and let them sit out front while he went in and shopped and come out and they would still be there, which just blew people away that these dogs would just sit patiently outside. And then he'd give them the bag and they'd carry it to the car. So they were definitely very famous in our town.
David Muhlbaum: That's awesome. They would sit outside? Unleashed, on a sit command and wait for him to come out?
Sandy Block: Yeah, on a sit command. They would sit in front of the Walmart and because people would come by and pet them and talk to them, but they wouldn't leave. They would just sit there until dad came out and then he would give them his bag, whatever he bought and they would carry it back to the car. That's how well trained those dogs were. That was his second career, training these dogs, and he was really good at it. And they were good dogs.
David Muhlbaum: Well, thank you for sharing, Sandy.
Sandy Block: Thank you for asking, David. It gives me a lot of peace to talk about my dad.
David Muhlbaum: That will just about do it for this episode of Your Money's Worth. If you like what you heard, please sign up for more at Apple Podcasts (opens in new tab) or wherever you get your content. When you do, please give us a rating and a review. And if you've already subscribed, thanks, please go back and add a rating or a review if you haven't already. To see the links we've mentioned in our show, along with other great Kiplinger content on the topics we've discussed, go to kiplinger.com/podcast. The episodes, transcripts and links are all in there by date. And if you're still here, because you want to give us a piece of your mind, you can stay connected with us on Twitter, Facebook, Instagram, or by emailing us directly at email@example.com. Thanks for listening.
Block joined Kiplinger in June 2012 from USA Today, where she was a reporter and personal finance columnist for more than 15 years. Prior to that, she worked for the Akron Beacon-Journal and Dow Jones Newswires. In 1993, she was a Knight-Bagehot fellow in economics and business journalism at the Columbia University Graduate School of Journalism. She has a BA in communications from Bethany College in Bethany, W.Va.
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