Independent, Fee-Only Financial Advisor

Independent, Fee-Only Financial Advisor

Monday, July 26, 2021

Money Talks: Social Security

This episode of MPB's Money Talks originally aired June 22, 2021 and is available online at http://www.mpbonline.org/moneytalks/

My favorite thing about our radio show is the callers. While each week we prepare a guest or a topic to discuss, brush up on a few points and hope to keep the conversation lively, the show really is nothing without the listeners who call in. Some have a personal question, a general curiosity or just a comment on the topic, but each becomes part of the show.

A perennial favorite show is when we talk about Social Security. Our guest is usually Shawn Mercer, District Manager from the Social Security Administration. This is always an excellent show because we get so many people calling in with questions!

The first question he tackled was my own. We have been talking a lot about inflation and the rising cost of living, and I wanted him to explain how that impacted Social Security benefits.

Shawn explained that since 1975 COLA has been automatic and based on the CPI. He recommended that we check out https://www.ssa.gov/cola for good more explanation. It is an automatic adjustment that happens around October or November each year.

While Shawn likes to remind folks that a phone call or an SSA.gov account can answer a lot of their specific questions, we still got a lot of excellent calls:

Q: Lisa from Jackson asked about how getting married would impact her social security benefits. Both she and her fiancé currently receive social security, would getting married have an impact?

A: As long as it is regular social security, and not Supplemental Security Income, getting married will not decrease either of their benefits since they received the benefits independently. You do need to report to Social Security that you got married though. As long as she was drawing benefits from her record, it would not be impacted.

Q: James was our next caller. He asked about unemployment benefits. This has been another popular topic in the last year or so, and we have had the Mississippi Unemployment office on the show a few times. He asked why benefits in Mississippi were cut off while the rest of the country still had additional federal funds.

A: This was tricky, Mississippi did cut benefits, though it was not clear why his was cut in particular.

Q: After our first break, we got a call from Jefferson County. The caller explained that she was on disability/SSI and wanted to know if she could sign up for regular Social Security now that she was 62.

A: Shawn said that the Social Security Administration should automatically reach out to her if she is eligible. If she has enough quarters of work for retirement benefits then she would be eligible. He noted that the way that they measure worked quarters is a little different for Retirement vs SSI benefits. Nancy prompted Shawn to remind the audience that you must work 40 quarters to qualify for social security retirement benefits. To qualify for SSI, you must have worked 20 quarters of the last 40.

Q: Our next caller was a man named Joseph. Joseph was still working at age 64 and considering taking his benefit. He wanted to know how much money he could make while receiving his retirement benefit

A: The limit this year to earn without penalty is $18,960. There is a reduction of $1 of benefit for every $2 that he earns over that limit. Once he reaches full retirement age, he will not have a reduction in his benefit. An important note from sea.gov might clear up some confusion in the call:

It is important to note that any benefits withheld while you continue to work are not "lost". Once you reach NRA, your monthly benefit will be increased permanently to account for the months in which benefits were withheld.

Q: Joe from Magnolia called in next. He wanted to know if there would be an increase in SSDI (SSI), he was hearing about a $200 increase. 

A: Shawn said that there might be a cost of living increase, as discussed before, but that would be a percentage, not a dollar amount across the board.

Q: Gary from Oxford called with a treat, saying "everyone can get involved in a little bit" with his question. When are you required to start taking withdrawals from Deferred Compensation and what are the social security implications. 

A: I was able to take the first part. Required Minimum Distributions start at age 72 for pretty much any deferred income account. Shawn noted that social security is "not a sole means of support" and he was glad to hear of someone having other means of support. Withdrawals would not affect his Social Security benefit as it was earned income that went against his income. Nancy was able to chime on on this as well - noting that because he would be 72 when taking the required distributions, those limits would not apply anyway.

Q: Myra from Jackson called in asking if there was a limit of time after working in which you can apply for disability.

A: Yes. Essentially a 5-year period. Sometimes they can do a longer one. More information about applying can be found at https://www.ssa.gov/disability/disability.html

Q: Annette in Madison tried to stump Shawn. She was married for 16 years at an early age, eventually re-married. She asked if she could receive income from her first husband.

A: Shawn explained that when she re-married, she gave up the right to benefits from her first spouse. If her second marriage was "not in force" they could go back and look at that first marriage for benefits. You must be married for at least 10 years to be eligible for benefits rom a previous spouse. They would look at her own benefits first.

Q: Michael called in from Mobile to ask if he passed away before his wife, would his wife receive his benefits?

A: Yes, they will look at that. They would look at both benefits for her and give her the higher of the two. As long as they were both above the full retirement age, then she would be eligible for the higher of the two. Shawn noted that this was a net loss to the household, as she would not be drawing both benefits. This is an important consideration that we make when making a recommendation on someone's social security, as the death benefit may be an important part of one partner's income.

Shawn noted that spousal benefits can start at age 60 for the surviving spouse.

Q: Robert called in from Florence. His wife takes an RMD from her retirement funds and he wanted to know how long that would come for.

A: Nancy took this question. The RMD is designed to last for your whole life, though you can take more than the required distribution, and funds could run out more quickly that way.

Q: Diane from Batesville called next on behalf of a friend. Her friend was on SSI and had been in a wheelchair since age 13. The SSI was $500/mo. Is there any additional help that she can get?

A: SSI is not based on work, but need. The maximum benefit was $794/mo this year. Shawn suggested checking if she has a disabled or deceased parent that she could draw an additional benefit on.

Q: James called in from Summit. He is between 62 and his full retirement age, and wants to know what the social security year is.

A: It is a calendar year. Also noted that in the year that you attain full retirement age, there is a higher income limit that your benefit goes against.

Q: Dale called in from Grenada. He gets his benefit paid on the second Wednesday of each month, and would prefer to receive it on the first Wednesday. Why can't they do that?

A: Shawn explained that they used to send everything out the first of the month, so they started payment cycling several years ago. If your birthday is on the 1st-10th of the month, you would receive your benefit on the  second Wednesday of the month, if your birthday is on the 11th-20th of the month, you would receive your benefit on the third Wednesday of the month, if your birthday is on the 21st-31st of the month, you would receive your benefit on the fourth Wednesday of the month. That is a fixed schedule that they cannot change. A calendar for 2021 can be found here.

Q: Janet called in from Starkville. She was married for 30 years and is now divorced. When could she get benefits on her ex-husband's record? She also asked why she had to sign up for Medicare at age 65 even though she has health benefits through work already.

A: When they check benefits on her own record, they would also look to see if she could draw up to 50% of his benefit (at full retirement age). Drawing benefits from an ex-spouse would not impact his benefit, nor could he do anything to stop her. As for having to sign up for Medicare, employers can require that employees sign up for Medicare to continue receiving other healthcare benefits.




Don't forget to tune in or subscribe to Money Talks at 9 AM every Tuesday on Mississippi Public Broadcasting, or online at http://www.mpbonline.org/moneytalks/. This episode is available online.

Friday, July 23, 2021

On the Up and Up?

Prices go up, prices go down. Why? Nobody knows.

Everyone understands the concept of inflation - we see rising gas prices on our daily commute, we listen to stories about how our parents bought their first house for a fraction of what we paid for ours, and every now and then we notice that our grocery bill has crept up a little. Inflation is rising prices - the inexorable march upwards of prices hitting our pocketbooks. As an economic indicator, measured by the BLS, it is meant to broadly capture the change in price of goods to the American consumer.

If you put all of these goods in a basket, you generally see that basket get more and more expensive every year.

At the same time that we see prices rising, though, we also see prices fall. Last year, we saw the price of oil plummet, and saw a somewhat correlated drop in the price of gas. Every year Apple announces a new iPhone that is better, faster, and stronger than last year, and the one we bought last year drops in price. Over the years, online shopping has constantly yielded newer, faster and cheaper shopping options.

Inflation can be sneaky. Sellers change the size of packages to charge the same price for less, but they also pack more features into our cars and technology and sell it at the same price. The cost of living tends to rise every year, but the quality of living often rises too. How to we measure that? The BLS adjusts the prices it sees in all different ways, and one of those ways is "hedonic adjustments" or adjustments that take into account the fact that we sometimes get more for the our dollar as products improve.

Click here to listen to this fantastic radio report on how inflation is measured.

So how does inflation affect us?

Since time and inflation affect different products in different ways, any individual will not see their budget grow in line with the published inflation number. Houses in my neighborhood that were priced at $120/sqft a year ago are $140/sqft today. The new laptop I bought for $1,500 six months ago is $1,100 on Amazon today. An EpiPen that was $400 six years ago is $700 today, though you can buy a generic version for $120 for a two pack. Gas prices are volatile and food can range from fine dining to off-brand ramen. None of this is readily obvious if I only told you that CPI was up 24% in the last 10 years.

What do all of these have in common?
Nothing... really.

Unexpected or high inflation is bad. If prices rise too quick, companies may not be able to keep up with expenses and consumers may have to cut their discretionary spending harshly.

Gentle inflation is generally encouraged in the economy, as rising prices encourage businesses to invest and consumers to innovate. Over time, a gentle rise in price and a corresponding rise in quality of life is good for the businesses selling the products and good for the consumers enjoying them. The Federal Reserve targets 2% inflation over time.

So what is going on right now?

In the news today, we hear there is high inflation. We have all seen prices rise for transportation, homes and meals out. We also hear that this is transient. Does this mean that we will get relief in our pocketbooks soon? No. The inflation is just the increase in prices. The prices may stop going up, but they don't have to come down.

Is this high inflation going to be a problem?

A lot of the current inflation is due to bottlenecks in the supply chain. Last year, factories shut down due to sick workers, mandated lockdowns or lack or raw materials. This meant that there were fewer products, namely building supplies, cars and electronics, to be sold. As the federal government stepped in to support it's citizens, demand rebounded quickly, outstripping supply. More money was competing for fewer goods, raising the prices sharply. Bottlenecks lead to more bottlenecks. 

Bottlenecks are not the only factor right now. Many raw materials and commodity prices are up. Wages and other labor costs appear to be rising. Even if other bottlenecks were freed up, these other expenses may continue to support higher prices.

Will prices keep going up forever? 

Federal government investments in infrastructure may help ease some of the bottlenecks. That should slow the rise in prices. A lot of the factors that are contributing to inflation right now do truly appear temporary. How long is this temporary? I don't know. Prices will continue to rise until supply can meet this pent up demand, or demand settles down to meet the given supply.

Tuesday, June 08, 2021

Let's go to the movies!


Back in February we talked about the interesting market dynamics that sent Gamestop from mall video game retailer obscurity to stock market phenom. Before capturing the hearts, minds and investment accounts of retail investors, Gamestop was a dying mall store in a year of close to no mall foot traffic. GME traded as low as $2.57 in April of 2020 before a passionate group of investors, plus some technical aspects of market structure sent the price to $483 in January 2021.

What does this have to do with the movies?

At the time, r/Wallstreetbets, the forum that drove the popularity of the GME trade, started looking for other companies to fall in love with. The found a most willing partner in AMC.

Movie Theatres suffered from declining attendance and revenue well before 2020 struck.


AMC (short for American Multi-Cinema) operates movie theaters all over the US and Europe. Like Gamestop, foot traffic all but disappeared in 2020. This was in the industry wide context of stagnant revenues and declining attendance since 2012. As Netflix, Disney+ and HBO Max provided better and better content, the movie industry failed to produce an experience that rivaled the customer's own living room.

They're just a big fish in a dying industry.
-New Perspectives, Inc Analyst Meredith DeLaune

AMC took in about one of every three movie ticket dollars in 2019. To get that large share of revenue they increased borrowings and paid higher and higher rents, eating into any potential increased profit. In the finance world, many investors saw their troubles and sold, or even sold the company short betting that the share price would fall further. The stock price went as low as $1.95 in March and April 2020.

In January 2021, the stock price hit a new low of $1.91.

Alongside the successful investing experience provided by Gamestop, investors at r/Wallstreetbets turned their sights to AMC. Unlike executives at Gamestop, however, AMC took full advantage of this newfound popularity. On January 25 AMC announced that they had raised $917 Million in new capital. Over the next two days, at a share price around $5, the company raised another $304.8 Million by selling shares directly into the open market.

Over the next few months, with Covid restrictions easing, AMC announced theaters opening across the country. On May 9th, they used all of this good news to raise another $428 Million at a share price around $10. June 1st they raised an additional $230 Million, selling shares privately to a fund called Mudrick Capital at a price of around $27 per share. This vote of confidence sent the stock price up further. While Mudrick sold their shares the next day for a large profit, AMC went back to the market as well, selling $587 Million more at a share price of around $50. At the same time, they announced that all shareholders would be eligible to claim a free large popcorn this summer (click here if you are a shareholder and want your popcorn!).

What is next for AMC? A rising share price indicates rising demand for the shares. AMC appropriately noticed their rising price and gave the market what it was demanding - more shares. While 2021 and 2022 will likely bring in more revenue than 2020, clever financing will only keep the company afloat for so long. The funds raised this year are only a little more than this year's lease obligations. With more movies being released online it might take more than a free popcorn to draw you out of your own living room.

We talk about shareholders being the owners of a company. With the "popcorn dividend" AMC has truly connected shareholding with ownership in a meaningful way. After all, if you owned a movie theatre yourself, wouldn't you treat yourself to a free popcorn every now and then? Imagine if Delta sent shareholders frequent flyer points, or Shell offered a free tank of gas every now and then. This would bring a whole new dimension to "investing in what you know."

Thursday, May 13, 2021

Tales from the Crypt

 Is Bitcoin and its sister digital currencies really money? 

Money represents work and earnings on that work or skill. It has 3 functions. It’s a medium of exchange. You can buy stuff with it-- trade it for food, housing, clothing, etc. Certainly, we are hearing more and more about cryptocurrency being accepted as a form of payment.

Money is also a store of value. The money I make today doesn’t have to be spent today. I can put it in the bank or under my mattress and store those earnings for another day. Okay, so crypto qualifies here.

Money is also a unit of account. That means the number of dollars, euros, renminbi, required to purchase something has meaning. When I travel overseas and find myself looking at price tags in another country, I’m clueless. They have no meaning to me, but prices in dollars and cents help me to peg a value on a good or service. Wow! That’s a good deal. Or, wow! That’s expensive. This is where crypto falters. Valuations fluctuate so widely that it is hard to translate the numbers to real value. Cryptocurrency lacks stability, and, so, fails the test on this function.

But crypto is pushing the bounds of our definition of money. We have used many types of currency through the ages. Maybe this is just a new one taking hold. At one time, we used whale teeth for money. Of course, the precious metals have had their run—gold, silver, copper. We’ve even used salt for money! Heaven help you if you had a hole in your pocket. Money has gone through many iterations as we humans have looked for ways to move beyond bartering as we trade goods. For a look at a really strange currency, check out The Island of Yap.

Money has 2 forms: commodity money and fiat money. Commodity money has value in and of itself. Think of gold and silver and even that salt. But fiat money has no real intrinsic value. Its value comes from the entity backing the currency. 

Anyone with old Confederate dollars in your attic? They only had value when the Confederacy was alive. Now, they are worthless (thank goodness). Ever pull out some coins from your trip to Canada at the convenience store? Sorry, worthless here. When it comes to fiat money, location is everything. Euros in Europe. Pound sterling in London. Renminbi in China. Each government issues its own currency, and the strength and stability of that currency is correlated to the strength and stability of that government.

But crypto is different. It isn’t issued by a government. As such, it’s not confined to a location and particular borders. And that’s what makes it so appealing. No converting from Euros to dollars and back again, with all the requisite fees in between. Supposedly, it would be universally accepted. No banker is keeping track of your account. The system is self-contained to assure coins are transmitted appropriately.

And crypto seems the natural transition as fewer and fewer actual coins and dollars are used. Rarely do I have actual dollars in my purse. My money is recorded in an account somewhere, and I pull out a debit card or use PayPal or Venmo to make purchases. The currency in my name is just a number on a computer screen somewhere, and isn’t that what crypto is? It’s just a digital currency.

In 2009, someone or some people with the name of Satoshi Nakamoto invented the first truly digital currency called bitcoin. The ability to move vast sums across borders very quickly made it quite appealing to the criminal element. The dark side of this currency caused it to languish until recently. More and more, reputable businesses are trading in and accumulating digital currency.

New digital currencies have sprouted up with names like Dogecoin, Ethereum, and even Polkadot. None are related to a particular government, but each serves different functions. Recently, we heard a presentation by an investment group solely focused on cryptocurrency. They have created exchange traded funds that own crypto and are encouraging advisors to include this in a diversified portfolio. We’re not convinced yet.

Implicit in our current system is the position of an intermediary. These are the folks who are in between each transaction as money changes hands throughout the day. They are the bankers. A digital currency that is self-contained does not need an intermediary. That sounds appealing since it would reduce cost and increase speed. Imagine going to your house closing and pushing the button at the table to transmit your down payment. Voila! Deal done.

But we still worry about the security of such a system. And we worry that the crypto we own today will lose value overnight. So, maybe it’s just not money… yet.

Certainly, crypto investors have been reaping big benefits in the last couple of years. Our presenters from Bitwise Asset Management told us to NOT think of it as a medium of exchange. They describe it as a new technology that can speed up the pace of business while keeping costs low. They also said to think of different types of crypto like different types of software.

It’s all so bizarre! Programmable money? Coins created from mining. Mining is just the solving of a puzzle. Coins stacked in blocks to create a blockchain. Money or not? Sort of. Maybe. But it’s crazy popular right now.

So how do you get your hands on (computers on) some crypto? Well, you can’t go through your regular brokerage account. You’ll have to go through a crypto-exchange like Coinbase or Gemini. Robinhood can give you access. You can also sign up with an investor group. There are several private crypto funds. BITW is the publicly traded exchange traded fund that we heard about.

But be careful. This is new. It’s exciting. It’s cutting edge. But it’s risky. As for us, we’re taking a “wait and see” approach. Digital currency may be the wave of the future, but, right now, it just feels like a tsunami. 


Saturday, February 20, 2021

Financial Resilience And Mutual Aid

We can't plan for every crisis. No matter what your financial resources are, you will find yourself in need some day. While money cannot buy you everything - the community you cultivate around yourself will always be a valuable asset.


There is a type of investor that always believes the world is ending. They may short stocks on the thesis that companies will stop making money, or are just fraudulent houses of cards. They may buy long term US Treasuries, putting their faith in the dollar and nothing else. They may eschew the dollar and our traditional financial system altogether, buying gold coins and bars just in case the apocalypse comes and nobody will take their dollars or buy their stocks.

Many years ago, one of the first investment fund salesman I met with had a streak of world ending beliefs. He painted a different picture, one that departed from a traditional investment portfolio.

“So, do you even garden?”

I explained I had been a gardener from a young age, and had just helped my mom plant blueberries and muscadines in her yard.

“Well, you probably don’t have chickens.”

Funnily enough, my roommate and I had just built a coop and bought three hens. We weren’t the only urban poulterers in the neighborhood either!

As amusing as it was for me to parry each claim of his, he had a unique way of looking at an “end of the world” scenario that has colored my thinking ever since.

He didn’t picture an asteroid wiping out half the earth or a foreign army marching down my street. He painted a picture of general decay, lack of services and a population growing more and more in need. The future he described was one where city and state services were less reliable, supply chains didn’t always link up and communities would be forced to rely more on what they could produce themselves.

In the world he described, your talents and your community are be the most valuable things you possess. As it turns out, these things are a valuable part of anyone’s financial picture. What we have seen recently is that a strong network is a community that supports you in times of crisis.


long abandoned grocery store in Chernobyl
When your world falls apart, who, not what, will you depend on?


It is valuable and important to have skills that you can rely on. The salesman gave an anecdote about darning his socks on a recent business trip, and noted that I had chickens to supply my breakfast every day. Being able to cook for yourself and perform repairs around the house not only save you significant amounts of money in the short term, but make you less reliant on others in the long term.

Many “end of the world” investors may also advocate for preparing for the end of the world: buying farmland, stocking up on canned goods, guns and tools. That is not a practical, or desirable course of action for most people. We can do something that humans have done for millennia: rely on our networks, neighbors and communities for mutual aid.

Mutual aid is simply people helping each other. People have been helping each other since time immemorial, how is mutual aid different? In a world of increased reliance on our friends and neighbors, mutual aid represents a more organized effort to allocate the resources of a network. Importantly, as the name implies, mutual aid is a two way street - you give what you can and receive what you need.

You are the first person that you must be able to rely on. Take the time to practice a new skill instead of relying on a paid service for a small repair. Keep your tools sharpened and your pantry filled for the times when you need to support yourself. When I moved into my house, I spent $800 to have someone replace a few broken window panes. The next cracked pane I noticed was fixed with $20 spent at a local hardware store and 20 minutes spent reading and watching videos.

When I was young, my mother would send me running to the neighbor’s house to borrow a cup of sugar. Being able to rely on a community for needs, small or large, is a huge financial benefit. In the moment of fixing dinner, being able to rely on a neighbor for a single ingredient saves a huge amount of time and strengthens social bonds. I have since leaned on my neighbors for housing for guests in town for a wedding or funeral, help moving, to borrow a truck, job recommendations and even the occasional piece of legal advice.

Your community will support you, but you need to cultivate relationships that you can rely on. People often turn to their churches, neighbors and professional organizations in times of need. Know who your community leaders are and who can connect you with resources when you need it. In the most recent ice storm, I have seen friends sharing important information about city services and offers for hot food. My network can connect me with resources, even if it is not my friends directly supplying them.

It is not a community unless you turn around and support it. Through the years I have also cooked for those in need, helped cut fallen limbs and lent a helping hand where needed. None of this has been a one to one relationship or an intricate system of favors. When you give freely to your community, it grows stronger. A strong community will support you when you are in need.

Supporting your community is how you strengthen it. Volunteer in organizations that you belong to - your church, your neighborhood and professional organizations all have ongoing needs that you may be able to help with. When you see or hear of a neighbor in need - support them. Deliver food for those shut in or suffering 

Looking back on difficult times, we often note that it is the people in our lives that got us through. While income, cash in the bank and insurance help, the biggest impacts come from our community.

Mutual aid can be as small and direct as borrowing a cup of sugar from your next door neighbor, to as big and indirect as helping arrange to feed strangers across your city. In every instance, it forms a valuable part of your well being.