On the Afford Anything podcast with Paula Plant and her guest former financial planner Joe Saul-Sehy, one listener called in sharing her devastating outlook on retirement with a few tears as she looked for some last-minute pension advice. The anonymous caller, dubbed Betty by the host, explained that she had recently been laid off from her job at the age of 60. Betty explained that she wasn't confident she could find another job and got audibly emotional when she revealed that her son had died less than two years ago from cancer, which had "changed everything".
However, she did have one saving grace: the decision to empty out her workplace pension fund when she was a single mum had left her with a major asset. She explained: "I own outright a triplex, I live in the smallest unit and rent out the other two units as vacation properties. I generate from that about $30,000 (£23,000) per year net.
.. I used my 401K funds as a downpayment when I purchased my triplex.
It was a really great opportunity for me as a single mom really struggling to support the kids during a really bad economy where we lived in particular." Unfortunately, as a result of this move and her sudden exit from the workforce, Betty feared her retirement prospects were quite bleak with "no real pile of money", having just $50,000 (£39,000) currently in her 401K (pension) and $150,000 (£118,000) in cash. She also highlighted that she isn't expecting to receive much in terms of social security when she reaches 67.
Paula initially offered her condolences to the tearful caller, Betty, acknowledging her "tough, tough situation" after a challenging year. Yet, the financial gurus on the podcast had some unexpectedly good news for her. The podcast host shared some insights: "She has an incredible asset which is a fully paid-off triplex.
That is the equivalent of having an annuity or having a retirement account with a huge balance in it. It's the equivalent of having a portfolio that is large enough that it would generate a $30,000 (£23,000) a year annual withdraw." Paula then explained, using the 4% rule commonly applied to retirement savings, that Betty's triplex was akin to owning a retirement portfolio valued at a whopping $750,000 (£590,000).
Joe chimed in, emphasising the strength of property as an investment, particularly its ability to keep pace with inflation, but he cautioned that Betty must adjust her rental charges accordingly to truly benefit. Joe also dispensed some sage advice on retirement planning: "It's not about being a genius or complicated with your investment strategy, it's just making sure that everything is working towards the end goal. If the end goal is to make your money continue to produce a paycheque, the triplex sounds like it's doing that.
$150,000 (£118,000) sitting in cash is not." Both finance gurus scrambled to advise Betty, with calls to smartly allocate her funds. Joe emphasised the significance of emergency savings, proposing that "putting three to 12 months' worth of expenses into a high-yield savings account as her emergency fund.
" Adding her two cents, Paula chimed in with more specific guidance: "And an emergency fund that represents six months of gross rent on the triplex. Betty, whatever monthly rental amount you collect, that monthly rent times six, put that aside. That's your cash reserve for the triplex and that is separate from your own personal emergency fund.
Everything else should go into investments because cash loses money with inflation." In conclusion, Paula commended Betty for her readiness to continue working despite her insecurity about age, assuring her that health permitting, she could still be gainfully employed especially in tech-based jobs that allow remote work. "As far as I'm aware you don't have any significant health restrictions that would limit your ability to work, particularly if it comes to computer-based knowledge work which you could do remotely.
You could do anything and what's beautiful about remote online-based opportunities is no one has to know your age...
it's not relevant.".
