Meir Statman (00:00):

When you die at 95, your kids are going to be 65. Surely, it’s nice to get millions when you’re 65, but wouldn’t it be better if you gave, say, tens of thousands when they are in their 20s and 30s than give them millions when they are in their late 60s? The answer in my mind is no. Give money to young people in their 20s and 30s when they need them.

[Music Playing]

Stephanie McCullough (00:37):

Hey, dear listeners, we need to let you know that Kevin and Stephanie offer investment advice through Private Advisor Group, which is a federally registered investment advisor. The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations to any individual. To determine which strategies or investments may be suitable for you. Consult the appropriate qualified professional prior to making a decision. Now, let’s get on with the show.

Stephanie McCullough (01:12):

This is Take Back Retirement, the show that’s redefining retirement for women. Retirement is an old-fashioned cultural concept. We want to reclaim the word so you can make it your own. I’m Stephanie McCullough, financial planner and founder of Sofia Financial, where our mission is to reduce women’s money stress and empower them to make wise holistic decisions so they can get back to living their best lives.

Kevin Gaines is my longtime colleague with deep knowledge in the technical stuff: investments, taxes, retirement plan rules. He’s a little bit giggy and quantitative, I’m a little bit touchy-feely and qualitative. Together, through conversations and interviews, we aim to give you the information and motivation you need to move forward with confidence. We’re so glad you’re here.

Stephanie McCullough (02:00):

Coming to you semi live from the beautiful Westlakes office park in suburban Philadelphia. This is Stephanie McCullough and Kevin Gaines of Sofia Financial and American Financial Management Group. Say hello, Kevin.

Kevin Gaines (02:11):

Hello, Kevin. Well, welcome to today’s episode of Take Back Retirement and fanboy Kevin is getting to live out one of his fantasies again. We have, at least for Stephanie and myself, the ever exciting and thought-provoking Dr. Meir Statman. And I’m just going to leave it at that, Stephanie, because otherwise I’ll just go on.

Stephanie McCullough (02:37):

Well, Meir Statman is a pioneer of the field of behavioral finance. He is a professor and researcher at Santa Clara University, and he attempts to understand how people make financial choices and how the choices are reflected in financial markets.

Stephanie McCullough (02:52):

Some of the questions he addresses in his research are things like, what are the cognitive and emotional shortcuts that we take when we’re out there making financial decisions and what are our wants and how can we balance them? And you’ll hear as he talks with us that he dives into some of that.

Stephanie McCullough (03:11):

I do want to say just quickly that Professor Statman is going to speak about dividends and capital appreciation. And I just wanted to give a tiny bit of background that kind of, the traditional economics said that if you own a stock and you got a dividend from that stock, right, which is shared the profits of the company, that feels good, feels like income.

Stephanie McCullough (03:32):

But the traditional folks said that, “Well, yeah, if you didn’t get one, you could just sell a little bit of your shares, and you’d get money anyway. And they’re the same.” And then Professor Statman is going to talk about his research into why it’s actually different. Alright. Without further ado, let’s dive in.

Stephanie McCullough (03:53):

Meir Statman, welcome to Take Back Retirement.

Meir Statman (03:57):

I’m delighted to be with you, Stephanie and Kevin.

Kevin Gaines (04:00):

Yes.

Stephanie McCullough (04:00):

It’s such a thrill because I might’ve mentioned to you in my email very early on in my career change to become a financial advisor, I heard you speak at a conference and I think it was one of the first times I’d heard about behavioral finance and really acknowledging that human beings aren’t always perfectly rational when making financial decisions. And it really opened my mind, and I thought, “Oh, this stuff is so much more interesting than just numbers and spreadsheets.”

Meir Statman (04:30):

Well, thank you. Thank you. I’ve always been interested in people as everyone is, trying to make sense of myself and trying to make sense of others and in the process, trying to expand the circle often as to speak about normal people, people like me and you and the people who are listening to this podcast.

Stephanie McCullough (04:52):

Yes. We appreciate it. So, you have this new book out, A Wealth of Well-Being. So, tell us why this book and why this book now?

Meir Statman (05:04):

Well, I just noted it is really important to speak about normal people, not rational people, not irrational people, but normal people like you and me. We are so interested in people and somehow when we get to finance, we don’t talk about people, we talk about numbers.

Meir Statman (05:32):

And it really makes no sense, you know. There are a ton of articles about how you should spend your money in retirement, such that you spend your last dollar on the day you die. And I’m saying this is crazy. It is people who know math but have never met a person it seems.

Meir Statman (05:56):

And so, that really is what I’ve been trying to do. And it is both fun and it is a vocation for me. I really enjoy both the teaching part of it at Santa Clara University and the scholarship part. And I am trying always to reach beyond the classroom and beyond my academic colleagues to speak to professionals, people like financial advisors, and to people more generally.

Meir Statman (06:31):

People who are retired, people who are not quite retired, young people, old people, make sense of them. And in the process makes sense of my own life.

Kevin Gaines (06:44):

So, Dr. Statman, let me just say, because you made a comment about rational versus irrational and one of the most annoying things about our field and as a economics major, I’ve been guilty about this for a very long time. It’s always the assumptions. We assume everybody’s going to do everything correctly for the right reasons at the right times. And that’s how we come up with all these theories. But frankly, that world’s bunk, correct?

Meir Statman (07:17):

Well, not entirely. I mean, there is something good about the logic of rationality. So, let me kind of give you a sense of it from my personal history and the history of finance along the way.

Meir Statman (07:33):

And so, I studied at the Hebrew University, economics like you and statistics and finance later on for the MBA. And I studied as all students do the work of Miller and Modigliani and both of them Nobel Prize winners in time. And what they showed is that dividends and capital appreciation are the same.

Meir Statman (08:05):

And the recommendation, I guess, that follows from that is that we should pay no attention to dividends. That all that matters is the overall return, say of a stock. And yet people pay attention to dividends and make a distinction between dividends and capital appreciation. Why?

Meir Statman (08:26):

This question has stayed with me. And when I came to New York in 1973 in the summer, just before the energy crisis and the Yom Kippur War that just preceeded it, there was a shareholder meeting, ConEd, the utility company of New York. And it had to do with the fact that ConEd stopped paying dividends and they had to stop paying dividends regrettably, they said, because the cost of oil has gone up.

Meir Statman (09:12):

And that, of course, is a big input for them. While they were not allowed to raise their fees, raise their rates. And so, it was really touching and sad that woman at that meeting said, “I used to have a husband, now ConEd is my husband. I live on those dividends, what do I do now?” And I was thinking, why are they so mad? I understood that, but she surely did not fit into the notions of rational finance.

Meir Statman (09:50):

And when I came to Santa Clara University at the very beginning of the 1980s, I met my colleague, Hersh Shefrin, who was working with Richard Thaler, who eventually got a Nobel Prize on issues of self-control, self-control and saving and spending.

Meir Statman (10:10):

And it just hit me, here is the solution to the dividend problem. And so, we worked on it together and what we said is that people may not be rational but doesn’t mean that they’re stupid. They are smart in their own way, in our own way.

Meir Statman (10:30):

And the point is that we all make a distinction between what is capital like a 401(k) and what is income, what is our salary and dividends and interest. And we follow a rule that says spend income, but don’t dip into capital and selling stocks to create what Miller and Modigliani said was homemade dividend is not something that comes naturally. It is something that violates don’t dip into capital. And so, we ended up writing a paper about that.

Meir Statman (11:11):

Now, the field in the 1980s was just beginning, it didn’t even have a name as behavioral finance. And the focus was on people being irrational, like making a distinction between capital and income, like trading too much. And so, we called them irrational people. And I have made my contributions to that of the literature as well.

Meir Statman (11:39):

But then I was thinking, people, I’m neither rational nor irrational. They are normal people like me and you, as I said. And so, let’s see what it is that they really want. And I was working on issues that have to do, say with social responsibility. So, some people are willing to give up some returns to be true to their values. For example, excluding fossil fuel manufacturers. And that applies to me as well.

Meir Statman (12:08):

I always have this analogy, and I say, imagine that you are facing an Orthodox Jew and you say, “Listen, pork tastes pretty good and it costs less than kosher beef. Why don’t you buy and eat pork and donate the savings to your synagogue?”

Meir Statman (12:26):

Well, everybody understands that it is crazy, that it is stupid because we care about being true to our values. We want utilitarian benefits. We need to eat, we need shelter, but we also want expressive benefits saying who we are, like an Orthodox Jew and emotional benefits. How do we feel about what it is that we are doing?

Meir Statman (12:54):

And so, someone who really is concerned about their environment so much that they want no fossil fuel stocks in their portfolio have expressive and emotional benefits by excluding them. And from that, I moved further, and I said, okay, let’s expand it further. What do we want? What do normal people want beyond those utilitarian, expressive and emotional benefits? We want well-being, we want life well-being.

Meir Statman (13:24):

Now we need financial well-being for life well-being. We cannot life well-being if we are homeless, but we want more. And life well-being has many domains. It has family and within that marriage and children and divorce and widowhood, and we have friends, and we have education, and we have work and we have health, and we have religion and society, all of these matter, all of these are kind of like your portfolio. They’re not going to be all perfect.

Meir Statman (14:02):

But life well-being is some combination of these, just like a portfolio is a combination of stocks and bonds. And that really is the center of my most recent book, A Wealth of Well-Being, where I focus on those issues of life well-being, how it is that we can manage, given that not all our domains are going to be perfect.

Stephanie McCullough (14:34):

And the interesting thing is that they’re interconnected. I have seen examples where financial advisors have given clients advice that might have been the one piece of advice that would maximize their wealth, but was ignoring other parts of it. Right? Per your example of suggesting someone eat pork. I have a client who’s a widow and she has an adult daughter with special needs. And her previous advisor said, “You can’t afford to support your daughter anymore.” Well, that’s not an option, right?

Meir Statman (15:07):

Yeah, I laugh, but of course it is really sad [Stephanie McCullough overcross: Yes]. It’s really, really sad when you hear that. Yeah. I tell the story early on, at the beginning of the preface of my book about a financial advisor who came to me after a presentation I gave where I talked about those issues.

Meir Statman (15:30):

And she said, “I started crying when you said it is better to give with a warm hand than a cold one.” Because it turns out that she gave her son as he was about to go in to university, she gave him some $27,000 as a loan. And now that he graduated, she wanted him to pay by agreed upon schedule. But the young man was broke.

Meir Statman (15:59):

She said, “He doesn’t even have money to buy an engagement ring for his girlfriend.” And you can imagine what it did to their relationship. And here is an example of that portfolio that is, she had plenty of money, she said, it was not a problem for her to forgive the loan.

Meir Statman (16:20):

Now forgiving the loan would make her a bit poorer, of course, but it would add well-being in the family domain, the parents and children part of it by more than she is going to lose in wealth. And so, what is the point of not saying, “Son, this money is yours. Go get that engagement ring and more than that I’ll pay for the wedding.” It is.

Meir Statman (16:52):

And so you know, I was thinking about my own life when I got married. I was 22. Navah, my bride, was 21 and we are still married.

Kevin Gaines (17:05):

Congratulations.

Meir Statman (17:06):

And we were both students at the Hebrew University. And a few months before our wedding, my parents drove up to meet Navah’s parents and we had dinner together. And after dinner, Navah and I were excused to go for a walk. And our parents sat down to business, business meant figuring out how much each pair of parents is going to give the young couple to get them going on their house on an apartment in Israel. Well, my parents were never wealthy and at that time they were even less so. Navah’s parents had even less, but they really scraped to give us what we needed to have a down payment on an apartment. You can see how this applies to well-being.

Meir Statman (18:06):

This is what, of course, we have done for our own daughters. It is eventually a not well-being. I don’t know what it is that people talk about when they talk about family without noticing that there’s such a thing as family that is we care about our old elderly parents. We care about our children. In fact, people in the United States, supposedly we are an individualistic society where it is really a matter of a couple children until they are adults, until they’re 18. Parents, elderly parents who cares about them. Well, in fact, it is not so. In real life, people care about elderly parents, people impoverish themselves to take care of elderly parents and people impoverish themselves to take care of say disabled children.

Meir Statman (19:01):

And there is you know, there has to be a balance of course between these. But we forget what life is about. It’s about well-being. And well-being means in part, taking care of the people who are close to us. And if we can, taking care of people who are further away from us by say, donating or money or time to help people who are not as fortunate as we are.

Stephanie McCullough (19:37):

Well, it seems like that’s one of the big themes that I took from the book is that money isn’t an end in itself, right. I mean, we do all this studying around money and wealth and investments, but what’s the money for? And it is for that well-being for ourselves and our loved ones, in my opinion.

Meir Statman (19:55):

Of course it is. And in a way it really, there’s nothing new about it that is … I think that the only people who have to learn that are financial advisors. Normal people know that [Stephanie McCullough overcross: Yeah]. But what I did in the book, there’s a whole lot of literature about well-being, about life well-being by sociologists and psychologists and people in law, and of course people in economics, but not really in finance. And of course, they do kind of scholarly work as I do. I’m a professor. And so, what we do is we do statistics. We get kind of general conclusions, for example, that having a disabled child reduces well-being by 10%. But this is kind of dry. And what I try to do is to marry those general conclusions from systematic studies with stories that are about real people.

Meir Statman (20:55):

People for example, a couple with two daughters and one died of cancer when she was 14. What can be worse than losing a child? We know that we are all going to die, but surely having a child die before we do is pretty much the saddest that I can imagine. And so, I try to bring those stories from my life, but of course from the lives of so many into it to really make sense and make it interesting and connect, I think that what will happen is that readers will see themselves in it. They will see other people, they will not understand all of them. They’re going to shake their heads and say, “Here is a man who wants to live forever.”

Meir Statman (21:59):

And so, he is going to be on a special diet. He is going to go to bed always at nine, always sleeping alone. He cannot be married. He drives slowly, so not to get into an accident. And so, I say, “Hey buddy, have you forgotten that there is life beyond a long life?” You know! We talk about longevity as if this is the issue. No, the issue is life while you are alive.

Kevin Gaines (22:33):

I mean, isn’t that the old saying, now I’m drawing a blank on it that you know, life is what happens while we’re making plans or something like that.

Meir Statman (22:41):

Yeah. They say it in Yiddish, and they say it in all languages, man plans, and God laughs.

Kevin Gaines (22:49):

Yep. Absolutely.

Meir Statman (22:51):

Yeah. And so, we have aspirations, when aspirations put them side by side with where we are with our situation. There’s this famous finding of a U curve of well-being, of evaluative well-being with age that is young people have relatively high well-being. They place themselves say high on a ladder that goes from zero, the worst life that you can imagine to 10 the best life. And then well-being goes down until middle age and then it begins to go up. And as you can see, I am beyond middle age. And so, I can testify that that is true for me.

Meir Statman (23:42):

Now, here’s what happens, when you are young, especially as you move to become, to be middle aged, your aspirations are greater than your situation. And so, this means that well-being is going to be declining. In fact, among young people today, well-being is lower than years ago because of the internet, because of Facebook, because people compare themselves to what they see on Facebook, their friends do. And they forget the adage of don’t compare your insides to other people’s outside.

Stephanie McCullough (24:26):

Yeah, I love that one.

Meir Statman (24:27):

So, they think that everybody is having a swell time over the weekend, only they stayed home and watched some movie. Now life goes on. We have aspirations and those aspirations drive us to do what is really going to enhance our well-being.

Meir Statman (24:48):

And so, for example, for me, I had a boring job in Israel when I graduated from the Hebrew University. I decided to take what I didn’t think of as a risk, but it was a risk coming to the United States to get a PhD. What will happen?  You know I might not be able to finish it. I might not get a job as a professor. But I felt compelled to do that because I aspired to a job that not only would pay decent income, but will be me, will be a vocation beyond something that pays for food and shelter.

Meir Statman (25:29):

And I was fortunate that my bet came on the positive side. Not everyone is so fortunate, of course. Now that I’m older, you know I’ve not achieved all my aspirations, but I’ve kind of say, “Hey, who cares?” I’ve done reasonably well you know. Some people win Nobel Prize. I have not. I will not, but that’s fine. Most professors, even those who do good work, don’t get Nobel Prizes. And that is perfectly fine. And so, I let things slide. I’m really happy with the small things and I’m happy that I have the ability to help other people. That is both in money and volunteering. My wife does a lot of volunteering for the National Alliance on Mental Illness and we both find well-being in being able to give away money and time because we have plenty of it.

Kevin Gaines (26:40):

So, Dr. Statman, you said something here in general that gets to one of the chapters in your book talking about saving versus spending. And I actually kind of like what you were just saying that it’s not even just … or even though you didn’t say this, what I interpreted was, it’s not even just dollars. It’s I’m willing to sacrifice today to go to school, to have a vocation and hopefully have a better life.

Kevin Gaines (27:06):

So, sacrificing now for the future. But when it comes to actual dollars, Stephanie will tell you as well, we have this battle with clients and it’s not, we’re telling them they have to save and they want to spend, it’s a battle they’re having with themselves of how do I get comfortable with doing some sacrificing now, but also being okay with spending money now.

Meir Statman (27:37):

You can overdo it both ways. We talk about the young as if they are just spending too much all the time. It is not so. That is when I look at my students both undergraduate and graduate, they’re very responsible people. They, Of course, they spend money on vacation. They spend money on tuition. They educate themselves to bettering themselves through education, through moving to another career. And so, what people do when they are young, they really invest in themselves. Really, If you think about risk, I like to say that the biggest risks in life are not in the stock market. If you want real risk, get married. And if you want more, have children.

Meir Statman (28:30):

But it is more than that. If you think about risks that pay off, then for young people, they’re not really in the stock market. They don’t have much money. It is in careers. That is, I just told you the story of my career. This is how I made it not by investing in Bitcoin. It is by getting a good job, doing good work, saving from my income, investing it.

Meir Statman (29:03):

And then I become accidentally wealthy as I am. So, we learn good lessons from our parents, and I can talk about it some more. And the people who are good at saving are conscientious people. They are the people who have those rules of spend income, but don’t dip into capital. But then comes retirement, comes a time when they are no longer earning income. What do you do now? People have been so good at saving, find it really difficult to switch to spending.

Stephanie McCullough (29:44):

We see this with our clients. It’s frustrating.

Meir Statman (29:47):

You know! It is odd whenever I speak with people, they say, “You are describing my parents.” Navah’s mom, she was a widow at the time, she was in her 90s, she had a rickety sofa, Navah, and her two brothers said, you have to get a new sofa. She said, “The sofa I have is perfectly fine.” Finally, they tossed out that old sofa and put in a new one. And so, she smiled, and she said, “You are dipping into your inheritance. Sure. But that really is, sometimes you have to kind of force those old people to see that their eyesight is not as good.

Meir Statman (30:39):

So, they think that the carpet that they have in at home looks like new. No, but the stain, it’s shaggy. It is from the 70s, come on. And so, you’ll have to get them to spend not beyond their means, but lots of people, and I’m sure that you’ve seen them in your practice, lots of people have, in fact, millions, have more than enough to spend.

Meir Statman (31:10):

How do people know? Well, people should speak to advisors like you, and you can do a spreadsheet and say, “So, from your 401(k), from your social security and other sources of income, you have this much, here’s your budget that you are currently spending. I’m not trying to get you to spend less.”

Meir Statman (31:34):

You are going to die with money left over. When you die at 95, your kids are going to be 65. Surely it’s nice to get millions when you’re 65. But wouldn’t it be better if you gave them, say, tens of thousands when they are in their 20s and 30s than give them millions when they are in their late 60s?

Meir Statman (32:00):

The answer in my mind is no. Give money to young people in their 20s and 30s when they need them. And of course, if you have a disabled child as Navah and I do, support them, what will you do?

Meir Statman (32:20):

I mean, these are your kids. There is such a thing as love. There is such a thing as responsibility. Would we accumulate more money if we didn’t support our older daughter? Sure. We are fortunate to have the money to support her. And we are even more fortunate that we have a younger daughter. And that younger daughter loves and supports her older sister. And so, you can see our well-being is higher now than it was years ago when we were trying to struggle figuring out what is going on with our daughter and why is it she not developing as we would expect from a daughter who we knew as a smart, talented girl who wanted to be a lawyer. Well, that did not happen. But she, as I say, in every conversation at the end, she says, “I love you.” What more can you ask for?

Kevin Gaines (33:27):

I just got to circle back because I can now not let my wife listen to this episode because literally this weekend we were out shopping for a new sofa, which objectively we do need, but I keep fighting her on it because … and we have the money to pay for it. I don’t like the idea of spending money on a new sofa. I mean, the thing’s technically still intact, but I keep coming up for excuses why I don’t want that couch or this couch. But the honest answer is I don’t want to spend the money.

Meir Statman (34:09):

Yeah, my mom would say, “Spend money, but don’t waste it.” Tell your wife that and tell yourself even more that yeah, it is not wasted, you know. I think as you say, you can afford it, this old sofa, maybe it does not break when you sit on it, but it is really rickety and worn, time to get a new one and enjoy it while you are still alive and get to enjoy it.

Meir Statman (34:43):

It is really important to kind of pause just as you did and ask yourself, “Is that really reasonable?” I’m not talking about what a rationale or irrational. Is it just smart for you to just, especially if your wife says it’s time to get the new one, Kevin. So, I think that your wife is going to like my words, get that sofa Kevin. It is a fine balance. How do we find that balance? We sort of learn from our parents, and it is part of our personality. People who are conscientious are people who come to meetings on time and study for an exam rather than go to a party and so on. It is really associated with self-control, but there’s such a thing as too much self-control and too many older people have too much self-control.

Meir Statman (35:48):

And I think that it is just as prevalent as insufficient self-control. So, we talk about those young people who drink lattes and blah blah, but when we helped our younger daughter buy a home, and it was not really renovated since its beginning, since it was built in the 1950s, it needed a lot of work. It needed, among other things, windows. She wanted to buy vinyl windows. I said, “You should buy wood, aluminum clad wood windows.”

Meir Statman (36:26):

She said, “I looked into it, aluminum clad wood windows cost double what vinyl windows cost.” She said, “Well, it is still too expensive.” I said, “What do you care? I’ll pay for them.” She said, “No, it’s still too expensive.” Eventually she did buy and I install them, but I was just marveling, here it is. We never talked about it in terms of lessons, you know. You have to save money if you want to buy a bike, blah, blah. But somehow, she watched us or perhaps part of her nature, and she’s a responsible kid. She’s not stingy, but she is a prudent. And so, I know that giving her money is not going to be wasted. It is really going to be, as she said, it’s nice to have a cushion. Of course, it’s nice to have a monetary cushion because sometimes stuff happens and you need that. And it’s nice to live knowing that if something were to happen that you’ll be fine.

Stephanie McCullough (37:33):

Kevin, I’m going to ask this one because I know it was on your list of things. Professor Statman, you’ve talked about the well-being that our families afford us, but what about our four-legged friends, our pets? This is near and dear to Kevin’s heart.

Meir Statman (37:49):

Well, I don’t know. So, I have two daughters, as you know, by now, and they are both cat ladies. Neither of them has kids and both of them have cats. I cannot stand pets. This idea of having a dog lick me is really pretty much disgusting.

Stephanie McCullough (38:15):

I’m with you on the dogs.

Meir Statman (38:18):

And I don’t want a dog. Actually, when we were moving from Philadelphia, when we lived there, our older daughter wanted a dog. And I said, “Well, we cannot have a dog because we live in an apartment, but when we have a house, we’ll get a dog.” Well, we moved, and we had a house. Where’s the dog? The truth reared it’s head. Well, I had to just disappoint her, you know, no dog. But when she was on her own, she got a dog and she got a cat and, and so on. So, I kind of intellectually understand that, that people like dogs. Intellectually, I understand that for some people, their dogs are like children that they really grieve when their dogs or cats die.

Meir Statman (39:12):

I cannot really put myself in their shoes emotionally, but it’s even more than to each his own. I can understand that beyond just the intellect, that people become attached to their four-legged friends as I am attached to my daughters when they were babies and when they were growing up.

Meir Statman (39:39):

And they probably tell stories about that dog when he was a puppy and doing those funny things. And I can tell stories about our daughters you know, who when our younger daughter was two and I would take her to daycare, she would sit on my lap and would not let go. And if I made a move, like I’m going to leave, she would hold tighter. But if I just relaxed, then she would spot the friend and she would run. And it is such a wonderful story to remember along with photographs that we have of her, of both of them when they were young.

Meir Statman (40:31):

Yeah, yeah. And think about children. I mean, there was a time when they’re actually useful in a utilitarian sense, you know. They’re going to help you in the field and they’re going to take care of you when you are old. There was no such thing as pension. Pension meant the children are going to take care of you. But now children, utilitarian wise, are a burden. You spend money on them and then if all goes well, they are out of the coop and taking care of themselves. You don’t even expect them to take care of you. Or at least if you are expected, you don’t demand it.

Meir Statman (41:18):

And God forbid something would happen to them and they die. I was once walking with my younger daughter and her husband and my wife. And we passed a funeral home. There was an older man and a younger one, likely his son. And they were shoving a casket into one of those hearses. And I said to my daughter, “Please don’t treat me like a luggage, just cremate me. And you can use the ashes to feed the redwoods in our garden. Make something useful out of them.” And God knows, I just shudder at the thought that something would happen to them. And I know, and I tell stories of what happens sometimes kids, God forbid, kids die before their parents. What do you do? You just hope for the best.

Meir Statman (42:29):

And this is what families and what community is. In Judaism, there is a tradition of a shiva that is people who are mourning sit at home for seven days and friends and family come over, they bring food and they bring boards of comfort because we are really part of a community. We help others and they help us. And when we share our pains with others, the response invariably is one of empathy and one of sharing that is when I talk to, say colleagues about my older daughter who lives with bipolar illness, they may not have kids that live with bipolar illness or have some disability, but usually their lives are not perfect either. And they’re likely to share some of those things that are painful to them.

Meir Statman (43:36):

And then we become friends, moving from being colleagues and acquaintances to becoming friends because now we know something deep about that person that enhances well-being or detracts from it. And one way we heal injuries is by having other people heal them. So, as I said, we have money, so we can take care of our older daughter. And Navah, as I mentioned, does a lot of volunteer work for the National Alliance on Mental Illness, NAMI, helping other people. And we both Navah and I get a lot of well-being from being able to help other people who are in need.

Stephanie McCullough (44:33):

Well, and one of the things we talk about with our clients as they look towards retirement, whatever that might mean to them, but certainly as we look towards growing older, is how do you invest in that community so that even if you are part of a couple now chances are one of you will outlive the other. Maybe your kids live nearby, maybe you don’t have kids, but how do you craft a community around yourself so that you are not on your own as life happens?

Meir Statman (44:59):

And you have to craft that long before you need to. And you do that by helping others. You do that by just knowing that stuff is going to happen. And so, having that is really important. You are going to have a circle of friends who are close and you’re going to have people who are further away, but then ,but still close enough to come and help when needed. And I envy generally women are better at it than men. Not always, but somehow that is on average true. I say when I go with my wife to the grocery store, my wife would pick conversations with fellow shoppers. She would say, “What do you do with this kind of vegetables?” When we go to say Chinese type grocery store, I just stand there, and I stand there at the checkout counter and I keep silent.

Meir Statman (46:05):

And that’s a problem. You can see those stories in the book where there are widows who say, “I don’t really need to marry now I have enough friends.” But men, widows are eager to get married because they’re used for having somebody who’s going to take care of them. And I’m not talking about cooking, I’m just talking about a social circle that women have created, that men their husbands get to share in, when that wife is gone, they are totally lost. I saw that in my family when my mom passed away before my dad.

Stephanie McCullough (46:49):

Yeah, I think that’s often true.

Kevin Gaines (46:51):

So, over your career looking into and researching all of this, what changes have you noticed among people? Not so much how the field has changed and what you research, but have you seen changes in attitudes of us?

Meir Statman (46:10):

Well, I think It change some—that there are many changes. One of them is that now people are less likely to have pensions. Now, really, just a quarter of people in the old days had pensions, but my parents and Navah’s parents had pensions. So, in some way it was easier for them to give us money when we were young knowing that they’re going to have a pension when they grow old. And so, now you have that anxiety of, “Will I have enough?” And still the reluctance to buy, say an annuity that will assure you of income when you are older.

Meir Statman (47:55):

And so, you have this really sense that you are on your own. And I think this really is where advisors can be really, really helpful in providing that perspective. Even if you don’t buy an annuity, how is it that you spend and find the path between being a miserly and being a spend thrift, that really is most important in terms of the environment. And then it is a matter of kind of setting your expectations, of setting your comparison groups right. I worked on papers with someone who is a billionaire. Well, I am a few million short of a billionaire, but I didn’t compare myself to him. You know! We were working side by side like two academics, but it is very hard not to compare myself to some fellow professors, especially ones that teach side by side with me at Santa Clara.

Meir Statman (49:00):

And I kind of, I have to catch myself and say again, “Hey Meir, you are doing fine. Somebody is more successful. That is fine. You can live with it.” And so, people on the whole, people are the same, generation after generation. What changes are the circumstances, and we have to kind of deal with those. And so, younger kids today have to deal with the fact that people lie, you know, that people lie. On Facebook, they will say, “My husband is awesome.” On internet search they say, “My husband is a jerk.”

Meir Statman (49:52):

And so, I had really kind of to guide a student who became a friend and who said, “All my friends—all the people I know have those wonderful lives.” And me look at me and I had to say, “Hey buddy, people lie, calm down and count your blessing.” So, the same thing. Yeah, I’ve heard count your blessings from my mom. I say it to my kids and to my students. In this sense, people have not changed, but the world has changed.

Stephanie McCullough (50:29):

Oh! I think that’s a great place to circle it up. Thank you so much for being with us. How can people find you and find your work if they want to learn more?

Meir Statman (50:37):

Well you know—look at—, put my name in and see what comes up. I’ve done some stuff that you can see on YouTube. I have written several books, and again, I know I mentioned it before, but A Wealth of Well-Being is a very interesting book and you might even want to buy it in a hard form, in a way to listen to it, a way to read it online. Exactly. Show them the book. Yeah, exactly.

Stephanie McCullough (51:13):

Yes. We’ll be linking to it for sure.

Meir Statman (51:15):

And you know what? It’s very easy to find my email on the internet. Write to me, share your experiences. I will keep them private, I might use them, but surely without disclosing your identity, those stories really matter. And those stories that you think of as just yours, those stories hold lessons for all of us. And so, I’m always eager to hear them and eventually use them.

Stephanie McCullough (51:50):

Oh, that’s wonderful. Thanks again for all your time today.

Meir Statman (51:54):

And thank you-

Kevin Gaines (51:54):

Appreciate it.

Meir Statman (51:57):

Stephanie and Kevin, it was a delight to speak with you and I hope that the listeners are going to enjoy it.

Stephanie McCullough (52:01):

Excellent.

Kevin Gaines (52:08):

Where to begin, Stephanie? Well-

Stephanie McCullough (52:11):

Okay. I wrote this quote down, Kevin, “the issue is life while you are alive.” I think that sums up the message of his new book, A Wealth of Well-Being, really well, right. It’s not just about the money and accumulating the money, which is why we were so excited to have him on, because I think that fits very well with what we’re trying to tell people.

Kevin Gaines (52:32):

Right. Well, I mean that’s the thing that we’re always trying to have with this podcast, Stephanie, is that money, yes, we want to grow our money, we want to save more, but it’s because we want to do something with it. It’s not the end result, which I need to remember as I confessed regarding my sofa that we do not have.

Stephanie McCullough (53:02):

We’re going to want an update on the sofa situation. Kevin, next episode, you’re going to have to report back. I appreciate Meir’s being so open about his own situation and some of the challenges that his family has gone through.

Stephanie McCullough (53:15):

I would love to meet Navah. I think I would really enjoy Navah, but you know him talking about the challenges of his oldest daughter and their decision that obviously it’s worth investing in, figuring out what was going on and then being able to support her and that that came before other things, right. Which I think in the old days, a finance professor might not have been talking about.

Kevin Gaines (53:40):

Right. That gets back to the rational versus the real. It’s rational to say we need to do this; we shouldn’t do that. But the real is we have a life to live. What is going to make us happy? What is going to give us satisfaction? What’s going to give us worth?

Stephanie McCullough (54:03):

Well-being, yeah.

Kevin Gaines (54:04):

And well-being, as it says right on the cover of the book [Stephanie McCullough overcross: Yup]. And that’s something that a lot of us unfortunately do lose sight of, our industry is structured to lose sight of that, unfortunately. But that the risk of hurting myself by patting us on the back. I think what we’re doing here, Stephanie, is really helping with that conversation, helping people understand it’s about the life you want to live, not the life you think you have to live.

Stephanie McCullough (54:39):

Well, and I really appreciated his comments towards the end about the importance of being aware of how we are setting our expectations and who we are comparing ourselves to, right. He talks about catching himself when he is comparing himself to a colleague, but we are all subject to that, even if we’re not on social media 24/7, it’s just kind of in our nature as humans to compare ourselves.

Stephanie McCullough (55:06):

So, catching ourselves before we fall into those traps and maybe do something that’s not in line with our well-being. I appreciated his advice there too.

Kevin Gaines (55:15):

Yes. And I guess my final thought is yet more proof of never meet your idols. I’m a little heartbroken to find out the man’s not a dog lover.

[Music Playing]

Stephanie McCullough (55:30):

Loved it. Well, we hope you enjoyed this conversation and check back with us in two weeks for more, we’ll talk to you next time. It’s goodbye from me.

Kevin Gaines (55:40):

And it’s goodbye from her.

Stephanie McCullough (55:42):

Be sure to subscribe to the show and please share it with your friends. Show notes and more information available at takebackretirement.com. Huge thanks for the original music by the one and only Raymond Loewy through New Math in New York. See you next time.

Voiceover (55:56):

Investment advice offered through Private Advisor Group, LLC, a registered Investment Advisor. Private Advisor Group, American Financial Management Group, and Sofia Financial are separate entities. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investments may be appropriate for you, consult your financial advisor prior to investing. This information is not intended to be substitute for individualized tax advice. Please consult your tax advisor regarding your specific situation.