I’m 52, won’t live past 80 and have $1.6 million. ‘I am tired of both the rat race and workplace politics.’ Should I retire?


I started working when I was 19 and have been saving half of my salary since my mid-20s. Now at 52, I am tired of both the rat race and workplace politics. With the virus, it feels even worse. I have saved about $800,000 in trading, $800,000 in my 401(k) and $300,000 in a house. I also have six months worth of emergency funds. I don’t have any debt and I own my vehicles, too.

I can easily live on a $60,000 budget (including taxes) but often it is less than that. No one in my family has ever survived beyond 80 years old. Thinking of the remaining days, I wonder should I just retire, do some one-off gig work or learn a language that I always wanted to learn? I just wonder if it is prudent to do so. Or should I keep on slogging another 10 years?

What do you think?

Wondering in Alamo.

See: I’m 63, a widow and lost my job because of COVID. I don’t have much in savings and feel lost. What can I do?

Dear Wondering in Alamo,

You bring up a question I think a lot of people have been asking themselves lately. The coronavirus crisis has certainly shaken up the way people live, and some of us have been wondering if this is the time to make a big change. But before you do, it’s important that you think about all of the potential consequences on your finances and lifestyle.

Because there are a few personal details missing from your question, it was hard for financial advisers and me to tailor this answer specifically to you. We’d have to know if you’re married, have any dependents, what your salary is roughly, where about in the country you live (I looked it up and there are a few cities named Alamo in the U.S.!) and if you’d have access to health care if you were to leave the workforce. We also weren’t sure what exactly you had included in your $60,000 budget, except for your taxes. Still, the following may help you — and others who are wondering if now is the time to “get out of the rat race.”

Health insurance is probably one of the most crucial — if not the most crucial — consideration you’ll need to make before you leave your job. You’re 52, which means you have 13 years until you qualify for Medicare. Private health insurance can be quite expensive, so if you don’t have a spouse whose insurance can cover you, the premiums alone could take quite a large chunk of your annual budget.

“He is going to have exorbitant rates until Medicare kicks in,” said Michelle Gessner, founder of Gessner Wealth Strategies. The pandemic may also affect how high those rates go in the foreseeable future, especially as hospitals and other medical institutions try to recover from the crisis, said George Gagliardi, a financial adviser at Coromandel Wealth Management.

Even if rates don’t jump because of COVID-19, health care expenses tend to rise, year after year. A single man retiring at 65 years old in 2019 would need $135,000 to spend on health care alone for the rest of his life, according to Fidelity Investment’s 2019 annual Retiree Health Care Cost estimate. That calculation is based on Medicare coverage and does not include long-term care insurance. Between 2002 and 2018, the estimate for health care costs jumped 75%, according to Fidelity’s analysis.

If you would end up needing private coverage because you left the workforce, do your research so that you get the most for your money. Look at the health insurance marketplace, set a budget for yourself, and use comparison sites — being careful to review what is and is not included in the plan so that you are not without services and prescriptions you will need.

I know you said people in your family tend not to live past 80 years old, but you may still want to consider long-term care insurance, Gessner said. It’s not unheard of for nursing homes to cost somewhere around $90,000 a year (or more), and if toward the end of your life you should need some sort of facility like that, you could wind up dwindling your nest egg down to nothing. “He is thinking, ‘Oh I’ll die by 80,’ but that is not a given,” Gagliardi said. Your estimated budget of $60,000 most likely would not be enough to clear your everyday expenses and medical expenses.

Now on to your savings. Aside from your trading and 401(k) investments, you have an emergency fund — something not everyone has or even thinks about, financial advisers said. Having that account will certainly help, both financially and emotionally, in the future.

Also, having a $1.6 million nest egg, outside of your emergency fund, is of course a wonderful feat. But this is the not-so-great news: you may be surprised at how quickly that could be spent, especially if you find out you need more than $60,000 a year to live.

“He has enough money as long as he lives a frugal life and nothing goes wrong and dies in his 80s,” said Jen Grant, a financial adviser at Perryman Financial Advisory. “That is a lot of assumptions to count on. Medicine has improved and he will very probably outlive his ancestors.”

When you start withdrawing money from your portfolio also matters. With the “sequence of return” risk, an investor who starts taking money from a portfolio during a downward cycle could diminish potential returns of the future (as there is less principal to grow on). “The other problem is we have had an amazing run-up of stocks the last 10 years,” Gagliardi said. “If you look at 10-year projections, we are not going to see the same.” The market is pretty volatile these days, which of course does not mean people can’t retire in the middle of these ups-and-downs — it just means you should think carefully before you start withdrawing money from these accounts, especially if you don’t have to yet.

On top of that, you’ll want to strategize which accounts you withdraw from and when, depending on the types of investment accounts you have (traditional or Roth), your age and your income each year. Typically, 401(k) account holders pay a 10% penalty if they take a distribution prior to 59½ years old, but there is the so-called rule of 55, where employees who have been separated from their jobs during or after their 55th birthday can withdraw money penalty-free.

Also see: I’m a 32-year-old stay-at-home mom, and my husband earns $150,000 a year. Will I ever be able to enjoy a retirement?

Beyond the numbers, think about what you want to do with your time. Retiring at 52 is quite young, and even if you do live to your personal life expectancy and not more, that’s 30 years of retirement. What will you do with that time?

“My recommendation would be to spend some time self-reflecting on hobbies and things he feels passionately about,” Grant said. This may be a sport, a new skill — you did mention wanting to learn a new language — or perhaps volunteer work. Or, it could just be a good time to take a breather and make a career switch.

“It might be the perfect time to pivot,” Grant said. “He has done a great job saving. Let that money grow another 10 years before he taps into it. He could get a different job, he could get a part-time job, he could get a lower paying (less mentally stressful) job that has health insurance.” Having another job, if even one that pays a fraction of what you currently earn, or building a gig business for yourself, would bring more money in through the years, offsetting potential pitfalls or gaps in your savings needs.

Remember that if you decide to retire, you’re essentially putting yourself on a fixed budget. Of course there are opportunities to find part-time or gig work in your retirement — something plenty of Americans do — but that income may not be as steady as the work you have now. “It becomes a whole different mentality,” Gessner said. “It’s very scary for people to put yourself on a budget if you’re not already. Think about how you want to live on that budget. Because that makes all the difference in the world.”

Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com



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New York said ‘action,’ but many film and TV cameras won’t get rolling until September or later


New York City gave movie and television crews the Phase 4 green light on July 20, the same day professional sports teams were cleared to play without cheering (or jeering) fans in the stands — just silent cardboard cutouts. 

And while the Yankees and Mets are swinging for the fences and the Islanders and the Rangers hit the ice for an exhibition NHL game, the stars of “The Marvelous Mrs. Maisel,” “Law & Order: SVU” and “Blue Bloods” — popular New York TV shows — are still warming the bench. 

Things are progressing, though. Production offices, closed since mid-March, are opening, stars’ schedules are getting untangled and scripts are being written and fine-tuned. 

“We’ve tried to take a very measured response to the production rollout. September is when we’ll start to see some of the bigger shows come back,” said Anne del Castillo, commissioner of the Mayor’s Office of Media and Entertainment (MOME). “That will include some locations throughout New York City. 

“But even then, because of geographic limitation, it’s not like you’re going to see a hundred productions on the street,” continued del Castillo, whose office handles permits for on-location shoots. Widespread outdoor dining up-and-down New York City streets also poses a challenge for film crews, and will change the way productions are rolled out until the end of October, when the city’s street-eating initiative is due to end. As part of the rules for on-location shoots, they can’t come within 21 feet of eateries participating in the open-restaurants program without permission.

When it comes to people and businesses, “New York is so dense. We’re trying to share the streets. We can’t have shows filming on top of open restaurants,” she said. 

As of July 27, a maximum of 50 cast and crew are allowed for shoots on public property, which is double the number in the previous protocols. “I know a group of filmmakers making music videos who haven’t taken their foot off the gas,” Mitchell-Brown said, adding that they observed Phase 3 maximums and social distancing and safety guidelines. “They were in the Lower East Side. They were in Queens.”

Currently, no more than two cameras, three lighting stands, and five vehicles may be used for shooting through Oct. 31. In addition al-fresco dining, on-location shoots can’t get in the way of hospitals and COVID-19 testing centers to ensure 24/7 access.

“Right now,” del Castillo said, “we’re all just trying to figure out what all the constraints are.” 

They already know what the stakes are. 

In January, in response to an article about New York-based productions, Flo Mitchell-Brown, Chair of New York Production Alliance, which promotes and supports various facets of production, noted that “New York state is now the nation’s second-leading location for TV and film, behind only California, home of Hollywood.” 

William Baldwin filmed on location in Brooklyn for “Blowtorch” in 2012.


Getty Images

In 2019, roughly 200 productions applied for the state’s film tax credit, created more than 250,000 jobs and generated $4.8 billion in new spending, Mitchell-Brown said. 

See: New York metropolitan area lost nearly 1.5 million jobs in June, the most of any U.S. city

Figures from MOME show that New York City TV and film production was at an all-time high pre-pandemic, generating more than $60 billion in annual direct economic activity for the city and $3 billion in tax revenue. There were 80 TV series and 300 films being shot in the city before COVID hit, putting more than 100,000 New Yorkers to work. More than 2,000 local small businesses are supported by film and TV production.

“I want to be a little bit careful,” del Castillo said, adding that state and local government agencies, unions, production offices and others are in the cast of characters mapping out a safe return. “It’s an ongoing conversation that we’re having. It’s safe to say that in the first bit of Phase 4, most production will be on soundstages.”

Around the boroughs, that includes the sprawling Steiner Studios in Brooklyn and Silvercup Studios in Long Island City and the Bronx, to name just a few. But studios dot the Empire State. “We’ve been having weekly calls with these various stages since the start of the pandemic,” Mitchell-Brown said.

“The Marvelous Mrs. Maisel,” “God Friended Me” and “Hunters” are a few series shot at Steiner Studios. Steven Spielberg’s movie remake of “West Side Story” was as well, said Doug Steiner, CEO of the large studio that bears his name. It reopened July 20. 

However, Steiner Studios is still pretty quiet. Set construction there ahead of cameras rolling was already expected to begin, but that’s not happened yet. “We’re still working things out,” Steiner said, adding that there are “layers” of guidelines when it comes to masks, social distancing and other issues. “Productions have their own set of rules. We have our own protocols for entering the studio.” 

Steiner optimistically expects shooting to begin “sometime in September. Worst case scenario,” he said, “in October.”

Also read: A rough September lies ahead for New York City’s tourism sector as major events pivot to virtual

“Everyone has good intentions about starting back up,” Mitchell-Brown said. “But there’s still a level of divide between intention and reality. The government says you can have a certain number of people on the set that’s acceptable. Unions may require fewer people on the set when actors’ masks come off. What I’m hearing and seeing is that unions and guilds are going to do everything in their power to protect their members. There’s a lot to consider and iron out.”

Making sure that everyone’s on the same page isn’t just a hurdle for huge facilities, according to Matthew J. Pellowski, of Red Line Studios, a relatively compact Manhattan production and postproduction facility. Looking ahead to a “proper reopening” in September, he said that he anticipates that one major challenge will be ensuring the rules and regulations of outside production teams “coincide with their own.” 

When shooting resumes full-gallop, or thereabouts — in studios large or small or on location — they will look different. There will be changes across the industry for safety and facilitation of contact tracing. 

“Productions will be specced out by zones,” Mitchell-Brown said. “Essentially that’s so they can control the amount of people on a live set at a particular time. There will be zones for hair and makeup and costumes and so on. Some people refer to the areas as pods. It’s a way to have the set’s ebb and flow in a way that adheres to guidelines.” 

The use of color-coded wrist wristbands to identify various members of the cast and crew and where they have access on a set is another strategy being discussed. “Like you wear at a nightclub, or, if you’re not old enough to drink, at an amusement park,” Mitchell-Brown said.

Meanwhile, up-for-grabs chow served communal-style, “is a thing of the past as previously presented,” Steiner said. “There will be no cafeteria tables. Catering for shoot days will be cooked on site and single served.”

Read next: Taking the New York City streets back before the cars return

As the movie and TV industry simmers in Phase 4, it’s been a time for reflection, according to Steiner. “There’s a sense of urgency. It’s important to get back on track as soon as possible. The pandemic has brought to the fore how important this industry is to New York City and New York state. It’s something New York does really well.” 



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Money alone won’t close America’s racial and wealth gaps. We first need to wipe out the value gap — ‘the belief that white people matter more than others’


There’s a ride at Disney World called the Carousel of Progress in which a cast of animatronic Americans on a revolving stage tell of all the technological upgrades to our lives since 1900: indoor plumbing, flight, television. It’s one of Walt’s original attractions, dating back to the 1964 New York World’s Fair — and the name could not be more apt. Carousels, for all their dizzying motion and calliope music, mostly just spin in place. “Progress” is like that, too.

I thought about that ride and its promise of “a great, big, beautiful tomorrow,” midway through Eddie Glaude Jr.’s profound and timely new book, “Begin Again.” The Princeton professor of African American Studies uses the life and words of James Baldwin as a lens to make sense of our present moment, somehow still spinning, like a broken reckoning, on the same carousel of horrors Black America has ridden since even before the Founding Fathers coded racism into our nation’s operating system.

Yes, America has made great strides toward racial justice, but too often on a treadmill.

Baldwin’s disillusionment as the civil-rights movement seemed to lose momentum in the 1970s and 1980s in what he called the “after times” gives us language and ideas for seeing better in 2020, Glaude writes. A national discourse pockmarked by racist rhetoric and dog whistles, the massive Black Lives Matter protests, and the outpouring of outrage and grief following the death of George Floyd all suggest we are in a new “after times,” Glaude says.

In 1962, in his famous letter to his nephew on the 100th anniversary of the Emancipation Proclamation, Baldwin wrote that “we can make America what America must become.” This was decades before Ronald Reagan’s 1980 campaign slogan, “Let’s make America great again,” and its foreshortening by Donald Trump for 2016. Baldwin’s version is unlikely to end up on any campaign hats, red or blue, but it is emblematic of his continued hope in spite of all evidence to the contrary.

“I guess he saw something like Donald Trump on the distant horizon, and, however bitter he seemed, he still wrote to us with love,” Glaude writes of Baldwin. “He still played the same notes no matter how dissonant they sounded.”

Glaude’s book shook me into seeing better, and reading better. I am embarrassed to confess I had not read Baldwin before, something I have since made a project of correcting. I have been spending the past month “thinking with Jimmy,” as Glaude calls it. In his novels and nonfiction Baldwin had a distinct ability to find words to make sense of the infernal and ineffable depths of America’s soul. As a Black man, a gay man, a New Yorker, an expatriate who spent years in Paris and Istanbul, the son of a preacher, and the grandson of enslaved people, he was able to see America from within and without. As a Whitman and as a de Tocqueville.


‘America is always changing and it’s never changing.’


— Eddie Glaude Jr., quoting James Baldwin

Books cannot fix America. But we need new words to find the path forward. “The root function of language is to control the universe by describing it,” Baldwin wrote..

I spoke to Glaude about Baldwin, about “Begin Again” and about the economic dimensions of racism in America. This conversation will kick off a MarketWatch interview series with leaders in business, government and the academy about how to address the racial wealth and income gaps. We’re calling it The Value Gap, adopting Glaude’s term for the lie at the heart of so much senseless misery and brutality.

MarketWatch: Let’s begin with the idea in the title “Begin Again.” When I first read your book, my immediate reaction was, this a terrible, depressing notion, that fighting racism is ultimately a Sisyphean task. But I sense you and Baldwin, who you’re quoting here, seem to be saying there is optimism amid the exasperation.

Glaude: Well, hopefulness — not necessarily optimism. There is a Sisyphean kind of quality to it. We have to push this damn boulder up the hill again. It has this existentialist quality to it, too, because the beautiful struggle itself becomes the aim, since there is no guarantee of the outcome. In our history it doesn’t bode very well, even in this moment. For we have these moments when the nation could be otherwise, and then we double down on our ugliness in the face of it.

This makes me think about John Lewis’s passing. And about Fred Douglass, who lives to see Lincoln sign the Emancipation Proclamation and also lives to see the first Jim Crow law passed, and he dies the year before Plessy v. Ferguson.

John Lewis lived long enough to see that we elected Donald Trump, and to see Black Lives Matter. He had to grapple with the fact that, I am 80 years old, I am about to take my last breath, and we are still fighting this fight.

What Baldwin is saying by “begin again” is the value may not be in the end of that typical American desire to resolve it all so that we can be comfortable. It might very well be in the ongoing struggle to build a more just society.

MarketWatch: When we talk about racism in America, we tend to also talk about money. Dr. Martin Luther King Jr. began his “I have a dream” speech by noting that “America has given the Negro people a bad check, a check which has come back marked ‘insufficient funds.’” Baldwin said, “A bill is coming in that I fear America is not prepared to pay.” He also lamented that “the price of the ticket” to American life was not the same in white and Black America. But you suggest that first we need to address what you call the value gap. What do you mean by the value gap, as opposed to the income and wealth gaps?

Glaude: The value gap is the through line in American history. It is the belief that white people matter more than others. That belief evidences itself in our habits, our practices and our dispositions. It shapes and informs our social, political and economic arrangements.

So, when we talk about the wealth gap or empathy gap or the education gap, all of those are consequences or reflections of a society organized along the lines that some people, because of the color of their skin, ought to be valued more. And the value gap shapes the distribution of advantages and disadvantages.

So what the value gap looks like in the context of slavery is going to be very different than what it looks like in context of Jim Crow, than what it will look like in the context of the first Black president.

We can’t just look for the loud racists, only paying attention to those folks who are screaming those ugly things, when in fact the value gap is reproduced in our daily choices, in the habits and the lies we tell ourselves.

MarketWatch: You say the value gap is “The Lie.” But what is the role of money here? How much of the struggle of Black America in 2020 is due to economics? The nation was founded on the insidious equation that a Black person is worth three-fifths as much as a white person. In 2020, however, the median Black household worth is one-tenth that of the median white household — if we could get to three-fifths that would be an improvement. So to make the point, if we reduce American society to a Monopoly board, while white players start the game with the usual $1,500, Black players get just $150. What are the odds one of those players would end up with Boardwalk and Park Place and win the game — some might, but it would be like hitting the lottery. Can the value gap even be addressed without first tackling the wealth gap?

Glaude: Stick with that Monopoly analogy. Yes, some start with $1,500, some start with $150, as you said, but some can’t even get past Go, because they are blocked. They aren’t going to get the $200. This has generational implications.

This is hard for us to think about as a society because we tend to think of racial justice as a zero-sum game. This idea that we have to take something from hardworking people and give it to people who are considered less hardworking.

We don’t want to admit that land grants, we were cut out of. The New Deal, we were cut out of. The very policies that built the vaunted American middle class, thanks to the deal made between FDR and Southern Democrats, we were cut out of it. It’s as if we never had segmented, dual labor markets and dual housing markets.

I am not talking about the distant past. I am talking about my dad. I am talking about John Lewis.

MarketWatch: So the value gap cannot be eliminated by economic policy alone?

Glaude: Any economic system that is predicated on the disposability of people, Baldwin is going to reject it. I am going to reject it. So the way in which we reconcile this is not by simply appealing to markets that can drive up the standard of living of Black folk and create some kind of equity as a result. No, we have to change the fundamental center of gravity of our moral concern and how it organizes our lives.

Budgets reflect what and who we value. If we look at how resources are allocated in this country, it reflects what and who we care about. For me, for example, I can’t fathom an economic system that can produce a trillionaire.

We have to change, at the heart of it all, what we value. Once that happens markets can be deployed in ways to ensure the public good as we imagine it.

MarketWatch: Baldwin seems suspicious of the idea of progress. Is progress real? Is it even possible?

The Carousel of Progress in the Tomorrowland section of the Magic Kingdom at Walt Disney World in Florida photographed in 2006.


WikimediaCommons/Matt Wade Photography

Glaude: Baldwin has that line: “America is always changing and it’s never changing.”

That question around progress is part of our insistence on our innocence. “Haven’t we progressed?” is usually a question that is asking for congratulations and gratitude: Look where we are. You should be thankful.

MarketWatch: It’s like the line in “Hamilton”: “Look at where you are. Look at where you started. The fact that you’re alive is a miracle …” That may be true, but it’s not enough.

Glaude: Yes, in some ways the country views racial justice as a philanthropic enterprise, as a charitable gesture. If racial justice is seen as philanthropic as opposed to a central understanding of who we take ourselves to be as Americans, we are still caught in the frame of the value gap, because some people see racial equality as theirs to give to others.

In the book, I use a quote from Baldwin’s “The Uses of the Blues”:

I’m talking about what happens to you if, having barely escaped suicide, or death, or madness, or yourself, you watch your children growing up and no matter what you do, no matter what you do, you are powerless, you are really powerless, against the force of the world that is out to tell your child that he has no right to be alive. And no amount of liberal jargon, and no amount of talk about how well and how far we have progressed, does anything to soften or to point out any solution to this dilemma.

Here I am a Princeton professor, right? Princeton Ph.D. and living quote-unquote the American Dream, and I still have to worry about that taking root in my child — progress? What the hell do you mean?

MarketWatch: You say Baldwin’s message is always one of love. But in “No Name in the Street,” he writes, “White Americans are probably the sickest and certainly the most dangerous people, of any color, to be found in the world today.” You echo that sentiment, writing, “In our after times, our task, then, is not to save Trump voters — it isn’t to convince them to give up their views that white people ought to matter more than others. Our task is to build a world where such a view has no place or quarter to breathe.” That doesn’t sound very hopeful.

Glaude: Baldwin makes this distinction between white people, and people who happen to be white. I love that distinction because I happen to love a lot of people who happen to be white.

Those people who are invested in this idea that the color of your skin ought to determine the distribution of advantage and disadvantage, those people have had the country by the throat from the beginning. What he is saying is that those of us who are committed to a more just world, not a more perfect union — that lets us off the hook, but a more just world — only have a finite amount of civic energy. And what we need to be doing is not try to convince those other folks who hold those noxious views, because what happens over and over again every generation is we end up compromising with them — compromises we have to bear the burden of. I don’t want to spend my energy trying to convince someone who thinks I am less than human — that I am not worthy of dignity — I don’t want to have that argument anymore, and that unsettles people.

MarketWatch: Baldwin said that “we can make America what America must become.” I have been thinking about that line as we see history rewritten, names changed and statues toppled. You say we need to tell a new story of America. But who should tell it?

Glaude: So the story we tell, we have to tell it together. It has to be a story of our contradictions and our sins as much as it is about our triumphs and aspirations. It is not to bludgeon ourselves with our failures but to confront what we have done.

The Confederate monuments are lies. The “Lost Cause” is a lie.

Truth becomes the basis of reconciliation. Baldwin says, you can’t do all of this damage and then claim innocence. That innocence is the crime.

(Footnote: Disney stopped updating the Carousel of Progress in 1994, though it continues to keep operating as a spinning time capsule. It is a nostalgia piece. In this series we will speak to leaders in business, policy, and academia to explore how America and its economy can avoid such a fate. Stay tuned.)



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This man’s estranged wife received his stimulus check — and spent it. She won’t pay it back. What can he do?


Dear Moneyist,

I am asking this question for my friend. He and his wife separated in October 2019. They are trying to represent themselves to avoid costly attorney expenses. They do not have children nor any assets. She kept him in the dark about account numbers and log-in information. They filed jointly in 2018.

The COVID-19 stimulus payment was deposited into their joint account, one that neither of them use anymore. As he was unable to check online banking, he did not know when this happened. He checked the balance at the ATM only to discover that she has withdrawn all of the $2,400 payment, leaving him with nothing.

He has since confronted her and she has admitted it and told him she had already spent it. She refuses to give it back, and declines to even work out a payment plan. When trying to report it to the IRS, everything seems to come down to identity theft as being the reason it was stolen. What does he need to do to obtain the $1,200 stimulus payment she stole from him?

What do you think?

Concerned friend

Dispatches from a pandemic: Letter from New York: ‘New Yorkers wear colorful homemade masks, while nurses wear garbage bags’

Dear Concerned,

If this is the bank account the IRS has on file, this is where the IRS will deposit your friend’s tax refund. So if he hasn’t done so already, he needs to change this account. Otherwise, the same thing will happen again. Prevention is better than cure. I hate cliches, but this one is painfully true.

Having your correct bank details on file will help speed the plow for a payment next year. If the IRS does not have your bank-account information on file, it will likely take longer. You can submit your bank-account and address information through the IRS tracking tool, “Get My Payment.”

Your friend’s dilemma is not the first one of this kind I have received. One husband actually refused to give the payment to his wife. That was a textbook case of financial abuse. Another husband filed a joint tax return and forged his estranged wife’s signature, and received her $1,200. That’s fraud.

Don’t miss:‘We will not have a vaccine by next winter.’ Like the 1918 Spanish flu, CDC says second wave of coronavirus could be worse. So what happens now?

This, however, falls short of that. The account is in both their names and, as per the terms of most joint accounts, they both have access to the account and they are both entitled to withdraw money from the account. The money was his. Once it hits their joint account, it’s theirs.

This is a cautionary tale for anyone opening a joint bank account. Account passwords on emails can be changed, and so can the passwords for online banking. Your friend appears to portray himself as a hapless or, at the very least, passive player in this financial fudgery.

He is not blameless. Not staying on top of your financial accounts, especially those connected with a former partner and the IRS and any other institution, is a choice. The lesson here is to be more assertive with the way he manages his life, so he doesn’t end up in a situation like this again.

He should inform his divorce lawyer, if he has one (if not, he should), and change any other direct deposits into this account. He can also take out a court order to freeze this or any other joint account to prevent his wife from withdrawing any other money that happens to be deposited into it.

The Moneyist: My son is staying with me, yet my financially irresponsible ex-husband received his $500 stimulus check. Is my ex right to keep it?

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com. Want to read more?Follow Quentin Fottrell on Twitterand read more of his columns here

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A Vaccine Won’t Save The Airlines


The trouble for airlines isn’t restricted to the travel volume dampening effect of COVID-19. This crisis has sparked a permanent change in how businesses approach in-person meetings, and business travel may never recover to pre-COVID levels, thanks to online video conferencing. Airlines are also racking up massive debt loads as they struggle to survive, burning through tens of millions of dollars each day. Long term, this debt will hamper their recovery and could lead to some short-term bankruptcies. In addition to the debt, newly issued shares undo years of buybacks and significantly dilute existing shareholders, again with a negative impact on future EPS.

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Business Travel

Business travel will never be the same. There will be no V-shaped recovery here, and we may never see a full recovery. And yes, this time really is different: unlike past recessions where business travel returned as corporate income surged, other factors and attitudes are at play this time. In a survey of Fortune 500 CEOs, more than half of the respondents agreed that business travel will never return to pre-COVID levels. And they were near-unanimous in agreeing that “Business travel will become less frequent, replaced by video conferencing.” It should be made especially clear here this isn’t simply a survey of the public, but these answers are from individuals who are responsible for these decisions, so when they say business travel isn’t coming back, you can expect their companies won’t be flying at the same level again. The virus has forced companies to implement virtual meetings, and we have now reached a point where most corporations have accustomed employees to using these platforms. As a result, we’re going to see structurally fewer flights for in-person meetings, international flights especially. This is in addition to the expected impact of cost cutting which will lead to even less travel in the short term.

Losing business travel will have an outsized impact on earnings due to the marginal profitability of business and first-class seats. Though business travel comprises 12% of passengers, it accounts for twice that amount of airlines’ profit from passengers. Not only will companies be paying for fewer people to travel, but due to the financial impact of COVID-19, companies that still have business travel needs will also be less likely to pay for high-cost airfares. As a result of corporations allowing for less business travel in general, I expect remaining travel will also be planned out more carefully in advance post-pandemic. The roughly 23% of business travelers who wait until the week before booking will decline, and with it, so will the fares paid by the passengers when they book.

Leisure Travel

Leisure is expected to rebound quicker than business travel, but the news here isn’t great for airlines either. Compared to previous years – even with states having re-opened – people are travelling more locally during the summer and driving rather than flying. The return of leisure travel is further hampered by states re-tightening restrictions and requiring quarantine periods as cases of COVID-19 rebound.

Barron’s also raised concern about a potential for a price war over returning customers after Southwest (NYSE:LUV) announced a sale on fall tickets. This is entirely possible, as it mimics the behaviors we have seen in Europe closely – where cases have fallen significantly and nations have begun re-opening – as airlines compete to undercut each other, offering 40% and 50% off ticket prices. It’s a reality that Southwest’s CEO expects, and unsurprisingly they’ve been pointed to as potentially kicking off a similar race to the bottom in the US. This will keep a significant lid on airlines’ recovery and ensure that their revenue recovers much more slowly than passenger volume. As Ryanair’s (NASDAQ:RYAAY) CEO said, in a worrying sign for the industry: “Wherever there is below-cost selling, we will price below the below-cost selling.”

Debt

As airlines continue to burn through cash, companies are raising massive amounts of debt. Not to expand or streamline operations, but just to keep their heads above water.

Airline (all numbers in millions unless otherwise noted)

Total Debt (Last Quarterly Report)

Pandemic-Raised Debt*

Net Interest Expense (Quarterly)

Liabilities (Last QTR)

Assets (Last QTR) **

Delta (DAL)

$24,071

$10,000

$79

$54,429

$68,738

United (UAL)

$23,429

$9,000-13,8001,2,3,4

$145

$43,637.0

$53,055

American (AAL)

$34,073

$7,450-10,9501,2,3

$257

$61,216.0

$58,580

Southwest (LUV)

$6,420

$8,8001

$11

$17,810

$26,885

Alaska (ALK)

$3,903

$2,1421

$4

$9,348

$13,363

JetBlue (JBLU)

$4,017

$550

$22

$7,974

$12,340

Spirit (SAVE)

$3,694.3

$340-1,0811

$20.285

$5,000.9

$7,235.3

Allegiant (ALGT)

$1,560.5

$52.6

$15.84

$2,382

$3,191.9

*Most of these debt numbers can be considered “x number and counting” – debt issuance is ongoing and certain credit lines have been partially utilized. (I have edited these numbers twice since submitting, as debt offerings get revised).

**Asset values for many airline assets have since cratered.

Airlines’ asset values have fallen since the beginning of the pandemic as a collapse in demand also brought the price of aircraft way down. Delta has a further problem here, with a South American airline it had invested $1.9 billion in – LATAM Airlines (OTCPK:LTMAQ) – declared bankruptcy. With massively raised amounts of debt, a prolonged coronavirus crisis could spark bankruptcy for American carriers. Many carriers will soon have greater liabilities than assets, further harming their solvency.

This debt airlines are taking on, at rates of between 5% and 7% for the most part, is not cheap. While this debt is necessary for the airlines to continue to cover their operating expenses as they hemorrhage tens of millions of dollars a day, once they return to profitability (read: if), the interest expense on this debt will hurt their quarterly earnings. The repayment of this debt will also require airlines to have considerable sums of cash, restricting their ability to spend on buybacks or dividend raises for years in the future or risk further financial instability.

Share Issues (the Reverse Buyback)

In the span of a few months, airlines have undone years of buybacks and billions of dollars spent on them, with share counts now leaping to levels not seen for several years – and that’s not even counting the convertibles and warrants they’ve been issuing.

Airline (In millions unless otherwise noted)

Share Value Issued

Approx. Number Shares Issued

Brings Share Count Back to Level of:

United1

$1,040.125-?

39.25-67.25

Dec 2017 – Mar 2017

American

$1,000.4

74.1-86.215

Jun 2017 – Mar 2017

Southwest

$1,995

70

Mar 2018

Spirit

$175

17.5

A New Record High!

This dilution is a further speed bump in the road to EPS growth. Comparatively, future earnings results will be lowered by the intense dilution going on now and will make the road to recovery longer and harder for many airlines. Further complicating this is the massive debt levels, which will have to be paid off and managed before the companies can consider returning to their previous habits of incessant buybacks.

Low-Cost Carriers’ Post-COVID Advantage

Low-cost carriers will feel the pain of losing business travelers, but not to the same extent. They never relied heavily on business travel for profit, and often have only one class of travel, such as with Southwest. As a result, the dampening of business travel, though it may hurt their overall demand, won’t have the same outsized effect on their earnings as with the legacy carriers. These low-cost carriers should also benefit from more budget-conscious travelers, squeezed by the current recession.

Not everything is good news for these airlines though. As I outlined earlier, nearly every airline has taken on massive amounts of debt, Southwest has more than doubled its debt load. Low-cost carriers Spirit and Southwest have also partaken in issuing new shares to raise equity which will have the same negative long-term effects as it will for legacy carriers. Low-cost carriers have less risk in some areas, such as business travel exposure, but risks remain for their financial stability, especially in the case of a prolonged environment of low travel volume.

Conclusion

In a short period, airlines have undone years of spending on buybacks and taken on huge amounts of debt which will encumber them after the pandemic passes. Considering business travel will never return to what it once was, and the travelers remaining will be less profitable, airlines have a longer-term struggle to return to profitability which will far outlast any vaccine which ends the pandemic. With any short-term recovery hampered by a reprise in virus cases worldwide and returning travel restrictions, medium-term recovery hampered by higher interest expenses and numbers of outstanding shares (along with general tepidness towards travel among the population, many of whom don’t have discretionary income at the moment), and long-term recovery hampered by structural shifts away from business travel, it’s not a good time to bet on the airlines.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: This article is for informational purposes only and should not be regarded as investment advice. This article should not be the sole basis for a financial decision, including the purchase of stock. Any personal financial decision should be made on the basis of your own research and consideration of your unique financial goals and investing ideals.





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