When to Pivot: Closing a Business, Reinventing a Career, and Selling Real Estate
39:27 Share

Hey everyone, it's Jean Chatzky. We have had so many new listeners join us lately, and I just wanted to take a sec to say welcome. Before we dive into today's episode, let me just take a moment to reintroduce myself.

I am a longtime personal finance journalist. You might remember me from my 25 years on the Today Show. And I started this podcast back in 2016 with one goal, to help women take control of our money and build the financial lives that we deserve.

Whether you are budgeting, investing, negotiating a raise, or just looking to make some smarter financial choices, you're in the right place. And if you're ready to go even deeper, I've got two fantastic programs. Finance Fix is my hands-on budgeting course. And Investing Fix is the investing club I run with Karen Feinerman from CNBC that's designed everything.

just for women. You can find out more about these programs at financefix.com and investingfix.com. And by the way, we spell fix with two X's. We are so glad you're here. Now let's get into the show.

I think that you are just too young to pull the money out of your 401k, to pull the money out of your annuity. We've got to give those sources of real retirement income time to grow. And the same is true of Social Security, as you've heard me say many times. For every year that you wait to take Social Security, you get an 8% bump in your benefits. I mean, that is just an incredible return.

Hey, everyone. I'm Jean Chatzky. Thanks so much for joining me today on Her Money. I am so excited to bring you another one of our live mailbags today where you jump on the phone with me and I get to answer all your questions and your follow-up questions. And I am especially excited for today's mailbags because they are two great,

really specific questions about selling assets. First, I'm talking to Dawn about selling her gift shop, her business, and the exciting pivot that that brings to her career. And then Karen's going to call in and we're going to talk about whether she should sell her second home in Denver or continuing to rent it out to long-term tenants.

Before we get into it, if you've got any questions about your money, talk to me. Let's jump on the phone. Reach out to me at mailbag at hermoney.com. We'll set up a Zoom. I love this so much. Here's my conversation with Dawn. Dawn is joining us from Joshua Tree, California. I know you've got some things happening in your life with your business and your retirement, and you've got questions, and I hope I've got answers. Sure.

I hope so, too. Let's start with the first thing that I'm closing my business that I've owned for five years. It's a small gift shop in downtown Joshua Tree, which is a gateway village to the Joshua Tree National Park. Unfortunately, it's been unprofitable this year. It's negative, actually, net profit this year. Sales were down 40%, and I'm not hopeful about improvement in 2025.

I've got about $2,700 on the business credit card and roughly $3,000 if I add up all the tax obligations that I'll have and clearing out some advertising. So I put some personal money in in the summer, but if I keep doing that, it's just an expensive hobby. And I'm trying to really look at it from a business perspective. Well, first of all, good for you. I think that's really hard to do, right? When we open a business, we put so much of ourselves into it.

into it no matter what it is and recognizing that it's more of a hobby than a business acknowledging that it's more of a hobby than a business and that it's costing us to sustain it is really difficult to do many people stick with it for far too long so i give you a lot of credit

for deciding that you're going to shut it down. Are there assets in the business that have value that you're able to sell to other gift shops or things like that? Yeah, I mean, I belong to what's called a de-stash group in the retail industry. So there's a number of shopkeepers in there and I've posted a lot of inventory in there and I've got some of it sitting over here on the side ready to get shipped out.

And I've been selling down fixtures from Facebook Marketplace, and they're not traditional retail fixtures, which is actually working in my favor. They're things from Wayfair and Overstock, shelving and things like that, and being fairly successful taking care of all that stuff. So I'm working on getting all that stuff out the door. So all in, what's the debt that you expect to owe?

I'm at $5,700 right now. Of course, I'm going to mark stuff down to make it go and hopefully not have to chip too much into my personal to close it out. Okay. These are on your personal credit card? No. The business is an S Corp here in California. Okay.

Tell me about how that ties into your questions. What are you wondering? Well, over and above that, I've got a car situation. And I guess what I'm looking for out of all this is maybe to kind of

kind of prioritize and get a sense of with what money I do have available to me, what the best way to use that is, if that makes sense. Got it. So I was rear-ended by an uninsured driver in November. It was drivable and mechanically sound, but it wasn't closing the gate. There were some things that needed to be fixed.

fixed. So I got through the Christmas season back and forth with all the things to the store, and then dropped it off early January. And I just heard this week that they are going to total the vehicle. And I'll probably see somewhere around $3,200. I'm in conversations with them about that. So I need a new car, because I'm in a rural area. The shop's a half a mile away, so I can walk back and forth, which isn't terrible. But when I need to go to the bank, or I need to get groceries, I'm leaning on friends and don't want to do that too much.

So then I'm looking at putting money out for a car and potentially a car payment. And then there's the retirement side of things. So I'm going to be 61 this year. So I could, in a couple years, begin taking Social Security early. I do have a 401k, which doesn't have a ton in it, but at 59 and a half, I just realized recently that, oh, that's available if I need it, I think.

And then I also have a pension from a previous bank job. It's in an annuity. And I'm wondering about, do I look at maybe taking a lump sum out, dealing with the business, dealing with the car and putting the rest in some investment vehicle for further retirement? Or that's kind of where I'm at. Okay. Tell me some numbers. What's in your 401k? What is in your, what's in your pension? Okay.

And how much does it cost you to live on a monthly basis? So I'm pretty lean. About $750 a month. To live? Yes. Housing, everything? Right. Yeah. Okay. And that's including like car insurance, not including a car payment. And I did check on the insurance yesterday while I had them on the phone. And it looks like depending on what I buy, it's not going to be maybe $100 more than what I'm already paying on the car insurance. So that's manageable. Okay.

401ks got hovering around five grand in it. I have savings of about 9,000. At age 60, if I took the lump sum from the pension, that's 59.8. Monthly would be 364. And I looked at some other numbers further down the line age-wise, and 62 social security would be at 1598 a month.

But of course, if I wait till 67, which is my full retirement age, it's 2269, which I would rather do. Yeah, absolutely. It's generally better to wait if you can afford it. And I've heard that over and over on your podcast. I'm sure you have. Thank you.

What about your prospects for earning money? If you shut the store down, what kind of job could you get? And what is that job likely to pay you? Yeah, I could pick up something here locally, maybe at another retail place, which is probably going to be a minimum wage, which in California right now, it may have gone up to 18. I'm not sure, 17 or 18 an hour. But for a long time when I was in LA, I also did voiceover work.

And that's what allowed me to move out to the desert. 18 months into living in the desert and being on a contracted voiceover job, they didn't renew my contract. So it's just been, I went out and found some random jobs and then this little shop opportunity came up and I started doing that. But what I did last summer was look into kind of going at it with a beginner's mind back into audiobook narration and those things. And I'm recording my demo next week.

And my website has been up all this time, but I feel a little more held and guided by this program and this coach that I'm working with. So by the end of next month, when this closes down, I will have a demo and start reaching out to publishers. And I have referral folks in LA that I can say, this is who I'm looking at. Do you have any insight into how I can get in there? And the other thing is, since I was paying myself as an employee from the S Corp,

I believe I could apply for unemployment with the store closing down.

Yes, I believe that is true as well. You absolutely should do that. But unemployment is not going to pay you what an $18 an hour job would pay you. Here's how I would go about this. I think that you are just too young to pull the money out of your 401k, to pull the money out of your annuity. We've got to give those...

those sources of real retirement income time to grow. And the same is true of Social Security, as you've heard me say many times. For every year that you wait to take Social Security, you get an 8% bump in your benefits. I mean, that is just an incredible return.

I would get a job and simultaneously I would try to get the audio book narration going. You want to get to the point where the audio book narration replaces the $18 an hour job if that's something that you really enjoy doing and want to be doing. But an $18 an hour job is really, it's nothing to sneeze at. It will easily change

cover your cost of living and it should pay for a car, which you're going to need in order to get yourself back and forth. And so I would allow myself to use my savings to find a good used car, going to get you back and forth to where you need to go. Make sure with your insurer that car is not going to for some reason get

Bump up your premiums. Double check it before you go with it. Use the money that you're getting, what you need. Use the money that you get from the insurance company to put the down payment on a car. And then just get yourself a low payment. Go to a credit union and talk to them about a low-cost auto loan. They're really good for that. And I would just move forward that way. But I think...

As you sort of look to retirement at some point in the future, the nice thing about living so leanly is that when you start drawing on Social Security and when you start pulling from your pensions,

that money is going to exceed what it's costing you to live right now. The problem with living so leanly is that as we get older and have more expenses related to health care, it's just really hard to sustain. And so I'd like you to save some powder and

until you truly need it. And I don't think you need it right now. I think retailers are having trouble finding people to work. You're in an area where I'm sure that labor is in demand.

As a shop owner, I can tell you it definitely is. Yeah, and maybe you find some place that you like the people. I mean, hopefully you find some place that you like the people, that you like to go, where you have a good time while you're there, and you continue to feel engaged in your community. But I think it would be irresponsible to start to tap these other sources. I did have one question about your health insurance issue.

What do you do for health insurance? So the income is low enough that I qualify for state-sponsored. So I am covered on that, for sure. When are you expecting the check for the car? Well, I'm negotiating, well, not negotiating. I'm trying to understand why they're taking out some money for a deductible when I had an uninsured motorist collision deductible waiver. So I'm trying to work that out with them. So probably once that gets settled, I would say probably within a week and a half or two.

If you are feeling like, oh my gosh, I can't go one more day without a car, you can take the money from your savings and go buy a car. Just keep the down payment under the amount that you know for sure that you're going to get.

and replenish it if that enables you to get on with your life. I mean, the good news is that you've got a lot of options. And I think gearing the audiobook business back up again sounds fun and exciting. Yeah, totally. I was on a call with the group yesterday, and we were all saying our celebrations at the beginning of the call while we're celebrating, and it's motivating and encouraging. I think losing that contract, my ego took a hit. Yeah.

Been there. But I know I still have, you know, with that, I have many years ahead of me of work. So...

Yeah, yeah, you absolutely do. When we started this podcast, we recorded it out of a studio called CDM in Manhattan that is primarily an audiobook studio. Oh, interesting. And, oh, so much fun. I'm a huge Audible fan. I listen to more books than I read by a mile. And for me, I

I would see some of my favorite, not only actors, come into that studio. John Rubenstein came in one day and Katherine Erbe came in one day. And the biggest thrill, I have to tell you, I had just listened to a book during the start of COVID about

called Maybe You Should Talk to Someone. It's a book about therapy written by a therapist named Lori Gottlieb. And the woman who read it is somebody named Brittany Presley. And she was such a good reader that I went down the audible rabbit hole in order to find other books that she had read. So

I was in CDM one day and the producer, there are three different studios in CDM and the producer said, bye, Brittany, see you tomorrow. And I was like, oh my gosh, are you Brittany Presley? And she was, yes.

That's awesome. Yeah, it was very exciting for me. Well, Elise, who runs this program that I'm in, she read the Madonna memoir. Oh, wow. Yeah. And she announced yesterday on the call that six people from the program have been nominated recently for Audi Awards.

That's amazing. So that's very encouraging. Yeah, I'm super excited. And I'm glad you had that experience. That's cool. It's very cool. Big audiobook fan. I hope that you have a ton of luck as you get back into it. But I would just, I just get a job, get moving, get a car, you're going to be fine. Okay. I appreciate you, Jean. Thank you so much. And we're going to take a quick break.

You know, I have learned a lot of lessons from running about pacing and resilience. And yes, getting older, my hips are very honest with me these days. The main lesson I've learned, our bodies are capable of some pretty incredible

incredible things, but they also need a little more support as we rack up the miles and the birthdays, which is why I've been loving Ancient Nutrition's Multi-Collagen Advanced Lean. Whether I'm lacing up for a quick

5K or just trying to keep up with life, this collagen supplement has been part of my routine right up there with my morning coffee. And collagen is not just about beauty. It also promotes fat loss. It helps build lean muscle and it supports joints.

Right now, Ancient Nutrition is offering 25% off your first order when you go to ancientnutrition.com slash hermoney. That's ancientnutrition.com slash hermoney for 25% off your first order.

ancientnutrition.com slash her money. I spend a lot of time in my apartment working, recording, unwinding, cooking at the end of the day. And now that it's spring, yes, you can hear it in my nose, that dreaded allergy season, my air doctor is more important than ever. Because here's the thing, indoor air can be up to 100 times more polluted than outdoor air.

That's why I trust Air Doctor. This award-winning air purifier removes 99.99% of harmful contaminants and unlike standard HEPA filters, it captures ultra fine particles that most purifiers miss. The air smells fresher, feels cleaner, and my sinuses way happier. Right now, Air Doctor is giving my listeners up to $300 off. Just go to airdoctorpro.com.

And we are back.

Karen is with us. She is joining us. Karen, are you in the Pacific Northwest or are you in Denver? I am currently living in the Pacific Northwest in Washington. Washington. How is it there? It's gorgeous. Beautiful sunny day today. Lovely. Yeah, it's beautiful and sunny here too. I know that you have

It's essentially a real estate question, but there are many parts to it. So tell me a little bit about you and then let's unpack what's going on in your life.

Great. Thank you so much for taking my question. I'm a longtime fan, longtime listener. Thanks. And yes, so my husband and I purchased a home in Metro Denver right as the pandemic began. We had been in multiple bidding wars, so it was very hard for us to finally get this home. It was actually the week that shutdowns began, and I think all other buyers were

were really scared at what happened. So we felt very lucky to finally win a bid on this home.

It's a modest home, but great views, access to trails. And we were thinking that this would be our longtime residence. However, my husband's job went remote and we thought this would be our one opportunity to try a new adventure, having that at least one secure income. So we became accidental landlords. We hired a management company locally and found great tenants.

who have now been in the property for three years, and we're facing a decision point where we might be subject to capital gains taxes. And we're trying to decide, do we end our Pacific Northwest adventure early and go back home? The tenants are interested in buying, so we also see an opportunity to

sell to them and avoid real estate, agent fees. But we also could keep it long term. The tenants have been great. Try to keep them in long term. So, so many options. And I know you have given advice when you're really emotionally invested to kind of take that pause and reassess.

Absolutely. Where you are right now in Washington, do you want to stay? What's your real estate situation there? Yes, we currently own a home here. You have also given the advice that it's best to rent when you're trying to explore an out-of-state area. However, with our pet situation, it was really hard for us to find something. We're in a pretty remote rural area now.

So we also have a lot of landlords who are interested in short-term rentals because we do have a big summertime boom with tourism. So again, really hard to find something, find a rental that fits our situation.

So we own, we have a home here that's, both homes are at a 3.25% interest rate. Lucky you. And where do you think you're going to, do you think you'll continue to live in Washington for how long? Let's talk about the numbers.

And let's start with the Washington home. What did you buy it for? What's it worth? How long do you think you're going to stay? We bought it for $575,000 and the value has not increased much. So we're right around there. It might have gone up to $600,000. Our mortgage is $2,600 per month.

And we like the area. The job that I have now is fully in-person, but is pension eligible. So if we look at the bare minimum, if I stay there for five years, my monthly benefit, if I wait to take it into retirement, is just $260 per month. If I stay for 10 years, that goes up to $760 per month and up.

And there's a cola with that as well. And do you, I mean, when you look at where you're living right now, are you happy? Do you like it there? I mean, put the, is this a place that you think that you want to stay? Is this a job that you think that you want to keep? It could be.

It could be, but I also think variety is the spice of life. I'm fully comfortable searching for a new job at any point and enjoy that. I think my husband and I, we like to live simply. So we made the decision not to have any children. We're comfortable living kind of a more modest lifestyle and really kind of putting our money towards experiences. So

So we're not looking to increase our income very much. We're looking at taking on less responsibility, not more. So right now, our combined gross income is about $160,000. Okay. And what percentage of that is yours versus his? I am right at about $70,000. Okay. What do you do?

I work at our library system. So I work in marketing for nonprofits and was able to take advantage of public student loan forgiveness and have been committed to nonprofit work.

Tell me about the Denver house. The Denver house is also very modest. It is about two bedroom, one bath upstairs. And then there's a potential for a little rental unit downstairs. We put in an egress window. We remodeled the kitchen, took down some walls. So it has a beautiful view. It backs to a mountain and has views of the foothills. So it's a lovely spot.

How much did you pay for it and what is it worth at this point? We paid $604,000 and current value estimates are around $900,000 or up. So that area had such a huge boom. So we have also a lot of equity in there because we only have $255,000 left on our mortgage. What's the monthly payment and what's the rent?

including all of the costs of the manager and stuff like that. Well, let's see. I wrote it down a little bit differently. So our monthly mortgage is 2015. And then we're collecting in rent after the management fees, $3,340. Okay. All right. So you're clearing about...

You're clearing about $1,300 basically. $1,325. Okay. That's right. And your question is, do you sell it? Right? Yeah. Do we sell it? And do we take the equity out of there to maybe...

sell the house in Washington and upgrade to something nicer. Our home here is fine, but when you're coming from a home that has these gorgeous views and access to hiking trails, you just have that desire to move a little closer to that ideal. Absolutely. And you also mentioned the desire to live simple. What does that mean to you? I mean, I think simply and being a landlord, that doesn't really square. Yeah.

That's right. Yeah, I feel like we definitely stumbled into becoming landlords. And for us, really not buying much, living with what we have, reusing, repurposing, buying secondhand things. So we try to do that quite a bit. All right. So if you could write the script for

What does it look like in your mind? What would you like to get rid of? What would you like to do? And what are you afraid of letting go of by selling this house? I think I'll start there. Our fear of letting go of this house is kind of coming to the end of our exciting time in Washington and wanting to move back to be closer to friends and thinking of that home as something

potential retirement home where the primary is on the first floor. We could potentially rent out the unit below if we ever needed to. We're within walking distance to a college campus, so potentially using that as an income property in our basement. So our fear, I think, is not being able to get back into that beautiful location when we retire if we ever want to.

And I just don't know if having that equity tied up in the Denver home would prevent us from living our best life in Washington while we're here. Boy, it is a tough one. Look, you're making some money on the home in Denver. But if you took the money out of the home in Denver and you invested it,

you would be making a lot more, right? If I just did some back of the envelope calculations, if you cleared $600,000 on the house in Denver, how much do you think it would take to add to the money that you've got into your current house and buy something where you'd actually be happy living?

Yes, I think that in looking at our current market, we're looking at about an $800,000 home in our area to get kind of into that house that we could envision ourselves being in more long term. Okay.

Okay. All right. So let's say you take $300,000 off the top because your current house is worth five to six, right? You add that to your current house. You leave your mortgage where it is or you decide to borrow a little more depending on how the numbers are working at that period of time. That gives you $300,000. You invest that for a long-term return. Let's just see what that looks like.

Let's say we invest it at 8% over the long term. That's going to give you, again, $20,000 to $25,000 a year in gains on average over a portfolio that rides the ups and downs of the market and just does its work for you over time because you've clearly got considerable years for retirement.

That's valuable. The real estate market in Denver, just like everywhere else where prices have really run up in the last few years, is right now the subject of controversy.

a lot of debate. There was a story in the Wall Street Journal that you should go back and read about two companies in the business of investing solely in residential real estate. They buy homes, sometimes they hold them for a while, sometimes they fix them up, they sell homes, but they're not in the commercial real estate business, just in the residential real estate business. And the net asset value of their portfolio

compared to their stock price is very uneven. The stock price of this company is being discounted by about 20 to 30%, which means that people are looking at these properties and they're thinking, oh, homes in the US, at least where these companies own homes, but they own them all over the country, are overvalued.

There's a chance that you could hold on to this home in Denver and the price of that home could go down. There's also a chance anytime you own real estate that the roof could go, that it could spring a leak, that you could have hassles that you are not excited about.

And given what I hear you saying to me about the not wanting to be a landlord, living simply,

part of the equation. I think what your heart wants to do is to actually sell this place, even if you think that you might at some point be sad that you let it go. Am I reading you correctly? Yes, I think you probably are. I think that looking forward and

Maybe feeling sad at that point rather than feeling sad about it right now is accurate. No, I think it's a really, really difficult thing to do. I am a big...

real estate porn person, right? I spend an awful lot of time on Zillow, an awful lot of time at realtor.com. I look at places where I might have had an opportunity to buy a property and I'm sad that I didn't pull the trigger because, oh my gosh, it would be worth so much money and I could have fixed it up so nicely.

There is usually something else to rent or to buy. It may take a while, as it did the first time that you found this home of yours in Denver. But you have to ask yourself about the opportunity cost of the money. How are you guys situated for retirement? You mentioned your pension, which even if you stay with the company for 10 more years is not going to...

cover a huge amount of your monthly net. What else are you doing to set yourselves up for a comfortable retirement? Right. We have right now about 200 in traditional IRAs and 150 in Roth and then small brokerage at about 10K and an HSA at about 10K. We have about 100,000 in our money market kind of waiting to make that next move and

And then I have an inherited traditional IRA that...

is over $200,000 that was inherited before the SECURE Act. My plan was to kind of leave that inherited IRA alone unless I needed it for something major. To let it continue to grow tax-deferred. What about 401k money? Do you or your husband have that? Yes, we both have with our current companies about $100,000 each. Okay.

Okay, so you have about four times, if you count the money in the inherited IRA, four times your current salary, four and a half times your current salary sucked away for retirement. How old are you? I'm 46.

Okay, so you know my benchmarks, right? In your 30s, you want to have one times your current income put away for retirement. By your 40s, three times. By your 50s, six times. By your 60s, eight times. And by the time you actually retire, 10 times. This is going to put you a lot closer to the next benchmark. The sale of this home will put you a lot closer to the next benchmark. Okay.

It's not a must because you are tracking, right? You're right in range with what you have now. But should you decide that you want to embark on another adventure,

Right now, you probably don't have the wherewithal to do it. But if you were to sell the place and put the money away, you just buy yourselves a little additional freedom. And to me, that sounds like it jives with your personality. It does. I like that. That makes me really excited. What does your husband think?

is happy anywhere. That is a very, very nice way to go through life. What does he think about this particular decision? Does he think he'll have a huge degree of FOMO about the Denver house? A little bit. I think we're both on track with that. But for me, I've lived in Colorado for about 20 years, but it's his hometown. So he's been in that same community since birth.

And granted, most of our family has moved away out of Colorado at this point to their retirement homes in warmer weather.

So really some good close friendships there, but no family. Look, I would sit on it for a little while longer. I think that you definitely should pull out a legal pad and do the pros and cons list, but that what we've been talking through gives you a greater sense of the pros and cons. And if you line them up, you should be able to get to a decision.

Great. Thank you. Sure. Anything left on the table? I'm curious, with our tenants interested in purchasing, I do feel for them, as we all know, that folks are really trying to get into the real estate market and own their own home. So it's enticing to us to give them the opportunity to do that. But we also don't want to leave money on the table for ourselves. Is there any smart way to go about that?

considering whether to sell to them using maybe a real estate attorney or what would your advice be there? I'd actually consult with a couple of realtors. Find the realtors who do the most business in your area and ask,

Go through the process with them of letting them see the home, asking them what they would price it at in order to give you a fair market value for this property. You should not undercut yourselves. You should get the money out of the house that the house is worth. If your current tenants want to pay that, fantastic. Saves you four, five, six percent.

on a real estate transaction. But just because they're living there doesn't mean that you have to lose money on the deal. Great.

Yeah. And that may sound hard hearted, but I think how many times do you get a chance to sell a house? I do have another question about capital gains because we're right kind of at that limit. I'm assuming it benefits us if we're going to make this decision to make it right away. Yeah. So when you say you're at that limit, if you stay out of the house for a

It's no longer considered your primary residence and you lose the ability to exempt $500,000 in capital gains taxes. Yeah. Yeah. You want to make this decision sooner rather than later, unless you're

you have enough in improvements to write off against the entire gain. So when you improved the home, I assume you saved all of your receipts. Yes, I luckily was smart about that. Okay, so how much did that cost you? We have just around $100,000 in improvements. Yeah, so then you're still looking at a $200,000 gain if you wait beyond the window, which is...

$40,000. That is real money at capital, you know, at a 20% capital gains rate. So you definitely want to avoid that if you can.

Great. Thank you so much, Jean. You are very welcome. Thank you for listening. Thanks for being a part of our community. And thanks for talking real estate. I love the topic, as you know. Yes. Thank you. If you love this episode, please give us a five-star review on Apple Podcasts. We always value your feedback. And if you want to keep the financial conversations going, join me for a deeper dive.

Her Money has two incredible programs, Finance Fix, which is designed to give you the ultimate money makeover, and Investing Fix, which is our investing club for women that meets biweekly on Zoom. With both programs, we are leveling the playing fields for women's financial confidence and power. I would love to see you there.

Her Money is produced by Haley Pascalides. Our music is provided by Video Helper and our show comes to you through Megaphone. Thanks for joining us and we'll talk soon.