HerMoney Podcast Episode 270: Are We Owned By Amazon? 

Jean Chatzky: (01:28)
Americans spent $143 billion (yes, billion) on mobile apps in 2020. And yes, our favorite shopping apps may be to blame. But social media is also a factor. According to a recent Adweek survey, 41% of Facebook users said they’ve purchased something after seeing it advertised. 49% of TikTok users said the same. There’s even a hashtag for it: #tiktokmademebuyit. And it seems like once a month, I spot a viral, cute, yet disconcerting story, about a kid who spent $2,000 buying digital armor in his favorite game. Or a child who ordered 400 of her favorite popsicles after getting overly chatty with Alexa. There is a reason that one of the first pieces of advice I always give people looking to slash their budgets is remove that stored credit card information from your apps, remove it from your favorite websites. When we have no barriers to spending – that barrier, being walking across the room and fishing our credit card out of our wallet – we are much more likely to spend without thinking about it. Without ever really analyzing why we’re adding something to our cart, and whether we really need, or even really, really want a particular thing.

Jean Chatzky: (02:55)
Over the last year, one of the main places I’ve been spending, we’ve all spending, is Amazon. Amazon was already huge before COVID controlling more than 40% of all e-commerce, but in the past year, its sales have grown more than 40%. It’s added more than 400,000 employees in the US and now employees almost a million people. The company also added 50% more warehouse space. It stocked nearly doubled and the personal wealth of Amazon founder, Jeff Bezos increased by $58 billion. Those stats are just some of the incredible numbers revealed in the new book, “Fulfillment: Winning and Losing in One-Click America” by author Alec McGillis, who is a senior reporter for ProPublica and an award winning journalist and author who previously worked at The Washington Post, The Baltimore Sun and The New Republic. He is joining us today from his home in Baltimore, Maryland. We’re so happy to have him. Alec, welcome. Start by telling me a little bit about this book. You started working on it. I know pre-pandemic, and I don’t think anyone going into this strange period in our history could have predicted how reliant the country would become on Amazon over the last year and a half. What has the writing journey been like for you?

Alec MacGillis: (04:28)
You’re right. I had just no idea. When I started out with this book a few years ago, just how incredibly topical and timely it would become just how much more extraordinarily dominant the Amazon would become in our lives. Over this past year, this book actually started out not being about Amazon. I wanted to write a book for years now about the growing inequality in America, especially regional inequality, the growing gaps between places in America, between sort of winner take all cities like New York, DC, Seattle, San Francisco, that are becoming increasingly unaffordable and difficult to live in. And then a whole swath of other smaller left behind cities and towns that have really been falling behind in our economy. And I, after wrestling with this for many years, wanting to write about this, I finally settled on Amazon as the frame, through which to tell that story of those disparities.

Alec MacGillis: (05:18)
And the reason I settled on Amazon was twofold. One, the company is just so ubiquitous now, so ever present in our lives that it just serves as a good thread to take you around the country to kind of show you what we’re becoming as a country in a sort of metaphorical sense. But then it’s also a good frame for the story of inequality, because it itself has been helping to drive this problem, drive these regional disparities, just to put it very bluntly. One reason we’re ending up with such disparity between our cities is that a lot of the commerce daily commerce business activity that used to be spread around the country in all different realms of our life is now kind of sucked into certain places where these tech giants are now based. So media ad revenue that used to be spread all around the country is now increasingly kind of drawn into the bay area where Google and Facebook control 60% of all digital ad revenue in the country in likewise retail, money, retail, commerce that used to be spread all around the country is now increasingly kind of drawn into Seattle where Amazon now controls more than 40% of all e-commerce.

Alec MacGillis: (06:18)
And so you end up with this kind of concentration of wealth in certain cities, because we have such a concentrated economy in certain companies. So that’s how I came to write about Amazon. I was not going to write about Amazon itself so much as the America that falls within the shadow of Amazon. Taking you all the way from Jeff Bezos at the top of the ecosystem, all the way down to the pickers and the packers and the warehouses and the guy making the cardboard boxes in Ohio.

Jean Chatzky: (06:45)
I love that explanation because the line that jumped out to me from the description of the book, and that made me excited to really dive in was that this was a book that could take the reader through the whole ecosystem of today’s America, from the billionaire at the top to the cardboard box maker at the bottom. And the explanation that you just gave us really sheds a lot of life on that. What has the size and success of Amazon specifically done to today’s America? And I’m thinking of this through a number of windows. I have a lot of different things flashing through my head at the moment, but I read a story in the New York Times, just this morning about London and about how London and the UK is trying to bring back its high streets or its main streets like the United States and the great efforts that they’re going to to do that.

Jean Chatzky: (07:47)
I turned on Discovery+ last night and I watched the first episode of “Home Town Takeover” where Ben and Erin Napier are putting all of their energies to reviving a small town in Alabama by renovating shops and homes and barbershops. And I caught up on Wednesday night with friends, from my hometown of Wheeling, West Virginia, which has been a town that has just struggled for 40, 50 years to gain a foothold. So in light of all of those things, where is America today and what has Amazon done to it. Sounds like a terrible way to ask that question, but what has been the Amazon impact?

Alec MacGillis: (08:29)
Sure. Well, first of all, let me just say that I’ve been to Wheeling several times and I really enjoyed my visits there and you’re absolutely right. That it’s such a strong example, clear example of a small city that’s been really been left behind in today’s economy. And there are so many these cities around the country, my hometown of Pittsfield, Mass is another example. Former GE town in Western Mass. That’s really gone through hard times and I’ve been to so many of these towns in my reporting and they all really kind of break my heart. And they’re kind of the core inspiration for the book. A lot of these trends have, of course been going on for some time now. They have many different causes, struggles that these towns and cities are going through, and they, you know, another big force, corporate force, in their struggles of course, was Walmart.

Alec MacGillis: (09:09)
So, you know, decades ago we had that sort of very large notorious threat of Walmart doing its famous devastation on small towns and main streets and main street businesses. What sets Amazon apart as a new kind of player in this evolution is the effect that it has at the top end. Walmart just was devastating to all the small town businesses, main street businesses. And Amazon has continued that of course, by just making it so easy for us to buy that, make that one click purchase, that is almost completely disconnected from our own economy, from the physical world around us. That then beyond that effect of undermining local business, it does, has this effect of drawing so much wealth and commerce into these cities where it’s based. It’s sort of headquarter’s towns, the cities like Seattle and now Washington DC. That’s going to be its second headquarters. In other cities where it has all of its sort of high paid tech jobs around the country.

Alec MacGillis: (10:01)
And see where you end up with is this kind of bifurcation of the country into headquarter cities that are incredibly expensive and congested and struggling to kind of retain their character, and then warehouse towns. You now have all these towns around the country where Amazon has its fulfillment centers, where you have a completely different kind of job that you have the $15 an hour job that’s out in the edge of town and the windowless warehouse that is incredibly grueling work that people stay at barely a year on average and just work that is so physically strenuous, so isolating, so completely atomizing. And so you end up with, with really this, this extraordinary disparity again, between the two different kinds of cities. You also of course end up with small businesses just around the country, that now are either put out of business, or close to being put out of business, by this new threat by Amazon. But also a lot of small businesses who feel like they have no choice, but to join Amazon.

Alec MacGillis: (10:53)
So the book spends a whole chapter on small businesses in El Paso, Texas in particular, office-supply dealers, sort of the Dunder Mifflin. So of El Paso, these local companies that employ 15, 20 people sell to local businesses, sell to school districts, local government, and now along comes Amazon and says, Hey, why don’t you sell through us? It’ll just be much more convenient, much more seamless, much more frictionless to sell through us. All your clients will start buying from us instead. So what you should come sell through us and what that of course overlooks is that those businesses are having to give up a big cut of their sales now to Amazon. And it’s a huge threat to their existence.

Jean Chatzky: (11:29)
Well, let’s actually lay out those economics if you don’t mind, because I don’t think people realize what it costs a small business to sell through Amazon.

Alec MacGillis: (11:40)
Sure. And this is now a huge part of Amazon’s retail business. They used to be that they would, most of their sales in the site were traditional kind of wholesale retail, where Amazon would buy from a wholesaler and it would mark up to some degree and sell on their site. Now, well over 60% now of the sales on Amazon.com or what they call third-party sellers. So it’s businesses that are selling through the platform, through Amazon, but really just kind of using Amazon as the marketplace, that’s what they call it, to make their sales. And they’re doing so of course because they feel like they have no choice but to be selling there, because thats now where we all go to buy our stuff, increasingly. And so they feel like they have to be in that space, in that marketplace. The problem for the sellers is that Amazon exacts an incredibly large share of their sales in the form of initial commission.

Alec MacGillis: (12:33)
And that’s typically somewhere around 15%, then on top of that, you have all these different fees. If you want to get noticed at all on the site, on the marketplace, when there’s a million other rivals sellers on the site, you feel you have to pay advertising fees, you have to pay fulfillment fees to actually just the logistics of holding your goods and then packing and sending them. And then a couple others that you can sort of add on on there. So often it gets up to close to 30% for a lot of businesses. And top of that, it’s just, it can also be just in addition to it being expensive to sell on the site. It can be very difficult to get access to Amazon for help when you’re having problems on the site or there’s this whole very tortured kind of game of rivalry between sellers and the site where sometimes you’d have got sellers who are putting sort of bogus false reviews on your product or just this endless cat and mouse game that you’re dealing with on the site that Amazon often does not do a good enough job of regulating.

Alec MacGillis: (13:28)
And then finally you face this threat that if your product is doing very well on the site, Amazon has been known to notice this because they of course have all the data, they know everything that’s going on. They know everything about your product. They know how it was made. They know the whole shebang. And so they have been known to when they see a product suddenly getting hot, even a very obscure product, like say a car trunk organizer, you know, some random product like that is suddenly getting hot. They have been known to just all of a sudden start selling their product under one of their own house, brand names and boom it’s like that in a heartbeat you’re snuffed out, you’re out of business and that’s actually become a big issue in some of the hearings in Washington, into Amazon’s dominance.

Jean Chatzky: (14:08)
Yeah, yeah. An old Costco trick, right. I have a friend who’s in the coconut oil business and they were doing very, very well selling at Costco until they were doing too well and Costco decided they were going to make it themselves. So it’s something that happens, I think, in the world of retail. But I think the message in everything that you just said, which is so distressing is if you want to support your local businesses, if you want your local businesses to continue to be local, just buy from them, make the effort to buy from them, which is I think something that people have done a bit during the pandemic that yes, we ordered a lot from Amazon, but we also, it seems anecdotally did try to patronize our towns and our communities and in whatever way we could. Am I making that up or is that actually true?

Alec MacGillis: (14:56)
I think we did at the margins, but if you look at the numbers over the overall numbers, the fact is that the surge in Amazon sales is hard to grasp just how incredibly large that surge was. And that was really kind of all of us doing that. There are previously been a sense, I think among a lot of consumers, some sense of compunction, some sense of conscience, guilt about buying from Amazon and with the pandemic. There was the sense that you not only could now start buying from Amazon without any sense of guilt, but you could really almost do it with a sense of virtue. You know, you were, by going online, you are sort of flattening the curve, bending the curve of the coronavirus by hunkering down, staying home. It really became somehow approved and permitted and encouraged by the authorities. I remember early in the pandemic, I drove home to see my parents for Easter, from Baltimore to New England.

Alec MacGillis: (15:48)
And I was just stunned to see just on these empty highways, just all these Amazon trucks, right? Just one trailer after another. And it was like I realized as if I was almost alone on the highway with those trucks. And it felt like you were in war zone and they were the troop suppliers. They were the military equipment suppliers. And that’s really, I think how we came to see them. And so the growth was just astonishing. They were already everywhere. They already had well over a hundred fulfillment centers in this country and they felt the need to build in a single year, 50% more warehouse space. Like there’s just popping up like mushrooms. Now these warehouses, because we put in such an incredible surge in orders. And that the question now is whether we’re going to sort of pull back from that or moderate those new habits at all.

Jean Chatzky: (16:35)
Well, the other big question is what has that done to the world? I mean, what is the impact environmentally? What is it economically? What is it socially step away from America for a second? And let’s talk about those things.

Alec MacGillis: (16:49)
Sure. The economic impact of Amazon is of course enormous all that packaging, right? There’s a whole chapter of my book devoted to the cardboard maker, but the packaging goes well beyond the cardboard to all that plastic, incredible sums of plastic. The company talks a good game about how they’re trying to reduce packaging. But the fact is that a few years ago, actually they considered having a new option. They were going to call us for the green option for consumers, where you could, if you click the green option, it would mean your package might get there a few days later, but it would have less environmental impact. And they decided not to offer that option in the end. I think there was a fear that my sense is that there was a fear that in fact too many people would take it and it would basically sort of mess with their entire sort of super highly efficient bottom line driven logistics operation that were just going to be too much of a hassle.

Alec MacGillis: (17:39)
The social impact is enormous. And if you just think about what the interactions involved with going to the store, you know, whatever the store and it might’ve been in the old days, just how even the most passing kind of trip to the store in the physical place where you live in your community would involve some level of social interaction. You run into someone, you know, or you simply have some interaction with someone at the store. So when it works, there are some kind of, uh, interaction that it would often be an interaction between classes, right, with asking someone for help at the hardware store, at having a little exchange with the young woman, working the register, there’d be some kind of a human moment there. And that has now been course completely stripped away in the realm of the one-click life. You have no contact whatsoever.

Alec MacGillis: (18:24)
It’s so frictionless, so seamless that it’s all completely invisible to you. I mean, in the old days, a lot of it was still invisible to you. We didn’t see the, where the product was coming from, you know, in China or wherever, but Elisa. At the end of that supply chain, there was some kind of human interaction. And now, you know, that delivery guys coming onto your porch or on your step or into your lobby. And you probably are not even going to lift your head from your laptop to acknowledge him. The whole thing is utterly humanless, literally humanless. And so when you think about that multiplied million fold in our daily life, just how much more atomized everything has become the work of the worker, the retail worker is now much more isolated because instead of working in a store, they’re working in a warehouse where they’re all by themselves on that warehouse floor, they barely even interact with anyone else on the warehouse floor. They’re working with robots essentially. So their work is much more atomized. And then our existence as consumers is also much more isolated and atomized.

Jean Chatzky: (19:23)
It’s an incredibly sad story. In many ways. I want to dig into the impact on our own personal finances. But before I do that, let me remind everyone that HerMoney and conversations like this one are proudly sponsored by Fidelity Investments. It is no secret that women are on a different financial journey than men. So it’s important to plan for those differences when thinking about retirement, social security investing and more Fidelity can help. They are taking steps to help women demand more from their money because you have worked way too hard to get where you are to keep your money on the sidelines, get the skills and investment advice you need to put it to work for you. Visit fidelity.com/HerMoney to learn more. I’m talking with Alec McGillis, author of “Fulfillment: Winning and Losing in One-Click America” So the statistics on women and spending have been out there for a long time.

Jean Chatzky: (20:22)
Women do about 85% of the spending in this country at this point. And I am wondering about the impact of doing more spending online, doing more spending on Amazon, Kathryn Tuggle, our producer took a deep dive into the back end of her Amazon account in preparation for this show. And she won’t mind me sharing. She spent a total of $2,482 and 69 cents just to be precise in 2020 up from $1,472 in 2019. So a significant jump. And let me just say, I know that Kathryn prides herself on shopping local whenever possible. And if you all want to know how to pull your annual spending on Amazon, Kathryn’s going to put the instructions in the show notes because it is not easy to find the point is she had more than a thousand dollar increase in Amazon spending over just a year’s time. Have we all been doing that Alec? And was that just the pandemic or do you think there’s going to be some sort of a reset.

Alec MacGillis: (21:34)
Those figures from Kathryn’s account are very striking because just by my doing the math in my head, I think that it was almost exactly what the national increase in sales was for Amazon. So Kathryn is actually a perfect example of what happened last year that roughly 40% increase in sales that we all contributed to. So, yes, the big question now is going to be whether we somehow pull back from that to some degree in moderate, that online spending and somehow return to the sort of physical businesses, physical spaces around us, or whether those habits that we acquired really kind of stay with us. And Amazon is certainly banking on the fact that the habits will stay with us. That’s why they have built so much more warehouse space. That’s why they hired all these hundreds of thousands more workers, because they really think that we’ve kind of faltered ourselves into a new realm.

Alec MacGillis: (22:23)
I am often asked how I think people should approach this at an individual level. And I do not advocate for a boycott. I am not purist about this. I occasionally buy from Amazon myself. If there’s things I can’t find elsewhere, I don’t belong to Prime, but I do, you know, here and there we’ll use it. But in general, I do urge for moderation. I urge to return to the physical world around us, not just in our shopping, you know, but in all sorts of ways that we we’ve been so hunkered down this year. And we’ve just so strained our ties with our own communities in that hunkering down. And it just seems so important to me that we get back out into the physical world, around us, both with our shopping and with, you know, going back to the movies, going to theater, just everything that makes the places we live in a value to us on the shopping front.

Alec MacGillis: (23:05)
It’s so important to always keep in mind the great lesson of Tim Wu, who is a really great thinker on all these questions. Who’s now actually in the Biden administration, in the Biden white house. And he pointed out a few years ago in a great column that we think that things are more convenient online. So we make that purchase from Amazon instead of going to the hardware store, five blocks down the road or five miles down the road. What we don’t think about is the fact that by buying everything online, we’re driving that business, that hardware store some other business out of business and a few years from now, when we have to buy that product again or buy something similar, again, it’s going to be even more convenient to go on Amazon because that store is gone. And so the alternative is now 10 blocks or 10 miles away. And so if you’re always just thinking about the convenience, you are in fact, changing the whole calculus of the convenience to the point where you’re going to be left with only that one option, that one Amazon option down the line. And so really just constantly just thinking about the convenience leads one into a kind of avoid. And I think it’s really important to think about that, that broader context in the threat of that void.

Jean Chatzky: (24:09)
Are there any suggestions that you have, I mean, you, you mentioned a habit and a habit that Amazon is banking on. If you want to break yourself of the one click ordering habit, I think it’s important to realize that, you know, there’s this feedback loop that’s happening in our brains, this concept of wanting something and then having it be there the next day, there’s a lot of psychology in here. So what has it done to us and how do we escape it?

Alec MacGillis: (24:37)
There is a lot of psychology on this in, and just how sort of the way their brain lights up over the prospect of instant gratification of what we want. And then also the way our brain lights up over low prices. There’s another book that came out just around the time of mine called “Made in China” which is all about the forced labor in China. That’s making a lot of this stuff that we’re buying and the author of that book gets into actually, it’s fascinating. She gets into the kind of the brain science behind the consumer purchase and just how powerful that chemistry is. But I don’t think that we are completely helpless in the face of this. And my book in a sense is really just an implicit urge to the consumer, to the reader, to just think the think somewhat more carefully about what is lying behind the easy one click and that just the whole landscape and consequences that lie behind it.

Alec MacGillis: (25:21)
And also just to keep in mind that the company is so banking on you, they have engineered all these different things to make you shop that way and act that way. The whole notion of Prime, the whole success of Prime was that they realized that once they charge you, this one-time annual fee for Prime membership, there was the going to be this consumer tendency to want to get as much as they could out of that fee and that they would start buying everything from Amazon to get as much as they could out of that fee. And that’s how they got us. And every time you kind of respond to that kind of thinking, they’re getting you again, and you’re responding to their kind of very shrewd and really kind of conniving kind of business tactic.

Jean Chatzky: (26:00)
It seems like a good time to ask you what Amazon’s response to the book has been

Alec MacGillis: (26:06)
Their head PR guy, Jay Carney, who used to be Barack Obama’s press secretary sent a letter to The New York Times book review after the book got a favorable review from them. And he criticized the favorable review in the book. And the gist of it was that, look, it’s unfair to attack us because we’re doing so much for the country. We’ve hired 400,000 more people this year, and we’ve got all these small businesses that are selling through Amazon now. And I was struck by that response because those are facts that I very much mentioned in the book. And I mentioned quite prominently as proof of their extraordinary growing dominance, both those numbers to be taken with context. Yes, we’ve seen this huge surge in Amazon hires at the warehouses, but those hires are occurring in a context of just massive job losses in brick and mortar retail.

Alec MacGillis: (26:55)
We’ve essentially replaced one kind of retail job with another. One job that was much more kind of social and less physically strenuous, with a job that is really more resembles factory work, except it’s not as well paid as factory work. And then as with the small businesses, yes, there are all these businesses that are now selling through Amazon, but again, they are doing so because they feel like they have no choice and they’re having to give up a large chunk of their profits to do so. So there’s a broader context to this incredible growing presence in dominance of the company in our lives. And the big question now is going to be not just how we respond as consumers to that dominance, but also whether the government decides to that it’s time to step in and somehow rein in these giants because we’re really kind of approaching something, resembling what we had in the early 20th century with the great monopolies of, of that era.

Jean Chatzky: (27:41)
Will any amount of encouragement to buy local, be able to get us to give up the convenience of one day delivery.

Alec MacGillis: (27:51)
I do think that things are always operate on a scale on a spectrum. Clearly e-commerce is here to stay in a very big way and specifically Amazon, you know, it’s just now a fact of life that they are going to be with us for a very long time. They’re going to be huge for a very long time, but if there were even some kind of moderation at the margins that would make a thing, a big deal for a lot of other businesses. One very interesting thing. That’s come along on the sort of consumer front and competition to Amazon recently is this company called Shopify, which is Canadian company that has proven very successful in helping small businesses set up their own direct e-commerce operations. You don’t go to buy things on Shopify. They’re simply behind the scenes helping many, many, many businesses with their own e-commerce sites. And they’re doing very well. They’re posing a real threat to Amazon and Amazon is very worried about them actually. And there’ll be interesting to see if companies like that, that are able to basically help businesses get their own e-commerce operations, going to the point where they no longer feel like they have to sell through Amazon. So that is one interesting new consumer development to keep one’s eye on.

Jean Chatzky: (28:59)
I think now I know that all of my listeners here at HerMoney, this is a community that really knows the power of voting with our wallets of spending and investing in a way that drives change. So if you could encourage everyone to make one change or think about one thing differently, what would that be?

Alec MacGillis: (29:23)
I think it would be to think not only about as you’re making that purchase to think not only about the workers who are being driven to exhaustion by, by this new model of consumer life and the workers in the warehouses and the drivers who are under such pressure to get us our desires in a day or two, that they often don’t even have time to go to the bathroom as has been documented, to think not only about them, but also to think about the effect on the places that we live in to be more mindful of our own communities, the own spaces in which we live that our own local economies, and to think about not only the effect on our local businesses of us buying from this kind of invisible, abstract, other distant place that is represented by Amazon, but also in our tax bases when the money that we’re spending as virtually no effect on the local tax face, because all that money is flowing away from us just to become more rooted in the places that we live and more engaged in the places we live and to really kind of break ourselves out of that hunkering down that we’ve been in the past year, where we were just kind of lost to that sort of abstracted digital realm.

Jean Chatzky: (30:28)
I think it’s a really, really important message right now. And I think it’s an important book. Alec McGillis, the book is “Fulfillment”. Thank you so much for the education today. Thanks for being here. Thank you. It was a great discussion and we’ll be right back with Kathryn and your Mailbag. [inaudible]. That was such a good discussion. Thank you so much for booking him.

Kathryn Tuggle: (30:59)
Oh my gosh. I loved it. It was so interesting in all the ways that I was hoping that it would be, and I feel so guilty about the amount that I spent on Amazon. I, I really did walk to the market. I walked to my local retailers to try to support them, but I still spend a thousand dollars more.

Jean Chatzky: (31:16)
Yeah, I’m sure I did too. I didn’t tally my numbers yet. And sometimes I do it because there are things that I find difficult to find, right? So I was eating these GG crackers for awhile. I’m stopped, but I was eating them for a while, which are just these high fiber crackers. And I had trouble getting them. You could get them at Whole Foods, but there’s no Whole Foods near me. And, um, so I was ordering those online and, and other things too. It’s a dance because I’ve been back to the mall in the weeks, since the country has started to open up and I’ve also been in my local stores and some of them don’t have a lot of stuff, right? It’s a vicious cycle. I never know, is it a vicious cycle or a vicious circle? It’s a vicious because when we stop shopping at our local stores, they don’t have enough money to keep inventory in stock, or they can’t keep as much inventory in stock because they know people aren’t going to buy it. And then it makes us not want to go to our local stores.

Kathryn Tuggle: (32:23)
Yeah, vicious is right. I had a good Amazon experience this weekend. I needed some new water ski gloves. I used to be a competitive water skier in college, and I was going to see

Jean Chatzky: (32:35)
If we learn new things about you, can we wait, can we just pause there for a second? You used to be a competitive water skier. I don’t even think. I know there is a thing that is competitive water skiing.

Kathryn Tuggle: (32:51)
It’s big in the SEC, all the SEC schools have a water ski team and I was on the University of Alabama water ski team. Anyway, I use water ski gloves because the ski rope always bothers my hands and I needed new water ski gloves. Before I was going down to see my family in Alabama and I was in New York and our flight was in 48 hours. And I realized I needed these water ski gloves. So I looked on Amazon because I knew in New York City, I wouldn’t get to find anything remotely close to that. And they were available on Amazon for next day delivery for $50. Or I could take the chance and maybe somewhere down on Lake Barton in Alabama, where I was this weekend, maybe there would be a retailer that would have them. So I decided to wait, try to buy local. When we got down to Lake Martin and the same gloves that I was going to pay $50 for on Amazon, I found for $38 at a local retailer at Lake Martin. And it came with a free drink koozie for me to use while I was on the lake and some very friendly customer service and a great shopping experience. And I just was so thankful that I had not clicked buy now and that I had waited.

Jean Chatzky: (34:07)
Well, that’s amazing. But what I really want to know is can you do tricks? So what does it mean? Like, is it jumping? Is it, is it turning? Is it twisting?

Kathryn Tuggle: (34:21)
So I have done trick ski before, which you don’t really see used anymore. That was something that my mom and dad taught me. That’s kind of a holdover from the seventies and trick ski is really hard. There’s no retter on it. It’s basically like you’re trying to stay balanced on a postage stamp. So that’s hard, but that was not competitive at Alabama. What I competed in was slalom at Alabama. You don’t really do tricks. You mostly just do a slalom course, but I can catch a fair amount of air and come down and not break my neck. So it’s an incredible feeling to be back there behind the boat and be at one with the water.

Jean Chatzky: (34:55)
Oh my goodness. A new side to you. I’m just, I’m, I’m smiling. Our listeners can’t see me, but I’m just smiling from ear to ear. I can’t wait to get you out to LBI and um, I have friends who have a boat that ski off the back of their boats. So maybe we’ll have to do a little bit of that and you can show off I’m in. Okay. All right. Sounds good. Let’s answer some questions.

Kathryn Tuggle: (35:18)
Yeah. Our first question comes to us from Chris. She writes “Hi Jean and Kathryn I’m retired, and I have been listening to your podcast for about a year and a half. Your advice shared information and interviews have given me lots of confidence for which I am truly grateful. I feel relatively comfortable in the past decisions that I’ve, but I have one nagging question. I wish we had been able to put more of our retirement savings into our Roth IRAs rather than our 401(k)s and 457 accounts. Since we were both educators, our incomes were modest during our working years, we raised two children and put them through college by scrimping saving and refinancing mortgages and placing money into graduated CDs, which earned 8% at the time. Hence the tax savings of the 401k and 457 accounts seemed so beneficial. Then I would like some advice at this point, would it be prudent to gradually roll over funds from our tax deferred accounts into our Roth accounts?

Kathryn Tuggle: (36:15)
What would be the most tax efficient way to do this? Some background information I’ll turn 70 this year and receive a pension approximately $76,000 a year through our state public employees, retirement association, and a very small $250 a month. Social security benefit. I have $30,000 in a Roth IRA and 170,000 in tax deferred retirement accounts. My husband will turn 69 this year with a pension, approximately $58,000 a year, and no social security. He has $20,000 in a Roth IRA and $116,000 in his tax deferred accounts. We have $110,000 in mutual funds and about $60,000 in savings accounts, we had twice that amount, but we bought an RV last summer, our pandemic escape vehicle. We decided to pay cash for this and opened a hundred thousand dollar home equity line of credit. Should we need it? We’ve kept the balance at zero. So it’s just a backup.

Kathryn Tuggle: (37:17)
We own our home, worth approximately $700,000 and our cars and have no debt. Our pensions cover all our expenses, so we don’t need to tap any of our retirement funds right now. Our pensions do not transfer to the other spouse upon our deaths. So we have term life insurance policies, $400,000 on my husband and $300,000 on me. These will expire when we are 82. We do not carry long-term care insurance in researching the possible rollover of tax deferred funds. I know there are other things to consider. If our tax bracket goes up, like with changes to Medicare premiums or the taxing of social security, I’ve also considered using our required minimum distributions. When they come up to fund long-term care insurance, any advice you can offer would be greatly appreciated.”

Jean Chatzky: (38:09)
Well, Chris, I have a smile on my face here, too. Thinking about you tooling around in that RV. I’m very happy that you guys made that purchase. And I hope that you’re enjoying touring the country, wherever it is you happen to be going. I’m pretty sure that this question was inspired from the IRA episode that we did recently with Ed Slott and the Mailbag that we did all about IRA questions. I wouldn’t stress about this right now. I think you got a lot of great value out of your 401k and 457s. I think you use them exceedingly, thoughtfully and well, and that you’ve been able to grow a nice substantial retirement nest egg. And right now you’re at the point where your income is stable. It’s not going up and moving money into a Roth. Having Roth assets is more beneficial for people who believe that their income is going to go up and their tax bracket is going to go up in the future.

Jean Chatzky: (39:11)
So I wouldn’t really stress about that. I think you’re going to be fine leaving your assets where they are. I do think though, that using your required minimum distributions to fund some sort of income source that you can turn on at age 82 ish, when those life insurance policies expire to fill what would be that gap might be helpful. And I don’t think at your ages, traditional long-term care insurance is going to be feasible. The sweet spot to buy that sort of coverage is usually around age 50 or 55. And you guys are past that. And I don’t know if you have any health issues, but sometimes health issues. Get you knocked out of the ballpark for long-term care insurance. Once you get towards your seventies. What I would think you might want to look at is something called longevity insurance or a deferred annuity.

Jean Chatzky: (40:21)
Basically you would take those RMDs. You’d put the money toward an annuity where you wouldn’t take the payout for years instead, you’d let the money grow and you’d tap it down the road. And because you would be giving the money time to grow, it would have more power when you were ready to turn it on. I’m not totally positive that this is going to be the solution. You could also just take the money out in the form of RMDs and invest it, put it in an investment account that you earmark for long-term care. But if you’re interested in talking to somebody about the concept of a deferred annuity, it would be a life insurance agent. So reach out perhaps to the same person that you talk to about those term-life policies in the first place. And good luck. I think you guys are in really good shape.

Kathryn Tuggle: (41:14)
I had a feeling you might suggest an annuity and absolutely these guys are in such great shape for retirement.

Jean Chatzky: (41:20)
Yeah. Yeah. I mean anybody who can say we don’t really need our money in our retirement accounts right now because our pensions are satisfactory is lucky. Right? Most people don’t have pensions and people who were to this question and wondering why their social security was so low. Sometimes that happens with educators. Sometimes in some states, when you are getting a pension as a teacher, you don’t get social security or you don’t get as much.

Kathryn Tuggle: (41:48)
What would you say, percentage wise, her line about how the pension doesn’t transfer to the spouse in the event of their death is that normal with pensions? I thought most pensions that your spouse was able to inherit them.

Jean Chatzky: (42:02)
It depends. I think how you take the pension when you first tap into it. So, many pensions, if not most pensions have the option of taking a smaller payout, but providing a payout for your spouse, they may have made the decision not to structure their pension payouts that way.

Kathryn Tuggle: (42:29)
Gotcha. Thanks Jean. Our next question comes to us from an anonymous listener. She writes “My husband and I are in our mid fifties. We own our home, which has a medium-sized mortgage with about 20 years remaining. And we also own a small four unit rental building, which we purchased as an investment many years ago. It is now mortgage-free. We have a small market consulting business. Although we have many steady clients and we make a comfortable income from the business that income fluctuates because shorter term clients come and go. We have financial investments, including bonds managed funds and a couple of small IRAs. However, we’ve always assumed that the bulk of our retirement income would come from the rental apartments. The rents are decent. Although when you subtract all the associated costs like real estate taxes, insurance utilities, routine maintenance and repairs, our income from the apartments is fairly modest while the building itself has grown a lot in value over the years.

Kathryn Tuggle: (43:27)
I have two questions for you first at this point, given the ongoing management responsibilities involved in being a landlord and giving the sizable asset of the building itself, I’m wondering if, and when it might be a wise strategy to sell the building and invest the profits in order to create a more hands-off and dependable source of retirement income. If so, what type of financial vehicle should we invest in? There would be taxes to pay upon selling the building as it has increased in value many times over. And I’m not sure how to compare that, to keeping the building and living on the income. Second while we do have an investment advisor at the institution that houses our financial accounts, we need to find some kind of finance professional who understands the complexities of small business ownership, including most importantly fluctuating income levels and the difficulty of translating that into any kind of a budget as well as real estate ownership, insurance needs and real estate tax law, to help us figure out our financial lives and plan strategically going forward into our later work years and into retirement. I’m not sure that a fee-based financial planner would have the depth and breadth of knowledge to tackle this complex situation. Would we be better served by some kind of a business advisor or perhaps a tax lawyer? We would appreciate your advice. Thank you so much.”

Jean Chatzky: (44:51)
Well, you are very, very welcome. Thanks for listening. And thanks for writing in with such an interesting question, just in hearing the real estate side of your question, my advice was going to be, you absolutely need a financial advisor. You need a financial advisor who can run the numbers on this for you and take the taxes into account and figure out if say selling the building after taxes spills off, I don’t know, $500,000 or a million dollars, what that looks like invested, what sort of an income stream could that produce for you down the road. And how does that compare to the income that you’re getting from the property based on the real estate market right now, if it’s as good, where you live as it is, where I live, I think now might be a good time to sell, or at least to look at selling, particularly because it sounds as if the landlording has become kind of a pain in the neck.

Jean Chatzky: (45:56)
And I don’t think this is something that anybody should take lightly, but you’re absolutely right. You need some advice and I’m going to send you two places. I want to first explain that financial planners, financial advisors come from all sorts of disciplines. There are advisors who are lawyers. There are advisors who are accountants. I worked with an advisor for years, a guy named Gary Schatzki who’s in New York, who is a lawyer and an accountant. And I know that people like him are maybe not a dime a dozen, but they absolutely do exist. So here’s where I’m going to send you. First, I’m going to send you to HerMoney.com and I want you to click on our, “Find an Advisor” button. This is a free service that we offer. We have a partnership with an organization called WealthRamp, and you can fill out the questionnaire and you can be very specific about what you need in this advisor.

Jean Chatzky: (46:57)
And if we have any vetted advisors in the database who check all the boxes, we will serve up those names to you. And then you can reach out to those advisors and you can make the connection. I’m also going to send you to NAPFA. NAPFA is The National Association of Personal Financial Advisors, NAPFA.org. They too have a huge database, a zip code locator, and you may be able to find a person that suits your needs there. And lastly, I would say, if you have an accountant in your life that you trust, if you have a lawyer in your life that you trust, I think both of those can be good. First phone calls to find the sort of advisor that can handle all of these questions. And it may not, as you expect, come in the form of one person, I’ve talked on this show before, about how I have a financial advisor.

Jean Chatzky: (48:02)
I have an accountant. They communicate. And the fact that they communicate helps me helps my business. I am happy allowing them to communicate. We function as a team, and that may be the approach that you need to solve this problem. But I think reaching out for help and finding the right help is exactly the right move. Thank you so much, Jean. Thank you, Kathryn. And thanks everybody for writing. Keep the letters and you can send them to us at mailbag@hermoney.com. In today’s Thrive, Let’s talk about how to cut food waste and save money in the process. Let’s quickly reflect just on the past week. Did you actually eat the gorgeous lettuces that you snagged at the farmer’s market? What about the beets that look too red and delicious to pass up? Did you find a hidden yogurt tucked in the fridge a month past its due date?

Jean Chatzky: (48:59)
Despite our best efforts to eat what we pay for and cut down on food waste. We all let things go to waste at some point. I know I do, but the impact to both our wallets and the environment can be extreme. Globally, an estimated 1/3 of all, food produced goes to waste according to The Food and Agriculture Organization of the United Nations and in America that comes out to a pound a person daily, and that carries a whopping cost. If it’s time that you shifted your strategy to ensure you’re eating all your veggies and fruits and meat, while they’re still fresh and delicious, we’ve got a run down on HerMoney.com this week with some of our favorite tips. First better organize your produce. Most of the time we let something go bad cause we don’t see it. So a visualization system is essential. Organize your fridge so that the fruits and veggies that go bad first are labeled and accessible.

Jean Chatzky: (50:03)
And you can do this by just cleaning off a shelf at eye level at the front of your fridge and dedicate it to that “Eat Me First” produce. Next prioritize meal prepping. The first mistake that usually leads to food waste is grocery shopping when you’re hungry or go into the market without a game plan, take stock of what you have in your fridge and pantry. So you don’t double up and while you’re jotting down what you need add quantities so that you don’t buy more than you’ll actually use in your recipes. And on that note, make sure you have an idea of what you’ll be cooking each week by devoting some time and some thought to your meal, prepping and planning strategy. When we do this, we can measure things out in accordance with our dietary needs, but we can also plan for potential food excess to be included in other dishes throughout the week.

Jean Chatzky: (51:01)
Finally, understand those labels. Take note of the differences in “best by” and “sell by” and “use by” labels. In truth, manufacturers can’t tell you with total certainty when something is going to expire. The USDA doesn’t regulate those dates. Rather, food manufacturer stamp them on their packages to indicate when the food will be at peak quality. It’s best to judge each food by sight taste and smell before discarding it. Thank you so much for joining me today on HerMoney. Thanks to Alec McGillis for sharing his stories with us today and walking us through how we can all make more conscious decisions around our spending. If you like what you hear, I hope you’ll subscribe to our show at Apple Podcasts. Leave us a review. We love hearing what you think. We also want to thank our sponsor Fidelity. We record this podcast out of CDM Sound Studios. Our music is provided by VideoHelper and our show comes to you through Megaphone. Thank you so much for joining us and we’ll talk soon.

Music: (52:22)
[inaudible].