Couple’s Attitudes About Money Rooted in Childhood Fears

Growing up poor helped shape the attitudes of Jean and Pamela Ganne about work and money, but in vastly different ways.

When they met in San Francisco 15 years ago, the spontaneous Pamela spent money as she made it, wandering from one short-term job to another. By contrast, the stoic Jean had spent decades in his native France perfecting the craft of stone-carving. The artisan was also careful with his money, spending only for life’s necessities.

Now married 11 years, the Costa Mesa couple’s attitudes have rubbed off on each other somewhat. Jean, 63, has lightened up, occasionally using money for his own enjoyment, such as playing the generous host to visiting relatives from France. A growing sense of security has inspired Pamela, 47, to save money, think about the future and stick with her job as an administrative assistant at UC Irvine.

But they still have questions about money that are rooted in childhood fears. Jean is worried about having enough money to retire, and the couple are trying to decide whether to buy a home--a property in France once owned by Jean’s late great-grandfather.

Brent Kessel, a certified financial planner in Santa Monica who reviewed the Gannes’ finances at The Times’ request, said people’s relationship to money is often linked to their past.

“Like the Gannes, most of us have automatic responses to money that have been programmed over a lifetime of experiences,” Kessel said. “If we can become aware of what our programming is, we can stop taking unconscious action that doesn’t serve our financial well-being.”

Jean’s frugal lifestyle and nose-to-the-grindstone work ethic are grounded in World War II and its aftermath. When he was just 3, the Nazis occupied Paris and imposed a food-rationing system so restrictive that civilians were constantly hungry. They were cold, too, as coal for heating homes was diverted to German munitions factories. And because leather was scarce, the soles of Jean’s shoes were cut from old tires. Shortages of basic goods continued long after the war ended, and Jean struggled to make ends meet as a young man in the 1950s.

Talking about money was not an issue in his family “because we didn’t have any money,” Jean recalled.

The need to support his parents directed Jean’s education and career path. The cost of attending school to become a stone carver was less than other vocational choices and, he reasoned, skilled craftsmen would be in demand to rebuild France’s bombed-out cities.

Deprivation marked Pamela’s childhood, too. Raised in a broken home and dysfunctional family, Pamela recalls frequent moves with one parent or the other to dozens of homes in Oklahoma, Texas, New Mexico and California.

“My mother was always terrified about not having enough money, not having a good enough job to support two, sometimes three, children, having to be on welfare temporarily and having all the things go wrong and cost money that typically go wrong and cost money in an average life,” she said.

Both of her parents later committed suicide, adding to the feelings of impermanence that Pamela has gradually countered through her stable marriage. Until just a few years ago, she had thought, “Why should I plan for the future when there isn’t going to be one?”

Concern for Jean’s welfare, however, has motivated Pamela to stay out of debt and, more recently, to start saving.

“I want Jean to have a retirement better than what his parents had. When Jean’s mother was in her 80s, she lived on the fifth floor of an apartment building that didn’t have an elevator. There was no shower or bathtub, only a toilet. The one sink they had was in the kitchen.”

*

Given Jean’s age of 63, the Gannes are getting a late start on retirement planning, but they’re still ahead of millions of Americans who don’t plan at all, Kessel said. The couple’s lack of debt, thrifty spending habits, rich life experiences, determination and resourcefulness will compensate, he concluded.

Pamela has set aside more than $7,000 in the university’s 403(b) retirement savings plan. She has also encouraged Jean, an independent contractor at Chiarini Marble & Stone in Santa Ana, to accumulate nearly $25,000 in a simplified employee pension-individual retirement account (a SEP-IRA, designed for the self-employed).

Jean plans to keep working until at least age 70. He cherishes the creativity associated with chiseling flowers and other delicate designs from rock.

*

That Jean is an entrepreneur in the United States is somewhat ironic. His late parents were die-hard socialists who deeply distrusted capitalism. With Southern California’s construction and remodeling industries generating demand for fireplace mantels, friezes, cornices, fountains and other decorative stonework, Kessel believes that Jean should earn adequate income enabling him to contribute approximately $7,000 a year to his retirement account.

But to beat inflation, Jean needs to invest the money in his SEP-IRA more aggressively, Kessel said. It is now earning less than 5% a year in a bank savings account. Kessel suggested switching to a mix of no-load mutual funds featuring stocks and bonds.

Kessel also said that because Pamela has more time before she retires--at least 18 years versus Jean’s seven--she can afford to take more risk.

He suggested that she continue contributing $4,600 a year to her 403(b) and that she split that money between the university’s equity fund and the Fidelity Investments stock fund available in the plan. Nearly all of her retirement savings are now invested in an insurance contract.

“If your investments could average 9% a year, then your money would have a good chance of lasting until Pamela’s 98th birthday,” Kessel said. “However, earning 9% probably requires you to have 60% to 80% of your investments in stocks, which also means being willing to endure portfolio declines of up to 25% in a major bear market.”

*

Although Jean is now a U.S. citizen, he worked long enough in France to become eligible for that country’s Social Security benefits. In fact, he is scheduled to receive his first payment--a $12,000 lump sum to cover 1999--this month. Thereafter, he will receive $1,000 a month.

Jean is also eligible to start receiving U.S. Social Security payments, but Kessel advised him to wait until he retires or reaches age 70, because benefits are reduced and taxed until then if an individual earns significant income.

Collecting Social Security from two countries requires some extra considerations, said Nigel Taylor, a certified financial planner in Santa Monica who reviewed the international issues associated with the Gannes’ finances. Treaties often determine whether an individual can transfer Social Security credits and how the benefits are taxed.

Jean’s French Social Security would be taxed in France but not in the United States, Taylor said, while the remainder of his income, all derived in the United States, would be taxed here. In the event of Jean’s death, Pamela would receive 54% of his French benefits.

Jean also made extra--and unnecessary--payments into the French system because he was afraid of losing his benefits. There is no way to recover those payments, Taylor said.

Both Taylor and Kessel recommended that Jean apply his French Social Security income toward fulfilling one of his goals: buying his late great-grandfather’s home in Le Blanc, France. His monthly benefit of $1,000 would cover the payments, making the transaction convenient and manageable. He could then rent it to relatives, friends or neighbors.

The modest home is available for only $36,000 because it is in a village off the beaten path. But it holds great sentimental value for Jean. After it is paid off in three years, the planners said, Jean could contribute some of his French Social Security payments to a Roth IRA.

“It’s not a bad investment,” Kessel said of the house, noting that it might serve as a safety net if a worldwide depression were to hit. “If everything went badly here, Pamela and Jean could always move there, live off French and U.S. Social Security and not have a rent payment to make. By not paying rent here, they could knock 20% off their monthly expenses.”

*

Taylor urged the Gannes to hire a competent French notaire, or notary, to guide them through the home purchase to make sure the property is free of liens and other encumbrances. The notaire could also help avoid potential conflicts arising from the transaction. Estate planning is essential for people with property outside the United States because inheritance laws are different in other countries and vary according to citizenship, residence, type of assets and other factors.

The Gannes’ eagerness to prepare for retirement and learn about investing will help them realize their goals, Kessel said.

“Pamela’s ability to let go of her unstable childhood is allowing her to plan for the future,” he said. “And Jean is becoming open to the idea that he doesn’t have to work until the day he dies.”

*

Suzy Hagstrom is a regular contributor to The Times. To be considered for a published Money Make-Over, send your name, age, phone number, income, assets and financial goals to Money Make-Over, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053 or to money@latimes.com. You can save a step and print or download the questionnaire at https://www.latimes.com/makeoverform.

*

Information on choosing a financial planner is available at The Times’ Web site at https://www.latimes.com/finplan. The site offers stories, phone numbers, addresses and links to related sites.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

This Week’s Make-Over

* Investors: Jean Ganne, 63, a self-employed stone carver and sculptor, and Pamela Ganne, 47, an administrative assistant at UC Irvine

* Combined gross annual income: About $74,000

Goals

Plan for retirement; coordinate U.S. and French Social Security payments; decide whether to buy a relative’s home in France.

Current Portfolio

* Cash: About $1,000 in a bank checking account

* Savings: About $10,000 in credit union

* Retirement accounts: About $30,000

Recommendations

* Invest the Gannes’ retirement savings more aggressively in stock funds. Specifically:

1. Jean’s SEP-IRA should be in a diversified selection of no-load stock and bond mutual funds, with an eye to security and the Gannes’ social interests. Financial planner Brent Kessel suggests 20% in Pimco Low Duration Bond, 20% in Vanguard Intermediate Term Bond, 14% in Domini Social Equity, 14% in Vanguard Value Index, 7% in O’Shaughnessy Cornerstone Growth, 7% in Vanguard Small Cap Index, 12% in Schwab International Index and 6% in SSGA Emerging Markets.

2. Move most of Pamela’s 403(b) savings into the stock mutual funds available within the plan.

* Monitor expenses closely to make sure both continue their retirement contributions.

* If they decide to buy home in France, employ a local notary for a smooth transaction and to protect the surviving spouse’s right to use the property.

* Buy additional life insurance for Jean: a $200,000 term policy with level premiums for about 10 years.

Meet the Planners

Brent Kessel, a certified financial planner, operates a fee-only firm, Abacus Wealth Management Inc. in Santa Monica. Kessel travels nationwide to conduct workshops on financial management and psychology. He also serves on the West Region board of the National Assn. of Personal Financial Advisors.

Nigel Taylor, a certified financial planner, operates a fee-based practice in Santa Monica. He specializes in international as well as U.S. estate planning. Taylor is chairman of the Financial Planning Assn.’s Los Angeles chapter.