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You should invest as though you’ll have to justify every buy and sell to your toughest high school teacher.

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ACA Subsidies for Early Retirees

"This happened to my father when he retired from a major medical center. The benefit was a cut of a million pieces."
- David Lancaster
Read more »

Contrarian Thinking About Roth Conversions

"One thing to contemplate is there is a good chance that your children may inherit your assets when they are in their peak earning years. If the deceased has been taking RMDs from a traditional IRA the non-spouse beneficiaries must start taking annual RMDs in the year after their death and also distribute the entire account within 10 years. This could result in a significantly higher tax rate. If the inherited funds are from a Roth there is no impact on the beneficiaries tax rate."
- David Lancaster
Read more »

Have you ever met “they?” 

"Oh wow Mark, there's an Irish "the man" too?"
- DAN SMITH
Read more »

It is never too late. By Chris

"RDQ is the HR guy with a heart. I'm pretty sure he knows that I like him."
- DAN SMITH
Read more »

Money Pit

"Cathrine, I think the good news is that you control your destiny. At this point in your life, your housing choices can be made on your terms, as opposed to being forced into a decision due to poor health or money issues. Best of luck with your homes. That was a great movie. "
- DAN SMITH
Read more »

Housing options for older Americans

"Nick, thank you for sharing the article. We don’t have a lot of experience with this. We had some friends who built a multi generation home in the mid ‘90s so one of their widowed moms could live with them. I think there were ups and downs, but they made it work for over 20 years and the mom was able to die peacefully at home. We have an empty nester type home that worked well when I was having my cancer treatments. Main living areas on first floor along with master and laundry. The shower already had a grab bar. We like living in a regular neighborhood. I have thought about if Spouse passes before me, I will probably go into an apartment, assisted living, etc, depending on my age then. We moved to the same town as our kids 10 years ago. Chris"
- baldscreen
Read more »

Easy DAF (e.g. Daffy.org) for Donation of Appreciated Stocks

"I generally like Fidelity because their tech is so user-friendly and reliable. I am over 70 1/2 so use QCDs instead of a DAF for donations and Fidelity makes it so easy, all online and the donation goes out within a day or so of the request."
- Sabine Nooteboom
Read more »

Drinking on the Job

"I remember, back in the late 70's and early 80's when it was totally acceptable to drink beer at lunch and return to work. I also remember that it came to an end with the advent of substance abuse testing in the workplace."
- Jeff Bond
Read more »

Backdoor Roth Explained

ROTH IRA IS A powerful account. It grows tax-free and withdrawals are tax-free during retirement. Roth IRA also has income limits. For 2025, if you are filing your taxes as single and make less than $150,000 ($236,000 if married filing jointly) of modified adjusted gross income, you can contribute a maximum amount of $7,000. But if you make $165,000 (single) or $246,000 (married jointly), you are ineligible to contribute to a Roth IRA directly. Luckily, there is a strategy that allows you to contribute indirectly (or the “backdoor” way).   Backdoor Roth Backdoor Roth is a strategy that allows high-income earners to contribute to a Roth IRA through a conversion process. The idea is simple: instead of contributing to a Roth IRA, you contribute to a Traditional IRA first and then convert the contributed amount to a Roth IRA. Before I dive into the strategy, let me give a bit of background on how this strategy came to exist. Prior to January 1, 2010, you could only convert from a Traditional IRA to a Roth IRA if your adjusted gross income was $100,000 or less. Luckily, after 2010 this income condition was eliminated, which is how the Backdoor Roth came to exist indirectly. Here is a step-by-step guide: 1. Eliminate traditional IRAs balances The first step is to roll over all your Traditional IRA, Rollover IRA, Traditional SEP, and Traditional SIMPLE IRAs into 401(k) or 403(b) plans before December 31, 2025. This is because if these accounts don’t have a $0 balance, you will be subject to the pro-rata rule on your conversion. If you are a solo business owner, you can also roll over these accounts into a Solo 401(k). If you don’t have 401(k) or 403(b) plans available to roll over into, there isn’t much you can do and you should generally avoid this strategy. You could potentially explore a Solo 401(k) for your side hustle, which may allow you to roll over these balances into it. If you are doing the Backdoor Roth process but get laid off during the year, do not roll over the 401(k) or 403(b) balances into an IRA. 2. Make a non-deductinle contribution to a Traditional IRA The next step is to contribute to a Traditional IRA. This contribution will be non-deductible. If you don’t have a Traditional IRA account, open one. Fund it with however much you want to contribute, up to the $7,000 limit for 2025. Note: You or your spouse need to have earned income, such as wages or self-employment income, to contribute (same rule as a direct Roth IRA contribution), even if you are using the Backdoor Roth process. 3. Wait once the money settles It usually takes a few days for your money to clear the bank and settle in your Traditional IRA. It’s generally recommended not to buy any stocks or ETFs within the account itself. That step should be done after the conversion. 4. Convert to a Roth IRA Now, you will need to have a Roth IRA account to which you will convert your contribution. It will be easier if both accounts (Roth and Traditional) are with the same broker (e.g. Vanguard, Fidelity and so on), as this will simplify the conversion process. You can typically complete the conversion online, or you can call your broker and ask them to process the conversion. Here’s an example of the online conversion:
As part of the process, you will be asked if you want to have any taxes withheld. Make sure to elect not to have any state or local taxes withheld from the conversion.
5. Invest within the Roth IRA Now that the money is within your Roth IRA, don’t forget to invest it. 6. Notes It’s generally best to complete both the contribution and conversion within the same calendar year. For example, say you contribute $7,000 for 2025 on 10/1/2025. The money settles on 10/3/2025, and you convert on 10/4/2025. This is a “clean” conversion and will be easily reported on your tax return (more on this in a bit). However, say you convert on 1/1/2026. You will actually need two years of tax return filings to correctly report your Backdoor Roth process: 2025 will show the contribution, and 2026 will show the conversion. So it’s best to complete both steps within the same year. Also, it’s best to convert as soon as the money has settled. This is because your original contribution will likely be placed in a money market fund yielding around 4%, which may generate dividends that are taxable. If you do receive any dividends (say, $2 of income at the end of the month), it’s best to convert them along with your contribution. 7. Tax time During tax time, you will receive quite a bit of paperwork (Form 1099-R, Form 5498). You need to make sure you enter it correctly in the tax software, or, if you are using a CPA, double-check their work. If you are using a CPA, make sure to tell them that you did a Backdoor Roth for the year. With your 1040 tax return, you will need to file Form 8606. Specifically, you will need Parts I and II. Part I will show that you’ve made a non-deductible contribution, and Part II will show your conversion to Roth. Line 18 of Form 8606 should be $0 or just a few dollars of earnings (if you converted more than the original contribution). If you’ve done everything correctly (this is how you can double-check your CPA), line 4b of Form 1040 will be $0 or a few dollars (if you had earnings).
I hope you learned something new today.   Bogdan Sheremeta is a licensed CPA based in Illinois with experience at Deloitte and a Fortune 200 multinational.
Read more »

Is The Stock Market Overvalued?

STOCK MARKET INVESTORS are enjoying yet another strong year. The S&P 500 has gained about 14% so far, shrugging off, for the most part, uncertainty over tariffs, interest rates and the latest government shutdown. Should this worry us? Since ancient times, soothsayers have been attempting—without luck—to forecast the future. As it relates to investment markets, the frustrating reality is that no one knows what the future will bring. But that doesn’t mean there’s nothing we can do. As investor and author Howard Marks emphasizes in Mastering the Market Cycle, we can still do our best to make judgments with the information we have. We aren’t completely in the dark. What does the data say? In short, the market has had a remarkable run. Since the market bottom in 2009, the S&P 500 is up about 1,200%, including dividends. Over the past 10 years, it’s gained more than 14% a year—far above the long-term average of 10%. Other metrics tell a similar story. The market’s price-to-earnings ratio is north of 23. That compares to a 40-year average of just 16. Investors today, in other words, are paying nearly 50% more for each dollar of corporate earnings.  The cyclically-adjusted P/E (CAPE) ratio, developed by Yale professor Robert Shiller, employs an even longer-term dataset, going back to the 1800s. It indicates that today’s market is even more expensive than it was at the peak in 1929, and that the only time it’s been more richly valued was in 2000, just before it dropped 60%. There are other risks. Washington seems as divided and dysfunctional as ever. That’s another reason observers feel the stock market is out of touch with reality. In late-September, Federal Reserve chair Jerome Powell commented that stocks were “fairly highly valued.” Others share this opinion. Aswath Damodaran is a professor at NYU and well known for his expertise on valuation. In response to Powell’s recent comments, he put together a detailed analysis and reached this conclusion: “It is undeniable that this market is richly priced on every metric…” Morningstar analyst Dan Kemp makes this observation: “The fact that equity prices have rallied as economic risks have grown suggests that we may be entering the ‘all news is good news’ part of the market cycle…” Longtime investment manager Jeremy Grantham is even more pointed in his commentary: “This is the highest-priced market in the history of the stock market in the U.S.” In the past, Grantham has also pointed to another indicator as a market barometer: He looks for signs of what he calls “truly crazy behavior.” He saw this in 2020 and 2021, when meme stocks, SPACs and other speculative crazes drove the market higher and higher. We’re seeing shades of the same behavior today. Consider the Meme Stock ETF (ticker: MEME). It launched in 2021 but liquidated two years later, after the market sank and the fund lost most of its value. But now it’s back. The fund’s manager just relaunched a new MEME fund, similarly designed to take advantage of the market’s current highfliers. Or consider the flurry of new leveraged funds, with some promising to magnify daily returns by three, four and even five times. The Wall Street Journal discussed this trend in a recent article titled “These Funds Can Go to Zero.” That wasn’t hyperbole. Some leveraged funds have literally lost all of their value, and yet, fund companies are bringing more of them to the table. Along these same lines, while I recognize the danger of anecdotal evidence, I thought it was notable last week when a high school student shared with me that he had been trading options—and making money at it. Where do all these data points leave us? Howard Marks offers what, in my view, is the best prescription. “We can’t predict,” he says, “but we can prepare.” Here are ways you might put that into practice: Step one would be to bear in mind the lesson of 1996. That was when Alan Greenspan, then the chair of the Federal Reserve, declared that the market was exhibiting “irrational exuberance.” It wasn’t an unreasonable observation: At that point, in December 1996, the market had gained nearly 70% in the space of just 24 months. And Greenspan’s concern was ultimately validated: In the end, the market did drop, by more than 50%. The problem, though, is that that decline only came later. After Greenspan’s warning, the market continued to rise for three more years, nearly doubling again before it dropped. The result? When stocks did eventually fall, they never fell as low as they were on that day in 1996 when Greenspan issued his warning. The lesson for investors: Sometimes when the market looks too high, it is indeed too high. But there’s no guarantee that it can’t go higher still before it goes lower. Timing, in other words, is always an open question. Even when all of the data and all of the commentators seem to agree, we can never be sure. That’s why it’s so important to consider your timeframe. If you have no foreseeable withdrawal requirement, then a reasonable response to a pricey market might be to do nothing at all.  On the other hand, if you do have an upcoming need for a withdrawal, then this would be a good time to audit your risk level and to take it down, if need be. Either way, consider both your quantifiable needs as well as what you might call the Alka Seltzer question: Ask yourself how you might react if you saw your portfolio drop 30% or 50% even if you have no immediate need for a withdrawal. Then work backward and ask whether an adjustment to your asset allocation might be in order. I’ve often compared the market to a Rorschach test, and that’s very much the case today. That’s why the most important thing, in my view, is to maintain a balanced outlook. The reality is that even the smartest and most knowledgeable market observers still can’t see the future. And market-timing strategies, appealing as they might seem, tend to be unreliable in practice. In his recent analysis, Aswath Damodaran tested a number of approaches to see if they would have helped investors through past downturns. His conclusion? Because every downturn is different, “there is not a single market timing combination” that would have been consistently profitable. That’s why this is a good time—while the market is strong—to prepare, even if we can’t predict.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
Read more »

Digital Lockout: A Cautionary Tale 

"Mark, Another great, thought provoking article. Thanks for posting it!"
- Winston Smith
Read more »

Drinking and finances

"Having trouble lessening your alcohol consumption? Take a page from the Scott Adam’s playbook and reframe drinking as “Alcohol is poison”. Worked for me."
- Doug Burke
Read more »

ACA Subsidies for Early Retirees

"This happened to my father when he retired from a major medical center. The benefit was a cut of a million pieces."
- David Lancaster
Read more »

Contrarian Thinking About Roth Conversions

"One thing to contemplate is there is a good chance that your children may inherit your assets when they are in their peak earning years. If the deceased has been taking RMDs from a traditional IRA the non-spouse beneficiaries must start taking annual RMDs in the year after their death and also distribute the entire account within 10 years. This could result in a significantly higher tax rate. If the inherited funds are from a Roth there is no impact on the beneficiaries tax rate."
- David Lancaster
Read more »

Have you ever met “they?” 

"Oh wow Mark, there's an Irish "the man" too?"
- DAN SMITH
Read more »

It is never too late. By Chris

"RDQ is the HR guy with a heart. I'm pretty sure he knows that I like him."
- DAN SMITH
Read more »

Money Pit

"Cathrine, I think the good news is that you control your destiny. At this point in your life, your housing choices can be made on your terms, as opposed to being forced into a decision due to poor health or money issues. Best of luck with your homes. That was a great movie. "
- DAN SMITH
Read more »

Housing options for older Americans

"Nick, thank you for sharing the article. We don’t have a lot of experience with this. We had some friends who built a multi generation home in the mid ‘90s so one of their widowed moms could live with them. I think there were ups and downs, but they made it work for over 20 years and the mom was able to die peacefully at home. We have an empty nester type home that worked well when I was having my cancer treatments. Main living areas on first floor along with master and laundry. The shower already had a grab bar. We like living in a regular neighborhood. I have thought about if Spouse passes before me, I will probably go into an apartment, assisted living, etc, depending on my age then. We moved to the same town as our kids 10 years ago. Chris"
- baldscreen
Read more »

Easy DAF (e.g. Daffy.org) for Donation of Appreciated Stocks

"I generally like Fidelity because their tech is so user-friendly and reliable. I am over 70 1/2 so use QCDs instead of a DAF for donations and Fidelity makes it so easy, all online and the donation goes out within a day or so of the request."
- Sabine Nooteboom
Read more »

Drinking on the Job

"I remember, back in the late 70's and early 80's when it was totally acceptable to drink beer at lunch and return to work. I also remember that it came to an end with the advent of substance abuse testing in the workplace."
- Jeff Bond
Read more »

Backdoor Roth Explained

ROTH IRA IS A powerful account. It grows tax-free and withdrawals are tax-free during retirement. Roth IRA also has income limits. For 2025, if you are filing your taxes as single and make less than $150,000 ($236,000 if married filing jointly) of modified adjusted gross income, you can contribute a maximum amount of $7,000. But if you make $165,000 (single) or $246,000 (married jointly), you are ineligible to contribute to a Roth IRA directly. Luckily, there is a strategy that allows you to contribute indirectly (or the “backdoor” way).   Backdoor Roth Backdoor Roth is a strategy that allows high-income earners to contribute to a Roth IRA through a conversion process. The idea is simple: instead of contributing to a Roth IRA, you contribute to a Traditional IRA first and then convert the contributed amount to a Roth IRA. Before I dive into the strategy, let me give a bit of background on how this strategy came to exist. Prior to January 1, 2010, you could only convert from a Traditional IRA to a Roth IRA if your adjusted gross income was $100,000 or less. Luckily, after 2010 this income condition was eliminated, which is how the Backdoor Roth came to exist indirectly. Here is a step-by-step guide: 1. Eliminate traditional IRAs balances The first step is to roll over all your Traditional IRA, Rollover IRA, Traditional SEP, and Traditional SIMPLE IRAs into 401(k) or 403(b) plans before December 31, 2025. This is because if these accounts don’t have a $0 balance, you will be subject to the pro-rata rule on your conversion. If you are a solo business owner, you can also roll over these accounts into a Solo 401(k). If you don’t have 401(k) or 403(b) plans available to roll over into, there isn’t much you can do and you should generally avoid this strategy. You could potentially explore a Solo 401(k) for your side hustle, which may allow you to roll over these balances into it. If you are doing the Backdoor Roth process but get laid off during the year, do not roll over the 401(k) or 403(b) balances into an IRA. 2. Make a non-deductinle contribution to a Traditional IRA The next step is to contribute to a Traditional IRA. This contribution will be non-deductible. If you don’t have a Traditional IRA account, open one. Fund it with however much you want to contribute, up to the $7,000 limit for 2025. Note: You or your spouse need to have earned income, such as wages or self-employment income, to contribute (same rule as a direct Roth IRA contribution), even if you are using the Backdoor Roth process. 3. Wait once the money settles It usually takes a few days for your money to clear the bank and settle in your Traditional IRA. It’s generally recommended not to buy any stocks or ETFs within the account itself. That step should be done after the conversion. 4. Convert to a Roth IRA Now, you will need to have a Roth IRA account to which you will convert your contribution. It will be easier if both accounts (Roth and Traditional) are with the same broker (e.g. Vanguard, Fidelity and so on), as this will simplify the conversion process. You can typically complete the conversion online, or you can call your broker and ask them to process the conversion. Here’s an example of the online conversion:
As part of the process, you will be asked if you want to have any taxes withheld. Make sure to elect not to have any state or local taxes withheld from the conversion.
5. Invest within the Roth IRA Now that the money is within your Roth IRA, don’t forget to invest it. 6. Notes It’s generally best to complete both the contribution and conversion within the same calendar year. For example, say you contribute $7,000 for 2025 on 10/1/2025. The money settles on 10/3/2025, and you convert on 10/4/2025. This is a “clean” conversion and will be easily reported on your tax return (more on this in a bit). However, say you convert on 1/1/2026. You will actually need two years of tax return filings to correctly report your Backdoor Roth process: 2025 will show the contribution, and 2026 will show the conversion. So it’s best to complete both steps within the same year. Also, it’s best to convert as soon as the money has settled. This is because your original contribution will likely be placed in a money market fund yielding around 4%, which may generate dividends that are taxable. If you do receive any dividends (say, $2 of income at the end of the month), it’s best to convert them along with your contribution. 7. Tax time During tax time, you will receive quite a bit of paperwork (Form 1099-R, Form 5498). You need to make sure you enter it correctly in the tax software, or, if you are using a CPA, double-check their work. If you are using a CPA, make sure to tell them that you did a Backdoor Roth for the year. With your 1040 tax return, you will need to file Form 8606. Specifically, you will need Parts I and II. Part I will show that you’ve made a non-deductible contribution, and Part II will show your conversion to Roth. Line 18 of Form 8606 should be $0 or just a few dollars of earnings (if you converted more than the original contribution). If you’ve done everything correctly (this is how you can double-check your CPA), line 4b of Form 1040 will be $0 or a few dollars (if you had earnings).
I hope you learned something new today.   Bogdan Sheremeta is a licensed CPA based in Illinois with experience at Deloitte and a Fortune 200 multinational.
Read more »

Is The Stock Market Overvalued?

STOCK MARKET INVESTORS are enjoying yet another strong year. The S&P 500 has gained about 14% so far, shrugging off, for the most part, uncertainty over tariffs, interest rates and the latest government shutdown. Should this worry us? Since ancient times, soothsayers have been attempting—without luck—to forecast the future. As it relates to investment markets, the frustrating reality is that no one knows what the future will bring. But that doesn’t mean there’s nothing we can do. As investor and author Howard Marks emphasizes in Mastering the Market Cycle, we can still do our best to make judgments with the information we have. We aren’t completely in the dark. What does the data say? In short, the market has had a remarkable run. Since the market bottom in 2009, the S&P 500 is up about 1,200%, including dividends. Over the past 10 years, it’s gained more than 14% a year—far above the long-term average of 10%. Other metrics tell a similar story. The market’s price-to-earnings ratio is north of 23. That compares to a 40-year average of just 16. Investors today, in other words, are paying nearly 50% more for each dollar of corporate earnings.  The cyclically-adjusted P/E (CAPE) ratio, developed by Yale professor Robert Shiller, employs an even longer-term dataset, going back to the 1800s. It indicates that today’s market is even more expensive than it was at the peak in 1929, and that the only time it’s been more richly valued was in 2000, just before it dropped 60%. There are other risks. Washington seems as divided and dysfunctional as ever. That’s another reason observers feel the stock market is out of touch with reality. In late-September, Federal Reserve chair Jerome Powell commented that stocks were “fairly highly valued.” Others share this opinion. Aswath Damodaran is a professor at NYU and well known for his expertise on valuation. In response to Powell’s recent comments, he put together a detailed analysis and reached this conclusion: “It is undeniable that this market is richly priced on every metric…” Morningstar analyst Dan Kemp makes this observation: “The fact that equity prices have rallied as economic risks have grown suggests that we may be entering the ‘all news is good news’ part of the market cycle…” Longtime investment manager Jeremy Grantham is even more pointed in his commentary: “This is the highest-priced market in the history of the stock market in the U.S.” In the past, Grantham has also pointed to another indicator as a market barometer: He looks for signs of what he calls “truly crazy behavior.” He saw this in 2020 and 2021, when meme stocks, SPACs and other speculative crazes drove the market higher and higher. We’re seeing shades of the same behavior today. Consider the Meme Stock ETF (ticker: MEME). It launched in 2021 but liquidated two years later, after the market sank and the fund lost most of its value. But now it’s back. The fund’s manager just relaunched a new MEME fund, similarly designed to take advantage of the market’s current highfliers. Or consider the flurry of new leveraged funds, with some promising to magnify daily returns by three, four and even five times. The Wall Street Journal discussed this trend in a recent article titled “These Funds Can Go to Zero.” That wasn’t hyperbole. Some leveraged funds have literally lost all of their value, and yet, fund companies are bringing more of them to the table. Along these same lines, while I recognize the danger of anecdotal evidence, I thought it was notable last week when a high school student shared with me that he had been trading options—and making money at it. Where do all these data points leave us? Howard Marks offers what, in my view, is the best prescription. “We can’t predict,” he says, “but we can prepare.” Here are ways you might put that into practice: Step one would be to bear in mind the lesson of 1996. That was when Alan Greenspan, then the chair of the Federal Reserve, declared that the market was exhibiting “irrational exuberance.” It wasn’t an unreasonable observation: At that point, in December 1996, the market had gained nearly 70% in the space of just 24 months. And Greenspan’s concern was ultimately validated: In the end, the market did drop, by more than 50%. The problem, though, is that that decline only came later. After Greenspan’s warning, the market continued to rise for three more years, nearly doubling again before it dropped. The result? When stocks did eventually fall, they never fell as low as they were on that day in 1996 when Greenspan issued his warning. The lesson for investors: Sometimes when the market looks too high, it is indeed too high. But there’s no guarantee that it can’t go higher still before it goes lower. Timing, in other words, is always an open question. Even when all of the data and all of the commentators seem to agree, we can never be sure. That’s why it’s so important to consider your timeframe. If you have no foreseeable withdrawal requirement, then a reasonable response to a pricey market might be to do nothing at all.  On the other hand, if you do have an upcoming need for a withdrawal, then this would be a good time to audit your risk level and to take it down, if need be. Either way, consider both your quantifiable needs as well as what you might call the Alka Seltzer question: Ask yourself how you might react if you saw your portfolio drop 30% or 50% even if you have no immediate need for a withdrawal. Then work backward and ask whether an adjustment to your asset allocation might be in order. I’ve often compared the market to a Rorschach test, and that’s very much the case today. That’s why the most important thing, in my view, is to maintain a balanced outlook. The reality is that even the smartest and most knowledgeable market observers still can’t see the future. And market-timing strategies, appealing as they might seem, tend to be unreliable in practice. In his recent analysis, Aswath Damodaran tested a number of approaches to see if they would have helped investors through past downturns. His conclusion? Because every downturn is different, “there is not a single market timing combination” that would have been consistently profitable. That’s why this is a good time—while the market is strong—to prepare, even if we can’t predict.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
Read more »

Free Newsletter

Get Educated

Manifesto

NO. 29: WHAT MATTERS to long-term stock investors is the market’s dividend yield and growth in earnings per share. Everything else is noise that can bully and seduce us into foolishness.

Truths

NO. 137: AIMING TO WIN means we’re more likely to lose. Yes, there’s some chance we’ll pick market-beating stocks and funds. But in all likelihood, our performance will be dragged down by the investment costs we incur. That failure often looks even worse once we factor in taxes, because active management tends to generate big annual tax bills.

humans

NO. 10: WE ALL HAVE tasks that we dislike. Research suggests hiring others to do chores we don’t enjoy, like mowing the lawn or cleaning the house, is a great way to use money to buy happiness. In fact, paying others to do chores we dislike is a double win. Not only do we avoid the distasteful task, but also we free up time for things that we truly enjoy.

act

DON'T RUSH to roll over your Roth 401(k) to an IRA. Once you’re in your 70s, you used to be required to take distributions from a Roth 401(k)—but not a Roth IRA—but that requirement went away in 2024. Result? Now that a key incentive to roll over Roth 401(k)s is gone, you might opt to leave money at your old employer, especially if the plan offers low-cost funds.

Saving diligently

Manifesto

NO. 29: WHAT MATTERS to long-term stock investors is the market’s dividend yield and growth in earnings per share. Everything else is noise that can bully and seduce us into foolishness.

Spotlight: Taxes

A dollar by any other name would smell as sweet. Connor wades into the income debate.

There has been a plethora of back and forth in the HD Forum recently about what constitutes income. I hesitate to wade into these stormy seas. But what the heck. I wrote an article a while ago that discussed the various meanings of income that the tax code uses.  Head there if you want a discussion of Gross income, Adjusted Gross Income (AGI), Modified AGI, Taxable income, and Combined income.
Right off the bat I’ll state that this argument will never be won.

Read more »

The Luxury of Choosing Tax-Free Cash from a Roth IRA or HSA….but Which One?

As a recent retiree who is using my cash reserves to cross my two-year “bridge” to my SS claiming date, I need to decide from which of my tax-free accounts I should withdraw to supplement our living expenses as I move into 2025. I will have used up my taxable account funds by the end of 2024.
Given our household’s low taxable income during this period I have been doing strategic (fill up the tax bracket,

Read more »

Taxing Matters

IF YOUR GOAL IS lower investment costs, the financial world has never been friendlier. Let’s say you want to buy the broad U.S. stock market. You can choose between a Schwab exchange-traded index fund that charges 0.03% of assets per year, an iShares ETF that levies 0.03% or a Vanguard mutual fund that costs 0.05%.
Those expense ratios are truly astonishing: If you had $100,000 to invest in the broad U.S. market, your annual fund expenses would be just $30 or $50.

Read more »

Seeking Shelter

YOU’VE HEARD OF asset allocation. But how good are you at asset location?

On that one, I’d have to give myself a failing grade, but I hope to pass the test someday. I’ve realized I could save myself hundreds of dollars a year in taxes by relocating much of my safe money to tax-advantaged accounts, while being more aggressive with stocks in my taxable account. Those moves would leave me with the same overall stock allocation,

Read more »

Pick Your Poison

TRAVELING DURING the holidays? As we drive east out of Ohio and into Pennsylvania, we know to fill the gas tank before we cross the border. According to the Tax Foundation, Pennsylvania has the third-highest gasoline tax in the country, behind California and Illinois, and about 20 cents per gallon higher than Ohio.
All states have to balance their budget. But they take very different approaches. This provides 50 experiments in taxation—and those taxes influence our behavior.

Read more »

An easy way to file a tax return extension due today

One option per the IRS –
Pay online and click on extension. Taxpayers simply pay what they owe using an online payment option, then click on extension as the reason for the payment. The taxpayer will receive a confirmation number of their extension for their records. There’s no need to file any additional forms.
https://www.irs.gov/payments
The failure to pay penalty is 0.5% per month. The failure to file penalty is 5.0% per month.

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Spotlight: Forsythe

Making Contact

I TURN 70 IN JANUARY and my wife just turned 65. I recently applied for my Social Security benefits, and got her kicked off with Medicare. I needed to call both agencies. What a contrast I’ve seen in their responsiveness. As I’ve conceded before, I’m a bit of a fanatic when it comes to this topic. We set up my wife’s online Medicare account, and she designated me as her “authorized representative.” Like most couples, we divide the labor, and one of my assignments is handling all medical and insurance accounts. I wanted to pay her premiums quarterly, and have them align with my premium payment schedule. That required first changing her payments to monthly for one month, and then back to quarterly. For the sake of bill paying convenience, I gave it a whirl. I called Medicare, got the usual robot, and chose the “call back” option. I received a call within minutes. The rep immediately saw my “authorized representative” designation, understood my request, and said it would be sent to the “Advanced Resolution Center” for action. Eight days later, I called back and spoke to a different rep, who was equally polite and helpful. He told me my request had been granted and my wife’s billing would now be monthly. As soon as I received her monthly Medicare bill, I paid it. Then, a few days later, I called Medicare to request a change back to quarterly billing. I spoke with a third rep, who was as polite and helpful as the previous two, and she processed my request. Finally, about a week later, I called Medicare and spoke to a fourth rep, who was likewise courteous and helpful. She confirmed my wife had now been switched back to quarterly billing. I was a happy camper. Now I can pay both our Medicare premiums once a quarter, as well as our Medigap and Part D premiums, which were already in sync. The Medicare folks made it all pleasant and easy. My wife thinks I’m crazy to have gone to all this trouble just to have perfectly aligned Medicare bills, but I doubt she’s surprised. She’s been living with an OCD husband for 33 years. Now, the dark side: I submitted my online application for Social Security benefits four months before my birthday, as recommended. My online Social Security account indicates that a review of my application began on Sept. 10. For most people, that takes two to four weeks. My application is simple, so when I saw no progress after six weeks, I called the field office where my review is pending. The first few times I couldn’t get past the phone robot from hell. When I finally did, a receptionist gave me the extension for the employee reviewing my application. After several attempts over the last couple of weeks, I’ve neither gotten through to her nor had a call back, despite leaving polite voicemails. What a difference an agency makes.
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Hear, Hear

I TURNED 70 THIS YEAR, and decided to finally do something about the hearing loss I’ve experienced over the past few years. In other words, get hearing aids. I asked my older sister for advice. She told me she ended up spending $4,000 to $5,000 for her hearing aids a few years ago. She also said she wishes she’d asked her friends for advice first. My sister doesn’t consider herself wealthy but has a few friends who are. She told me that, when she later asked these well-appointed ladies where they’d gotten their hearing aids, they replied—to a woman— “Oh, my dear, Costco is the only way to go.” With this advice, Costco was on my radar, but I wanted to explore the alternatives first. After plenty of online reading and YouTube watching, I became interested in Eargo. It was an attractive option—tiny and discreet in-the-ear aids with rechargeable batteries. The company also has the best hearing aid commercial ever. I’ll concede that I was put off by the fact that it had paid $34 million in April to settle a Department of Justice investigation, which also had quite a negative effect on the company’s stock. Things have gotten worse since. As I write this, the shares are trading below $2. Nevertheless, I decided to give Eargo a try. I should mention that every hearing aid manufacturer or retailer I explored offered a “no questions asked” return policy, and Eargo was no exception. Eargo is an all-remote operation. You take an initial hearing test online, place your order online, take delivery by mail, and follow up with phone or video sessions. I found the process easy and convenient, and was even able to negotiate a bit. I got a pair of its top-of-the-line model at a better-than-advertised price. Unfortunately, the Eargos I received by mail didn’t fit well in my ear canals. In addition, despite the initial hearing tests indicating I was a good candidate, my hearing loss in one ear was too great for the Eargo aid to remedy. I next decided to explore the program offered by my Medicare supplement policy with Mutual of Omaha. The insurer is affiliated with a group called Amplifon, which in turn referred me to a traditional, full-service hearing aid center in my area. I made an appointment, went in for a hearing test, and then heard a brief pitch for its recommended hearing aids. The quotes per pair were $4,000 to $5,000, even with the “special” price I was getting through Mutual of Omaha. The budget shopper in me flinched at that, so I decided to finally check out Costco. First, I had to join Costco, which costs $60 a year for my wife and me. Next, I made an appointment for an in-person exam at the Costco store. On the appointment date, my wife and I made the fairly long drive and I went through a test and evaluation—the most thorough to date. [xyz-ihs snippet="Mobile-Subscribe"] I was impressed with the tech, who was knowledgeable and patient with my many questions—and is not paid on commission, as Costco likes to point out. The retailer’s biggest seller is the house brand Kirkland 10.0 hearing aids, which sell for $1,399.99 a pair and are manufactured by Sonova, a Swiss company and one of the leading hearing aid manufacturers. Similar models, sold under Sonova’s Phonak brand, cost thousands more, which is clearly one of the biggest selling points for the Costco models. While Costco is also happy to sell you other brands, and at higher prices, the Kirkland aids had all the features I wanted, and had great online reviews as well. I should also note that hearing aids are a qualified medical expense if you have a health savings account. I placed my order that day and returned a couple of weeks later when my hearing aids had come in. They’d been calibrated by the tech according to my exam results. The fitting went well, and I knew right away these were probably going to work for me. I went back again in two weeks for a follow-up appointment where the tech answered more questions and made an additional small tweak. A month later, I had a remote appointment through an app installed on my iPhone, which also allowed the tech to make another small adjustment. There were no additional charges for all these appointments. As long as I keep my Costco membership current, I can schedule additional free appointments as often as needed, even if it’s for something as simple as having a complete cleaning done. So far at least, I’ve had a great experience with Costco. I now can see why it’s so popular when it comes to hearing aids. Of course, there’s one other plus—or maybe it’s a negative. Every time we make a trip to Costco for an appointment, we leave the store with a few other “must haves” in our shopping cart. Andrew Forsythe retired in 2017 after almost four decades practicing criminal law in Austin, Texas, first as a prosecutor and then as a defense attorney. His wife Rosalinda and he, along with their dogs, live outside Austin, at the edge of the Texas Hill Country. Their four kids are now grown, independent and successful. They're also blessed with five beautiful grandkids. Andrew loves dogs, and enjoys collecting pocketknives and flashlights. Check out his earlier articles. [xyz-ihs snippet="Donate"]
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Is Remembered for…..

I’ve been retired from the practice of law since 2017, but I still receive the State Bar of Texas monthly magazine, The Texas Bar Journal. Towards the end of each issue is the Memorials section which contains obits for our fallen brothers and sisters of the bar. (There are a lot more brothers than sisters listed since most of the departed are older types who came of age when there was a much larger skew towards men in the legal profession.) The obits are brief and contain the basic information such as city of practice, law school attended, area of legal concentration, etc. But towards the end, just before survivors are listed, there’s a sentence that begins: “(Last name of deceased) is remembered for…….”, and then a few particular things are mentioned. Oftentimes this is a predictable and anodyne list and might consist of “his love of his family and the practice of law” or some such. But sometimes there are quite interesting nuggets. Just from the edition I received in the mail today are these: “….remembered for possessing an encyclopedic knowledge of rock n’ roll history” “.…remembered as a fan of Rudyard Kipling, with a lifelong interest  in the history of the British and Indian armies during the Victorian era, amassing a sizeable collection of related books, firearms, military prints, and toy soldiers.” “.…remembered for his love of family, the legal profession, and….racehorses.” The Bar Journal is not generally known for its creativity, but I’ve always been intrigued with the idea of describing a deceased’s essence in a single sentence. And I’ve wondered what that sentence might be for me when I shuffle off this mortal coil and go on to my reward (or some might say, for lawyers, my eternal punishment). If I come up with something I think fitting, maybe I’ll send it in to the magazine ahead of time. But I’m still working on it. For any of my fellow HDers who think more quickly than me, please feel free to post what your one sentence would be.
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The Investing Life

MY PARENTS WERE financially comfortable but not rich. Some of their friends, though, were rich. The men always seemed to die before their wives, resulting in a few wealthy widows in my parents’ social circle. I recall glancing at the annual report of a company for which my dad had done some work. One of the widows was listed as a board member and her occupation was stated as “investor.” I asked my dad what that meant and he replied that it meant she had enough money that simply managing it was a part-time job. Through my working career, that intriguing idea stuck in my mind. I think I was forming an unconscious goal that, in retirement, I’d actually have a new job—as an “investor.” I’m retired now, and our net worth doesn’t come close to that of those wealthy widows I remember, and yet managing our financial affairs really does amount to a part-time job. We have investment accounts at Vanguard Group and Charles Schwab, including taxable accounts, Roth IRAs and a SIMPLE IRA from my working days. We also have accounts at Chase, our brick-and-mortar bank, as well as a handful of savings accounts and no-penalty certificates of deposit at various online banks. My wife and I each have a health savings account, with linked brokerage accounts at TD Ameritrade. Recently, we each opened a TreasuryDirect account and made our first Series I savings bond purchases. There’s an old Lincoln Financial variable annuity from back when I didn’t know any better. There’s also a modest trust from my long-deceased grandmother that still requires some attention and oversight. In addition, my old law-firm partner and I own a piece of investment real estate, which has always been complicated but which we hope we can finally sell in our lifetimes. On top of all that, I help my wife with her duties as executor of her dad’s estate, which consists of some rental properties in south Texas. My daily routine: After walking the dogs and working out, I grab some coffee, sit down at the computer and dive in. Am I now an “investor”? Not even close to the widows from my youth, but maybe “pee-wee grade.” Is it a dream come true? Not really. My main goal is to start simplifying all of this. But in the meantime, it sure beats working for a living.
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Friday the 13th, the Luckiest Day of My Life

Happy Friday the 13th, everyone. They say that one of the best financial decisions you can make, if you’re married, is to stay married. So I figure that gives me just enough of a hook to justify sharing on Humble Dollar why I celebrate today. I met my wife Rosalinda for the first time…twice. In 1977, I was a 2nd year law student at the University of Texas in Austin. That spring I found myself spending another boring and tedious weekend studying at the UT law library. I took a break and was walking the halls when I saw a beautiful girl sitting alone on the steps. I mustered my courage and sat down beside her. We talked for just a few minutes and I thought things were going pretty well---right up until she told me she was there with her boyfriend. I said my goodbyes and left, impressed not only with her beauty but with her kindness. Ten years later I was a lawyer in Austin, enjoying my bachelor life. One Friday at a local Happy Hour, I noticed a woman enter. She was quite a distance away, but her smile lit up the whole room. There was something absolutely electric about her presence. I walked over, introduced myself and said, “I think we’ve met somewhere before.” Naturally, she rolled her eyes at the oldest line in the book. But somehow a distant memory had surfaced in my mind. “You’re from the Rio Grande Valley”, I said. “Your father is Mexicano and your mother is Puertorriquena. You once had an orange sweatshirt. And, about 10 years ago, you spent time in the law school library.” How a 10 minute conversation survived 10 years in my musty brain, I can only attribute to fate. But I got her attention, and eventually I got her phone number. This spring, we celebrated 36 years of marriage. And that Friday in March of 1987, when I met Rosalinda for the second time? Yep, it was the 13th --- Friday the 13th  --- the luckiest day of my life.    
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Amazon (Almost) for Free

Do you write reviews for items you buy from Amazon? Most people probably don’t bother. But I do at times, especially if I find a particular purchase to be either great or horrible. Although the ways of the Amazon Vine program are mysterious, I’m guessing that’s why last October I was invited to join. The Vine program allows members to pick from a daily and ever changing menu of Amazon items to receive for free. In exchange, members are required to write reviews for at least 60% of the items received. There’s a footnote to the “free” part: Amazon sends a 1099 at year end to the IRS listing the total taxable value of the items you received. You’re then responsible for paying income tax on that amount. For food and certain medical items, though, Amazon assigns a zero taxable value. So, not quite free, but seriously discounted. Amazon merchants choose to participate in Vine if they’re launching a new product and are eager to get some early reviews posted. My feeling is that if I’m getting the items (almost) for free, I should try to review every one, not just 60%. Since October, I’ve received 46 items and I’ve reviewed 45. The one review lacking is for a TENS/EMS electrical stimulation device that I thought might be helpful for my wife’s leg and hip arthritis. Somehow she never seems to be available to try it out, maybe because she’s afraid I’ll dial the current up too high! So what kind of items have I received over the last 8 months? It’s an extremely wide ranging list, and includes a dog bed, chair cushions, bolt cutters, a table lamp and a floor lamp, a knife block, a flashlight, steel toe boots, 2 stainless steel garden hoses, Italian biscotti, a carving knife, a large bag of macadamia nuts, a 12-pack of Ben’s risotto, a cordless tire inflator, a pressure washer, and several items my wife has found handy: slippers, a set of plant stands, a nice sweater, a huge set of makeup brushes, and more. And lest I forget, there was the 25 lb. bucket of lentils, which may last us decades. There is a lot of chaff with the wheat. Amazon has undoubtedly figured out my age as the items on offer always include countless wheelchair accessories, canes, knee braces, shower stools, etc. But at the other end of the spectrum, I’ve been surprised to see some really wild offerings, including paternity test kits, “Nuclear / Chemical Survival Gas Masks”, at home insemination kits, and even, believe it or not, sex toys. I’m just at the “Silver” level, which means my limit is 3 items per day (more than I’d ever choose), and the items have a list price of $100 or less each. If you’re a really ambitious Viner, you can try to make “Gold” status, which allows up to 8 items a day with no limit on the list price. I have no desire for that status as it strikes me as a full time job. But there are plenty of these “extreme Viners” out there, and a NYT article provided a peek into their very busy world. I’ll probably tire of it eventually, but so far Amazon Vine has been fun and rewarding. And it’s probably as close as I’ll ever come to working after retirement.
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