When irrational investors meet unpredictable markets, there’s only one recourse: Grab the popcorn and enjoy the show.
Jeffrey K. Actor, PhD, was a professor at a major medical school in Houston for more than 25 years, serving as an academic researcher with interests in how immune responses function to fight pathogenic diseases. Jeff’s retirement goals are to write short science fiction stories, volunteer in the community and spend time in his garden. Check out his earlier articles.
The table shows that the Traditional IRA would have been the better choice, producing about $3,500 more in available funds, or about 22% more. This demonstrates that the primary driver in choosing between a Roth and a traditional qualified account is a consideration of the tax rates at the time of contribution and at the time of distribution. There have been a number of changes to the tax code in the last decade that have contributed to the result, but I certainly didn’t predict any of them. If you guess wrong, you pay the price in a higher tax bill. In the example above, the extra $1,750 invested in the traditional account produced an additional $6,143.31 in earnings. The lower tax rate at the distribution of the traditional IRA results in the $3,500 in extra funds. Even though the Roth IRA had tax free earnings growth, the initial larger tax rate overcame that advantage, when compared to the traditional IRA. Because of my pension and my wife’s social security benefit, 85% of her social security benefit is taxable income, so that is not a consideration in our tax calculation. I used Dinkytown’s 1040 Calculator to run a series of estimates of our 2026 tax return to assess if we want to execute a Roth Conversion this year. We are still 4 years from taking RMDs, and I will start my Social Security in a year when I turn 70. My current thinking is a conversion of about $40,000 will keep us in the 12% bracket. There would also be a small NJ state tax impact. My simple analysis reinforces what I’ve been taught. Roth contributions make the most sense when you think your current tax bracket is lower than when you expect to withdrawal the funds. There are secondary considerations, like no tax diversification, no RMDs, and uncertainty about future tax rates. If you intend to pass the funds to heirs, it might make sense to perform Roth conversions today at the 22% tax bracket if you intend to pass these accounts to heirs who may be in their peak earnings years. Not sure? I believe I recall several HumbleDollar contributors write something about splitting the difference?
Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.
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.NO. 55: THE BEST PART of spending is often the anticipation, while the purchase itself usually disappoints. Buying a new car? Plan far ahead, so you enjoy a long period of eager anticipation.
NO. 61: WE'RE anxious to help family and friends—but that desire can blind us to the risks involved. Think about things like lending money to a family member who doesn’t pay us back or investing in a friend’s business that fails. In such situations, we can not only lose significant money, but also the relationship involved is often irreparably damaged.
NO. 140: TENACITY trumps financial savvy. Even if we know how to build a great investment portfolio, our financial results will be miserable—if we make foolish decisions at times of market turbulence. Instead, the best results go to those who show great discipline, saving diligently and sticking with their investment mix when financial markets turn rough.
HAVE A FAMILY talk about college. How much financial help can you give your children? If they’ll need to shoulder part of the cost, tell them long before they start eyeing colleges. What career do your teenagers plan to pursue? If they’ll likely end up with a modest income, counsel them against colleges that will require taking on hefty student loans.
NO. 55: THE BEST PART of spending is often the anticipation, while the purchase itself usually disappoints. Buying a new car? Plan far ahead, so you enjoy a long period of eager anticipation.
WE’VE ALL HEARD of the obscure relative—often a long-forgotten uncle or aunt—who leaves behind a surprise inheritance. This usually only happens in fairy tales, trashy novels and screwball comedy movies. I certainly never expected it to happen to me, especially at this late stage. But happen it did—from my lifelong friend Katie, who bequeathed me a generous sum.
I learned I was a beneficiary from the will’s executor and from a subsequent letter from the attorney handling the estate.
I WAS 48 years old when the judgement was final and the papers were signed. My former wife and I split our net worth 50/50. There were no arguments over household items like furniture; I didn’t care about that stuff. Pam gladly accepted my proposal that she keep the house, and all its equity, in exchange for me keeping an offsetting amount of the IRAs and my 401(k), a very good move for my future self.
One of HD’s newer authors, Alina Fisch has a great article about Bucket Lists, but it was something in her bio that really caught my attention. Alina is a fee only financial advisor focused on helping single and divorced women.
My experience with the subject comes from my own divorce, as well as a handful of my income tax clients who found themselves in that situation.
These women were all good people and loving moms whose marriages ended for a variety of reasons.
SOMETIMES WORLD events beyond your control create a hard reset point in your financial life. A before and after. For me, that point was the 2007 Great Financial Crisis (GFC). The psychological scars still reverberate into my current life.
Looking back, I was aware of something rumbling about in the financial landscape but didn’t take much notice due to being deeply involved in running my business. Little did I realize the impact heading my way.
A number of events over the past few months have me thinking about aging, mortality, legacy, frailty, and – of course – financial planning. These events included attending funerals, preparing tax returns (ours and dozens of others), visiting old friends and distant family, minor traffic accidents, winter doldrums, and the recent discussions on HumbleDollar on the unique estate planning needs of childless retirees. Recent market volatility may have played a small role.
My wife and I have a lot of real-world experience caring for aging and infirm parents,
If this post is appearing, it means I’ve succumbed to cancer or one of its side effects. Please don’t feel sad for me. I’ve had a life filled with love, great experiences and wonderful career opportunities. Despite my demise at a relatively young age, I consider myself beyond fortunate.
I’m hoping that, under the tree in front of our little Philadelphia rowhome, my wife Elaine will place a stone tablet inscribed with my name, and the year I was born and died.
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- Secure the login to your bank account by setting up two-factor authentication. And if your bank supports it, use an authenticator app, rather than text messages, for the authentication codes. Ideally, if your bank supports it, switch to a passkey. This is a newer technology that represents a significant advance over traditional passwords. Most importantly, they aren’t vulnerable to phishing attacks. They’re also easier to use, providing one-click logins, and you can store passkeys in a password manager. For those reasons, more websites are beginning to support passkeys. I’d make the switch as soon as your bank makes them available.
- Set up alerts through your bank to monitor activity in your checking account. Every bank is different, but most allow you to set up email- or text-based alerts to let you know when transactions above a specified threshold are processed, or when other types of activity occur.
- Monitor your transactions. These days, it can be hard to keep an eye on every account. Households often have one or more bank accounts plus credit cards and electronic payment services like Venmo or Zelle. Most people realistically don’t have the time to review every account in real time. That’s why I recommend a service like Monarch or YNAB, which are web-based versions of traditional budgeting tools like Quicken. These services can pull in transactions from all your accounts and present them in a consolidated list, making review much easier. If you kept Monarch or YNAB open in a browser window on your home computer, you could scroll through recent transactions whenever you have a spare minute.
- To narrow the circle of people who have access to your account information, try limiting the number of paper checks you write. Especially with Zelle and Venmo as alternatives for making payments, this is getting easier. If you do write paper checks, be sure to use a gel pen and to avoid freestanding mailboxes. Those steps can help prevent a related type of fraud, as Jonathan Clements explained a few years back.
- Pay attention to notifications of data breaches. Unfortunately, breach announcements seem to occur so frequently that we’ve become immune to them. It’s worth paying attention, though, to understand which particular pieces of information have been stolen. If it looks like your banking information is included in a breach, it might be worth opening a new account, inconvenient as that would be.
- Have your guard up against unsolicited phone calls, emails or text messages. If someone is contacting you about an “account security issue,” or claims to be calling from your bank or from the IRS, be especially wary. Those are common tactics for creating a sense of urgency that can cause people to let their guard down.
What if, like Tom and Jane, you spot a fraudulent transaction in your account? Then it’s important to report it as quickly as possible. Regulation E can limit your liability, but the faster you report a suspicious transaction, the more protection it provides. Liability is limited to just $50 if a theft is reported within two business days, but that exposure increases to $500 if it’s reported later. And after 60 days, there are no guarantees. Thieves, unfortunately, don’t seem to sleep, which means that we need to be more vigilant than in the past, and need to be continuously vigilant. As personal finance author Mike Piper wrote recently, “Cybersecurity should be considered another core area of personal finance—no different from insurance planning, for instance.”A bleak picture for retirement in the future?
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