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Want to prepare yourself for midlife misery? Save early and often, so you later have the financial breathing room to change careers.

What Is Retirement?

AT A DINNER THAT I attended recently, someone pointed out that a high percentage of us were newly retired. That included me, as well as a couple who were just reaching age 60. After the dinner, the wife of the couple told me she was offended by being called retired. She’s writing fiction every day and her husband does some consulting work.
The work they’re doing pays, but it’s not by itself enough for them to live their comfortable,

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January’s Hits

READERS LOVE LISTS. For proof, look no further than our (ahem) list of January’s 10 most popular articles. Seven of those articles took the form of lists, and their readership helped propel HumbleDollar to its second-best month ever for pageviews.

“I suggest skipping the step of building up an emergency fund—in cash, that is,” writes Chuck Wilson. “I’m willing to bet that only a small minority truly use it for emergencies only.”

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Recent Writing

Saving Our Retirement

I ONLY WOKE UP TO the notion of financial independence at age 50. I’d been asleep at the financial wheel and almost crashed. It had been a 20-year Rip Van Winkle slumber. I realized suddenly that I had an irresponsible, unconscious and unintentional money mindset.
I could offer plenty of excuses, but they don’t make me feel better. Shame, grief and disbelief overcame me initially. At times, regret still haunts me. We had lost so much time without taking care of our future.

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Introverted Me

NOW THAT I’M RETIRED—and living in a warm desert climate—walking has become one of my favorite activities. Most days, I log between six and eight miles trekking around our neighborhood. I usually listen to a podcast during my journey, but it just serves as background noise. My real focus is contemplating dog training strategies or the subject matter of my future HumbleDollar posts.
Some days, I play the “what if” game.

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Improve Yourself

I’LL TURN AGE 72 this year. Since I’ve retired, my wife and I have had some wonderful experiences. Our travel adventures are full of great memories that I’ll cherish for the rest of my life.
Still, as great as those adventures have been, they aren’t nearly as important to our happiness as living a healthy, pain-free life without physical or mental limitations. That’s something that’s hard to beat. It gives you a different outlook.

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Back From the Dead

JUST LIKE THAT, growth stocks are back in vogue. Vanguard Growth ETF (symbol: VUG) has outpaced Vanguard Value ETF (VTV) by more than nine percentage points over the past three weeks. That gap in favor of “risk-on,” meaning mainly technology shares, is the biggest since those two exchange-traded funds were created some 19 years ago.
What gives? Weren’t all the strategists proclaiming a new era of value investing? It still seems that way based on what you hear on financial TV and read in investment magazines.

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Home Call to Action

Grossman’s Favorites

ONE WINTER DAY IN 2016, I jotted down a few comments about the financial markets and emailed them to a group of clients. I received a few responses—some of them positive—so I did the same thing the following week, and I’ve continued that practice every week since.
For better or worse, when it comes to investment markets, there’s always something new to discuss. But it can also be helpful to pause and revisit key investment principles from time to time.

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Pushing Myself

I LIKE CHALLENGING myself to do hard things. I guess it’s just the way I’m wired.
Recently, I started thinking about the hardest things I’ve done. Convincing my wife to marry me was hard. She was a tough sell. But eventually I wore her down and got the deal done—one of my best deals, by the way.
Attempting Ironman Cozumel at age 68 was hard and, even though I failed, it’s one of my most cherished memories.

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Retire Is a Verb

WE LIKE TO ESCAPE the Northeast’s cold each winter, so we just spent 10 days in Sarasota, Florida. Like many others when they’re on vacation, we found our noses pressed against the windows of real-estate offices, perusing the listings and musing about whether we’d want to live there.
Fantasizing about the future is fun and free, but it can also be dangerous. It’s how folks end up buying timeshares and second homes during wonderfully relaxing vacations.

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Hearing Voices

READING ABOUT FINANCE can be a little dry at times, so I occasionally turn to TV for relief, relaxation and a little entertainment. What am I drawn to? More than anything, it hinges on a person’s voice.
For instance, I like listening to Neil Cavuto on Fox Business Network. His interviews with business leaders are usually interesting and his demeanor holds my attention. He comes across as earnest.
My parents were transplanted New Englanders,

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Get Educated

Truths

NO. 71: IF YOU’RE FIVE years from spending your investment dollars, look to get that money out of stocks, because stocks have lost money over some five-year stretches. Indeed, to invest in stocks, you probably need at least 10 years—five years to make money and a five-year window to ease out of the market, preferably selling when stocks are near all-time highs.

Act

CALCULATE YOUR required nest egg. Once retired, you’ll likely have Social Security and perhaps a traditional employer pension. How much additional income will you need for a comfortable retirement? This money will need to come from savings. Take your desired portfolio income, multiply by 25—and you’ll have an estimate for how big a nest egg you need.

Think

BEHAVIORAL FINANCE. Economists used to assume that folks almost always behaved rationally and—to the extent they didn’t—it wasn’t significant. Behavioral finance has questioned these assumptions, pointing out that standard economic models often fail because they don’t account for overconfidence, loss aversion and other behavioral issues.

Money Guide

Remodeling

WHEN YOU SELL YOUR home, you might make back 50% to 70% of the money spent on recent remodeling projects. For proof, check out Remodeling magazine’s annual survey at CostvsValue.com. The survey is based on selling your home within a year of making the improvements. For example, according to the 2022 survey, a midrange major kitchen remodeling costs an average $80,809, but you might recoup just $45,370, or 56%, if you sell soon after. The longer you wait to sell, the less you are likely to recoup, because your improvements will no longer look spanking new. In other words, as with homeownership in general, remodeling is part consumption and part investment. With that in mind, you should go ahead with remodeling projects only if they will give you pleasure commensurate with the dollars spent and not because you think they will boost your home’s value. That said, if you’re concerned about resale value, you should probably avoid fixing up your home to the point where it is fancier than most houses in the area. Instead, you are more likely to get a fair price if your property is comparable to others in the neighborhood. In the market for a new home? Because remodeling projects tend to be money losers, you might look for a home that has been fixed up to your liking. That way, you may be able to buy the owner’s home improvements at a discount. Next: Rental Properties Previous: Assessing the Market Articles: Hammered HomeWhile We're at It11 Remodeling TipsDid It Myself and Window Dressing
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Manifesto

NO. 41: VERY FEW of us need life insurance for our entire life. That’s why term insurance makes sense and cash-value policies are usually a mistake—despite what insurance agents say.

Voices

Should retirees use a 4% portfolio withdrawal rate?

"I've never quite understood how the 4% (or any %) Rule can work in reality. We have expenses. And, the other reality is we are probably going to want to replace 100% of our income in retirement. Over the course of that retirement are going to be life event expenses like a new downsized home, a replacement car or two, Medicare (which could be a reduction in healthcare expense), 529 seed money for a grandchild, etc. And, there is going to be life event income like Social Security, a pension. These are the spikes that naturally occur which invalidates that nice, smooth line of projected spending. The only model that makes real sense is to create a spreadsheet that has for each year the income you have minus the expenses (based on past years). Those life event expenses are sprinkled in at projected times, too. That gap analysis will describe how investment withdrawals will have to happen each year. Yes, not everyone can or wants to do that kind of work, but I think Life shows us that this is closer to resembling how actuals will play out."
- Kurt Yokum
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What are your top financial worries?

"As we grow older, we become much more susceptible to falling under the influence of someone who does not share our desire to bequeath our estate to our kids. I have seen several cases of new spouses and "trusted" relatives essentially stealing inheritances because someone was able to manipulate the surviving spouse."
- Jackie
Read more »

If you couldn’t buy index funds, how would you invest?

"I'd still look for a diversified fund, but would focus on companies with long records of steady growth, a desirable stable of products or services, and in the best case, a dividend with its own positive history."
- Martin McCue
Read more »

Second Look

Retirement

Go Ahead and Pay

EXPERTS OFTEN suggest putting bonds or bond funds in retirement accounts. I think this is kind of dumb—or, at the very least, it places the focus on the wrong thing.
It’s always a good idea to consider taxes. But my experience is that many people place too much emphasis on taxes, often to their own detriment. Municipal bonds are a great example of this: Many people who purchase them are in lower tax brackets,

Read more »

Family Finance

COBRA Call Option

I QUIT MY JOB last year and then found I needed medical care. My old employer was required to offer me health insurance—but it was expensive. Luckily, I found a loophole that allowed me to obtain the coverage I wanted at a bargain price. I got the treatment I needed, and saved almost $1,000.

First, a bit of background. More than half of the U.S. adult population gets health insurance through their employer. Indeed,

Read more »

Investing

Buy and Hodl

I’M A FAN OF SLANG and newly coined words. Think of all the names for money we’ve had over the years, like cheese, clams and cabbage. New words catch on not only because they allow a new generation to put their stamp on the world, but also the words reflect changing attitudes.
That brings me to “stonks,” the name many millennials use for stocks—and one that reflects a different view of investing. No one’s sure where the word originated.

Read more »

Lists

Risk Returns

WE HAVE MUCH to learn about the coronavirus, but we already know a great deal about financial risk—and, indeed, recent weeks have offered a brutal refresher course. What insights can we draw from investors’ reaction to this awful epidemic? Here are eight timeless lessons:
1. The greatest risks are those we never see coming.
Some risks are predictable, such as stock market volatility. Others are less probable but widely known, like the possibility of a recession.

Read more »
Home Call to Action

Mindset

Running in Place

OUR STANDARD of living has more than doubled over the past four decades. Has all that extra money bought happiness? Not a chance. In 1972, 30% of Americans described themselves as “very happy.” As of 2016, we’re still at 30%, according to the latest General Social Survey.
Over the 44 years, there was a slight uptick in those describing themselves as “pretty happy” and a tiny decline in those who said they were “not too happy,”

Read more »

Free Newsletter

Get Educated

Manifesto

NO. 41: VERY FEW of us need life insurance for our entire life. That’s why term insurance makes sense and cash-value policies are usually a mistake—despite what insurance agents say.

Act

CALCULATE YOUR required nest egg. Once retired, you’ll likely have Social Security and perhaps a traditional employer pension. How much additional income will you need for a comfortable retirement? This money will need to come from savings. Take your desired portfolio income, multiply by 25—and you’ll have an estimate for how big a nest egg you need.

Truths

NO. 71: IF YOU’RE FIVE years from spending your investment dollars, look to get that money out of stocks, because stocks have lost money over some five-year stretches. Indeed, to invest in stocks, you probably need at least 10 years—five years to make money and a five-year window to ease out of the market, preferably selling when stocks are near all-time highs.

Think

BEHAVIORAL FINANCE. Economists used to assume that folks almost always behaved rationally and—to the extent they didn’t—it wasn’t significant. Behavioral finance has questioned these assumptions, pointing out that standard economic models often fail because they don’t account for overconfidence, loss aversion and other behavioral issues.

Money Guide

Start Here

Remodeling

WHEN YOU SELL YOUR home, you might make back 50% to 70% of the money spent on recent remodeling projects. For proof, check out Remodeling magazine’s annual survey at CostvsValue.com. The survey is based on selling your home within a year of making the improvements. For example, according to the 2022 survey, a midrange major kitchen remodeling costs an average $80,809, but you might recoup just $45,370, or 56%, if you sell soon after. The longer you wait to sell, the less you are likely to recoup, because your improvements will no longer look spanking new. In other words, as with homeownership in general, remodeling is part consumption and part investment. With that in mind, you should go ahead with remodeling projects only if they will give you pleasure commensurate with the dollars spent and not because you think they will boost your home’s value. That said, if you’re concerned about resale value, you should probably avoid fixing up your home to the point where it is fancier than most houses in the area. Instead, you are more likely to get a fair price if your property is comparable to others in the neighborhood. In the market for a new home? Because remodeling projects tend to be money losers, you might look for a home that has been fixed up to your liking. That way, you may be able to buy the owner’s home improvements at a discount. Next: Rental Properties Previous: Assessing the Market Articles: Hammered HomeWhile We're at It11 Remodeling TipsDid It Myself and Window Dressing
Read more »

Voices

When does it make sense to hire a financial advisor?

"Every few years I hire a fee-for-service financial planner, operating as a fiduciary, to run the numbers for me. Since I invest almost exclusively in low cost index mutual funds I do not need more than that. I recently calculated how much a 1% AUM would have cost me over the twenty-two years since I retired, and I cannot conceive that any advisor would have been worth going on for a quarter of a million dollars. And that didn't include lost compounding or the fees for the advisor's choice of funds or stock trades. Most recently I had an advisor check whether I can afford the CCRC I plan to enter next year, at 2%, 4% and 5% inflation, which led me to develop Plan B if inflation stays high (a one bedroom apartment instead of two bedrooms). On the other hand I recommended the advisor to friends who really need some hand-holding and they seem very happy."
- mytimetotravel
Read more »

Should you buy bond funds or individual bonds?

"I believe in simplicity. I use bond funds. Convince me that individual bonds are likely to give me a substantial benefit in terms of return or reduced risk, and I might consider changing my approach... other wise I'll just keep it simple."
- Roboticus Aquarius
Read more »

How has your financial thinking changed over the past year?

"That my Excel skills are now like my Dads “back of the napkin math.”   Between phase-outs, shifting tax brackets, sunset provisions, SS, ACA, FPL limits, Medicare IRMMA lookbacks and RMD age extensions Congress and the IRS have made navigating retirement finances a game of 3Dchess.  Much more difficult than buying cap-weighted index funds for 30 years and letting it ride! "
- TechnoPeasantx
Read more »

Second Look

Retirement

Go Ahead and Pay

EXPERTS OFTEN suggest putting bonds or bond funds in retirement accounts. I think this is kind of dumb—or, at the very least, it places the focus on the wrong thing.
It’s always a good idea to consider taxes. But my experience is that many people place too much emphasis on taxes, often to their own detriment. Municipal bonds are a great example of this: Many people who purchase them are in lower tax brackets,

Read more »

Family Finance

COBRA Call Option

I QUIT MY JOB last year and then found I needed medical care. My old employer was required to offer me health insurance—but it was expensive. Luckily, I found a loophole that allowed me to obtain the coverage I wanted at a bargain price. I got the treatment I needed, and saved almost $1,000.

First, a bit of background. More than half of the U.S. adult population gets health insurance through their employer. Indeed,

Read more »

Investing

Buy and Hodl

I’M A FAN OF SLANG and newly coined words. Think of all the names for money we’ve had over the years, like cheese, clams and cabbage. New words catch on not only because they allow a new generation to put their stamp on the world, but also the words reflect changing attitudes.
That brings me to “stonks,” the name many millennials use for stocks—and one that reflects a different view of investing. No one’s sure where the word originated.

Read more »
Home Call to Action

Lists

Risk Returns

WE HAVE MUCH to learn about the coronavirus, but we already know a great deal about financial risk—and, indeed, recent weeks have offered a brutal refresher course. What insights can we draw from investors’ reaction to this awful epidemic? Here are eight timeless lessons:
1. The greatest risks are those we never see coming.
Some risks are predictable, such as stock market volatility. Others are less probable but widely known, like the possibility of a recession.

Read more »

Mindset

Running in Place

OUR STANDARD of living has more than doubled over the past four decades. Has all that extra money bought happiness? Not a chance. In 1972, 30% of Americans described themselves as “very happy.” As of 2016, we’re still at 30%, according to the latest General Social Survey.
Over the 44 years, there was a slight uptick in those describing themselves as “pretty happy” and a tiny decline in those who said they were “not too happy,”

Read more »