Want parental popularity? Buy them stocks when you buy them diapers—and let decades of compounding work their magic.
WHEN I WAS FORCED out of my banking job of 36 years, I was age 59 and had enough money to retire comfortably. But I still felt the need to work—because that’s how I’m wired. Working gives me a sense of purpose and makes me happy, but it has to be the right kind of work.
I need work that’s fulfilling and which allows me to help others. I knew myself well enough to realize that,
AS A TEENAGER, I wanted to be an architect. I took six years of mechanical drawing during junior and senior high school, and I was good at it, earning nearly all As.
At another time, in my 30s, I thought about becoming a lawyer. People told me I’d make a good one. A lawyer’s opinion seemed to carry more weight, even when the subject was unrelated to legal matters.
I also wanted to play a musical instrument.
IN THE WEEK SINCE Silicon Valley Bank (SVB) failed, a debate has raged: Did the government do the right thing when it decided to guarantee all of SVB’s depositors, including those that exceeded FDIC limits?
On one side of this debate are those who view the government’s action as an inappropriate and undeserved bailout. In an article titled “You Should Be Outraged About Silicon Valley Bank,” The Atlantic argued that the bank’s failure was the predictable result of incompetent risk management.
RETIREMENT IS LIFE’S most daunting financial puzzle, not least because many of the decisions we make are difficult or impossible to reverse. To make matters worse, we’re often making decisions we’ve never made before, so we have no real expertise.
What sort of decisions am I talking about? Here are 10 examples.
1. When should I quit work? Needless to say, this is the most important retirement decision. Once you quit the workforce,
A FEW MONTHS BACK, this site’s editor suggested I write an article about the “10 things I learned about money from four years traveling the globe.” I thought, hey, if someone wants to pay me $60 to write about travel, I’m in. I’m hoping he’ll next suggest I write an article about drinking bourbon.
Starting in September 2017, my wife and I traveled the world for four straight years. Travel can be wondrous. Filled with new tastes,
MOST OF US REACH a point in retirement where we think about downsizing. This happened most recently for us when my husband was replacing batteries in our smoke alarms. This required him to stand on a ladder and look up, triggering a bout of vertigo.
This and other elder episodes, happening as we try to perform simple, everyday tasks, caused us to rethink our ability to remain in our current home. We’re not decrepit yet,
MY AFFINITY FOR spreadsheets began in the late 1960s when I was a paperboy in Virginia Beach. I had a morning route for The Virginian-Pilot and an afternoon route for the now-defunct Ledger-Star. I used my Huffy bicycle with huge baskets front and back.
The business model was straightforward. I paid wholesale for the papers, and customers paid the retail price of 35 cents per week, or 55 cents if they also got the Sunday paper.
RACHAEL AND I WENT to Walmart the other day to stock up on dog food—and came away with a severe case of sticker shock.
We feed our two dogs a daily menu of dry food mixed into a delightful mash with a little canned wet food. Our go-to brands are Purina Dog Chow for the dry food and Pedigree Chopped Ground Dinner for the wet food.
The cost of the 40-pound bag of Purina dry food has barely budged.
WE JUST PURCHASED a new car. The whole buying process has been upended by the pandemic and today’s chip shortage, and we learned seven important lessons.
My wife and I view car buying as an unavoidable chore. We know financial experts recommend buying a car that’s a few years old, so someone else takes the big hit on the initial depreciation. We haven’t done that. We like to buy a new vehicle and keep it for 15 or 20 years.
I WAS A RABID football fan as a kid. I would sweep across our front lawn, fantasizing about the many and varied ways I would run to daylight for Hewlett High School. But when I finally got the chance, I lasted only a few practices. I hadn’t counted on all the bruises that came with the program.
So, too, was it with my brief stint as an independent investment advisor affiliated with a large discount broker.
NO. 10: WALL STREET always strives to look its best. To ensure mutual fund expenses and advisory fees appear small, they’re expressed as a percent of the dollars we invest, not as a percent of our likely gain. To make their results appear more impressive, money managers pick their benchmark indexes carefully and use cumulative return “mountain” charts.
ROUND UP the mortgage check. If you’re paying $1,512 a month, send the mortgage company $1,600 instead. It’s a painless way to increase savings, the extra $88 a month could allow you to pay off your mortgage years earlier and you’ll earn a pretax return equal to your mortgage’s interest rate. That return could be higher than you can get with high-quality bonds.
LONGEVITY RISK. Spending down a retirement portfolio is tricky: You don’t know how long you will live—and hence there’s a risk you’ll run out of money before you run out of breath. To fend off that risk, limit annual portfolio withdrawals to 4% or 5%, delay Social Security to get a larger check and consider an immediate annuity that pays lifetime income.
NO. 23: IF WE DON’T have much money, we should compensate with time—by starting to save when we’re young, holding stocks for decades and encouraging our children to do the same.
I MAY BE THE POSTER child for the new retirement, switching back and forth between standard employment and side gigs, as I seek work that I find fulfilling. I’m not alone: It seems many people are retiring earlier than they planned and then working part-time, moving in and out of the workforce based on need and opportunity.
The annual Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI) shows that—while workers expect to retire at age 65—the median retirement age is actually 62.
YES, EDUCATION is invaluable. But should young adults go to college to obtain a piece of paper that may mean little in the real world? Is the student debt we hear so much about really worth it? Could pushing college attendance for all be as misguided as pushing homeownership for all?
I’m not against formal education. I put four children through college. In fact, I believe parents are obligated to cover their children’s college costs,
IN A NOTE TO CLIENTS last week, Deutsche Bank analysts wrote that they expect a “major recession.” What should you make of ominous predictions like this?
First, don’t panic. Yes, Deutsche Bank is a big institution. But it’s worth noting that last week two equally prominent institutions also weighed in—with a different point of view. Goldman Sachs argued that a recession is “not inevitable.” UBS wrote that, “We do not expect a recession.” They can’t all be right.
ASK NOT WHAT THE markets can do for you. Ask what you can do for your portfolio.
After 15 turbulent months for stocks, many folks feel they’re at the mercy of the financial markets. But in truth, we’re far from powerless. We may not be able to control the direction of share prices. But here are seven crucial financial levers over which we have a lot of control:
1. We can figure out how much cash we’ll need from our portfolio over the next five years,
BEATING THE STOCK market over the long term is no mean feat. Only a tiny proportion of investors—professional or otherwise—manage to do it. So why do so many people think they can?
Meir Statman, a finance professor at Santa Clara University, cites eight key reasons. In a new monograph titled Behavioral Finance: The Second Generation, he slots these reasons into two broad categories—five cognitive and emotional errors, followed by three expressive and emotional benefits:
1.
NO. 23: IF WE DON’T have much money, we should compensate with time—by starting to save when we’re young, holding stocks for decades and encouraging our children to do the same.
ROUND UP the mortgage check. If you’re paying $1,512 a month, send the mortgage company $1,600 instead. It’s a painless way to increase savings, the extra $88 a month could allow you to pay off your mortgage years earlier and you’ll earn a pretax return equal to your mortgage’s interest rate. That return could be higher than you can get with high-quality bonds.
NO. 10: WALL STREET always strives to look its best. To ensure mutual fund expenses and advisory fees appear small, they’re expressed as a percent of the dollars we invest, not as a percent of our likely gain. To make their results appear more impressive, money managers pick their benchmark indexes carefully and use cumulative return “mountain” charts.
LONGEVITY RISK. Spending down a retirement portfolio is tricky: You don’t know how long you will live—and hence there’s a risk you’ll run out of money before you run out of breath. To fend off that risk, limit annual portfolio withdrawals to 4% or 5%, delay Social Security to get a larger check and consider an immediate annuity that pays lifetime income.
I MAY BE THE POSTER child for the new retirement, switching back and forth between standard employment and side gigs, as I seek work that I find fulfilling. I’m not alone: It seems many people are retiring earlier than they planned and then working part-time, moving in and out of the workforce based on need and opportunity.
The annual Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI) shows that—while workers expect to retire at age 65—the median retirement age is actually 62.
YES, EDUCATION is invaluable. But should young adults go to college to obtain a piece of paper that may mean little in the real world? Is the student debt we hear so much about really worth it? Could pushing college attendance for all be as misguided as pushing homeownership for all?
I’m not against formal education. I put four children through college. In fact, I believe parents are obligated to cover their children’s college costs,
IN A NOTE TO CLIENTS last week, Deutsche Bank analysts wrote that they expect a “major recession.” What should you make of ominous predictions like this?
First, don’t panic. Yes, Deutsche Bank is a big institution. But it’s worth noting that last week two equally prominent institutions also weighed in—with a different point of view. Goldman Sachs argued that a recession is “not inevitable.” UBS wrote that, “We do not expect a recession.” They can’t all be right.
ASK NOT WHAT THE markets can do for you. Ask what you can do for your portfolio.
After 15 turbulent months for stocks, many folks feel they’re at the mercy of the financial markets. But in truth, we’re far from powerless. We may not be able to control the direction of share prices. But here are seven crucial financial levers over which we have a lot of control:
1. We can figure out how much cash we’ll need from our portfolio over the next five years,
BEATING THE STOCK market over the long term is no mean feat. Only a tiny proportion of investors—professional or otherwise—manage to do it. So why do so many people think they can?
Meir Statman, a finance professor at Santa Clara University, cites eight key reasons. In a new monograph titled Behavioral Finance: The Second Generation, he slots these reasons into two broad categories—five cognitive and emotional errors, followed by three expressive and emotional benefits:
1.
What should be the top priorities for those in their 20s?
Are annuities ever worth buying—and, if so, which type?
When does it make sense to hire a financial advisor?