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The richer you are, the more risk you can afford to take—but the less need you have for high returns.

Super Old

FINANCIAL ADVISORS used to suggest a 20-year planning horizon for retirement. Now, most advisors say to plan for a 30-year retirement. From my own experience, I believe 40 years should be the norm, and 50 years isn’t unreasonable.
If we plan for the longest possible life expectancy, we’ll almost always die with money left over. That’s far better than the alternative—living longer than planned and running out of money.
People who live to 100 are called centenarians.

Read more »

Enjoying the Show

TWO TICKETS TO the Kia Forum: $250. Event parking: $60. One beer and one water: $28. A night with my wife at a Pearl Jam concert: priceless.
A few weeks ago, we attended a concert for the first time in more than two years. It was my 13th Pearl Jam show since becoming a fan 30 years ago. My status as a Pearl Jam follower has not wavered from the first time I heard them in the early 1990s.

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Short Stuff

Spend With a Smile

AS I WAS PREPARING to retire last year, I spoke with a number of friends who were also about to leave the workforce. One of the main topics of discussion: How could we best arrange a stream of income for the next three decades or so?
Among my friends, a common refrain was that they planned to spend more in their first decade of retirement. They thought their spending would fall during the second decade,

Read more »

Stay Positive

AMONG THE AREAS of law that have made me miserable over 16 years of practice, it’s the adversarial roles that have made me most miserable. My experience in labor and employment law has been particularly difficult because the interaction with opposing counsel is usually contentious, each side compelled to zealously advocate for their position.
Almost any type of litigation is a zero-sum game. One side wins, the other loses. Because the outcome is never guaranteed,

Read more »

Close but No Cigar

BEAR MARKET territory. On Friday, that phrase was all over the “financial pornography” channel, as commentator Carl Richards labels it. During trading, the S&P 500 finally dropped 20% from its early January all-time closing high. In truth, that number alone doesn’t mean much. Consider that stocks in both 2011 and late 2018 briefly encroached on 20% before bouncing back in a big way.
The media was ready last week to go with all the flashing banners and alerts.

Read more »

That Losing Feeling

LOSS AVERSION IS ONE of the most powerful behavioral-finance phenomena. It’s often defined as “losses loom larger than gains.” It’s been said that the psychological pain from a loss is about twice as powerful as the pleasure from an equivalent gain.
Boy, am I feeling that right now. This year’s market losses have many of us concerned. But this year is different for my wife and me. This is our first year with no consistent earned income.

Read more »

Hard to Follow

“BUY LOW, SELL HIGH.” This is probably the most famous investment adage. It sounds so simple and commonsensical—a sure path to success. Like so many investing truisms, however, following it is easier said than done.
For one thing, how do we really know when we’re buying low? When it comes to a pair of jeans or a laptop computer, we have a good sense of value. When they go on sale, we snap them up without hesitation.

Read more »

A La Carte

I REMOVED THE YOKE of cable TV several years ago. Thanks to today’s streaming channels, I have endless options—and I’m still saving money.
If you thought cable offered an overflowing abundance of choices, buy a Roku or other streaming device. You could stay glued to the screen 24/7 and never see anything twice, probably for years.
A Roku device, available for as little as $24, will give you access to more than 200 channels,

Read more »

Longer Reads

Big League Lessons

IT WAS JUNE 3, 2006, and I was in the starting lineup for the New York Yankees. We were in Baltimore, playing against the Orioles at Camden Yards. I went 1-for-4 in my major league debut.

A week later, I had the experience of a lifetime. June 10 was my first start at Yankee Stadium. It was a nationally broadcast Fox Saturday day game against the Oakland A’s. I hit my first major league home run.

Read more »

Seven Figures

A FEW WEEKS AGO, my net worth hit the $1 million mark. It was a milestone I’d been looking forward to for years.
Almost a decade ago, I performed my first net worth calculation. Back then, I was recently divorced and living on my own for the first time in my life. My only assets were three retirement accounts and a seven-year-old car, plus half the proceeds from the sale of a house my ex and I had owned.

Read more »

Under the Radar

RESEARCH SHOWS HOW subtle sales pitches, called nudges, can influence our buying. Think of tricks like putting the more expensive potato chips on eye-level grocery-store shelves. Over time, such nudges create spending habits. Those habits become ingrained, nonthinking ways of dealing with money.
A collection of such poor habits begun in childhood can result in a hard-to-alter lifestyle of poor saving and foolish spending. Even worse, nudging sends a stealth message, especially to children,

Read more »

The Taylor Rule

IF YOU’VE TRIED TO buy a car or a home recently—or have even just been to the grocery store—I’m sure you’re aware how much prices have jumped over the past year. John Taylor certainly has an opinion on the topic.

Taylor is an economics professor at Stanford University. While not a household name, he’s a leader in economic circles. Before Jerome Powell was appointed Federal Reserve chair in 2018, Taylor was a candidate for that spot.

Read more »

Following My Muse

WHEN I WAS A YOUNG boy, my grandmother kept telling me, “You must go into the family warehouse business.” She was a product of the Great Depression. To her, this well-established business represented security. Many people would crave an offer of financial stability and a career roadmap. But I hated the feeling that my life path was being dictated by my family.
Maybe my financial journey was complicated by two competing influences—my father and my mother.

Read more »

Driving a Bargain

“NEVER BORROW MONEY to buy a depreciating asset.” This personal finance tip is often used to dissuade folks from taking out car loans. But does a car really leave folks poorer?

When we value an asset, it’s typically thought of as its dollar value on a balance sheet. The monetary value of my car might indeed decline, and quickly at that, but it has far more usefulness than my personal balance sheet shows. When I consider my car’s true value,

Read more »

Voices

Should political views influence how we invest?

"I agree with all the other answers. All have truth to them. However, we are ultimately bound to have a world view. I can think of one critical time I thought the market would tank based on an election result, and I couldn’t have been more wrong. Fortunately, a financial advisor convinced me not to trim my stocks. So, a huge dose of humility is required when reacting to any world event. Having said that, sometimes we need to make values-based decisions. I won’t touch China or Russia with a 10-foot pole, partly on values but partly in recognition that foreign investors thrive at the discretion of autocratic leaders, and I can’t risk my money to their whims. I don’t know if China or Russia will do well from here or not. But just count me out. If I miss out on big gains, so be it."
- William Ehart
Read more »

How did you get started as an investor?

"In the 1970’s when IRA’s were first introduced, I selected 3 funds from Money magazines recommendation list. After a few years, 2 did great, 1 did not. I realized that there were many things I did not understand. The one thing I did understand was a low expense ratio, which lead me to Vanguard. In the mid 1990’s, I put $100,000 in a Smith Barney wrap account with a 2.25% aum fee. In a few years, it went to $225,000, which seemed great. Of course, it crashed with everything else in the dot com crash. One thing that I learned is that anything can be made to look good. My Smith Barney rep gave me a glowing report showing how my investment was exceeding the “modified benchmark”. (I have become suspicious when anyone uses a modified benchmark.) I said, “Peter, the report looks great but the bottom line is that since I been with you, my account has increased from $100,000 to $124,000. Your fees over that time have been $25,000. I don’t think that this is the way it should work. Your making more than I am. I’m transferring everything back to Vanguard”. We have been 100% Vanguard since then."
- Paul Wolgemuth
Read more »

What do you need for a fulfilling retirement?

"Purpose. Without it life is like spice that’s lost it’s flavor. And try as people might, riches and fame in my observation are inadequate substitutes."
- medhat
Read more »

Money Guide

College Investing

YOU SHOULD PROBABLY be more conservative with your children’s college savings than with your own retirement nest egg. Sound counterintuitive? Remember, your kids likely have no more than 18 years until they head off to college, while you may have decades until you quit the workforce—and you’ll likely live a few decades beyond that. The implication: While you might initially invest your children’s college savings heavily in stocks, you should probably start moving toward bonds even before they enter high school. Let’s assume you plan to put a quarter of your children’s college fund toward each of the four years needed to earn an undergraduate degree. With that in mind, you might look to have a quarter of your children’s savings in certificates of deposit, short-term bonds or similar conservative investments when they’re five years from their freshman college year. You might aim to have another quarter in conservative investments when they’re five years from their sophomore year, and so on. Why this caution? Over some five-year stretches, stocks have lost money. Another reason: While you might spend your retirement money over 20 or 30 years, the deadline is a lot harsher with your children’s college savings, because the money is spent over a brief four-year period. As you invest your children’s college savings, also think about what sort of account to use, whether it’s a 529 college savings plan, prepaid tuition plan, Coverdell education savings account or custodial account. As an alternative, some parents keep the money in their own name, perhaps stashing it in a regular taxable investment account, buying savings bonds or even using an individual retirement account. Next: 529 Savings Plans Previous: Save Something
Read more »

Manifesto

NO. 49: WE SHOULD ensure our family will be okay financially, even if we aren’t around. That means making sure there’s enough money—and making sure our affairs are well organized.

Truths

NO. 54: RISK GETS rewarded—usually. To earn high investment returns, we need to take high risk. But not all risk gets rewarded: Stocks should climb over time, but there’s no guarantee any one stock will triumph. Even entire national stock markets can suffer long periods of lousy returns, which is a reason to diversify globally and own some bonds.

Act

CHECK YOUR CREDIT reports. Every 12 months, you can get a free copy of your credit reports from the three major credit bureaus by heading to AnnualCreditReport.com. Look not only for mistakes, but also for accounts you don’t recognize. The latter could be a sign that your identity has been stolen. While you’re at it, you might find out your credit score.

Think

IMPUTED RENT. Folks love to boast about their home’s price appreciation. But after deducting maintenance costs, property taxes and insurance, we might barely break even on the price gain. Instead, often the biggest return comes from the imputed rent—the fact that we get to live in the place. Each year’s imputed rent might equal 6% or 7% of a home’s value.

Second Look

Retirement

Ready to Retire

IF THERE WAS ANYONE who should have been emotionally unprepared to retire, it was me. In the years immediately before, I was at the top of my career. I’d been promoted to vice president. I had virtual total control over my job. I was recognized by nearly every employee because of my extensive employee benefits communications and the fact that I’d negotiated benefits for decades. I was among the few who routinely met with the company’s chairman.

Read more »

Family Finance

Who We Were

MILLIONS OF RETIRED baby boomers struggle financially, and yet they don’t eat avocado toast, don’t have a daily Starbucks habit and didn’t graduate college with a degree in women’s studies.
What’s my point? In the comments section of HumbleDollar, there are two recurring themes—that young adults spend recklessly and that college is of questionable value. I understand these concerns and even share them to some extent. But I’d favor a more nuanced view.

Read more »

Investing

Robbin’ Who?

TERRY ODEAN has been studying investor behavior for decades. The University of California at Berkeley finance professor has proven again and again that everyday investors often harm their performance by trading too much.
Last year, Odean and his fellow researchers turned their attention to the Robinhood phenomenon. Result? When I spoke to Odean, he said the only thing that surprised him was the magnitude of the self-inflicted investment wounds by users of the free-and-easy trading app.

Read more »

Lists

Choice Words

AS WE MAKE FINANCIAL, political and other decisions, we’re bombarded with messages that supposedly offer helpful information. But as savvy consumers of news and advertising, we need to realize that we aren’t nudged just by the content of these messages. It’s also the packaging that can have a huge influence.
Below are 21 ways that information is packaged to make it more enticing. Think of this list as a follow-up to my earlier article,

Read more »
Home Call to Action

Mindset

Tell Us a Story

YOU MENTION to a colleague that longtime smokers shorten their life expectancy by an average of 10 years. Your colleague responds by talking about his grandmother who smoked a pack every day until she died at age 98. We all know that the statistic should trump the anecdote. But on the conversational scoreboard, it’s one point for both sides—and, three weeks later, you can’t help but recall the grandmother’s story.
The same thing happens with personal finance all the time.

Read more »

Longer Reads

Big League Lessons

IT WAS JUNE 3, 2006, and I was in the starting lineup for the New York Yankees. We were in Baltimore, playing against the Orioles at Camden Yards. I went 1-for-4 in my major league debut.

A week later, I had the experience of a lifetime. June 10 was my first start at Yankee Stadium. It was a nationally broadcast Fox Saturday day game against the Oakland A’s. I hit my first major league home run.

Read more »

Seven Figures

A FEW WEEKS AGO, my net worth hit the $1 million mark. It was a milestone I’d been looking forward to for years.
Almost a decade ago, I performed my first net worth calculation. Back then, I was recently divorced and living on my own for the first time in my life. My only assets were three retirement accounts and a seven-year-old car, plus half the proceeds from the sale of a house my ex and I had owned.

Read more »

Under the Radar

RESEARCH SHOWS HOW subtle sales pitches, called nudges, can influence our buying. Think of tricks like putting the more expensive potato chips on eye-level grocery-store shelves. Over time, such nudges create spending habits. Those habits become ingrained, nonthinking ways of dealing with money.
A collection of such poor habits begun in childhood can result in a hard-to-alter lifestyle of poor saving and foolish spending. Even worse, nudging sends a stealth message, especially to children,

Read more »

The Taylor Rule

IF YOU’VE TRIED TO buy a car or a home recently—or have even just been to the grocery store—I’m sure you’re aware how much prices have jumped over the past year. John Taylor certainly has an opinion on the topic.

Taylor is an economics professor at Stanford University. While not a household name, he’s a leader in economic circles. Before Jerome Powell was appointed Federal Reserve chair in 2018, Taylor was a candidate for that spot.

Read more »

Following My Muse

WHEN I WAS A YOUNG boy, my grandmother kept telling me, “You must go into the family warehouse business.” She was a product of the Great Depression. To her, this well-established business represented security. Many people would crave an offer of financial stability and a career roadmap. But I hated the feeling that my life path was being dictated by my family.
Maybe my financial journey was complicated by two competing influences—my father and my mother.

Read more »

Driving a Bargain

“NEVER BORROW MONEY to buy a depreciating asset.” This personal finance tip is often used to dissuade folks from taking out car loans. But does a car really leave folks poorer?

When we value an asset, it’s typically thought of as its dollar value on a balance sheet. The monetary value of my car might indeed decline, and quickly at that, but it has far more usefulness than my personal balance sheet shows. When I consider my car’s true value,

Read more »

Free Newsletter

Voices

How often do you check your portfolio and the markets?

"I check the status of the overall market a couple of times daily. I check our two active accounts weekly - a bit more when I reset any expired covered-call options mid month and less when traveling. We check two other accounts maybe quarterly - these are fully invested in index funds and in "set-it & forget-it" autopilot mode. Based on comments below, I should probably check these autopilot accounts more frequently."
- John Yeigh
Read more »

What’s the best strategy for generating retirement income?

"I will have 5 potential income streams if I retire from my current position at age 62. The first is a pension from current employer, that will pay me 46% of my gross salary. Second is a pension from a former employer, worth $1000 monthly at age 65. Third is Social Security, but I plan to wait until age 70 to file. Since the first three income streams will be available at different ages, I’m considering how to handle the fourth and fifth potential income streams, working and drawing down my investments. Ideally, I’ll find lower stress work to help pay bills for a few years. I rather like the structure of a job, but I’m looking forward to leaving management in a few years. if I didn’t have pension income, I’d probably buy an annuity to cover essential expenses, then use investments for discretionary expenses."
- Ginger Williams
Read more »

What should you look for when buying a home?

"My most important lesson related to house purchase occurred while my husband was in the Army. He had been in ROTC and went on active duty during the Vietnam War. Fortunately, he was stationed at the US Military Academy at West Point. We were both in graduate school at the time and lacked a car; my father drove us around so we could find housing in ONE day-- Tom was too low ranking to qualify for on post housing. We had the minimal amount for a down payment on a modest house, and looked at a couple that we could have afforded and which would have been fine. We decided not to risk a buy and instead found a rental. We stayed at West Point for 3 years; during that time, we saw career army people buy and sell their houses. They rarely planned to stay put for more than 3 years. Nevertheless, they rapidly found houses they thought would "work" for them and bought them. Every junior officer we knew followed this plan, and sold at a profit when their tour was finished. After the army stint, my husband took a job at the University of WI -- Madison. We were not mid-westerners and did not plan to stay (we actually have for almost 50 years!) BUT this time we followed the "army way." We drove to Wisconsin with one week to find a house that would work for us and our two young children The inventory available was very limited, but we found a 3 bedroom ranch that met our needs but was NOT our dream house. We stayed in that house for 5 years. During our initial week looking for housing in Madison, we did identify the small neighborhood in which we wanted to live, but it took us five years to find a house there that we could afford. We were constantly outbid until we came upon a true fixer upper. We were the first people to tour the house and we offered the full asking price. Our offer had no contingencies -- we did not have it inspected (it would never have passed!), we gambled we could sell the ranch house before the closing, and we just held our breath. We sold the ranch for about 25% more than we paid, and closed on both houses the same day! Forty-four years later, my husband and I still live in the fixer uppers. The house over the years has required a lot of work -- both do- it- yourself and bigger projects that were done by professional contractors. But the house in which we raised 3 kids still works well for us as empty nesters. Realtors often claim "location, location, location" are the 3 most important factors in real estate. I totally agree -- today, my neighborhood is as hot as it was 44 years when we moved into it. But I would tell any first time home buyer to determine his/her non-negotiable-- it might not be location for them-- and then proceed from there. No house is going to be "perfect," and it's important not to be overwhelmed by a housing purchase. The lesson from West Point was that what you buy, you can also sell! That approach definitely does work!"
- Marilyn Lavin
Read more »
Home Call to Action

Manifesto

NO. 49: WE SHOULD ensure our family will be okay financially, even if we aren’t around. That means making sure there’s enough money—and making sure our affairs are well organized.

Act

CHECK YOUR CREDIT reports. Every 12 months, you can get a free copy of your credit reports from the three major credit bureaus by heading to AnnualCreditReport.com. Look not only for mistakes, but also for accounts you don’t recognize. The latter could be a sign that your identity has been stolen. While you’re at it, you might find out your credit score.

Truths

NO. 54: RISK GETS rewarded—usually. To earn high investment returns, we need to take high risk. But not all risk gets rewarded: Stocks should climb over time, but there’s no guarantee any one stock will triumph. Even entire national stock markets can suffer long periods of lousy returns, which is a reason to diversify globally and own some bonds.

Think

IMPUTED RENT. Folks love to boast about their home’s price appreciation. But after deducting maintenance costs, property taxes and insurance, we might barely break even on the price gain. Instead, often the biggest return comes from the imputed rent—the fact that we get to live in the place. Each year’s imputed rent might equal 6% or 7% of a home’s value.

Money Guide

Start Here

College Investing

YOU SHOULD PROBABLY be more conservative with your children’s college savings than with your own retirement nest egg. Sound counterintuitive? Remember, your kids likely have no more than 18 years until they head off to college, while you may have decades until you quit the workforce—and you’ll likely live a few decades beyond that. The implication: While you might initially invest your children’s college savings heavily in stocks, you should probably start moving toward bonds even before they enter high school. Let’s assume you plan to put a quarter of your children’s college fund toward each of the four years needed to earn an undergraduate degree. With that in mind, you might look to have a quarter of your children’s savings in certificates of deposit, short-term bonds or similar conservative investments when they’re five years from their freshman college year. You might aim to have another quarter in conservative investments when they’re five years from their sophomore year, and so on. Why this caution? Over some five-year stretches, stocks have lost money. Another reason: While you might spend your retirement money over 20 or 30 years, the deadline is a lot harsher with your children’s college savings, because the money is spent over a brief four-year period. As you invest your children’s college savings, also think about what sort of account to use, whether it’s a 529 college savings plan, prepaid tuition plan, Coverdell education savings account or custodial account. As an alternative, some parents keep the money in their own name, perhaps stashing it in a regular taxable investment account, buying savings bonds or even using an individual retirement account. Next: 529 Savings Plans Previous: Save Something
Read more »

Second Look

Retirement

Ready to Retire

IF THERE WAS ANYONE who should have been emotionally unprepared to retire, it was me. In the years immediately before, I was at the top of my career. I’d been promoted to vice president. I had virtual total control over my job. I was recognized by nearly every employee because of my extensive employee benefits communications and the fact that I’d negotiated benefits for decades. I was among the few who routinely met with the company’s chairman.

Read more »

Family Finance

Who We Were

MILLIONS OF RETIRED baby boomers struggle financially, and yet they don’t eat avocado toast, don’t have a daily Starbucks habit and didn’t graduate college with a degree in women’s studies.
What’s my point? In the comments section of HumbleDollar, there are two recurring themes—that young adults spend recklessly and that college is of questionable value. I understand these concerns and even share them to some extent. But I’d favor a more nuanced view.

Read more »

Investing

Robbin’ Who?

TERRY ODEAN has been studying investor behavior for decades. The University of California at Berkeley finance professor has proven again and again that everyday investors often harm their performance by trading too much.
Last year, Odean and his fellow researchers turned their attention to the Robinhood phenomenon. Result? When I spoke to Odean, he said the only thing that surprised him was the magnitude of the self-inflicted investment wounds by users of the free-and-easy trading app.

Read more »

Lists

Choice Words

AS WE MAKE FINANCIAL, political and other decisions, we’re bombarded with messages that supposedly offer helpful information. But as savvy consumers of news and advertising, we need to realize that we aren’t nudged just by the content of these messages. It’s also the packaging that can have a huge influence.
Below are 21 ways that information is packaged to make it more enticing. Think of this list as a follow-up to my earlier article,

Read more »

Mindset

Tell Us a Story

YOU MENTION to a colleague that longtime smokers shorten their life expectancy by an average of 10 years. Your colleague responds by talking about his grandmother who smoked a pack every day until she died at age 98. We all know that the statistic should trump the anecdote. But on the conversational scoreboard, it’s one point for both sides—and, three weeks later, you can’t help but recall the grandmother’s story.
The same thing happens with personal finance all the time.

Read more »