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The markets give—and inflation, taxes and investment costs take away. But where does that leave you?

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Living On Autopilot

"Gee Mark, this is dangerously close to a rant. 😁 However, I share your view 100%. It comes under the category - “what are they thinking?” And it is more the norm than exception. People are their own worst enemy more often than not. Many times it’s themselves they hurt, but sometimes it’s family and other people. Over here we are in a find someone or something to scapegoat mode - the poor, the wealthy, immigrants, “they” or “them”, take your choice, when what people should be doing is looking in the mirror."
- R Quinn
Read more »

Starting Up

"Wow, thanks Andrew for a powerful reflection. I've been incredibly fortunate to have a solid, stable family life. But with the benefit of hindsight, I definitely put more time and effort into my work than I should have."
- greg_j_tomamichel
Read more »

Dickie and his magic beans

"Haven’t heard about instant coffee in years, last time I had instant was in Europe somewhere. I remember when I was growing up that’s all my father drank. The word Sanka comes to mind."
- R Quinn
Read more »

Sundry Memories of Mom

"Thanks for sharing your mom’s story. An impressive woman."
- Nick Politakis
Read more »

Investing Fundamentals: A Simple Guide for Beginners

"Nick, Young or old there are many people who don’t have a clue. I’m helping a neighbor who is 67, and newly retired. He was on auto pilot with his company plan and his government pension. He is one of the fortunate few who will be OK."
- W.D. Housley
Read more »

Saving for Grandchildren

OUR FIRST GRANDCHILD recently arrived, which naturally has us thinking about the smartest ways to build a strong financial foundation for her future. In 2019, I wrote Take a Break, which outlined saving strategies on behalf of children. Since then, the landscape has changed with the introduction of Trump accounts and Roth-conversion pathways for 529 accounts.  Families have four tax-advantaged savings approaches on behalf of young children plus the Roth IRA option once the child has earned income – 529 education savings account, a Uniform Gift to Minor (UGM) custodial account, a Coverdell account, and the new Trump account. Each option offers a different mix of tax benefits, contribution requirements and withdrawal rules. 529 Accounts Pros
  • Tax-free growth when used for qualified education expenses
  • High gift-tax contribution limits: $19K per contributor per year (indexed)
  • New ability to convert up to $35K into a Roth IRA for the beneficiary
Cons
  • Relatively complex with penalties and taxes on non-qualified withdrawals
  • Limited, state-approved investment options
  • Risk of underutilization if the child does not pursue qualifying education
Caveats
  • Technology and AI could significantly reduce education’s cost structure in the future
  • Roth conversions are capped at $35K lifetime
  • The 529 must be open 15 years, and contributions must age 5 years before conversion
  • Conversions require the beneficiary to have earned income (i.e. they could Roth anyway)
  • Annual Roth contribution limits still apply (e.g., $7.5K in 2026), so completing the full $35K conversion would take five years
UGM Custodial Accounts Pros
  • Brokerage account where up to $2.7K of unearned income can be tax-free each year
  • High gift-tax contribution limits: $19K per contributor per year (indexed)
  • Broad investment flexibility — stocks, bonds, funds, etc.
  • Few restrictions on how funds may be used for the child’s benefit
  • Potential for low taxes on capital gains, but subject to marginal “kiddie tax” at parent’s rates until tax-independency or age 24 
Cons
  • Higher income or capital gains could trigger the kiddie tax at the parents’ marginal rate
  • Assets count as the child’s for financial-aid purposes
Caveats
  • Custodians have some ability to spend down the account for legitimate child expenses if the child is a wild-child in the later teen years
Coverdell Accounts Pros
  • Tax-free growth for qualified education expenses
  • More flexible investment choices than most 529 plans
Cons
  • Low contribution limit: $2K per year plus income limits restrict who can contribute
  • Essentially irrelevant today given the expanded options within 529 plans
Trump Accounts Pros
  • $1K government seed deposit for children born 2025–2028
  • Contribution limit of $5K per year in 2026, indexed to inflation
  • Parent employers may contribute up to $2.5K per year (also indexed)
  • Tax-deferred growth with Roth-conversion opportunities beginning at age 18
  • No earned-income requirement for Roth conversions 
  • Roth conversions are ideal in low-income years starting after age 18 once the child has transitioned to tax-independency of parents or at age 24 when “kiddie taxation” ends. Early tax independence could even be a combined Roth plus student financial-aid strategy
  • Potential to convert large account values over several years at relatively low tax rates (potentially marginal 10-12% tax-rates, but averaging less due to the standard deduction).
Cons
  • Investment options limited to low-cost indexed stock funds (not necessarily a drawback)
  • Penalty-free withdrawals must wait until age 59½, but the accounts could be advantageous even including penalties
  • Limited custodian control and intervention possibilities if the teen is a wild-child
Caveats
  • If Roth conversions are not undertaken during the child’s low-income years, a UGMA invested to capture long-term capital gains tax-rates may outperform a Trump Account taxed at ordinary income tax-rates
  • Watch this space as future adjustments or eligibility changes are possible
  In effect, the 529 is a two-decade college savings program having some complexity and withdrawal limitations; the UGM is a reasonably flexible, 18-30-year college or house downpayment savings program; and the Trump account is a somewhat inflexible, sixty-year retirement accelerator   Resulting Playbook Here is our family’s intended playbook for tax-advantaged accounts in the grandchild's name:
  • Parents’ retirement account fundings remain their top priority - 401K’s at a minimum up to the match, HSAs with their triple tax advantages, and Roths as long as eligible within income limits.
  • A Trump account has already been initiated to secure the free $1K government seed contribution – grows to potentially $2.6K at age 18 after penalties and taxes.
  • Limited 529 funding has also been initiated to start the 15-year clock for potential later Roth conversions. 
  • The family’s next priority is to fund the Trump account which starts at $5K later this year. Maximizing the Roth conversion opportunity will require ~$116K of contributions (at 3% inflation) over 18 years which we grandparents intend to help fund. I estimate the Roth converted Trump account could grow to ~$2 million of tax-free money at age 60 (6% growth) assuming early-age Roth conversions, and the Wall Street Journal projects as much as $3 million (link likely paywalled).
  • The subsequent priorities are to start UGM taxable account and 529 account contributions in parallel to perhaps initial levels of about $35K each. This may take our family some years depending upon available resources for contributions.
For the UGM account, a balance of $35K should capture a sizeable chunk of the annual $2.7K tax-free income limit by investing in high-yield income alternatives. For the 529 account, $35K aligns with the Roth conversion limit. On a personal note, we had extremely positive UGM outcomes with our children. We saved taxes for two decades, and each child used the ~$60K balance as down payments on their first house shortly after college. Due to the 529’s withdrawal rigidities and potential technology impacts, we are unlikely to fund the 529 to the max. 
  • We will skip Coverdells as the alternatives offer ample savings opportunity in the child’s name ($200K+). 
  • Depending upon spare resources available for gifting, we can always reassess future contributions. 
That’s our plan, and we’re sticking to it…. until something changes.    John Yeigh is an author, coach and youth sports advocate. His book “Win the Youth Sports Game” was published in 2021. John retired in 2017 from the oil industry, where he negotiated financial details for multi-billion-dollar international projects. Check out his earlier articles.  
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New Face, old scam

"My wife is an amateur artist and sells her paintings on her web site and Facebook. She gets contacted by scammers with similar pitches. One wanted to license one of her paintings to supposedly use the image on commercial products. My wife has a boilerplate licensing agreement she sent out and never heard anything more. The internet has made it possible for every criminal in the world to try to steal your money."
- Howard Schwartz
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Wall Street Trap

IN THE INVESTMENT world, May 1st is a notable day. It was on May 1, 1975 that the Securities and Exchange Commission deregulated the brokerage industry. For the 183 years prior to that, trading commissions on the New York Stock Exchange had been fixed at uniformly high rates. But when deregulation arrived, competition got going. That’s when discount brokers like Charles Schwab got rolling, and over time, May Day, as it’s now referred to, has delivered enormous savings to consumers. More than 50 years later, though, Wall Street still operates in ways that are often at odds with consumer interests. As an individual investor, what are the obstacles to be aware of? At the top of the list is Wall Street’s fixation with individual stocks. For almost 100 years, the data has been clear that stock-picking is counterproductive. Probably the first to uncover this was a fellow named Alfred Cowles. Cowles came from a wealthy family and wondered whether the investment advice his family had been receiving was worthwhile. He set about answering that question and in 1933, published a paper titled “Can Stock Market Forecasters Forecast?” Cowles’s conclusion: They can’t. More recently, research by finance professors Brad Barber and Terrance Odean came to a similar conclusion. The title of their most well known paper is self-explanatory: “Trading Is Hazardous to Your Wealth.”  Along the same lines, Standard & Poor’s regularly examines actively-managed mutual funds to see how many are able to outperform the overall market. The most recent finding: Over the past 10 years, fewer than 15% of funds benchmarked to the S&P 500 managed to beat the index. Research by Jeff Ptak at Morningstar has found that the more active a fund is, the worse it performs. So-called tactical funds, which shift among different asset classes in response to economic forecasts have, in Ptak’s words, “incinerated” shareholder dollars. This data is fairly well known. The problem, though, is that trading activity generates revenue for the brokerage industry, so it has an interest in keeping investors engaged with the market. That’s why brokerage analysts are on TV every day, offering their forecasts for individual stocks, for the overall market and for the broader economy. To be sure, this makes for interesting television. The problem, though, is that it’s been shown to carry almost no value. According to research by Joachim Klement, the accuracy of Wall Street prognosticators is approximately zero. Why are they so poor at forecasting? For starters, there’s the simple fact that no one has a crystal ball. No one can know what a company—or its competitors—will do a month or a year from now, and how that will translate into stock price gains or losses. Sociologist Ezra Zuckerman Sivan uncovered a more subtle explanation. In research published after the technology selloff in 2000, Sivan found that Wall Street analysts are constrained by two obstacles. The first is that they’re dependent on access to companies’ management teams to help in their research. For that reason, it’s in their interest to maintain positive relationships with the companies that they follow. Investment banks that take a positive view on a company may also be rewarded with profitable mergers or acquisitions work when the need arises. Those factors bias stock recommendations overwhelmingly in the direction of “buy” ratings. Another reason analysts tend to avoid negative comments about the companies they cover: Sivan found that there is a community effect that tends to form among the analysts assigned to a given company, and thus an incentive develops to not “rock the boat” in saying anything too critical. People generally want to get along, and that results in a sort of self-censorship. This research is well understood, and yet Wall Street continues to generate forecasts day after day, year after year. Why? There are two explanations, I believe. The first is that it’s entertaining. I’ll be the first to acknowledge that index funds aren’t terribly interesting to talk about. It’s far more interesting to talk about smartphones or AI and the companies behind them. That makes Wall Street analysts invaluable to the media, who need to fill airtime.  And as long as they’re granted that airtime, forecasters are of great value to the brokerage industry. Since trading activity is profitable for Wall Street, it’s in brokers’ interest to generate continued interest in stocks. That brings in commission dollars for brokers. And even though commissions have shrunk in recent years, brokers benefit in other ways from active trading, including the “bid-ask spread” on each trade. That’s the difference between what buyers pay and what sellers receive, and though these spreads are tiny, they add up for the brokers who collect them. For good reason, then, Wall Street continues to promote stock-picking. At the same time, the investment industry is always busy developing new funds. In the first half of last year, for example, fund companies rolled out more than 640 new funds. Among them: funds that hold single stocks with varying degrees of leverage and other seemingly unnecessary new formulations. The result: There are now many more funds than there are stocks trading on U.S. exchanges.  Many of these new funds follow ever more esoteric strategies. They’re often opaque. And almost invariably, they carry higher fees. In a 2011 study titled “The Dark Side of Financial Innovation,” finance professor Brian Henderson and a colleague looked at one popular category of fund known as a structured product. Their conclusion: These funds were overpriced to the point that their expected return was actually a bit below zero. How were they able to market such an inferior product? Henderson’s hypothesis was that the fund companies designed them to be intentionally as complex as possible in order to exploit individual investors. The bottom line: To a great degree, Wall Street is upside down. But as an individual investor, you don’t have to be. My rule of thumb: In building a portfolio, investors should do more or less the opposite of what Wall Street recommends. That, I believe, is a reliable formula for success.   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 »

Living On Autopilot

"Gee Mark, this is dangerously close to a rant. 😁 However, I share your view 100%. It comes under the category - “what are they thinking?” And it is more the norm than exception. People are their own worst enemy more often than not. Many times it’s themselves they hurt, but sometimes it’s family and other people. Over here we are in a find someone or something to scapegoat mode - the poor, the wealthy, immigrants, “they” or “them”, take your choice, when what people should be doing is looking in the mirror."
- R Quinn
Read more »

Starting Up

"Wow, thanks Andrew for a powerful reflection. I've been incredibly fortunate to have a solid, stable family life. But with the benefit of hindsight, I definitely put more time and effort into my work than I should have."
- greg_j_tomamichel
Read more »

Dickie and his magic beans

"Haven’t heard about instant coffee in years, last time I had instant was in Europe somewhere. I remember when I was growing up that’s all my father drank. The word Sanka comes to mind."
- R Quinn
Read more »

Sundry Memories of Mom

"Thanks for sharing your mom’s story. An impressive woman."
- Nick Politakis
Read more »

Investing Fundamentals: A Simple Guide for Beginners

"Nick, Young or old there are many people who don’t have a clue. I’m helping a neighbor who is 67, and newly retired. He was on auto pilot with his company plan and his government pension. He is one of the fortunate few who will be OK."
- W.D. Housley
Read more »

Saving for Grandchildren

OUR FIRST GRANDCHILD recently arrived, which naturally has us thinking about the smartest ways to build a strong financial foundation for her future. In 2019, I wrote Take a Break, which outlined saving strategies on behalf of children. Since then, the landscape has changed with the introduction of Trump accounts and Roth-conversion pathways for 529 accounts.  Families have four tax-advantaged savings approaches on behalf of young children plus the Roth IRA option once the child has earned income – 529 education savings account, a Uniform Gift to Minor (UGM) custodial account, a Coverdell account, and the new Trump account. Each option offers a different mix of tax benefits, contribution requirements and withdrawal rules. 529 Accounts Pros
  • Tax-free growth when used for qualified education expenses
  • High gift-tax contribution limits: $19K per contributor per year (indexed)
  • New ability to convert up to $35K into a Roth IRA for the beneficiary
Cons
  • Relatively complex with penalties and taxes on non-qualified withdrawals
  • Limited, state-approved investment options
  • Risk of underutilization if the child does not pursue qualifying education
Caveats
  • Technology and AI could significantly reduce education’s cost structure in the future
  • Roth conversions are capped at $35K lifetime
  • The 529 must be open 15 years, and contributions must age 5 years before conversion
  • Conversions require the beneficiary to have earned income (i.e. they could Roth anyway)
  • Annual Roth contribution limits still apply (e.g., $7.5K in 2026), so completing the full $35K conversion would take five years
UGM Custodial Accounts Pros
  • Brokerage account where up to $2.7K of unearned income can be tax-free each year
  • High gift-tax contribution limits: $19K per contributor per year (indexed)
  • Broad investment flexibility — stocks, bonds, funds, etc.
  • Few restrictions on how funds may be used for the child’s benefit
  • Potential for low taxes on capital gains, but subject to marginal “kiddie tax” at parent’s rates until tax-independency or age 24 
Cons
  • Higher income or capital gains could trigger the kiddie tax at the parents’ marginal rate
  • Assets count as the child’s for financial-aid purposes
Caveats
  • Custodians have some ability to spend down the account for legitimate child expenses if the child is a wild-child in the later teen years
Coverdell Accounts Pros
  • Tax-free growth for qualified education expenses
  • More flexible investment choices than most 529 plans
Cons
  • Low contribution limit: $2K per year plus income limits restrict who can contribute
  • Essentially irrelevant today given the expanded options within 529 plans
Trump Accounts Pros
  • $1K government seed deposit for children born 2025–2028
  • Contribution limit of $5K per year in 2026, indexed to inflation
  • Parent employers may contribute up to $2.5K per year (also indexed)
  • Tax-deferred growth with Roth-conversion opportunities beginning at age 18
  • No earned-income requirement for Roth conversions 
  • Roth conversions are ideal in low-income years starting after age 18 once the child has transitioned to tax-independency of parents or at age 24 when “kiddie taxation” ends. Early tax independence could even be a combined Roth plus student financial-aid strategy
  • Potential to convert large account values over several years at relatively low tax rates (potentially marginal 10-12% tax-rates, but averaging less due to the standard deduction).
Cons
  • Investment options limited to low-cost indexed stock funds (not necessarily a drawback)
  • Penalty-free withdrawals must wait until age 59½, but the accounts could be advantageous even including penalties
  • Limited custodian control and intervention possibilities if the teen is a wild-child
Caveats
  • If Roth conversions are not undertaken during the child’s low-income years, a UGMA invested to capture long-term capital gains tax-rates may outperform a Trump Account taxed at ordinary income tax-rates
  • Watch this space as future adjustments or eligibility changes are possible
  In effect, the 529 is a two-decade college savings program having some complexity and withdrawal limitations; the UGM is a reasonably flexible, 18-30-year college or house downpayment savings program; and the Trump account is a somewhat inflexible, sixty-year retirement accelerator   Resulting Playbook Here is our family’s intended playbook for tax-advantaged accounts in the grandchild's name:
  • Parents’ retirement account fundings remain their top priority - 401K’s at a minimum up to the match, HSAs with their triple tax advantages, and Roths as long as eligible within income limits.
  • A Trump account has already been initiated to secure the free $1K government seed contribution – grows to potentially $2.6K at age 18 after penalties and taxes.
  • Limited 529 funding has also been initiated to start the 15-year clock for potential later Roth conversions. 
  • The family’s next priority is to fund the Trump account which starts at $5K later this year. Maximizing the Roth conversion opportunity will require ~$116K of contributions (at 3% inflation) over 18 years which we grandparents intend to help fund. I estimate the Roth converted Trump account could grow to ~$2 million of tax-free money at age 60 (6% growth) assuming early-age Roth conversions, and the Wall Street Journal projects as much as $3 million (link likely paywalled).
  • The subsequent priorities are to start UGM taxable account and 529 account contributions in parallel to perhaps initial levels of about $35K each. This may take our family some years depending upon available resources for contributions.
For the UGM account, a balance of $35K should capture a sizeable chunk of the annual $2.7K tax-free income limit by investing in high-yield income alternatives. For the 529 account, $35K aligns with the Roth conversion limit. On a personal note, we had extremely positive UGM outcomes with our children. We saved taxes for two decades, and each child used the ~$60K balance as down payments on their first house shortly after college. Due to the 529’s withdrawal rigidities and potential technology impacts, we are unlikely to fund the 529 to the max. 
  • We will skip Coverdells as the alternatives offer ample savings opportunity in the child’s name ($200K+). 
  • Depending upon spare resources available for gifting, we can always reassess future contributions. 
That’s our plan, and we’re sticking to it…. until something changes.    John Yeigh is an author, coach and youth sports advocate. His book “Win the Youth Sports Game” was published in 2021. John retired in 2017 from the oil industry, where he negotiated financial details for multi-billion-dollar international projects. Check out his earlier articles.  
Read more »

Free Newsletter

Get Educated

Manifesto

NO. 40: WE SHOULD all know the minimum dollar amount we need each month to keep our financial life afloat. This will drive our emergency fund’s size and our cash holdings once we’re retired.

think

EXPECTATIONS. Investment losses are most distressing when they’re least expected. For instance, many investors expect their stock portfolios to fall occasionally by 20% or more. But they’d be horrified if their money-market mutual fund—which they consider a haven of safety—“broke the buck” and slipped 1% from the standard $1 share price to 99 cents.

act

INVESTIGATE a reverse mortgage. Once you're retired, borrowing against your home’s value shouldn’t be a first choice, but a last resort. Still, it’s helpful—and comforting—to know what that last resort might be worth. To that end, try playing with a reverse mortgage calculator. Pay attention to the money you’ll receive—and to the hefty fees you will incur.

Truths

NO. 111: WALL STREET tries never to send us a bill, so we’re unaware of how much we’re paying. Fund expenses and financial advisor fees are quietly subtracted throughout the year. Stock trading spreads and bond markups are built into security prices. Load mutual fund commissions are swiped from our initial investment or they're deducted when we sell.

Pay down debt

Manifesto

NO. 40: WE SHOULD all know the minimum dollar amount we need each month to keep our financial life afloat. This will drive our emergency fund’s size and our cash holdings once we’re retired.

Spotlight: Behavior

Don’t Push It

I’M ALL IN FAVOR of striving. But I’ve also belatedly come to see the appeal of acceptance.
Should we strive for more, or should we accept what we currently have and what’s currently on offer? As I’ve noted in earlier articles, there’s great pleasure in striving. We love the feeling of making progress, even if our achievements don’t make us happy for long. It’s an instinct we no doubt inherited from our hunter-gatherer ancestors.

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Three Things

As one saying goes, there are three things that should not be talked about in polite company: money, politics, and religion.  Here at HumbleDollar, we are given license to discuss (politely) the first topic. And have we ever discussed money here! Pretty much any aspect of personal finance you can think of has been addressed thoroughly and intelligently somewhere on this website.
When the conversation has veered into the second topic, politics, the discourse can get a bit chippy.

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Mirror, Mirror on the Wall

They say at 20 years of age you have the face that nature gave you.  At 40, you have the face life gave you and at 60, you have the face you deserve. This is a variation on a quote attributed to both George Orwell, author and essayist, and Coco Chanel, fashion maven. If this is true, it means  that our choices and attitudes leave an indelible mark on our character which ultimately surfaces in our physical appearance.

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Eyes Forward

AT THE 2016 SUMMER Olympics in Rio de Janeiro, South Africa’s Chad Le Clos challenged Michael Phelps for the gold medal in the 200-meter butterfly. A famous image emerged from that event: Throughout the semifinal, Le Clos repeatedly looked over at Phelps as he struggled to keep up. Meanwhile, Phelps just kept looking forward. The result: Phelps ultimately won the gold, while Le Clos trailed in fourth place.
I believe there’s a parallel between what we saw in that race and what we see in the investment world.

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Why We Struggle

I’VE SPENT MUCH OF MY life trying to better understand the world, especially the financial world. But I wonder whether I should have spent more of that time trying to better understand myself.
Why do some financial situations scare us, while others leave us unperturbed? Why do we spend time and money in ways we later regret? Why do we find our bad habits so difficult to change? Why do we admire some folks,

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Money Grows Up

I MOVED FROM LONDON to New York City in 1986, when I was age 23. That’s when my financial education truly began.
I’d previously studied economics for three years and spent a year writing about the international financial markets for Euromoney magazine. Still, I knew almost nothing about investing, insurance, homeownership and other topics crucial to managing a household’s finances.
I’ve learned a ton since, and the focus of that education keeps changing,

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Spotlight: Drak

Winning Retirement

AMERICANS THINK they need an average $1.9 million to retire, according to a survey of 401(k) plan participants by Charles Schwab. Years ago, a finding like that would have terrified me. I worked really hard in my younger years and socked away money diligently. But between paying off the mortgage, saving for the kids’ education and being hit by an unexpected divorce, there’s no way I could ever have amassed $1.9 million. Still, I’ve learned to live well in retirement. How? By emulating my favorite movie, Scent of a Woman, starring Al Pacino. The lessons it taught led me to write my first book, Victory Lap Retirement. In the movie, Pacino plays retired Army Lieutenant Colonel Frank Slade, a blind and bitter alcoholic. He survives on a disability pension, living in a converted garage behind his niece’s house. Once an aide to President Lyndon Johnson, Slade knew the high life. But now he spends the bulk of his time alone, slumped in an armchair, feeling miserable and sorry for himself. He knows his best days are behind him. Slade comes up with a plan to go out with a bang (pun intended). The movie is filled with a series of last-chance adventures that are deeply pleasurable to Pacino’s character. He uses money saved from his disability payments to travel by limo to New York City and check into the Waldorf Astoria Hotel. He gets to dance a tango with a beautiful woman, drive a Ferrari and flirt with a seamstress as she fits him for an expensive suit—the last one he will ever own. It’s his last hurrah. To end his trip, he plans to don his Army uniform and then shoot himself with his service pistol at the Waldorf. But, of course, it doesn’t turn out that way. [xyz-ihs snippet="Mobile-Subscribe"]…
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Movies That Move Me

EVERY DECEMBER, I watch two Christmas movies—movies I’ve been watching for as long as I can remember. My favorite is A Christmas Carol, based on the novel by Charles Dickens. It’s about the mean and miserable Ebenezer Scrooge, a money lender who constantly bullies his poor clerk, Bob Cratchit, and rejects his nephew Fred’s wishes for a merry Christmas. Scrooge lives only for money. He has no real friends or family, and cares only about his own well-being. As the story goes, on Christmas Eve, Scrooge is visited by three ghosts. They teach him about the Christmas spirit through visions of Christmases past, present and future. In each visit, he sees either the negative consequences wrought by his miserly nature or the good tidings that others bring about through their love and kindness. Scrooge sees his future—dying alone with no one to mourn him. He has his money and his possessions, yes, but nothing else. He finally understands why qualities like generosity and love are some of the most important things in life. He’s grateful when he realizes he has a chance to redeem himself and change his future. This is the important message conveyed by Dickens. If Scrooge can change and improve his future, then anyone can. Dickens reminds us that we still have a last chance to be remembered as we would wish. But we need to start living that way today, while we still have the opportunity to change the direction of our lives. Seven years ago, after being packaged off by my employer at age 59, I once again watched the movie while suffering from a bad case of retirement shock. I started to think deeply about what I wanted my life to look like, and what I needed to do to get there. Similar to…
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Life’s Not a Beach

WE’VE BEEN BRAINWASHED by advertisers and financial firms into believing that retirees are a homogeneous group who all want the same things. They aren't. Instead, they have differing needs, values and wants, and this divergence is getting greater because of things like increasing longevity, dwindling job security and the elimination of pensions. Let’s consider the standard bell-shaped distribution curve—and then apply it to people’s retirement behaviors. On the far left and far right of the curve are the outliers, people who are approaching retirement quite differently. On the far left are the early retirees, people who adopted the FIRE—financial independence-retire early—philosophy and retired long before age 65. Joining them are the comfort-oriented retirees who never want to work again. They just want to relax and enjoy a safe, simple, predictable retirement. On the far right of the curve are people who intend to work right until the very end. We’re talking about folks like Warren Buffett and Mick Jagger. They have more than enough money to retire but have decided against it because they enjoy the work they do. Also found here are growth-oriented retirees who want to be challenged and keep growing. They view this time of their life as an opportunity to do things they always liked but didn’t have time for before, when they were working fulltime. But what about all the people in the middle, perhaps slightly to the left or slightly to the right of “average”? They’re all over the place. Many continue to work because they need the money to make ends meet. Others choose to work because they don’t want to cut back their lifestyle. The important takeaway here: Retirees across the distribution curve are fundamentally different from each other. Not everyone enjoys the same type of retirement. Each retiree has different needs,…
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My Favorite Ideas

WHAT ARE THE MOST important financial notions? For me, the answers are “compounding” and “financial independence.” Albert Einstein purportedly called compounding the eighth wonder of the world. Warren Buffett has said that the power of compound interest played an important role in his success. But what I’ve learned is that compounding doesn’t just apply to our finances. It can also be used to improve our health, our relationships and our mastery of whatever topic we choose. Life reinvention is a slow process that happens in small steps that compound upon one another over time. You need to be patient and let the power of compounding work its magic. Do one positive thing each day, such as exercising, eating right or developing a new skill, that moves you toward who you want to be. If you do that one thing every single day, I promise that you’ll get there. Meanwhile, I discovered the concept of financial independence—as opposed to the traditional notion of retirement—when I was in my mid-50s and struggling with whether or not to leave my stressful banking job. It was one of my biggest aha moments. I didn’t want to fully retire, but I wanted the financial freedom to do what I wanted when I wanted. Realizing I had that freedom was life-changing for me. It gave me back my personal freedom—the freedom to be me—and allowed me to regain control over how I spend my time. I wasn’t scared about losing my job anymore. I could finally sleep at night knowing that, no matter what happened, my family and I would be okay. We all have a fundamental need for security and safety. Gaining some degree of financial independence helps us meet those important needs. Achieving financial independence allows us to change our life’s direction. We can…
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Rise of the Ronin

SAMURAI WERE EMPLOYED by feudal lords in Japan. They were skilled in the art of combat and highly trained—the best of the best. A ronin—meaning a "drifter" or "wanderer"—was a samurai who’d left his clan, usually when his master died. Upon leaving, he was free to use his skills to seek similar employment elsewhere or even to choose a completely different profession. A ronin then relied entirely on himself and his skills to get by. Most ronin were self-reliant, self-disciplined and very good at whatever they chose to do. My friend Simon is a modern-day ronin. Simon used to be like the rest of us, living by the rules and doing what was expected of him: graduating from university, securing a well-paying corporate job, getting married, buying a home, starting a family. He was careful with money—something his parents taught him—living within his means, paying down debt and saving as much as possible, so he could retire comfortably one day. Things changed for Simon when his older sister became ill and he almost lost her. That experience served to remind Simon about what’s important in his life—his family—and what isn’t, which was spending most of his time working. He realized he was caught in a trap, trading his quality of life for money, and he didn’t want to play that game anymore. He ran the numbers and calculated that he’d saved up enough money so he could work less and enjoy life on his own terms. He knew that he’d need to keep working to some degree to fund the lifestyle he was accustomed to, but now he could do work he enjoyed without worrying about how to pay the bills. Because of the retirement assets he’s accumulated and the passive income it generates, Simon doesn’t have to make a…
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Free to Work

FOR THE RECORD, I’m a card-carrying member of the FIRE—financial independence/retire early—movement. Except I don’t believe in the RE part. All the folks I know who advocate FIRE, and who have achieved financial independence, are still working in some capacity. Many of them have websites, put out podcasts or write books on how to retire early—which is funny because they’re still working and making money. For some reason, they feel the need to deny that they’re still working. But why deny the truth? There’s no shame in admitting that you enjoy working. The pandemic taught us how important it is to have a sense of purpose. Some people woke up to the fact that having a job—any job—was better than just puttering around the house killing time or taking the dog out for yet another walk around the block. The lesson: Even when you become financially independent and get your freedom back, you still need to find interesting, rewarding things to fill your day. Working at something you enjoy is one of the best ways of doing that. FIRE is still a good concept, one that I’m teaching my kids. We just need to redefine the RE part.
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