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Staying Rational

ArticleAdam M. Grossman | Apr 18, 2026

IT'S BEEN MORE than six years since Covid first entered our vocabulary. It goes without saying that investors have experienced a lot, and for better or worse, recent market events provide some useful lessons. The first has to do with the nature of the stock market. What drives stock prices? Open a finance textbook, and the answer will be clear: The value of a stock should equal the sum of the company’s future profits. This idea is known as intrinsic value, and it’s the textbook explanation of how stock prices work. But there’s clearly a disconnect, since stock prices bounce around far more than the math suggests they should. How can we square this circle? Over the long term, the data tell us that intrinsic value is a valid idea. Chart the price of any given stock, then overlay the company’s profits, and there will often be a reasonably close relationship. But only if you’re Rip Van Winkle. Over shorter periods of time, anything can happen. Stocks often move far above or far below their intrinsic values in response to the news of the day. Especially during times of economic uncertainty, intrinsic value analysis is typically cast aside and replaced by some combination of emotion, conjecture, speculation and storytelling. That’s what we saw in the early months of 2020. Stores were closed, employees had been sent home and the economy went into recession. And since no one had a crystal ball, that’s when storytellers were able to step in with their extreme predictions, causing the stock market to drop more than 30% in the space of six weeks. The lesson for investors: No one can predict when the next crisis will roll around or what form it will take. But there is one very reasonable way to be able to keep it in perspective: by remembering that, at the end of the day, intrinsic value is what matters, and ultimately that’s what drives stock prices. Basic arithmetic illustrates how this can help us manage through the next crisis. Consider that the price-to-earnings ratio of the U.S. stock market has historically averaged around 16. The average company’s total stock market value, in other words, has been equal to about 16 times its annual profits. Now let’s imagine that the next crisis results in every company in America losing an entire year of earnings. That’s extreme and hasn’t happened since the Depression, but it’s useful as a thought experiment. In that scenario, what would be the impact to those companies’ intrinsic value? In simple terms, it would be just one-sixteenth, or a modest 6%. What if a crisis were so severe that a company lost two years of earnings? Using this simple model, the impact would be about 12%. This is meaningful, I believe, because crises typically result in stock price declines that are far more severe than just 6% or 12%. In 2000 and in 2008, the market dropped more than 50%. While every crisis is different, I think it’s useful to keep these numbers in mind whenever the next geopolitical event causes stocks to drop. When that occurs, storytellers will inevitably take over, and the news will be downbeat. But if stocks drop to an extreme degree, as they have in the past, we can probably view it as an overreaction. That won’t help anyone’s portfolio recover any faster, but it should help us tune out the worst of the forecasters and maintain our equanimity. How else can you maintain an even keel during a market crisis? It’s important to understand the impact of recency bias. This bias is the tendency to extrapolate from current conditions, to assume that the future will look like the present, and to downplay the possibility that things might change. That tendency is what contributed to the cycle of negative news during the depths of 2020, and this is why I think it’s so important for investors to be aware of market history. Again, extensive analysis isn’t required. We need only look back across some of the crises the country has weathered, from the Civil War to the Depression to World War II. In each case, the economy recovered and went on to become larger and stronger than before. The lesson for investors: In the depths of a crisis, it’s very difficult to know when or how it will end. But a sense of history can help carry us through. Those are ways to manage through a crisis. Covid also provided a lesson on how to prepare—specifically, how to prepare our portfolios—for a future downturn. In 2022, investors were caught flat-footed when popular total-bond market funds delivered surprising losses. These funds are one pillar of the well-known three-fund portfolio and have traditionally been viewed as the default choice for a set-it-and-forget-it bond allocation. But in 2022, when the Federal Reserve hiked interest rates, these funds dropped a surprising 13%. That was during the same year that the U.S. stock market dropped nearly 20%, creating a very difficult situation for those in retirement and needing to withdraw from their portfolios. The lesson for investors: Total-bond market funds may be well diversified, but they carry risk along another very important dimension known as duration. This is a bond metric that measures, in simple terms, how long it will take for bondholders to be repaid, and it’s a key determinant of risk. The longer the duration, the greater the risk of loss when rates rise. While total-bond market funds have holdings across a broad range of durations, they average out to nearly six years. That’s why they lost so much value in 2022. What’s the alternative? Short-term bond funds tend to have a duration in the neighborhood of just two years. As a result, in 2022, short-term government bond funds like Vanguard’s Short-Term Treasury ETF (ticker: VGSH) lost a far more manageable 4% of their value. To be sure, every crisis is different, and it’s easy to rationalize about the past once it’s in the past. But these lessons, I think, can help us better prepare both our emotions and our portfolios for whatever comes next. 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.

Something to Think About

David Lancaster | Mar 24, 2026

"This is an issue for an optimizer but not a satisficer. I'm more concerned with the total amount I convert each year than the timing. But I do have optimizer tendencies: I tend to leave maybe half or more of my Roth conversions for December so I can guess better and make my income near the top of the tax bracket and keep my capital gains in the 0% bracket."

- Randy Dobkin

Penny Wise, Pound Foolish

DAN SMITH | Apr 12, 2026

"I always liked Luxman gear. Almost bought their hybrid integrated amplifier at one point years ago. They still make some very cool gear. Happy listening!"

- John Rocke

Fixing Social Security once and for all

R Quinn | Apr 15, 2026

"I’ve read that is so! 😂"

- David Lancaster

The condo, HOA, senior citizen conundrum

R Quinn | Apr 19, 2026

"Ah, good point, but of course contributing to the long term viability of the community is part of the deal. That is something people need to realize. It’s like saying we shouldn’t pay property taxes because we no longer have children in schools. Or why should I pay SS taxes as I may never collect. When I buy insurance I hope I never collect a penny."

- R Quinn

The IRA Decision That Affects Your Kids

David Lancaster | Apr 17, 2026

"Children yes"

- R Quinn

A Life You Build

Jeff Peck | Apr 19, 2026

"Jeff: Thanks for sharing some of the details of your life journey: the situation you were born into, the lessons you were taught and learned through experience and hard work, and the wisdom you have gained through living. It is a great blessing to reflect back on the life we have had and to be able to see meaning and fulfillment. I would agree that often that comes through how we choose to approach life and the cards we are dealt, and the kinds of decisions we make."

- Doug C

One Good Call?

Mark Crothers | Apr 14, 2026

"Jeremy. A very sharp observation, and it brings to mind that old saying: invert, always invert. To answer your question directly: no, I haven't analysed my wife's portfolio to that extent — and if I'm honest, I probably won't. She's determined to stay with the adviser, and I'm content with what we've achieved: a fee reduction and a new commitment to advise based on our total combined holdings rather than hers in isolation. Sometimes you have to know which hill to die on — and when to retreat with a partial victory."

- Mark Crothers

What happens to Medicare Supplement coverage when moving to a different state?

Carl C Trovall | Mar 15, 2026

"Triple check but I believe that the Medigap insurer you originally picked stays with you if you move to another county or state (and don't change plans or companies). A few states even allow you to change companies and/or plans without underwriting or higher premiums (community pricing). Each state has an 800 SHIP (State Health Insurance. Assistance Program) hotline to connect you with knowledgeable folks."

- R Mancuso

A Bit More Humble

ArticleEdmund Marsh | Apr 18, 2026

I LOVE TO PLAN. My wife, Sharon, often catches me nestled in my chair, gazing out a window at a distant object as my mind wanders even farther afield. My musings become scribbles on a scrap of paper, destined for discussion with Sharon at length over coffee and long walks. Eventually, we hammer out the settled strategies we think will best bring us happiness in adventures ranging from our next hike to the next few decades of life. Of course, I know our intended track, or even the final destination, may change over time. I'm just a little boat on a big sea, blown about by winds and carried along by deep currents that may push me far off my charted course. Still, though it may be somewhat of an illusion, I cling to the comfort of control. Smooth sailing. And for most of 2025, life was comfortable. In April, I shifted to part-time work as a physical therapist. I termed my new lifestyle “semi-retirement”. My reduced salary, added to Sharon’s contribution from a few hours’ work each month, still gave us enough income from our jobs to cover expenses, with leftovers for a little investing and so forth. Along with that, we gained enough new-found, free time to pursue a bit more fun while catching up on projects around the house. As an added bonus, I expected delaying full retirement a couple of years might lead to more happiness in the decades ahead. How so? Because my post-retirement plan was still a work-in-progress. “I studied and planned for two years before I retired,” Mike told me at a large family gathering. In his mid-70s, his excitement was evident as he recounted his active lifestyle. At home, his schedule includes participation in our state’s Master Gardener program and regular trips to the gym. Abroad, he organizes groups to walk the Camino de Santiago in Spain. I had a yen for a fulfilling retirement like Mike’s. My roster of reasons to jump out of bed each morning might have a different twist or two, but I wanted the same zest for living. My unique recipe for retirement happiness still needed time to cook, however. Oh, I knew I had plenty to keep my hands active. Even so, I wasn’t yet convinced I could substitute the mental stimulation provided by my patients and colleagues. According to a decades-long study from Harvard University, some folks discover that work supplies satisfaction not found elsewhere. I have a nagging suspicion I’m one of those restless souls, and I dreaded the thought of finding myself adrift, with little sense of purpose beyond indulging my own selfish needs. And let’s face it: I still get a thrill from watching my money grow. Earning an income delays the need to plunge my fingers into my pile of savings to pay the grocery bill. All told, I figured my best move was to stay put until a clear exit appeared. Unexpected storm. Meanwhile, my employer was moving in its own interest. In December, I learned that with the new year came new management for our outpatient physical therapy clinics. Our hospital system opted to outsource operations with the hope of securing guaranteed revenue. After the revamping, my boss would keep some new iteration of her job, but the outpatient clinics would report to the new administration, rather than her. The news was a blow to my ordered life. No longer was I sailing through calm waters toward the sunset of my choosing. Instead, I faced the probability of turbulence as our clinic transitioned to the new system. And we were already struggling to implement a comprehensive computer software replacement that would take many more months to fashion into a serviceable tool. I sensed danger ahead. Or, at the very least, a year or two of starts, sputters and stops before the clinic machine was humming again. I decided to bail, and on February 18th clocked my last day with my former employer, four days after Sharon. It turns out my radar was right. The details are dirty, but the gist is the transition is stalled and leadership of the affected clinics in limbo. New direction. On the face of the situation, it seems my “clear exit” did indeed appear, and that I acted with autonomy to choose the course of my life. After all, I had exercised the option of jumping out of a job headed south and into the retirement I had dreamed of for decades. On top of that, I landed in a new, part-time job with Miranda, an old friend. Back in December, Miranda called to ask if I could help cover patients in her clinic while she was out on extended leave. I wasn’t seeking more work, but she needed help. I couldn’t refuse. So, starting with one half-day per week in January, I’m now up to two or three half-days. Miranda’s made it clear I’m welcome to work more, but I’m satisfied for now. And the atmosphere in the clinic is great. It’s staffed by easy-going folks who are serious about patient care. Still, it’s hard to shake the sense I’ve been scrambling to right myself after getting shoved off balance. During the last few weeks with my former employer, I had the feeling I was getting pushed out of a satisfying job before I was ready to leave. My usual optimism suffered, as did my sleep habits and typical interests, like gardening and writing. Why? Perhaps the answer is the sudden, unplanned departure from my job. Research indicates forced retirement can lead to negative feelings about health and to depression. I have to admit I found my new temperament described in the pages of a research paper. Other studies on job loss, found here, here and here, examine and compare the emotions experienced by losing a job to that of other types of loss, such as grief after the death of a loved one. Considered in this light, the Kubler-Ross model of the five stages of grief might help someone--like me–understand and deal with the psychological aftermath of job loss. Peering ahead. Back to my reality, I know I’m painting a grim picture of a life that’s actually very blessed. Others have experienced far worse with fewer complaints. My perceived suffering pales beside that of a person who’s lost a loved one, or an income needed for survival. Also, as I get used to the shift in my lifestyle, I’m beginning to find my groove again. Last spring, I started the season thinking I was at life’s helm, confident I could steer in any direction and choose my pace. I was thankful, but a little smug as I laid plans for my vision of retirement. One year later, I’m still planning and still thankful–but a bit more humble. Ed is a semi-retired physical therapist who lives and works in a small community near Atlanta. When he's not spending time with his church, family or friends, you may find him tending his garden and wondering if he will ever fully retire. Check out Ed’s earlier articles.

What Bangladesh Taught Me About Enough

Andrew Clements | Apr 16, 2026

"Thank you Sundar for sharing your experiences and your encouragement to keep writing. I appreciate it."

- Andrew Clements

Navigating a Turbulent Career

ArticleRichard Connor | Apr 18, 2026

A RECENT article by Adam Grossman relayed an interesting story of the 2015 merger of Kraft and Heinz. One of the aspects that made this merger unique was the involvement of Warren Buffet. Adam’s story is a cautionary tale for investors – research shows that, more often than not, the hoped-for corporate synergies and growth are elusive. The story provides more evidence for the benefits of indexing to investors. There is, however, another side to this story that is very important to an individual’s personal financial life. In addition to being investors, most of us are, or were, employees of a corporation. What if you are an employee of a company that is acquiring another company, being acquired by another company, or part of a merger? How do you navigate the challenges of this significant career event? In late November 1985, I interviewed with RCA’s Astro Space division in East Windsor, NJ. Several weeks later I interviewed with GE Aerospace in King of Prussia, PA. In between those 2 interviews it was announced that GE was acquiring RCA. I received an offer for a position in the thermal engineering group of both companies. The GE offer was for $32,000, $4,000 more than the RCA offer. The GE plant was about 8 miles from our home; the RCA plant was 62 miles from our home. I accepted the GE offer. When I called the RCA manager to tell him my decision, he was professional and understanding. He remarked that “who knows, we may end up working together and you got a better deal out of it”. Four months later that RCA manager became the senior manager of the merged thermal engineering organization – my new boss’s boss. Seven years later my division was sold to Martin Marietta, whose space operations were based in Denver, CO. Two years later Martin Marietta merged with Lockheed, in Sunnyvale, CA, to form Lockheed Martin. Later that year it was announced that the company was closing its 2 east coast plants and moving the work to Sunnyvale and Denver. Over the 31 years starting in 1986, I was part of numerous acquisitions, mergers, two plant shut-downs, and being sold to a private equity company. Somehow, I managed to stay employed, and grow my career. I wasn’t special – hundreds of colleagues trod the same path. When I look back I can identify some of the attributes that helped me navigate a turbulent career. Build your Reputation: Be someone that people want to hire. If you move up, be someone that people want to work for. My first senior manager position came about because the hiring team remembered me from 4 years previous Maintain Flexibility: Are you willing to travel or relocate? Would you take a lateral position, or even a step down, if it meant keeping a job? During my career I traveled extensively, commuted 62 miles for four years, and took new positions that challenged me and my family. Focus on your Skills: What are the skills and behaviors that are valued by your company, and differentiate successful employees? These include technical, leadership, managerial, and interpersonal skills. My first GE manager provided a sound technical base, but also taught me just as much about work ethic, and professionalism. Focus on the Culture: Combing organizations means combining cultures, just as much as products or processes. This may require you to be open to a different way of doing things. It requires a willingness to learn and grow. It will also likely require some diplomacy skills. Change is hard for employees, and nobody enjoys being told their processes or products are inferior. When we merged with RCA, we found there was a significant difference in the way that managers and senior technical leaders challenged their employees in public forums, in front of customers. GE preferred to work out technical differences and approaches in-house, and present a united front to customers. This took some time to resolve into a shared approach. Focus on the People: When my first GE manager retired, we held a group luncheon. He was universally liked and respected. Someone described him as the best “BTU chaser” he’d ever seen, which was high praise. He gave a short speech at his retirement, where he discussed the exciting space programs he had supported. He ended that the thing that made his career special wasn’t the projects and technology, it was the people. I was also fortunate to work on some exciting, ground-breaking projects. It wasn’t always easy, and the path certainly wasn’t straight. Looking back, it is the people I think of most, and I miss the most. Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.

Staying Rational

ArticleAdam M. Grossman | Apr 18, 2026

Something to Think About

David Lancaster | Mar 24, 2026

- Randy Dobkin

Penny Wise, Pound Foolish

DAN SMITH | Apr 12, 2026

"I always liked Luxman gear. Almost bought their hybrid integrated amplifier at one point years ago. They still make some very cool gear. Happy listening!"

- John Rocke

Fixing Social Security once and for all

R Quinn | Apr 15, 2026

"I’ve read that is so! 😂"

- David Lancaster

The condo, HOA, senior citizen conundrum

R Quinn | Apr 19, 2026

- R Quinn

The IRA Decision That Affects Your Kids

David Lancaster | Apr 17, 2026

"Children yes"

- R Quinn

A Life You Build

Jeff Peck | Apr 19, 2026

- Doug C

One Good Call?

Mark Crothers | Apr 14, 2026

- Mark Crothers

What happens to Medicare Supplement coverage when moving to a different state?

Carl C Trovall | Mar 15, 2026

- R Mancuso

Manifesto

Apr 19, 2026

NO. 59: MOST FOLKS should avoid alternative investments. Yes, they promise returns uncorrelated with the stock market and gains when shares are tumbling. But isn’t that why we own bonds?

humans

Apr 19, 2026

NO. 64: WE MAY feel stuck—but often others can point the way forward. We’ve all struggled with seemingly intractable problems, mulling them over and over, trying to figure out the answer. But sometimes, the solution isn’t to think harder. Instead, it’s to ask others, who will have a different perspective—and may suggest solutions that hadn’t occurred to us.

Truths

Apr 19, 2026

NO. 21: WE’RE HARDWIRED to search for patterns. We might convince ourselves that markets are sure to rise or fall, that individual stocks will soar or sink, or that certain mutual fund managers are destined to be market beaters. This can lead us to make large, costly investment bets—and yet often we’re seeing things that simply aren’t there.

act

Apr 18, 2026

CHECK YOUR FUND expenses. If you own index funds, aim for weighted average annual expenses below 0.15%. If you own active funds, you’ll pay more—but allocate enough to index funds to push your portfolio average below 0.4%. By holding down costs, you’ll keep more of what you make, plus low-cost funds typically beat high-cost competitors.

Money Guide

Manifesto

Apr 19, 2026

NO. 59: MOST FOLKS should avoid alternative investments. Yes, they promise returns uncorrelated with the stock market and gains when shares are tumbling. But isn’t that why we own bonds?

Spotlight: Retirement

Roth Hidden Benefits

Bogdan Sheremeta | Oct 25, 2025

WHEN MOST PEOPLE think of Roth IRAs or Roth 401(k)s, they just think “tax-free withdrawals.” But that’s only part of the story.
Roth accounts can protect you from financial traps that catch many retirees off guard. Here are five key advantages to keep in mind:

1. Tax Rate Protection
One thing we can’t control is future tax rates.
Did you know that in the 1980s, the highest federal tax rate was 50%?

Dream Retirement – Is it fading away?

smr1082 | Oct 31, 2024

Jamie Dimon says, “The American dream is disappearing—and half the public no longer believes in it”.

Soaring costs of housing, child care, education, and health care are making it harder than ever for the middle class to achieve their dream. Pew research study found that while 64% of upper-income Americans say the American dream still exists, 39% of lower-income Americans say the same – a gap of 25 percentage points. About two-thirds of adults ages 65 and older (68%) say the American dream is still achievable,

Going too far with FIRE: The downside of being in the financial advice business – RDQ

R Quinn | May 30, 2025

I always thought the glowing stories of FIRE folks were a bit dodgy. Much of the time they aren’t even retired in the traditional sense. Sometimes they go too far sharing their acquired wisdom for cash.
I followed one blogger for several years. She shared her frugal ways, extreme in my view like buying her two-year olds shoes in a second hand thrift shop. She wrote a book, gained a lot of publicity, was featured in news articles and gave advice.

Funded Ratio vs Monte Carlo – Different Routes to Get to the Same Destination (or not)?

Bill Minter | May 18, 2025

I find the “liability matching” concept as outlined in Dr. Wad Pfau’s “Funded Ratio” helpful based on our household-specific inputs I provide. This analysis, while based on different inputs than those of Monte Carlo simulation, has given me another way to project whether we expect to have adequate financial resources for the remainder of mine and my spouse’s life.
I have used Mike Piper’s simplified funded ratio example spreadsheet to “run the numbers” using the following inputs for each year of our expected life spans:

1) Select a conservative,

Pop’s Parallel Path

Ken Cutler | Feb 5, 2025

In honor of my late father’s birthday today, I’ve decided to post an article I wrote many months ago but never released to Jonathan for publication.
MY FATHER’S FINANCES has some parallels to my own. Like me, he saved his end of year paystubs. Using an inflation calculator, I was able to compare his earnings to mine. He was an accountant who rose to the highest level of his company, while I was an engineer who topped off at senior staff level,

A new glitch in retirement planning to consider

R Quinn | Dec 24, 2024

An article in today’s Wall Street Journal illustrates a problem I never considered.
Many retirees who paid off their mortgage as part of retirement planning are now finding that increases in property taxes and home property insurance are so significant those payments now exceed the former mortgage payment thus putting some retirees in a financial bind.
It seems applying a standard inflation factor to future costs for those items may not be accurate.

Hope is Not a Plan

David Powell | Mar 9, 2025

The risk of sensitive personal data leaks is higher than ever, fueling identity theft, phishing attacks, financial account hijacks, and scams. It’s also a time when nation-backed hackers skillfully target critical infrastructure like mobile networks. A major hack revealed last year led the FBI to advise trusting only end-to-end encrypted communications. No security is foolproof against a determined attacker, but you can make yourself a harder target. Nancy and I have so far avoided major cybercrimes but have faced fraud attempts. One stemmed from a non-profit’s security breach that exposed our personal data from background checks. Freezing our credit records avoided a lot of misery. In the past, many HumbleDollar readers could just avoid the online world and hope for the best. Today, hope is not a plan. Avoiding the online world may now place you at more risk. Failing to create secure online accounts – like with the IRS or Social Security – only makes it easier for criminals to impersonate you because so much more personal data has become available on the dark web. The National Public Data breach last year was allegedly large and damaging. Troy Hunt’s excellent site will show if you were likely affected. The IRS, for instance, has a backlog of 470,000 open fraud cases from fake tax returns for fraudulent refunds. Who suffers in situations like this? You do, when you try to file your legitimate tax return after a scammer used your identity, whether you file with paper or electronically. This kind of cybercrime is easier to avoid if you’ve already created an IRS.gov account and secured it well. Ready to boost your security? Follow this Sweet 16 checklist – an hour a week, and in a month or two, you’ll be far better protected. If tech isn’t your strength, ask a…

Retirement Income Goals: Bottom Up Beats Top-Down

David Powell | Oct 9, 2025

When I was younger, I pictured retirement as a life much like our working years, minus child-raising and commuting costs, but with more travel and higher medical bills. That vision was easy. The harder part was translating it into a retirement income goal. This is where confusion sets in, and why discussions about “income replacement ratios” often go in circles. People’s situations differ too widely for one-size-fits-all advice. Some work jobs with steady income, others have income which varies a lot each year. Some rent, some start retirement with a mortgage, some own homes outright (researchers factor “imputed rent” into replacement ratios). Some are big savers, others scrape by. Single vs. partnered, median vs. high income, pension vs. no pension—all change the math. Even defining “base pay” is slippery. Should steady bonuses count? What about quarterly stock compensation that’s taxed like regular income? And which years of income do you use—your last, your peak five, or an average? Add to that some semantic confusion over whether base pay means gross or net of taxes, and you see the problem. In fact, taxes complicate things further: effective tax rates are often lower in retirement, especially with Roth accounts, another way the replacement-rate metric might lead you astray. After wrestling with all this, and gaining a few years of retirement hindsight, I’ve concluded the replacement-rate metric is more misleading than useful, unless your finances are unusually simple. A better planning approach is bottom-up: go through a year of your actual expenses with Quicken, Mint, Excel, or your bank's web site; adjust for what will rise or fall in retirement; be clear about fixed vs. discretionary; add a cushion for surprises. That spending target gives you a far more practical goal than chasing an abstract ratio.

Beat the Cheats

David Powell | Jul 26, 2019

U.S. CREDIT CARD fraud topped $8 billion in 2015 and should surpass $12 billion next year. You can reduce your exposure to such incidents with a few simple steps. Why bother? Won’t the bank pick up the tab when unauthorized purchases show up on your account? Generally, yes, thanks to the Fair Credit Billing Act and the Electronic Fund Transfer Act. But there may be limitations on that protection, based on how quickly you notify your bank when you discover unauthorized charges. There are two well-established ways your credit card information can be stolen and used. The most likely scenario is when a hacker exploits weak security measures at a merchant or payment processing company to download big lists of detailed credit card and billing contact info. These tend to be big, disruptive incidents which cost the responsible party millions of dollars and create a lot of hassle for you and others affected. The Heartland Payment Systems hack in 2009 exposed 160 million cards, according to the indictment of those charged. More such incidents have been reported, including at TJX Cos. (in 2006, 94 million cards), Home Depot (in 2014, 56 million cards) and Target (in 2013, 40 million cards). The next most common scenario is when an attacker gains access to a merchant’s payment terminal or point-of-sale system at a gas station, restaurant or store, and installs malware or modifies it with a skimmer or shimmer device, to steal information from every card used there. Skimmers exploit the oldest tech on your credit card: the old-school magnetic stripe that holds all of your card data in an open, unencrypted form. Michaels crafts stores in 20 states reportedly experienced such a crime in 2011. Skimmer use on ATMs has risen, too. When these incidents are discovered, banks proactively issue new cards to all affected customers.…

Money for Later

David Powell | Oct 26, 2020

IF A SALESPERSON had tried to get me to sink my hard-earned money into an investment that’s illiquid or issued by an insurance company, I would have shut down in a New York minute—until now. My spouse and I recently became owners of a deferred income annuity (DIA), with plans to put perhaps 15% of our savings into these products. Also known as longevity insurance, a DIA involves plunking down money today in return for regular monthly income starting at a future date. What convinced us to buy DIAs? Income hedge. We want income we can’t outlive. The DIAs will provide us with a safety net if the withdrawals from our 401(k), IRA and taxable savings fall short of what we expect or if our Social Security benefits get cut. Shrinking yields. Treasury bonds—both the conventional type and those that are indexed to inflation—are mainstay riskless assets in our portfolio. But today, they yield less than inflation. Yields on municipal and higher-quality corporate bonds are also disappointing, especially when you factor in the added risk involved. By contrast, with a DIA, we can collect handsome income, in part because the insurance company will be effectively returning part of our initial investment to us each month. Longevity risk. Some of us will live much longer than our birth year cohort. It’s impossible to know how life will go, but my spouse and I are keen to stay independent to the end. Simplicity. Our plan is to collect income from annuities and Social Security, while also taking required minimum distributions from our retirement accounts. Put these three together, and we have a simple plan for turning our savings into retirement income. That simplicity will be useful as we age. My first concern with buying an annuity was the usual—that our chosen insurer…

Unhealthy Inflation Expectations?

David Powell | Sep 22, 2025

The rule of 72 is a convenient mental math tool to quickly estimate the future value of today's investments, extrapolated some years forward. It's quite handy, as Jonathan noted in the Math section of HumbleDollar's Guide. Expecting a 7.2% return from your stock funds? Your holdings should double in value over 10 years (72 divided by 7.2). Of course, the rule assumes a magical world where your returns are always the same and markets are perfectly linear (ha!), but it's still handy for quick guesswork. Its use isn't limited to envisioning potential growth of investments. It can also help imagine the outcome on our lives from a shrinking process which melts the purchasing power of money like an ice cube on a summer day: inflation. According to the 2025 Global Investment Returns Yearbook, by Dimson, Marsh, and Stanton (published now by UBS), the U.S.'s average annual rate of inflation over the past 125 years has been 2.9% (geometric mean), or 3.0% based on an arithmetic mean. Using that latter round number, the rule of 72 suggests our purchasing power could be cut in half in 24 years (72 divided by 3) if our income doesn't keep up with inflation. The CPI inflation indexes were created using a basket of items which may or may not reflect how each of us spends our money. But there is one item which all of us need: healthcare. Adam Grossman posted a piece in 2021 ("Their Loss, Your Gain") about LTC insurance; in that, he linked to a FRED blog post which showed how healthcare costs since 1948 grew at an average rate about 1.5 percentage points higher than the general CPI rate. Envisioning that trend with the Rule of 72, we would spend twice as much on healthcare costs every 16 years (72…

Losing It All

David Powell | Jul 5, 2021

OVER A PRODUCTIVE 30-year career that ended in 1950, Willie Sutton robbed as many as 100 banks for gains worth $40 million today—without ever firing a shot. That sort of bank robbery is rare now and, when it happens, customers don’t lose a dime, thanks to FDIC insurance. Today, Sutton—the Babe Ruth of robbers—wouldn’t waste time knocking over banks. Trillions of dollars held in millions of internet-accessible retirement and brokerage accounts are much softer and more lucrative targets. He’d use a cyber-heist known as an account takeover. For that, our modern Willie Sutton would access your account with your weak and often reused password (the one in that massive leak) or by stealing your password when you click on links in his spear phishing outreach. In a typical takeover, Sutton would log into your account, link a bank account he controls to yours and then start transferring cash out. All while sipping espresso. But that won’t happen to your online retirement accounts, right? In a recent incident, elderly grandparents in Illinois had $40,000 wired out of their hijacked Fidelity Investments account. They discovered the theft long after the money had vanished by wire transfer into a bank account that the attacker had linked to theirs. The money was then transferred again and lost forever. It seems investors don’t need to dump their retirement savings into cryptocurrency or lottery tickets to lose it all. Instead, just sign up for online access to your investment accounts. Was the couple reimbursed? At first, the answer was “no” because they reported the incident long after the deadline in their account agreement. On top of that, they hadn’t enabled certain security features that would have made it harder to change account contact information or to add additional linked bank accounts to their investment account. Who bears the cost of…

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