Want to prepare yourself for midlife misery? Save early and often, so you later have the financial breathing room to change careers.
AT A DINNER THAT I attended recently, someone pointed out that a high percentage of us were newly retired. That included me, as well as a couple who were just reaching age 60. After the dinner, the wife of the couple told me she was offended by being called retired. She’s writing fiction every day and her husband does some consulting work.
The work they’re doing pays, but it’s not by itself enough for them to live their comfortable,
READERS LOVE LISTS. For proof, look no further than our (ahem) list of January’s 10 most popular articles. Seven of those articles took the form of lists, and their readership helped propel HumbleDollar to its second-best month ever for pageviews.
“I suggest skipping the step of building up an emergency fund—in cash, that is,” writes Chuck Wilson. “I’m willing to bet that only a small minority truly use it for emergencies only.”
I ONLY WOKE UP TO the notion of financial independence at age 50. I’d been asleep at the financial wheel and almost crashed. It had been a 20-year Rip Van Winkle slumber. I realized suddenly that I had an irresponsible, unconscious and unintentional money mindset.
I could offer plenty of excuses, but they don’t make me feel better. Shame, grief and disbelief overcame me initially. At times, regret still haunts me. We had lost so much time without taking care of our future.
NOW THAT I’M RETIRED—and living in a warm desert climate—walking has become one of my favorite activities. Most days, I log between six and eight miles trekking around our neighborhood. I usually listen to a podcast during my journey, but it just serves as background noise. My real focus is contemplating dog training strategies or the subject matter of my future HumbleDollar posts.
Some days, I play the “what if” game.
I’LL TURN AGE 72 this year. Since I’ve retired, my wife and I have had some wonderful experiences. Our travel adventures are full of great memories that I’ll cherish for the rest of my life.
Still, as great as those adventures have been, they aren’t nearly as important to our happiness as living a healthy, pain-free life without physical or mental limitations. That’s something that’s hard to beat. It gives you a different outlook.
JUST LIKE THAT, growth stocks are back in vogue. Vanguard Growth ETF (symbol: VUG) has outpaced Vanguard Value ETF (VTV) by more than nine percentage points over the past three weeks. That gap in favor of “risk-on,” meaning mainly technology shares, is the biggest since those two exchange-traded funds were created some 19 years ago.
What gives? Weren’t all the strategists proclaiming a new era of value investing? It still seems that way based on what you hear on financial TV and read in investment magazines.
ONE WINTER DAY IN 2016, I jotted down a few comments about the financial markets and emailed them to a group of clients. I received a few responses—some of them positive—so I did the same thing the following week, and I’ve continued that practice every week since.
For better or worse, when it comes to investment markets, there’s always something new to discuss. But it can also be helpful to pause and revisit key investment principles from time to time.
I LIKE CHALLENGING myself to do hard things. I guess it’s just the way I’m wired.
Recently, I started thinking about the hardest things I’ve done. Convincing my wife to marry me was hard. She was a tough sell. But eventually I wore her down and got the deal done—one of my best deals, by the way.
Attempting Ironman Cozumel at age 68 was hard and, even though I failed, it’s one of my most cherished memories.
WE LIKE TO ESCAPE the Northeast’s cold each winter, so we just spent 10 days in Sarasota, Florida. Like many others when they’re on vacation, we found our noses pressed against the windows of real-estate offices, perusing the listings and musing about whether we’d want to live there.
Fantasizing about the future is fun and free, but it can also be dangerous. It’s how folks end up buying timeshares and second homes during wonderfully relaxing vacations.
READING ABOUT FINANCE can be a little dry at times, so I occasionally turn to TV for relief, relaxation and a little entertainment. What am I drawn to? More than anything, it hinges on a person’s voice.
For instance, I like listening to Neil Cavuto on Fox Business Network. His interviews with business leaders are usually interesting and his demeanor holds my attention. He comes across as earnest.
My parents were transplanted New Englanders,
NO. 71: IF YOU’RE FIVE years from spending your investment dollars, look to get that money out of stocks, because stocks have lost money over some five-year stretches. Indeed, to invest in stocks, you probably need at least 10 years—five years to make money and a five-year window to ease out of the market, preferably selling when stocks are near all-time highs.
CALCULATE YOUR required nest egg. Once retired, you’ll likely have Social Security and perhaps a traditional employer pension. How much additional income will you need for a comfortable retirement? This money will need to come from savings. Take your desired portfolio income, multiply by 25—and you’ll have an estimate for how big a nest egg you need.
BEHAVIORAL FINANCE. Economists used to assume that folks almost always behaved rationally and—to the extent they didn’t—it wasn’t significant. Behavioral finance has questioned these assumptions, pointing out that standard economic models often fail because they don’t account for overconfidence, loss aversion and other behavioral issues.
NO. 41: VERY FEW of us need life insurance for our entire life. That’s why term insurance makes sense and cash-value policies are usually a mistake—despite what insurance agents say.
EXPERTS OFTEN suggest putting bonds or bond funds in retirement accounts. I think this is kind of dumb—or, at the very least, it places the focus on the wrong thing.
It’s always a good idea to consider taxes. But my experience is that many people place too much emphasis on taxes, often to their own detriment. Municipal bonds are a great example of this: Many people who purchase them are in lower tax brackets,
I QUIT MY JOB last year and then found I needed medical care. My old employer was required to offer me health insurance—but it was expensive. Luckily, I found a loophole that allowed me to obtain the coverage I wanted at a bargain price. I got the treatment I needed, and saved almost $1,000.
First, a bit of background. More than half of the U.S. adult population gets health insurance through their employer. Indeed,
I’M A FAN OF SLANG and newly coined words. Think of all the names for money we’ve had over the years, like cheese, clams and cabbage. New words catch on not only because they allow a new generation to put their stamp on the world, but also the words reflect changing attitudes.
That brings me to “stonks,” the name many millennials use for stocks—and one that reflects a different view of investing. No one’s sure where the word originated.
WE HAVE MUCH to learn about the coronavirus, but we already know a great deal about financial risk—and, indeed, recent weeks have offered a brutal refresher course. What insights can we draw from investors’ reaction to this awful epidemic? Here are eight timeless lessons:
1. The greatest risks are those we never see coming.
Some risks are predictable, such as stock market volatility. Others are less probable but widely known, like the possibility of a recession.
OUR STANDARD of living has more than doubled over the past four decades. Has all that extra money bought happiness? Not a chance. In 1972, 30% of Americans described themselves as “very happy.” As of 2016, we’re still at 30%, according to the latest General Social Survey.
Over the 44 years, there was a slight uptick in those describing themselves as “pretty happy” and a tiny decline in those who said they were “not too happy,”
NO. 41: VERY FEW of us need life insurance for our entire life. That’s why term insurance makes sense and cash-value policies are usually a mistake—despite what insurance agents say.
CALCULATE YOUR required nest egg. Once retired, you’ll likely have Social Security and perhaps a traditional employer pension. How much additional income will you need for a comfortable retirement? This money will need to come from savings. Take your desired portfolio income, multiply by 25—and you’ll have an estimate for how big a nest egg you need.
NO. 71: IF YOU’RE FIVE years from spending your investment dollars, look to get that money out of stocks, because stocks have lost money over some five-year stretches. Indeed, to invest in stocks, you probably need at least 10 years—five years to make money and a five-year window to ease out of the market, preferably selling when stocks are near all-time highs.
BEHAVIORAL FINANCE. Economists used to assume that folks almost always behaved rationally and—to the extent they didn’t—it wasn’t significant. Behavioral finance has questioned these assumptions, pointing out that standard economic models often fail because they don’t account for overconfidence, loss aversion and other behavioral issues.
EXPERTS OFTEN suggest putting bonds or bond funds in retirement accounts. I think this is kind of dumb—or, at the very least, it places the focus on the wrong thing.
It’s always a good idea to consider taxes. But my experience is that many people place too much emphasis on taxes, often to their own detriment. Municipal bonds are a great example of this: Many people who purchase them are in lower tax brackets,
I QUIT MY JOB last year and then found I needed medical care. My old employer was required to offer me health insurance—but it was expensive. Luckily, I found a loophole that allowed me to obtain the coverage I wanted at a bargain price. I got the treatment I needed, and saved almost $1,000.
First, a bit of background. More than half of the U.S. adult population gets health insurance through their employer. Indeed,
I’M A FAN OF SLANG and newly coined words. Think of all the names for money we’ve had over the years, like cheese, clams and cabbage. New words catch on not only because they allow a new generation to put their stamp on the world, but also the words reflect changing attitudes.
That brings me to “stonks,” the name many millennials use for stocks—and one that reflects a different view of investing. No one’s sure where the word originated.
WE HAVE MUCH to learn about the coronavirus, but we already know a great deal about financial risk—and, indeed, recent weeks have offered a brutal refresher course. What insights can we draw from investors’ reaction to this awful epidemic? Here are eight timeless lessons:
1. The greatest risks are those we never see coming.
Some risks are predictable, such as stock market volatility. Others are less probable but widely known, like the possibility of a recession.
OUR STANDARD of living has more than doubled over the past four decades. Has all that extra money bought happiness? Not a chance. In 1972, 30% of Americans described themselves as “very happy.” As of 2016, we’re still at 30%, according to the latest General Social Survey.
Over the 44 years, there was a slight uptick in those describing themselves as “pretty happy” and a tiny decline in those who said they were “not too happy,”
Should retirees use a 4% portfolio withdrawal rate?
What are your top financial worries?
If you couldn’t buy index funds, how would you invest?