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Basements are badly curated museums dedicated to the purchases we regret, but can’t yet bring ourselves to trash.

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Blood Money

"If a future NUA has limited value to you then if you are concerned about the concentration from owning a high percentage of XOM I would hope you have the option to diversify within your 401(k). Before retirement I previously had some 1040 tax clients whose 401(k) plans/funds had lower expense ratios than what is available at Vanguard so leaving their funds in their 401(k) made more sense than rolling to a 401(k)."
- William Perry
Read more »

Traditional or Roth

THE CHOICE BETWEEN a traditional retirement account or a Roth is a frequent topic on HumbleDollar. The choice is generally framed as a choice between paying taxes up front (a Roth), or deferring taxes until withdrawal (traditional). I thought it would be interesting to evaluate a real-life example of how this choice might work out. In December of 2016 my wife and I had an opportunity to each open a Roth IRA. My wife took a partial sabbatical that year, and that, combined with maxing out our 401k accounts, gave us a chance to each open a $4,500 Roth IRA. The maximum allowable contribution that year was $6,500 for those 50 and over. Up until then we had assumed that our marginal tax bracket would likely be lower in retirement, and focused on contributing to our employer’s traditional 401k plans. Despite that, we decided to move forward with opening a Roth IRA. I thought it would give us some tax diversity, and the opportunity to do Roth conversions when, and if, it made sense in the future.  In December of 2016 we opened Roth IRAs at Vanguard and invested the $4,500 in their S&P 500 Index Fund. Those initial funds have been invested for almost 10 years. Over that decade we have added some additional funds, and have done a few conversions. I recently did a quick analysis to see how my Roth experience would have compared to investing in a traditional IRA.   In 2016, our marginal tax bracket was 28%.  To contribute the $4,500 required $6,250 of pre-tax income. Due to some financial engineering over the last year, including selling our second home in late 2025, I expect our 2026 marginal tax bracket to stay within the 12% bracket. I’ve been looking at this closely because I’m considering doing a Roth conversion later this year. The table below shows the comparison between the Roth performance, and what a traditional IRA would have produced. The annual rate of return was determined using Nick Maggiulli’s S&P 500 Historical Return Calculator. Roth vs Traditional The table shows that the Traditional IRA would have been the better choice, producing about $3,500 more in available funds, or about 22% more. This demonstrates that the primary driver in choosing between a Roth and a traditional qualified account is a consideration of the tax rates at the time of contribution and at the time of distribution. There have been a number of changes to the tax code in the last decade that have contributed to the result, but I certainly didn’t predict any of them.  If you guess wrong, you pay the price in a higher tax bill. In the example above, the extra $1,750 invested in the traditional account produced an additional $6,143.31 in earnings. The lower tax rate at the distribution of the traditional IRA results in the $3,500 in extra funds. Even though the Roth IRA had tax free earnings growth, the initial larger tax rate overcame that advantage, when compared to the traditional IRA.   Because of my pension and my wife’s social security benefit, 85% of her social security benefit is taxable income, so that is not a consideration in our tax calculation. I used Dinkytown’s 1040 Calculator to run a series of estimates of our 2026 tax return to assess if we want to execute a Roth Conversion this year. We are still 4 years from taking RMDs, and I will start my Social Security in a year when I turn 70. My current thinking is a conversion of about $40,000 will keep us in the 12% bracket. There would also be a small NJ state tax impact. My simple analysis reinforces what I’ve been taught. Roth contributions make the most sense when you think your current tax bracket is lower than when you expect to withdrawal the funds. There are secondary considerations, like no tax diversification, no RMDs, and uncertainty about future tax rates. If you intend to pass the funds to heirs, it might make sense to perform Roth conversions today at the 22% tax bracket if you intend to pass these accounts to heirs who may be in their peak earnings years. Not sure? I believe I recall several HumbleDollar contributors write something about splitting the difference?   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.
Read more »

Make the Attic Great Again

"I agree--it sounds like I would get along splendidly with your Christine. I will take a night at home with our dogs over...well...just about everything else. How do you like your 55+ community? We really like ours and are learning how much we appreciate having so many easily-accessible services. I also adore how much the folks here look after one another."
- kristinehayes2014
Read more »

What’s your Domicile?

"AD = Active Duty TX, FL, TN = three states without state income taxes Being on active duty Alaska = another state without a state income tax and also getting yearly income from the Permanent Fund Dividend"
- William Perry
Read more »

This would be a great posting on a web site with the name “HaughtyDollar.”

"Actually no decision to have a fourth child and never a backup plan. Of course, I never planned retirement either. I did take advantage of phased retirement though. If I had lost my job at 50, life would have been very different. Actually, I came within two months of that happening at age 62. Not sure of the purpose of your question. No one disputes there are exceptional situations in any situation. That still doesn’t change the fact most people who get into financial binds such as credit card debt could have avoided it."
- R Quinn
Read more »

The Value of Scratch Cooking in Retirement

"Tim, Regarding your first sentence: My wife gets frustrated when we go out and the quality of the food is inferior to her cooking which happens quite often. She is a great chef, and I have the physique as proof."
- DavidHLancaster
Read more »

Americans and their credit cards

"53% of Americans is greater than 46% of cardholders since all Americans don’t have credit cards so both those numbers can’t be correct."
- R Quinn
Read more »

Percentage that “age in place”

"Lots of important insights here. We’re still committed to aging in place, but being 83 have seen what our friends are encountering. I totally agree about the importance of having family nearby. That seems to be critical. Also, I think you’re right about memory care facilities. I really wonder about those with many residents in independent living and a handful in memory care. I know of one non profit CCRC where the independent living folks had the manager fired because he was spending on Memory Care and shortchanging their amenities. The prices you mention are very typical of those where I live."
- Marilyn Lavin
Read more »

Long Term Care

"Hi Jen. As someone who has been on the operations side of CCAH programs for over a decade I wanted to pop in here to make you aware that there are about 6 programs across the commonwealth of PA. So, depending on where you live you have options! (yay) The website Home - My House. My Home. will give you great guidance as to where they are offered in PA and actually across the nation."
- Jen Egizi
Read more »

How do you prepare for the long term care cost as retiree?

"Any way we slice it care needs are expensive. Whether you go the traditional route and move into a CCRC, join a CCAH program or self-fund. The care is expensive. I think it comes down to where do you want to be as you age?"
- Jen Egizi
Read more »

Bad Maths, Good Fire.

"David, I'm with you on the peat fire. I still burn peat now and then in winter — messy fuel, but that smell is hard to beat. These days it's surprisingly hard to come by in Ireland, thanks to legislation protecting the peat bogs."
- Mark Crothers
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The Intentional Spendthrift

"The train from Milan to Zurich is a beautiful, scenic journey — though my first time was a big disappointment. I hadn't realised there were two different routes, and I mistakenly booked the one that goes through the tunnel under the Alps. A few years later, I made sure to book the right one!"
- Mark Crothers
Read more »

Blood Money

"If a future NUA has limited value to you then if you are concerned about the concentration from owning a high percentage of XOM I would hope you have the option to diversify within your 401(k). Before retirement I previously had some 1040 tax clients whose 401(k) plans/funds had lower expense ratios than what is available at Vanguard so leaving their funds in their 401(k) made more sense than rolling to a 401(k)."
- William Perry
Read more »

Traditional or Roth

THE CHOICE BETWEEN a traditional retirement account or a Roth is a frequent topic on HumbleDollar. The choice is generally framed as a choice between paying taxes up front (a Roth), or deferring taxes until withdrawal (traditional). I thought it would be interesting to evaluate a real-life example of how this choice might work out. In December of 2016 my wife and I had an opportunity to each open a Roth IRA. My wife took a partial sabbatical that year, and that, combined with maxing out our 401k accounts, gave us a chance to each open a $4,500 Roth IRA. The maximum allowable contribution that year was $6,500 for those 50 and over. Up until then we had assumed that our marginal tax bracket would likely be lower in retirement, and focused on contributing to our employer’s traditional 401k plans. Despite that, we decided to move forward with opening a Roth IRA. I thought it would give us some tax diversity, and the opportunity to do Roth conversions when, and if, it made sense in the future.  In December of 2016 we opened Roth IRAs at Vanguard and invested the $4,500 in their S&P 500 Index Fund. Those initial funds have been invested for almost 10 years. Over that decade we have added some additional funds, and have done a few conversions. I recently did a quick analysis to see how my Roth experience would have compared to investing in a traditional IRA.   In 2016, our marginal tax bracket was 28%.  To contribute the $4,500 required $6,250 of pre-tax income. Due to some financial engineering over the last year, including selling our second home in late 2025, I expect our 2026 marginal tax bracket to stay within the 12% bracket. I’ve been looking at this closely because I’m considering doing a Roth conversion later this year. The table below shows the comparison between the Roth performance, and what a traditional IRA would have produced. The annual rate of return was determined using Nick Maggiulli’s S&P 500 Historical Return Calculator. Roth vs Traditional The table shows that the Traditional IRA would have been the better choice, producing about $3,500 more in available funds, or about 22% more. This demonstrates that the primary driver in choosing between a Roth and a traditional qualified account is a consideration of the tax rates at the time of contribution and at the time of distribution. There have been a number of changes to the tax code in the last decade that have contributed to the result, but I certainly didn’t predict any of them.  If you guess wrong, you pay the price in a higher tax bill. In the example above, the extra $1,750 invested in the traditional account produced an additional $6,143.31 in earnings. The lower tax rate at the distribution of the traditional IRA results in the $3,500 in extra funds. Even though the Roth IRA had tax free earnings growth, the initial larger tax rate overcame that advantage, when compared to the traditional IRA.   Because of my pension and my wife’s social security benefit, 85% of her social security benefit is taxable income, so that is not a consideration in our tax calculation. I used Dinkytown’s 1040 Calculator to run a series of estimates of our 2026 tax return to assess if we want to execute a Roth Conversion this year. We are still 4 years from taking RMDs, and I will start my Social Security in a year when I turn 70. My current thinking is a conversion of about $40,000 will keep us in the 12% bracket. There would also be a small NJ state tax impact. My simple analysis reinforces what I’ve been taught. Roth contributions make the most sense when you think your current tax bracket is lower than when you expect to withdrawal the funds. There are secondary considerations, like no tax diversification, no RMDs, and uncertainty about future tax rates. If you intend to pass the funds to heirs, it might make sense to perform Roth conversions today at the 22% tax bracket if you intend to pass these accounts to heirs who may be in their peak earnings years. Not sure? I believe I recall several HumbleDollar contributors write something about splitting the difference?   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.
Read more »

Make the Attic Great Again

"I agree--it sounds like I would get along splendidly with your Christine. I will take a night at home with our dogs over...well...just about everything else. How do you like your 55+ community? We really like ours and are learning how much we appreciate having so many easily-accessible services. I also adore how much the folks here look after one another."
- kristinehayes2014
Read more »

What’s your Domicile?

"AD = Active Duty TX, FL, TN = three states without state income taxes Being on active duty Alaska = another state without a state income tax and also getting yearly income from the Permanent Fund Dividend"
- William Perry
Read more »

This would be a great posting on a web site with the name “HaughtyDollar.”

"Actually no decision to have a fourth child and never a backup plan. Of course, I never planned retirement either. I did take advantage of phased retirement though. If I had lost my job at 50, life would have been very different. Actually, I came within two months of that happening at age 62. Not sure of the purpose of your question. No one disputes there are exceptional situations in any situation. That still doesn’t change the fact most people who get into financial binds such as credit card debt could have avoided it."
- R Quinn
Read more »

The Value of Scratch Cooking in Retirement

"Tim, Regarding your first sentence: My wife gets frustrated when we go out and the quality of the food is inferior to her cooking which happens quite often. She is a great chef, and I have the physique as proof."
- DavidHLancaster
Read more »

Americans and their credit cards

"53% of Americans is greater than 46% of cardholders since all Americans don’t have credit cards so both those numbers can’t be correct."
- R Quinn
Read more »

Percentage that “age in place”

"Lots of important insights here. We’re still committed to aging in place, but being 83 have seen what our friends are encountering. I totally agree about the importance of having family nearby. That seems to be critical. Also, I think you’re right about memory care facilities. I really wonder about those with many residents in independent living and a handful in memory care. I know of one non profit CCRC where the independent living folks had the manager fired because he was spending on Memory Care and shortchanging their amenities. The prices you mention are very typical of those where I live."
- Marilyn Lavin
Read more »

Long Term Care

"Hi Jen. As someone who has been on the operations side of CCAH programs for over a decade I wanted to pop in here to make you aware that there are about 6 programs across the commonwealth of PA. So, depending on where you live you have options! (yay) The website Home - My House. My Home. will give you great guidance as to where they are offered in PA and actually across the nation."
- Jen Egizi
Read more »

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Get Educated

Manifesto

NO. 24: OUR ONLY earthly immortality will be the memories of others. We should make sure those memories are good—by spending our wealth on special times with friends and family.

Truths

NO. 75: IF YOU BUY and hold individual stocks or stock index funds in a regular taxable account, you can defer taxes, just like you can in a retirement account. Any capital-gains tax bill is postponed until you sell. But for this tax deferral to be truly valuable, you need super-low portfolio turnover, holding investments for 10 or preferably 20 years.

humans

NO. 26: WE TEND to be overconfident—which isn’t a bad thing. Self-confident individuals tend to be happier, have a wider circle of friends and enjoy greater career success. Problem is, if we’re too confident in our financial abilities, there’s a risk we’ll rack up hefty investment costs and make big undiversified bets, both of which could come back to haunt us.

think

PASCAL’S WAGER. Belief in God is rational, argued Blaise Pascal. If you believe and God doesn’t exist, the price is modest: a less immoral life. But if you don’t believe and God does exist, the price is far higher: an eternity in hell. The lesson? When managing money, we should focus less on the odds of something happening and more on the consequences.

College-bound kids?

Manifesto

NO. 24: OUR ONLY earthly immortality will be the memories of others. We should make sure those memories are good—by spending our wealth on special times with friends and family.

Spotlight: Cars

Diminished Value

A CRUCIAL STEP WHEN buying a preowned car is to scrutinize its Carfax report. A single-owner car with a regular maintenance history and which was driven solely for personal use should be a safe bet, while an accident record gives most people pause. All things being equal, a car that was in an accident, however minor, ought to cost less than a similar one with a clean history.
Some bargain hunters don’t mind taking a chance on a car with an accident history as long as it drives well.

Read more »

Another HD Post About Cars

Here’s another car-themed Forum post. Last June I wrote a Humble Dollar article about vehicle ownership and longevity. I ended that article with a description of the most recent major repair required for my 2011 Subaru Forester when the clutch assembly failed and required replacement. Those of you wishing to revisit that article can view it here.
I mentioned at the end of that article it might be time to search for another Subaru. At the end of 2024 I read about the introduction of a Subaru Forester option in the new model year –

Read more »

They’ve Gone Soft

MY WIFE AND I BOUGHT a used hybrid Toyota RAV4 recently. We saw it at a dealership and bought it that day.
This wasn’t an impulse purchase. We knew it was time to replace my 10-year-old Subaru Forester, and we’d done research on hybrids and electric vehicles. Because the new car would be our distance traveling vehicle, and my occasional work transportation, we wanted the flexibility of a hybrid. In time, we’ll replace our second car with an electric vehicle for local driving.

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Taking Back the Wheel

WE FLEW BACK TO the U.S. last week from Madrid, and were reunited with our car of 12 years. After selling our house in late 2022 and going nomadic, we had headed to Europe six months ago, opting to have our 2008 Lexus SUV professionally stored.
In an earlier article, I recounted the thought process behind this decision. Suffice it to say, we chose this option largely because we had no firm plans for when we’d need our car again,

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Wrong Number

WE BOUGHT A SAILBOAT and trailer in 2008 for our son for his 15th birthday. At the time, he was too young to own a boat, so I registered it in my name.
Fast forward 15 years, and we finally got around to transferring the title to our son. Transferring the boat was quick and easy. Transferring the trailer was not.
Cars, trucks, boats and trailers all have unique vehicle identification numbers, or VINs.

Read more »

13 Rental Car Rules

IN SEPTEMBER 2017, my wife and I sold our home, car and almost all our earthly possessions. We spent the next four years driving across four continents. Along the way, I learned a great deal about renting a car that, in this rental-car-challenged world, could make your travels less costly and more reliable.
1. I use Expedia, Kayak and Hotwire to compare rental car rates. When you book, pay attention to whether your reservation is free cancellation or pay now (noncancellable).

Read more »

Spotlight: Rodriguez

The Get Rich Fast

TWO YEARS AGO, I was 100 pounds overweight and constantly hungry. I had been overweight most of my life. But as a father of young kids, I was newly motivated to try to improve my life expectancy. I fortuitously discovered intermittent fasting and the low-carbohydrate way of eating, and instantly had success. Right away, I set an ambitious goal of losing the entire 100 pounds in one year. With a lot of hard work and dedication, I reached my goal—but it took two years. Along the way, I’ve learned a lot about health and about myself. While my primary motivation for losing weight was to improve my longevity, health and happiness, losing weight also saved me money, both in the short term and—I strongly suspect—over the long haul. To begin with, by fasting, I avoided many costly restaurant meals. While fasting, I also couldn’t drink alcohol on an empty stomach, further adding to the savings. After losing about 75 pounds, I figured it was time to check in with my term-life insurance broker to see if I could save on premiums. It turned out that, at my new weight, I could save $300 per year—about one third of the premium. Over the life of my 20-year term policy, that’ll be quite a chunk of change. [caption id="attachment_1525320" align="alignright" width="300"] Ben in 2019 ( left)—and how he looks today, two years and 100 fewer pounds later.[/caption] The savings on forgone copays and medication seem obvious, but the biggest savings will likely be the future medical costs I won’t incur. I don’t have a precise figure on how much I’ll likely save by not being obese, but it appears to be substantial. Given my family history of diabetes, I would likely have required insulin injections, which can run into the thousands of…
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I accidently Coast FIRE’d. Can I stop saving?

Six months ago Scott Dichter wrote a forum post (Coast FIRE! Who would have thought that FIRE could have so many flavors? - HumbleDollar) about Michael Kitces's blog post about Coast FIRE.  For those unfamiliar with the term, please check out the articles. In a nutshell, Coast FIRE is when one accumulates enough money whereby the money currently saved for retirement is sufficient to meet one's future goal to retire early without the need to continue adding to retirement savings. As last year progressed I began to suspect that I may have (inadvertently) achieved Coast FIRE.  I just inputted our figures into Kitces's calculator in the article, and my suspicions were confirmed.  We did it!  But how, and, will we actually be able to stop saving? As I've noted in previous posts, my wife and I are in our 40s and we've long planned to retire in our 50s, so about 10 years from now (at the latest).  We're prodigious savers--saving about a third of our gross income in all available retirement accounts and any amounts over those in brokerage accounts.  We always wanted to reach FIRE, but we did not plan on nor think that we would reach Coast FIRE (which I probably hadn't even heard of until maybe 5 years ago). Having reached Coast FIRE, it appears that we may have the following options:  (1) stop investing or reduce investing because we've already met our goal (or will reach it); or (2) continue to invest at the same or similar rates in order to have an even fatter retirement. I wonder if any of you had this happen or have any thoughts.  My initial thinking is that, given our natures as savers, it's probably unlikely that we'll stop saving at the levels we're currently doing.  Further, given that…
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Forget You

AT LEAST ONCE A YEAR, I watch the hilarious short YouTube clip by personal-finance author JL Collins. If you aren’t around small children and can handle liberal use of America’s favorite four-letter word, check it out. Some may recognize it as a parody of actor John Goodman’s soliloquy from the film The Gambler starring Mark Wahlberg. The clip, however, is more than just entertaining. Its content is what keeps me and, judging from the half-million views, others coming back. In the video, Collins argues that amassing $2.5 million gives the possessor—er, shall we say—“forget-you money.” To Collins, that means no one can tell you what to do. Not your boss, not your girlfriend, nobody, because you can shine them off with, “Forget you. I’ve got [a lot of] money.” Collins advocates an 80-20 portfolio. Put 80% in Vanguard Total Stock Market Index Fund (symbol: VTSAX), which holds every publicly traded U.S. company. With the remaining 20%, buy a broad-based bond fund (VBTLX) to “smooth the ride,” he says. He’s not done dispensing advice to Wahlberg’s character. Collins says not to buy a house (rent, let the landlord worry about it) and drive an “indestructible” economy car. Once you’ve done all that, you’re in your “Fortress of Solitude.” I’m sure we could all quibble with the details, but overall I’ve heard worse money wisdom. What’s he getting at with all of this advice? If you have $2.5 million and use the 4% rule, you could pull out $100,000 a year from your nest egg to live on. Nowhere in the video does it say you have to, or even should, quit working or bringing in additional money. It’s just that an 80-20 portfolio of that size gives you the comfort of knowing you have a potentially healthy income stream. From your…
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My Mentor

FOURTEEN YEARS AGO, my father-in-law was diagnosed with a blood cancer—multiple myeloma—and given five years to live. Ever since, he’s been battling it like a warrior. But he’s dying now, and he won’t be around much longer. My father-in-law grew up without money to Depression-era parents. He earned his way into a prestigious college, and eventually received a PhD in chemical engineering. He had an impressive career as an engineer with a large chemical company in the Midwest. He was an internationally recognized expert in his field. Like most engineers, he was a tinkerer. He liked to figure out how things worked. As a do-it-yourself investor, he did well in the stock markets of the 1970s, ’80s and ’90s. He retired early, with a paid-off house and a handsome nest egg. And that was after putting two kids through college, including my future wife. As for me, I was born to be wealthy. But by some galactic mistake, my family had little money, but—thankfully—a strong work ethic. I went to college by borrowing the full amount for tuition, room and board. After graduating, I had little desire to repay my loans. I also discovered that all the good political scientist jobs had already been taken. I decided the only sensible thing to do was to go to law school—and borrow twice as much for that degree. I knew very little about money when I landed my first job as a lawyer. My impression of finance was that it was a complicated subject best left to the experts. I never dreamed of becoming a do-it-yourself investor. I started investing in my firm’s 401(k) plan at age 27. That happened to be when the market peaked just before the Great Recession. Two years later, the market had bottomed out. By then I…
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Me and the Dow

WHEN I WROTE ABOUT the Dow Jones Industrial Average reaching 35,000 in 2021, it’ll surprise few to hear that I—like the stock market—was euphoric. I’ll confess that in 2022, as stocks plunged, I felt silly for having written the article. But here I am again, writing about the latest milestone for our old friend. After flirting with the number in mid-March, the Dow hit an intraday high topping 40,000 on May 16 for the first time in its history. The next day, it closed above that level for an all-time high. I agree with a recent Wall Street Journal article that the Dow is a “terrible” index. That’s mostly because it’s a price-weighted index, as opposed to its cousin, the Standard & Poor's 500, which weights companies according to their total stock market value. Nevertheless, I—perhaps like many of you—have followed the Dow almost my entire life, even when I didn’t really know what it was. The reason for my Dow 35,000 article: I was trying to gauge at what Dow level I’d have enough to retire. I was using an admittedly unscientific approach to come up with that figure. Three years ago, I mentioned that my wife and I wanted to retire in 10 to 15 years. We’re still on track for that goal, which is now nine to 12 years’ away. I postulated that at Dow 50,000 we might have reached our goal. Our magic Dow number is still a bit tricky and unclear. Let’s assume our investment nest egg is half of what I’d like it to be at retirement. In other words, I need it to double to retire. Using the rule of 72, if the Dow notched 7.2% a year, including dividends, the nest egg would double in 10 years. At 10%, it would double…
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Did you retire in or around year 2000? If so, how’s it going?

I see this new Forum as akin to the Bogleheads forum.  I have some problems with that site, and I (obviously) like this one better.  But one very interesting post I saw related to retirees from 2000. The idea is that, theoretically, 2000 was just about the "worst time" someone could retire because it was shortly before the 9/11/2001 drop in stocks, followed by the 2008-09 plunge. As a mid-career investor, I'd be interested to hear how retirees from that time period fared.
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