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Hidden Conflicts

ArticleJesse Cramer | Aug 15, 2026

WALMART SELLS FOOD. They sell car tires. Board games too. You can stop at any Walmart in the world and buy the same plethora of consumer goods. One roof, dozens of product areas, thousands of individual items. This "cross-vertical" strategy has many perks to consumers like us. But it's not without flaws. From brand dilution to in-store clutter, down to a lack of item expertise when you ask questions of employees - there are issues with "selling everything to everyone." The financial world is no different. Many national household names in financial services are "one name, many businesses." Retail banking, wealth management, investment research, custodial services, market making, investment banking, private market access. The list goes on. There is value in these institutions for consumers like us. Just as there is value to buying my snow tires and my peanut butter in the same Walmart store. But there's a core tension we must be aware of when financial services are a one-stop shop. The same connective tissue that creates value for customers also introduces deep conflicts of interest. Ready to Launch Let's examine SpaceX's recent initial public offering. Morgan Stanley served as a joint investment bank (with Goldman Sachs) and sole stabilization agent for the IPO. Morgan Stanley managed early trading, retail distribution, and - yes - earned massive underwriting fees (to the tune of ~$100M). As a consequence of Morgan Stanley's involvement, clients of Morgan Stanley and their subsidiary, eTrade, received special access to the IPO. For example, long-time Tesla shareholders who held TSLA in a Morgan Stanley or E*TRADE account for at least 10 years qualified for a supplemental allocation of SpaceX on top of standard offerings. Nice perk! In other scenarios, such cross-pollination might lead to lower-cost loans. It can lead to access to unique private investments. You can ask a question of your big bank and get a world-class expert to provide their niche answer. There's an upside here. Stuck on the Launch pad? But the same fuel that can propel you into the atmosphere can also blow up in your face. Deeper connections and internal conflicts are the same exact mechanism, just pointed in opposite directions. Let's step back to the late 1990s, when WorldCom was a darling of Wall Street. But much of WorldCom's meteoric rise was a result of perverse incentives at a large bank. Telecom analyst Jack Grubman of Salomon Smith Barney (owned by Citigroup) issued glowing ratings on WorldCom and other telecom stocks throughout the 90s. Those ratings flowed down to Salomon brokers on Main Street, who pushed WorldCom stock on everyday investors like you and me. SSB/Citigroup also acted as WorldCom's investment banker, earning huge fees as WorldCom acquired more and more small telecom firms. The same bank also provided wealth management services to WorldCom's CEO, Bernie Ebbers, frequently showering him with discounted shares of new IPOs. Give WorldCom a great review. Sell its stock to Main Street, pushing the price higher. Lend WorldCom more money to acquire smaller companies. Earn huge fees. Give the CEO backdoor access. Give them more great reviews. Sell more stock to Main Street...etc. The word you're looking for is: perverse. The rest is history. WorldCom collapsed amid $11 billion in accounting fraud. Grubman resigned, was banned from the securities industry, and paid fines. Ebbers was dragged in front of Congress and separately sentenced to 25 years in prison. Many individual investors were left holding the bag. The episode became a symbol of Wall Street's research/banking conflicts. Model Rockets, Too But the same conflicts happen on a smaller scale, too. Enter the "Smith" family. This is a true story. The Smiths have about $2.5M invested with a wealth management advisor at Bank A. I won't call out Bank A, but you know them. Their CEO is a borderline household name. You own them in any/all USA index fund. The Smiths' taxable account has about $200,000 in fixed-income assets (yielding around 4% interest). Also, the Smiths bought a small vacation home last year, splitting costs with family members. Their share was about $200,000. "How," the Smiths asked their advisor, "should we best pay for our share of the home? Where should we pull the $200,000 from?" Their Bank A advisor suggested they use a pledged asset line of credit. They are using their investments as collateral to borrow the $200,000 at an 8% interest rate. They still own the $200,000 in fixed income that earns 4%, while also borrowing $200,000 at 8%. They have locked in a negative arbitrage of $8000 per year. Bank A is still collecting their AUM fee on the $200,000 of invested assets - another $2000 per year. Did the Smiths receive advice in their best interest? Did their advisor/banker benefit from the path he steered them down? Did Bank A's diverse services work in the Smiths' favor? I doubt the Smiths' banker / advisor is a bad actor. But his incentives are conflicted. As the late, great Charlie Munger would remind us: Show me the incentives, I'll show you the outcome. It's Double-Edged The same size and clout that provides early access to the SpaceX IPO also leads to WorldCom's fraud and the bad advice given to the Smiths. The mega-financial firms are a double-edged sword. You don't get the good without risking the bad. Caveat emptor. Jesse Cramer writes “The Best Interest” blog and creates the podcast, “Personal Finance for Long Term Investors.” After a decade as an aerospace engineer, Jesse switched careers and now helps families plan their retirements at an independent fiduciary firm. Jesse, his wife, and two daughters live outside Rochester, NY. His previous article was Happy Conclusion.

Risk Management

ArticleAdam M. Grossman | Aug 15, 2026

BY NOW, YOU'VE probably heard the story of the 25-year-old wunderkind Leopold Aschenbrenner. After graduating as valedictorian from Columbia University at age 19, he worked for FTX, the crypto trading firm, then found his way to OpenAI, where he worked as a researcher for about a year, until mid-2024. In the months after he left OpenAI, Aschenbrenner wrote a 165-page paper titled “Situational Awareness,” in which he detailed his views on the future of artificial intelligence. The paper was full of dramatic pronouncements—“the exponential is in full swing now,” he wrote—and ended up being shared widely online. Capitalizing on that attention, Aschenbrenner established a hedge fund to make bets on the AI economy. He named the fund Situational Awareness, and at first, things went remarkably well. In its first two years, it grew to $45 billion in assets as he correctly identified some of the biggest beneficiaries of the AI build-out, including memory chip maker SK Hynix, fuel cell producer Bloom Energy and AI infrastructure provider CoreWeave. The fund also shorted traditional software company stocks, betting that AI would pressure their business models. And Aschenbrenner invested in some private companies, including Anthropic, the developer of Claude. For a while, these bets worked out extraordinarily well. In its first two years, the fund reportedly gained 1,000%. The rest of Wall Street began to follow him closely. In a June profile, The Wall Street Journal wrote that his fund’s regulatory filings “are studied like scripture.” But earlier this summer, both of the trends Aschenbrenner had been betting on reversed at the same time. Fears that AI infrastructure spending was becoming unsustainable led many of these stocks to fall 30% or more. And the traditional software stocks that Situational Awareness had been betting against—companies like Adobe and Salesforce.com—began to rebound, with some rising 20% or more. Those reversals alone would have been a problem, but it turned out that Situational Awareness had also been borrowing on margin to increase the size of its bets. According to estimates, it was leveraged up to 400%. That led lenders to begin closing in. It got even worse from there, when the fund’s high profile began to work against it. As it attempted to sell positions to reduce its debt, it got trapped. Because of the size of the orders it was placing, and their concentration among AI stocks, other traders were able to guess that Situational Awareness was the seller. That spooked investors, leading others to sell, thus compounding a downward spiral. In a letter to investors, Aschenbrenner compared it to a bank run. Over the course of the next few weeks, as the fund’s assets dropped from $45 billion to just $10 billion, Aschenbrenner found himself with few options. At the end of July, he announced that the fund had sold virtually its entire portfolio of publicly-traded stocks to the investment firm Citadel. Because the positions were so large and thus difficult to sell on the open market, Situational Awareness was forced to sell them at what was reportedly a significant discount. This story might not necessarily seem relevant for individual investors. But there are, I think, several conclusions to draw from this episode. First, and perhaps most important, it’s a reminder that risk management should always come first. After so many years of market gains, it would be easy to become complacent. But it’s precisely when the market is doing so well that investors should be diligent in considering rebalancing. This story also reminds us of the importance of diversification. To be sure, Situational Awareness made mistakes, but it also got one very important thing right: It was diversified. Though it had to conduct a fire sale of its publicly-traded holdings, it still holds a multi-billion-dollar stake in Anthropic. Without that, it might have faced total liquidation. The lesson: We should never go too far out on a limb with any investment idea. British economist John Maynard Keynes was famous for his observation that, “markets can remain irrational longer than you can remain solvent.” In other words, for an investment to be successful, it needs to be correct and correct over the right timeframe. In an ironic twist, in the few weeks since Situational Awareness offloaded its holdings at a discount, many have rebounded. If it had been able to hang on a little longer, the fund might have been able to avoid the situation it was forced into. The lesson: Liquidity is important. This is one of the many reasons I recommend that individual investors avoid private funds—because an asset really only has value if you can sell it when you want to, or need to. The Situational Awareness story also teaches us something about the narratives that surround the stock market. Because of the number of variables involved, it’s all too easy for market observers to paint virtually any picture they wish. And since no one has a crystal ball, no one can say that anyone else is necessarily wrong at any given time. Concerns about “circular” deals in the AI ecosystem have ebbed and flowed over the past few years, as have worries about the impact of AI on traditional software companies. The lesson: We should be careful to never worry too much about the news of the day because it’s often just that—today’s news, only to be replaced by a potentially different narrative tomorrow. There’s an easy comparison between the events at Situational Awareness and the failure in the 1990s of the hedge fund Long-Term Capital Management (LTCM). Both got off to a fast start, both involved leverage and both were run by extraordinarily impressive individuals. At LTCM, two of the founders had Nobel Prizes. But ultimately, IQ doesn’t guarantee success. Nothing does. And that, I think, is another key lesson for investors to draw. In managing our personal investments, we should always look for ways to maintain a balanced, center-lane approach. 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.

Looking Back On My Hard Luck Days

DAN SMITH | Aug 7, 2026

"Extra points for the first verse of a Buffett song."

- Terry Wawro

Medicare Advantage Part C — Not too soon to start planning for 2027

R Quinn | Aug 11, 2026

"Some good reasons in this chain to consider dropping my company's retiree Medicare Advantage sponsored plan (Employer PPO). But I can't find one. Figures below solely for Medicare Advantage piece of things; does not include Medicare. Combined premiums for my wife and me annually are $1100. Maximum out of pocket for each is $1500. Seems prudent to roll with it unless I'm missing something. Am I?"

- John Katz

Can a Value fund also be a Growth fund?

Harold Tynes | Aug 11, 2026

"Ed Slott & Jeffrey Levine have a good podcast called the Great Retirement Debate. Also I've watched some good YouTube videos by Sean Mullaney."

- Randy Dobkin

COBRA insurance: No need to fear the bite

Heidi - SunnyMoneyDIY | Aug 11, 2026

"I retired 11 years ago at age 59 in Texas. At that time, I was able to connect with an insurance specialist that was well versed in the options of the day and did not charge me anything. My original contact has also retired, but his replacement has graciously helped me navigate through changing ACA plans and eventually through Medicare options. It varies from state to state, but my sister in Pennsylvania found a specialist that helped her too. You need to find the costs of ACA plans available in your area to compare to COBRA alternatives. These insurance specialists can quickly find the options in your area. It is difficult to be confident that your personal web searches have comprehensively found all your alternatives. Good luck in this difficult time."

- John Redfield

Income taxes on retirees with Social Security

R Quinn | Aug 14, 2026

Be the first to comment.

My Sister – A Reflection One Year Later

Andrew Clements | Aug 12, 2026

"Thank you, John. Life certainly seems to hold beauty and heartbreak side by side. Losing Tory has reminded me to appreciate the people we love while we have them and to hold tightly to the memories when they’re gone. I appreciate your kind words."

- Andrew Clements

Roth Conversions and Taxes

ArticleJohn Urban | Aug 8, 2026

EVERY ARTICLE ABOUT Roth conversions says the same thing: pay the tax from taxable money, not from the IRA. That is good advice if you have taxable money. Plenty of retirees do not. Their savings sit almost entirely in a traditional IRA, built from years of 401(k) contributions and a rollover at retirement, with little brokerage money and no cash reserve worth naming. For them, “pay from outside money” is not advice. It is a condition they do not meet. Their real choice is a self-funded conversion or no conversion at all. The familiar warning is that self-funding requires a gross-up. You withdraw money to pay the conversion tax, that withdrawal is itself taxable, so you have to withdraw a little more. Less discussed is what else that withdrawal sets off. It makes more of your Social Security taxable, it raises your Medicare premiums two years later, and in a high-tax state it enlarges the amount that has to leave the IRA. Here is what those three cost, on one household. A cautious conversion Meet Dianne, a composite rather than a real person. She is 66, single, retired to Florida, with $1 million in a traditional IRA and nothing outside it. Social Security pays her $28,000 a year. She is past 59 and a half and already on Medicare. Florida keeps state income tax out of the arithmetic for now. She converts $40,000. Careful, modest, the size people choose when they are trying not to do anything dramatic. The tax on that conversion, paid from a checking account she does not have, would be $4,234. Funding it from the IRA instead, the withdrawal that covers it is $5,125, and her tax rises to match. That extra $891 is 17.4% of the $5,125 she withdrew. Her ordinary-income bracket is 12%. Twelve of those points are the tax on the withdrawal itself, which is the gross-up everybody expects. The other 5.4 points come from $2,300 of her Social Security being pulled into taxable income by that same withdrawal. Paying from cash, $21,500 of her benefit would be taxable. Self-funding, $23,800 is. The difference is caused by how she paid, not by what she converted, and nothing on her return will label it. Not a smaller version of a large one The effect is not linear. Run the same woman at $150,000 and 85% of her benefit, the statutory maximum, is already taxable before she funds the tax. The funding withdrawal drags in nothing further, and this particular cost is zero. That is not an argument for converting more. It is an argument against assuming a small conversion is simply a smaller version of a large one. The one that looks cautious can carry the higher marginal rate. What self-funding actually costs Give Dianne the $150,000 conversion, still with no outside cash, and add the state question. Still in Florida, $195,469 has to leave the traditional IRA to put $150,000 into the Roth. Move her to California, changing nothing else, and it is $219,751. That is $1.30 of IRA spent for every dollar reaching the Roth, against $1.47, and the gap is California income tax compounded through the gross-up. If a move across state lines is anywhere in your plan, the order of operations may matter more than the size of the conversion. But $1.47 invites a conclusion it does not support, and I would rather correct that myself than let it travel. A conversion is taxable whichever pocket pays. Of the $69,751 Dianne withdraws in California, roughly $44,639 replaces cash she would have spent anyway. The incremental cost of self-funding, in wealth given up, is $25,111. About 17% of the conversion, not 47. The bill that arrives in 2028 At that $150,000 conversion, self-funding also costs Dianne $1,735 in higher Medicare premiums, a surcharge of $6,355 rather than $4,620, charged on top of the standard premium, for one year, and hers alone as a single filer. The bill arrives two years late. Medicare sets her 2028 premiums from her 2026 income, so the cost is invisible at the moment she is deciding how to pay the 2026 tax. When it can still make sense Doing nothing is not free either. Money left in a traditional IRA comes out eventually, under required distributions, at whatever rates apply then, possibly to a survivor filing single, possibly to heirs facing a 10-year deadline. Where self-funding still holds up, a few things tend to be true. The rate gap is durable rather than a one-year accident. Whether it repays a cost this size depends on time, future tax rates and investment returns. A temporary dip in income is a thin foundation. A structural window, after retirement and before Social Security or required distributions begin, is more compelling. There is runway, because shrinking the portfolio to change its tax character needs years of tax-free growth to earn back. Age 59 and a half is cleanly behind you. The converted amount is not subject to the 10% additional tax on early distributions. A separate distribution taken to pay the tax generally is, unless an exception applies. And enough is left afterward. Check the balance after the funding withdrawal, not after the conversion. Dianne’s California IRA drops to $780,249, and whether that funds the next 30 years matters more than whether the conversion was tax-efficient. A practical warning about withholding Withholding from the conversion is not a cheaper way to pay the tax. It reduces what reaches the Roth. Elect 24% on Dianne’s $40,000 conversion, as this illustration does rather than as any custodian requires, and $9,600 goes to the IRS while $30,400 lands in the Roth, against $4,234 actually owed. The cash comes back next spring as a refund. The Roth room does not come back at all. Restating the rule Pay the conversion tax from outside cash if you have it. That remains the best answer. It is not an answer for the retiree whose savings are almost entirely in a traditional IRA. For that person, “never pay from the IRA” skips the actual decision, which is whether a self-funded conversion, with its full marginal cost, beats leaving the money where it is. Before deciding, count the gross-up, the Social Security effect, state tax and the Medicare bill two years later. Sometimes that arithmetic still says no. It beats applying a rule written for somebody with a different balance sheet. ________________________________________________________________________________ John Urban is the founder of RetireSmartIRA, a retirement tax-planning app. Earlier, he founded GT Nexus, a supply-chain software company acquired by Infor in 2015. He lives in Northern California with his wife, Kathy, and enjoys time with family, travel, reading, Bay Area sports, and the occasional deep dive into the fine print of the tax code.

What is the right percentage?

R Quinn | Aug 9, 2026

"I log on to my investments everyday, just out of habit. My bank sends automatic updates on account balances. I make sure I stick with my theory, but there is no budget. I see no difference between my method at any income level. It’s a forced way to live within one’s means, you can’t spend more than you have. Of course, your example is an exception. There are always exceptions. In the example, it probably means a lower lifestyle, lower budget, lower everything regardless."

- R Quinn

Don’t Let a Roth Conversion Trigger a Penalty

John Urban | Jul 8, 2026

"Hi Grant, and thanks for the article (John Urban) and this comment. Sorry to be a few months late commenting but I think your approach is very intriguing and I have questions for you if you have time to help me understand your process. Firstly, my situation is retired, no W2 income and RMDs to be satisfied from conventional IRA before the end of the year. Also, not yet concerned over IRMAA impact at this time. Q1. The 1, 2, 3 process says one can do a rollover contribution to the Roth account with money from a regular brokerage or other non-IRA account within 60 days. Is this correct? I thought that a rollover should be IRA to IRA (Roth and/or conventional). Q2. About the 1, 2, 3, process. Why not make the conversion and pay the taxes directly from the converting IRA at the same time. Brokerage will withhold the amount specified to make it a single operation on my part. THEN I take money from the non IRA account and rollover the amount withheld in taxes into the target Roth account. I realize this violates the guidance that taxes shouldn't be withheld from a conversion, however, since the taxable amount is being deposited almost immediately back into the Roth account then it would seem to be a wash. What are your thoughts? Am I missing something? Thanks, Derek"

- Derek Shuttleworth

For most retirees, the greatest fear is not death—it is running out of money before they die.

Matt Halperin | Aug 6, 2026

"I understand, thanks, Dunn"

- DAN SMITH

Hidden Conflicts

ArticleJesse Cramer | Aug 15, 2026

Risk Management

ArticleAdam M. Grossman | Aug 15, 2026

Looking Back On My Hard Luck Days

DAN SMITH | Aug 7, 2026

"Extra points for the first verse of a Buffett song."

- Terry Wawro

Medicare Advantage Part C — Not too soon to start planning for 2027

R Quinn | Aug 11, 2026

- John Katz

Can a Value fund also be a Growth fund?

Harold Tynes | Aug 11, 2026

"Ed Slott & Jeffrey Levine have a good podcast called the Great Retirement Debate. Also I've watched some good YouTube videos by Sean Mullaney."

- Randy Dobkin

COBRA insurance: No need to fear the bite

Heidi - SunnyMoneyDIY | Aug 11, 2026

- John Redfield

Income taxes on retirees with Social Security

R Quinn | Aug 14, 2026

Be the first to comment.

My Sister – A Reflection One Year Later

Andrew Clements | Aug 12, 2026

- Andrew Clements

Roth Conversions and Taxes

ArticleJohn Urban | Aug 8, 2026

Manifesto

Aug 14, 2026

NO. 56: WE SHOULD hold down our fixed monthly costs, especially car payments and mortgage or rent. If these are too high, we’ll struggle to save, no matter how determined we are.

humans

Aug 15, 2026

NO. 58: WE THINK having kids will boost happiness, and yet parental happiness often slumps with the arrival of children. That doesn’t mean kids aren’t good for long-term happiness. But the big boost tends to come after the heavy-lifting of the child-rearing years has passed, and especially once the children are adults and possibly have a family of their own.

act

Aug 15, 2026

CHANGE YOUR financial account passwords. Make sure each password consists of a complicated, random mix of letters and numbers. Avoid using the same username and password for multiple accounts, so there's less financial fallout from any data breach. Struggling to keep track of all this account information? Consider a password manager.

Truths

Aug 14, 2026

NO. 78: INVESTORS often boost their annual tax bill—by gleefully selling their taxable account’s winners, while refusing to unload losers. But to trim taxes, you should do the opposite: Sell losers, so you have realized capital losses to offset your capital gains and even your ordinary income. Meanwhile, hang onto winners, thus deferring the capital-gains tax bill.

Money Guide

Manifesto

Aug 14, 2026

NO. 56: WE SHOULD hold down our fixed monthly costs, especially car payments and mortgage or rent. If these are too high, we’ll struggle to save, no matter how determined we are.

Spotlight: Borrowing

Credit Card Debt.

Michael l Berard | Nov 23, 2024

American credit card debt just broke the trillion dollar level. Taking on debt, “ bad” debt, credit cards , auto loans and similar, is a like attending a raucous party , taking in too much alcohol , etc.
The aftermath , paying off high interest loans, is like the worst hangover, ever. It can take decades to recover from it.
Often, too much alcohol can kill you, quickly or long term, * alas , debt can kill you,

Credit Where It’s Due

Ron Wayne | Dec 20, 2022

THE BEST FINANCIAL advice I could give to a Gen Z or millennial is this: Join a credit union. But they probably wouldn’t listen.
A GOBankingRates survey earlier this year found that fewer adults under age 40 are banking with credit unions, instead preferring national or online banks by as much as a two-to-one margin. I’ve done all my banking with a local credit union for almost 18 years, and it’s provided me with a degree of personal customer service that’s likely less common with banks.

Pay No More

Kevin Thompson | Feb 10, 2023

IF YOU PUT DOWN less than 20% on a conventional home loan and you’re still paying private mortgage insurance (PMI), do what I did: See if you can get those pesky PMI payments eliminated.
I purchased a home in September 2017 for $341,000. The interest rate was near 4% and I put down roughly 10%. Why not put down 20%, so I could avoid PMI? My thought: If I can borrow money at an interest rate below 5% and get a reasonable rate of return elsewhere,

Double Trouble

Jonathan Clements | Oct 14, 2017

PEOPLE OFTEN ACT foolishly and then desperately try to justify their financial sins. A case in point: Those who take on too much debt, can’t get it paid off by retirement—and end up servicing huge mortgages and other loans long after their paychecks have come to an end.
Cue the tap dancing. The indebted start waxing eloquent about the virtues of the mortgage-interest tax deduction and how it’s smart to pay the bank 4% while they invest the borrowed money at 10%.

Playing Your Cards

George Diaz | Jun 15, 2017

YOU’VE PROBABLY already asked yourself this question: Is it better for my credit score to have just one credit card—or many?
There’s no magic number, because it isn’t really about how many credit cards you have. Rather, what matters is your financial situation and how you handle your cards. For example, if you are just beginning to build a credit history, it’s best to have a single card. Try to follow three rules:

Pay your bills on time—and avoid late payments at all costs.

You May Be Surprised

Mike Roberts | May 31, 2022

IF YOU’RE LIKE MANY people, you’ll cringe when I mention reverse mortgages. The perception is that they’re loans of last resort for desperate retirees who don’t have any other options. But I suggest keeping an open mind. I believe reverse mortgages can be a shrewd way to unlock liquidity during retirement.
Reverse mortgages have evolved significantly, and retirees are often pleasantly surprised when they learn how today’s loans work. They find that many of the negatives they’ve heard are no longer true.

Cost of Living

Sanjib Saha | Aug 29, 2019

I TUTOR MY 10-year-old niece once a week in math and science. After the study sessions, we often talk about other things—mostly kid stuff. Recently, her treasured piggybank got a nice boost on her birthday and we discussed what she might do with the money. That’s when my niece asked, “How much money will I need when I grow up?” I guess she was trying to figure out if she did indeed have to study hard and get a job—or whether her current savings would be enough. I laughed and told her that she would definitely need to work, just like the rest of us, because she’d need much more money than her piggybank held. Still, in retrospect, I think her seemingly innocent question can be a good starting point for introducing teenagers and young adults to the topics of money and careers. As children grow, they generally develop a sense for why money is important—but there’s no easy way for them to gauge how much they need. A ballpark estimate can give them perspective and help them to double-check whether a career path will meet their financial needs. It can also force them to learn more about basics of smart money decisions. When I started my career, I knew I needed to work hard, earn a decent wage, avoid overspending and save regularly. But beyond those abstract notions, there was no concrete, holistic target in my mind. A rough roadmap—even one with a large margin of error—would’ve helped me to plan and organize my financial life better. It isn’t too hard to come up with a ballpark estimate. Let’s ignore inflation and instead think about everything in today’s dollars. Let’s also assume a hypothetical couple who start a household at age 30, work for 30 years, raise two kids,…

Money Misconceptions

Sanjib Saha | Jan 11, 2024

AS I'VE TRIED TO HELP folks understand financial issues, I’ve come across numerous money misconceptions. I wasn’t surprised—because, before I learned better, I too misunderstood some of these issues. Here are the top eight misconceptions I’ve encountered: Misconception No. 8: Consumer prices drop when inflation falls. Inflation measures the pace of price increases. Declining inflation simply means that prices aren’t rising as fast, but they’re still going up, albeit at a slower rate. Furthermore, the effect of inflation remains, with prices stuck at higher levels. Inflation is calculated based on price fluctuations for a variety of goods and services. While specific items might slip in price, a positive inflation number—even if it’s smaller than before—still signifies an overall upward trend in prices, rather than a reversal to lower costs. Misconception No. 7: Investing requires professional help. Investing can seem intimidating to beginners, leading many to conclude that professional guidance is the only way to go. But technological advances and a wealth of free educational resources, including HumbleDollar’s money guide, have transformed the landscape. Unlike years ago, today’s investors have access to user-friendly investment platforms and simple, evidence-based strategies like target-date funds and index funds, eliminating the need to rely on professional money managers and stock brokers. Indeed, arguably, investing has become as straightforward as everyday tasks like grocery shopping. Moreover, after learning the basics and gaining confidence, managing investments—especially low-cost diversified investment products—requires surprisingly little time and effort, and there’s no need for extensive knowledge of the financial markets or the economy. There’s nothing wrong with using an advisory service when the cost is reasonable and conflicts of interest are minimized. But doing so is no longer the only way to achieve your investment goals. Misconception No. 6: Buying a home is always financially better than renting. Homeownership carries numerous…

Changing My Mindset

Sanjib Saha | Oct 13, 2023

WHETHER MONEY BUYS happiness is a matter of debate, but a recent incident reinforced my conviction that financial security does indeed help. The incident would’ve caused me considerable distress a few years ago, when I was earning more but was still dependent on my fulltime job’s paycheck. My newfound financial security, however, transformed the situation into a truly memorable experience. My wife, Bonny, and I both enjoy attending Indian music and dance performances. We make it a point to see the live shows put on by local groups and, if the ticket prices are reasonable, also those featuring artists visiting from India. This year, Bonny was keen to see a dance-drama performance by a touring group from India. Although the show was scheduled for July, Bonny wasted no time securing two tickets when reservations opened in March. I got the sense that the tickets came with a hefty price tag. As the date drew nearer, Bonny’s excitement built. On the day of the event, she repeatedly urged me to hurry up and get ready, with the half-joking threat to leave me behind if I delayed any further. Both of us got dressed up and were about to head out when Bonny received a text message. It was from a friend who’d purchased tickets in the same row as us. She was curious if we changed our seats because she couldn’t spot us in the theater. Bonny responded with a touch of impatience, assuring her that we’d be there shortly. Her friend called within minutes to say the show had just finished. Bonny was perplexed, while I hastily jumped to the conclusion that she must have misremembered the showtime. Bonny, however, was adamant that she had purchased tickets for a 7 p.m. performance, and the screenshots of the tickets saved on…

Four or Less

Sanjib Saha | Nov 21, 2021

A RECENT ARTICLE from Morningstar suggested that the 4% rule for sustainable retirement withdrawals should be revised downward to 3.3%. This lower rate, the researchers argued, is safer given today’s rich stock market valuations and low bond yields. The article also recommended being flexible with withdrawals, by taking larger amounts in good markets and smaller withdrawals during down periods. This strategy could provide more lifetime income than fixing a withdrawal amount in the first year and then automatically increasing that sum each year with inflation. I like simple rules of thumb, but I only use them as ballpark estimates. The old 4% rule provides a quick, back-of-the-envelope sense of our retirement readiness. For instance, if we divide 100 by that 4%, we get 25. The upshot: If we have savings equal to 25 times our average annual spending, or something in that range, we may have enough to quit the workforce. For younger folks, I’d bump up the multiplier in recognition of longer life expectancies. What if our retirement readiness passes this simple sniff-test? Now, it’s time for detailed calculations using individually tailored parameters. A ballpark estimate is not helpful at this stage. My unease with the 4% rule—and I’m not alone—isn't with the number’s accuracy. Rather, I’m uncomfortable with its widespread use as a one-size-fits-all withdrawal strategy. And, no, tweaking the recommended withdrawal rate up or down from a nice whole number to a decimal figure doesn’t necessarily make it more correct. Rather, it can simply create a stronger illusion of accuracy. “Everything should be made as simple as possible, but not simpler,” as Albert Einstein may have said. Withdrawal strategies in retirement needn't be too complicated. But a prescribed withdrawal rate—even with some adjustments here or there—strikes me as an over-simplified endeavor.

Blessing in Disguise

Sanjib Saha | Dec 17, 2019

IN OCTOBER, WHILE I was visiting family in California, I got a text from an old friend, Tass. He had lost his job. Tass and I were close buddies in college, but we lost touch. After completing our undergraduate degrees in computer science, I started working, while Tass pursued a business degree. We soon ended up in different parts of the globe. Many years later, we bumped into each other at an airport. I learned that Tass had moved abroad to start his own offshore business. We exchanged contact information, but soon lost touch again. This past summer, Tass emailed me to say that he was moving to the city where I live. We got together soon after his arrival and spent an entire evening catching up. Tass’s startup had been a thrilling business adventure, but it had also drained his finances. He moved back to the U.S. in search of a fresh start. Tass needed to get his finances back on track—quickly. He had his own retirement to worry about, plus college costs for two teenagers. He took a well-paid management position. But after many years of self-employment, he didn’t adjust well to the corporate world. A few stressful months later, he called it quits and returned to his software roots. Tass brushed up on his coding skills and started chasing six-figure programming jobs. He worked mostly out of state, leaving his family for long stretches. His latest job as a senior programmer brought him to my city. In the weeks following our reunion, I started to worry about Tass. He missed his family. I found it odd that he moved out of state just for a fatter paycheck. Tass had credible qualifications, wide-ranging experience, and a proven reputation for hard work and self-discipline. He could easily get a decent-paying…

Affordable Mistakes

Sanjib Saha | Aug 29, 2023

WHEN I SET OUT TO improve my financial knowledge, sites like HumbleDollar didn’t exist. Instead, I garnered insights from books, investment seminars and like-minded people. Still, my greatest lessons came from my own financial mistakes. I’ve made many, and I still occasionally stumble. A few missteps were costly and had lasting repercussions, but the rest were less damaging, especially considering the lessons I learned from them. Here are six of what I call my “affordable mistakes.” 1. Investing in individual stocks without research. After losing years of investment compounding by ignoring the stock market, I foolishly adopted an invest-now-research-later approach. Relying solely on company name and price history, I narrowed my buy list to a dozen or so public companies and then invested equal amounts in each. Among my selections were two familiar names. I knew about Eastman Kodak from my college days, when one of my hobbies was developing film. And I was familiar with Washington Mutual because the bank sponsored a spectacular annual firework display that I loved to watch. I naively assumed that these stocks, together with the others I chose, would be good long-term investments. They weren’t. Both Kodak and WaMu eventually failed, leaving me with no chance of recouping my investment. I figured that unless you enjoyed stock research (which I didn’t), had a strong desire to beat the market (which I didn’t), and could dedicate time to staying on top of company and industry news (which I couldn’t), it made no sense to favor individual stocks over low-cost, diversified stock funds. 2. Borrowing from my 401(k). In my mid-30s, when I was going through a financially challenging period, I found myself in need of immediate cash. My 401(k) plan offered a loan that seemed appealing. The paperwork was minimal, the funds would be available…

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For most retirees, the greatest fear is not death—it is running out of money before they die.

Hidden Conflicts

Risk Management

Looking Back On My Hard Luck Days

Medicare Advantage Part C — Not too soon to start planning for 2027

Can a Value fund also be a Growth fund?

COBRA insurance: No need to fear the bite

Income taxes on retirees with Social Security

My Sister – A Reflection One Year Later

Roth Conversions and Taxes

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