FREE NEWSLETTER

Want parental popularity? Buy them stocks when you buy them diapers—and let decades of compounding work their magic.

Reinventing Myself

WHEN I WAS FORCED out of my banking job of 36 years, I was age 59 and had enough money to retire comfortably. But I still felt the need to work—because that’s how I’m wired. Working gives me a sense of purpose and makes me happy, but it has to be the right kind of work.
I need work that’s fulfilling and which allows me to help others. I knew myself well enough to realize that,

Read more »

Pipe Dreams

AS A TEENAGER, I wanted to be an architect. I took six years of mechanical drawing during junior and senior high school, and I was good at it, earning nearly all As.

At another time, in my 30s, I thought about becoming a lawyer. People told me I’d make a good one. A lawyer’s opinion seemed to carry more weight, even when the subject was unrelated to legal matters.

I also wanted to play a musical instrument.

Read more »

Recent Writing

Learning from Failure

IN THE WEEK SINCE Silicon Valley Bank (SVB) failed, a debate has raged: Did the government do the right thing when it decided to guarantee all of SVB’s depositors, including those that exceeded FDIC limits?
On one side of this debate are those who view the government’s action as an inappropriate and undeserved bailout. In an article titled “You Should Be Outraged About Silicon Valley Bank,” The Atlantic argued that the bank’s failure was the predictable result of incompetent risk management.

Read more »

No Going Back

RETIREMENT IS LIFE’S most daunting financial puzzle, not least because many of the decisions we make are difficult or impossible to reverse. To make matters worse, we’re often making decisions we’ve never made before, so we have no real expertise.
What sort of decisions am I talking about? Here are 10 examples.
1. When should I quit work? Needless to say, this is the most important retirement decision. Once you quit the workforce,

Read more »

Worldly Wisdom

A FEW MONTHS BACK, this site’s editor suggested I write an article about the “10 things I learned about money from four years traveling the globe.” I thought, hey, if someone wants to pay me $60 to write about travel, I’m in. I’m hoping he’ll next suggest I write an article about drinking bourbon.
Starting in September 2017, my wife and I traveled the world for four straight years. Travel can be wondrous. Filled with new tastes,

Read more »

Luxury Liner Living

MOST OF US REACH a point in retirement where we think about downsizing. This happened most recently for us when my husband was replacing batteries in our smoke alarms. This required him to stand on a ladder and look up, triggering a bout of vertigo.

This and other elder episodes, happening as we try to perform simple, everyday tasks, caused us to rethink our ability to remain in our current home. We’re not decrepit yet,

Read more »
Home Call to Action

Spreadsheets and Me

MY AFFINITY FOR spreadsheets began in the late 1960s when I was a paperboy in Virginia Beach. I had a morning route for The Virginian-Pilot and an afternoon route for the now-defunct Ledger-Star. I used my Huffy bicycle with huge baskets front and back.
The business model was straightforward. I paid wholesale for the papers, and customers paid the retail price of 35 cents per week, or 55 cents if they also got the Sunday paper.

Read more »

Inflation Bites Dog

RACHAEL AND I WENT to Walmart the other day to stock up on dog food—and came away with a severe case of sticker shock.
We feed our two dogs a daily menu of dry food mixed into a delightful mash with a little canned wet food. Our go-to brands are Purina Dog Chow for the dry food and Pedigree Chopped Ground Dinner for the wet food.
The cost of the 40-pound bag of Purina dry food has barely budged.

Read more »

Driving Me Crazy

WE JUST PURCHASED a new car. The whole buying process has been upended by the pandemic and today’s chip shortage, and we learned seven important lessons.
My wife and I view car buying as an unavoidable chore. We know financial experts recommend buying a car that’s a few years old, so someone else takes the big hit on the initial depreciation. We haven’t done that. We like to buy a new vehicle and keep it for 15 or 20 years.

Read more »

Errors of Commission

I WAS A RABID football fan as a kid. I would sweep across our front lawn, fantasizing about the many and varied ways I would run to daylight for Hewlett High School. But when I finally got the chance, I lasted only a few practices. I hadn’t counted on all the bruises that came with the program.
So, too, was it with my brief stint as an independent investment advisor affiliated with a large discount broker.

Read more »

Get Educated

Truths

NO. 10: WALL STREET always strives to look its best. To ensure mutual fund expenses and advisory fees appear small, they’re expressed as a percent of the dollars we invest, not as a percent of our likely gain. To make their results appear more impressive, money managers pick their benchmark indexes carefully and use cumulative return “mountain” charts.

Act

ROUND UP the mortgage check. If you’re paying $1,512 a month, send the mortgage company $1,600 instead. It’s a painless way to increase savings, the extra $88 a month could allow you to pay off your mortgage years earlier and you’ll earn a pretax return equal to your mortgage’s interest rate. That return could be higher than you can get with high-quality bonds.

Think

LONGEVITY RISK. Spending down a retirement portfolio is tricky: You don’t know how long you will live—and hence there’s a risk you’ll run out of money before you run out of breath. To fend off that risk, limit annual portfolio withdrawals to 4% or 5%, delay Social Security to get a larger check and consider an immediate annuity that pays lifetime income.

Money Guide

Identity Theft

IDENTITY THEFT OCCURS when someone uses your name, address, Social Security number and other personal information to borrow money, open a credit card account, take out a loan or commit fraud in some other way. To guard against identity theft, take the usual precautions: Don’t give out financial information to anybody who calls. Ignore emails that seek account information and never click on embedded links. If you think a call or email could be legitimate, phone the financial institution involved using a number you dig up, not one provided by the caller or in the email. Use strong, complicated passwords—and don’t use the same password for every account. Don’t access sensitive information from a public computer. Also regularly review the activity on your credit card statements and in your financial accounts. Become concerned if you receive a bill from a company you don’t recognize. That may mean someone has opened an account in your name. In addition, be concerned if you receive a letter saying a loan application has been rejected. That could indicate someone is trying to use your identity to borrow money. What if you believe you're a victim of identity theft? Contact the companies where accounts have been opened and ask that they be closed. File a report with the Federal Trade Commission and call the local police to report the crime. Place a fraud alert on your file at the three major credit bureaus. To find out how, go to Equifax.com, Experian.com and TransUnion.com. If you place an initial, 90-day fraud alert in your file at one credit bureau, that bureau should notify the other two bureaus. You might even consider freezing your credit. To learn more about identity theft, check out the Federal Trade Commission’s site at Consumer.FTC.gov. Next: Protecting Yourself Previous: What Won’t Hurt Articles: Identity CrisisAn Ode to OwingTax Time Robbery and Keeping It Private
Read more »

Manifesto

NO. 23: IF WE DON’T have much money, we should compensate with time—by starting to save when we’re young, holding stocks for decades and encouraging our children to do the same.

Voices

What should be the top priorities for those in their 20s?

"Start a Roth IRA and max it out every year. Let compound interest do the rest for you. I followed my dad's advice and started an IRA with Vanguard as soon as I began working, started a Roth when it became available, converted my regular IRA over to a Roth when the opportunity was offered to pay the taxes over several years and I've never looked back. I now have 7 figures going strong, spread over just five accounts, and not too many worries after nearly 40 years of letting it ride. That's the bottom line in terms of financial advice. The rest of the story is this: use your head and be sensible (if you're going to college, get a degree worth having; mine was in engineering, and it's served me well); be generous and support the causes you believe in along the way (and the people you meet who need help); never live extravagantly, and pay your bills on time because good credit is important (translation: I don't drive a Porsche or live in a mansion, but I have a nice car and a comfortable home); and last but not least, tithe (because it's all His anyway). ;)"
- Ronnie Rawls
Read more »

Are annuities ever worth buying—and, if so, which type?

"Every time I get tempted by a new twist on an annuity, I remember that this instrument comes from an insurance company who has diligently calculated for the House to always win. Ultimately, it fails the trust test when knowing the investment completely is difficult, if not impossible."
- Kurt Yokum
Read more »

When does it make sense to hire a financial advisor?

"Every few years I hire a fee-for-service financial planner, operating as a fiduciary, to run the numbers for me. Since I invest almost exclusively in low cost index mutual funds I do not need more than that. I recently calculated how much a 1% AUM would have cost me over the twenty-two years since I retired, and I cannot conceive that any advisor would have been worth going on for a quarter of a million dollars. And that didn't include lost compounding or the fees for the advisor's choice of funds or stock trades. Most recently I had an advisor check whether I can afford the CCRC I plan to enter next year, at 2%, 4% and 5% inflation, which led me to develop Plan B if inflation stays high (a one bedroom apartment instead of two bedrooms). On the other hand I recommended the advisor to friends who really need some hand-holding and they seem very happy."
- mytimetotravel
Read more »

Second Look

Retirement

Brave New World

I MAY BE THE POSTER child for the new retirement, switching back and forth between standard employment and side gigs, as I seek work that I find fulfilling. I’m not alone: It seems many people are retiring earlier than they planned and then working part-time, moving in and out of the workforce based on need and opportunity.
The annual Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI) shows that—while workers expect to retire at age 65—the median retirement age is actually 62.

Read more »

Family Finance

Matter of Degree

YES, EDUCATION is invaluable. But should young adults go to college to obtain a piece of paper that may mean little in the real world? Is the student debt we hear so much about really worth it? Could pushing college attendance for all be as misguided as pushing homeownership for all?
I’m not against formal education. I put four children through college. In fact, I believe parents are obligated to cover their children’s college costs,

Read more »

Investing

Ominous Predictions

IN A NOTE TO CLIENTS last week, Deutsche Bank analysts wrote that they expect a “major recession.” What should you make of ominous predictions like this?

First, don’t panic. Yes, Deutsche Bank is a big institution. But it’s worth noting that last week two equally prominent institutions also weighed in—with a different point of view. Goldman Sachs argued that a recession is “not inevitable.” UBS wrote that, “We do not expect a recession.” They can’t all be right.

Read more »

Lists

Control What You Can

ASK NOT WHAT THE markets can do for you. Ask what you can do for your portfolio.
After 15 turbulent months for stocks, many folks feel they’re at the mercy of the financial markets. But in truth, we’re far from powerless. We may not be able to control the direction of share prices. But here are seven crucial financial levers over which we have a lot of control:
1. We can figure out how much cash we’ll need from our portfolio over the next five years,

Read more »
Home Call to Action

Mindset

Why We Try

BEATING THE STOCK market over the long term is no mean feat. Only a tiny proportion of investors—professional or otherwise—manage to do it. So why do so many people think they can?
Meir Statman, a finance professor at Santa Clara University, cites eight key reasons. In a new monograph titled Behavioral Finance: The Second Generation, he slots these reasons into two broad categories—five cognitive and emotional errors, followed by three expressive and emotional benefits:
1.

Read more »

Free Newsletter

Get Educated

Manifesto

NO. 23: IF WE DON’T have much money, we should compensate with time—by starting to save when we’re young, holding stocks for decades and encouraging our children to do the same.

Act

ROUND UP the mortgage check. If you’re paying $1,512 a month, send the mortgage company $1,600 instead. It’s a painless way to increase savings, the extra $88 a month could allow you to pay off your mortgage years earlier and you’ll earn a pretax return equal to your mortgage’s interest rate. That return could be higher than you can get with high-quality bonds.

Truths

NO. 10: WALL STREET always strives to look its best. To ensure mutual fund expenses and advisory fees appear small, they’re expressed as a percent of the dollars we invest, not as a percent of our likely gain. To make their results appear more impressive, money managers pick their benchmark indexes carefully and use cumulative return “mountain” charts.

Think

LONGEVITY RISK. Spending down a retirement portfolio is tricky: You don’t know how long you will live—and hence there’s a risk you’ll run out of money before you run out of breath. To fend off that risk, limit annual portfolio withdrawals to 4% or 5%, delay Social Security to get a larger check and consider an immediate annuity that pays lifetime income.

Money Guide

Start Here

Identity Theft

IDENTITY THEFT OCCURS when someone uses your name, address, Social Security number and other personal information to borrow money, open a credit card account, take out a loan or commit fraud in some other way. To guard against identity theft, take the usual precautions: Don’t give out financial information to anybody who calls. Ignore emails that seek account information and never click on embedded links. If you think a call or email could be legitimate, phone the financial institution involved using a number you dig up, not one provided by the caller or in the email. Use strong, complicated passwords—and don’t use the same password for every account. Don’t access sensitive information from a public computer. Also regularly review the activity on your credit card statements and in your financial accounts. Become concerned if you receive a bill from a company you don’t recognize. That may mean someone has opened an account in your name. In addition, be concerned if you receive a letter saying a loan application has been rejected. That could indicate someone is trying to use your identity to borrow money. What if you believe you're a victim of identity theft? Contact the companies where accounts have been opened and ask that they be closed. File a report with the Federal Trade Commission and call the local police to report the crime. Place a fraud alert on your file at the three major credit bureaus. To find out how, go to Equifax.com, Experian.com and TransUnion.com. If you place an initial, 90-day fraud alert in your file at one credit bureau, that bureau should notify the other two bureaus. You might even consider freezing your credit. To learn more about identity theft, check out the Federal Trade Commission’s site at Consumer.FTC.gov. Next: Protecting Yourself Previous: What Won’t Hurt Articles: Identity CrisisAn Ode to OwingTax Time Robbery and Keeping It Private
Read more »

Voices

What should be the top priorities for those in their 20s?

"Start a Roth IRA and max it out every year. Let compound interest do the rest for you. I followed my dad's advice and started an IRA with Vanguard as soon as I began working, started a Roth when it became available, converted my regular IRA over to a Roth when the opportunity was offered to pay the taxes over several years and I've never looked back. I now have 7 figures going strong, spread over just five accounts, and not too many worries after nearly 40 years of letting it ride. That's the bottom line in terms of financial advice. The rest of the story is this: use your head and be sensible (if you're going to college, get a degree worth having; mine was in engineering, and it's served me well); be generous and support the causes you believe in along the way (and the people you meet who need help); never live extravagantly, and pay your bills on time because good credit is important (translation: I don't drive a Porsche or live in a mansion, but I have a nice car and a comfortable home); and last but not least, tithe (because it's all His anyway). ;)"
- Ronnie Rawls
Read more »

How has your financial thinking changed over the past year?

"That my Excel skills are now like my Dads “back of the napkin math.”   Between phase-outs, shifting tax brackets, sunset provisions, SS, ACA, FPL limits, Medicare IRMMA lookbacks and RMD age extensions Congress and the IRS have made navigating retirement finances a game of 3Dchess.  Much more difficult than buying cap-weighted index funds for 30 years and letting it ride! "
- TechnoPeasantx
Read more »

What’s the best way to collect and use credit card rewards?

"Read the fine print. I recently got into the rewards game due to my long-standing favorite credit card (Citibank 2% Cashback) asked me to participate in a known scam behavior "I'm going to send you a text and you read the code back to me". The text arrived "customer support will never ask you for this number". And I had just read an article about how scammers login as you and then they are off to the races before you can figure out what happened. I've been playing around with the credit card of the month, mostly because different cards are less than truthful about how their rewards program works. X1 is the worst - they say they do 3% (as long as you meet the minimum purchase requirements, which is easy for us to hit), but you can't actually get 3% out unless you buy from certain stores, so it really comes out to 2.1%, and you have to deal with their app (no website access). And they didn't have monthly statements until recently. Their "boosts" make it a little better, but to make the most use of those, everyone in the household has to have the app (and have a smart phone) to make use of it. We're enjoying the 10% can back Discover card, though that is only for the first year, but I think we'll keep the 5% rotating categories, and I just recently signed up for a Venmo 3% in the top category that it chooses for me based on my spending, 2% in the second category and 1% everywhere. It doesn't allow authorized users, so that might be a deal breaker, as then everyone needs to get their own account, etc. Capital One has a simple 3% for groceries and a couple other categories. We also did some hotel and airfare "temporary" cards for their sign-on bonuses. My wife isn't happy with all the accounts, so we're trying to consolidate."
- Jon Daley
Read more »

Second Look

Retirement

Brave New World

I MAY BE THE POSTER child for the new retirement, switching back and forth between standard employment and side gigs, as I seek work that I find fulfilling. I’m not alone: It seems many people are retiring earlier than they planned and then working part-time, moving in and out of the workforce based on need and opportunity.
The annual Retirement Confidence Survey from the Employee Benefit Research Institute (EBRI) shows that—while workers expect to retire at age 65—the median retirement age is actually 62.

Read more »

Family Finance

Matter of Degree

YES, EDUCATION is invaluable. But should young adults go to college to obtain a piece of paper that may mean little in the real world? Is the student debt we hear so much about really worth it? Could pushing college attendance for all be as misguided as pushing homeownership for all?
I’m not against formal education. I put four children through college. In fact, I believe parents are obligated to cover their children’s college costs,

Read more »

Investing

Ominous Predictions

IN A NOTE TO CLIENTS last week, Deutsche Bank analysts wrote that they expect a “major recession.” What should you make of ominous predictions like this?

First, don’t panic. Yes, Deutsche Bank is a big institution. But it’s worth noting that last week two equally prominent institutions also weighed in—with a different point of view. Goldman Sachs argued that a recession is “not inevitable.” UBS wrote that, “We do not expect a recession.” They can’t all be right.

Read more »
Home Call to Action

Lists

Control What You Can

ASK NOT WHAT THE markets can do for you. Ask what you can do for your portfolio.
After 15 turbulent months for stocks, many folks feel they’re at the mercy of the financial markets. But in truth, we’re far from powerless. We may not be able to control the direction of share prices. But here are seven crucial financial levers over which we have a lot of control:
1. We can figure out how much cash we’ll need from our portfolio over the next five years,

Read more »

Mindset

Why We Try

BEATING THE STOCK market over the long term is no mean feat. Only a tiny proportion of investors—professional or otherwise—manage to do it. So why do so many people think they can?
Meir Statman, a finance professor at Santa Clara University, cites eight key reasons. In a new monograph titled Behavioral Finance: The Second Generation, he slots these reasons into two broad categories—five cognitive and emotional errors, followed by three expressive and emotional benefits:
1.

Read more »