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Do retirees really struggle financially? Why and what to do?

"Does pre retirement spending accurately predict retirement spending?"
- R Quinn
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What Bangladesh Taught Me About Enough

"Thank you Cindy for taking the time to comment. And yes kindness is free, a simple hug will brighten a persons day and also fill your heart."
- Andrew Clements
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Fixing Social Security once and for all

"Social security, on its face (or in theory), is indeed supposed to serve as insurance for lower-income workers. However, in practice, it takes a larger bite out of the earnings of lower income workers and is therefore regressive in the sense of taking a bite out of their utility. While one could argue that lower-income folks get proportionately greater returns, any reasonable adjustment for longevity wipes out that advantage. (There is a strong positive correlation between income and age of death.) My comment reflects these realities. In short,
  1. Increasing the FRA disadvantages the poor more than the rich because the former die earlier (on average).
  2. Increasing the rate also disadvantages the poor because they lose a larger chunk of their income and every marginal dollar is worth more to them.
Increasing the cap would address both these concerns without imposing additional costs on the lower-income folks. All of the incremental costs accrue to folks making over $400K a year."
- ram bala
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One Good Call?

"What a great example. Now I want Peking Duck for dinner! As far as financial advice goes, I tend to agree with your philosophy... but only if the client is truly an educated DIYer. As I have said in numerous other posts, the level of financial ignorance present in the US population is borderline abysmal. After spending 15 years in academia and 3 decades in financial services, I never cease to be amazed by how many people know so little about how money works, and specifically, how to manage their own financial situation. You have to admit, most HD readers do not fall into that category."
- Mike Lynch
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Social Security Survivor Benefits for Spouses

"You are correct can only claim own benefit. Can claim reduced survivor benefit now or wait to FRA to maximize it."
- James McGlynn CFA RICP®
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The IRA Decision That Affects Your Kids

"I looked up the article, and wow, that’s complicated. We have an estate attorney, a trust (that then flows into our daughter’s trust once we’re both gone), and a local fiduciary as the successor trustee, so she’ll have all the advice she needs. If I’m understanding it correctly, a key variable that’s hard to predict is whether you/your spouse dies before RMDs are required. Once that happens, it seems like most decisions are already made. I guess if the surviving spouse disclaims the inherited IRA, that changes the time line a bit. But I wonder how many people are really in a position to do that. Makes my head hurt. https://www.morningstar.com/personal-finance/ira-decision-that-affects-your-kids"
- DrLefty
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Recency Bias (or: You’re Running Buggy Software)

"I loved your comparison of the psychology of investors with software, Mark!"
- Mark Gardner
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Buying and Selling our Condo (Our Big “Little” Move, Part 2)

"Our agent has been amazing. Not only did he help us make great deals on both ends, but everyone he’s recommended, from a mortgage broker to a contractor for repairs to our remodeling firm has been first rate. What a pleasure to have a real professional just handle things. When our purchase closed last week, he came over with a bottle of wine, chocolate, and several generous gift cards for a “date night”—movie theater, our favorite restaurant in town, the local bookstore. We were pretty blown away."
- DrLefty
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Nothing Like a War To Bring Folks around to Personal Financial Planning

"I like the concept "Pay yourself first". When I started practicing I set my savings rate and this determined what I could spend. This plan was simple, easy to stick with and effective. Some years later I tracked my expenses for a while and noticed that while my overall spending was under control, the amount spent proportionately on certain areas was not what I would have preferred. So I implemented a spending plan, or budget which improved the efficiency of my spending. Like any tool, a budget can be used wisely or otherwise."
- Jack Hannam
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Penny Wise, Pound Foolish

"Most likely it’s the level of the state gas taxes. That has a great deal to do with gas prices from one state to another. In certain regions bulk gas is the same per gallon. As an example most of the gas in that region is probably refined in the Delaware river port areas. The stations then have to add their mark up and in addition their state gas tax per gallon. OOPS, missed Howard’s post below."
- David Lancaster
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Avoid the noise, buy the market and stay invested

"Alan, As to your title the S and P hit an all time high yesterday and never reached correction territory. I fear for what some investors will do when another bear returns. To quote another Jack Bogle, “Don't just do something, stand there!” As for me I used the drop in the market to move forward a few months of Roth conversions incrementally at a lower valuations. During the COVID drop I did the same buying incrementally as the market dropped. The lesson learned is market drops it creates opportunities to take advantage of. The key is not to try to figure out when the market hits bottom but to make small incremental changes as it swoons."
- David Lancaster
Read more »

Do retirees really struggle financially? Why and what to do?

"Does pre retirement spending accurately predict retirement spending?"
- R Quinn
Read more »

What Bangladesh Taught Me About Enough

"Thank you Cindy for taking the time to comment. And yes kindness is free, a simple hug will brighten a persons day and also fill your heart."
- Andrew Clements
Read more »

Fixing Social Security once and for all

"Social security, on its face (or in theory), is indeed supposed to serve as insurance for lower-income workers. However, in practice, it takes a larger bite out of the earnings of lower income workers and is therefore regressive in the sense of taking a bite out of their utility. While one could argue that lower-income folks get proportionately greater returns, any reasonable adjustment for longevity wipes out that advantage. (There is a strong positive correlation between income and age of death.) My comment reflects these realities. In short,
  1. Increasing the FRA disadvantages the poor more than the rich because the former die earlier (on average).
  2. Increasing the rate also disadvantages the poor because they lose a larger chunk of their income and every marginal dollar is worth more to them.
Increasing the cap would address both these concerns without imposing additional costs on the lower-income folks. All of the incremental costs accrue to folks making over $400K a year."
- ram bala
Read more »

One Good Call?

"What a great example. Now I want Peking Duck for dinner! As far as financial advice goes, I tend to agree with your philosophy... but only if the client is truly an educated DIYer. As I have said in numerous other posts, the level of financial ignorance present in the US population is borderline abysmal. After spending 15 years in academia and 3 decades in financial services, I never cease to be amazed by how many people know so little about how money works, and specifically, how to manage their own financial situation. You have to admit, most HD readers do not fall into that category."
- Mike Lynch
Read more »

Social Security Survivor Benefits for Spouses

"You are correct can only claim own benefit. Can claim reduced survivor benefit now or wait to FRA to maximize it."
- James McGlynn CFA RICP®
Read more »

The IRA Decision That Affects Your Kids

"I looked up the article, and wow, that’s complicated. We have an estate attorney, a trust (that then flows into our daughter’s trust once we’re both gone), and a local fiduciary as the successor trustee, so she’ll have all the advice she needs. If I’m understanding it correctly, a key variable that’s hard to predict is whether you/your spouse dies before RMDs are required. Once that happens, it seems like most decisions are already made. I guess if the surviving spouse disclaims the inherited IRA, that changes the time line a bit. But I wonder how many people are really in a position to do that. Makes my head hurt. https://www.morningstar.com/personal-finance/ira-decision-that-affects-your-kids"
- DrLefty
Read more »

Recency Bias (or: You’re Running Buggy Software)

"I loved your comparison of the psychology of investors with software, Mark!"
- Mark Gardner
Read more »

Buying and Selling our Condo (Our Big “Little” Move, Part 2)

"Our agent has been amazing. Not only did he help us make great deals on both ends, but everyone he’s recommended, from a mortgage broker to a contractor for repairs to our remodeling firm has been first rate. What a pleasure to have a real professional just handle things. When our purchase closed last week, he came over with a bottle of wine, chocolate, and several generous gift cards for a “date night”—movie theater, our favorite restaurant in town, the local bookstore. We were pretty blown away."
- DrLefty
Read more »

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Get Educated

Manifesto

NO. 13: FACED with an unknown future, we should diversify our investments, buy insurance, keep some cash—and accept that, in retrospect, these precautions will often seem unnecessary.

Truths

NO. 22: MONEY BUYS happiness, but this could be partly explained by a focusing illusion: When asked about their happiness, the wealthy ponder their good fortune, prompting them to say they’re happy. Moreover, research suggests happiness doesn't rise in lockstep with income. Instead, as our income increases, it takes more and more dollars to boost our happiness.

think

SIGNALING. How we spend and invest our money often has less to do with what we want—and instead it's driven more by the signals we want to send to others. Owning a hedge fund signals we’re wealthy. Driving a Prius signals we’re concerned about the environment. Going to a classical music concert tells our friends that we’re cultured.

act

PONDER WHEN to claim Social Security. Start with Mike Piper's calculator. Many folks are inclined to claim benefits as soon as they retire, but often it makes sense to wait until as late as age 70. To understand why, learn more about Social Security, including the advantages of delaying and the different strategies that couples might use.

College-bound kids?

Manifesto

NO. 13: FACED with an unknown future, we should diversify our investments, buy insurance, keep some cash—and accept that, in retrospect, these precautions will often seem unnecessary.

Spotlight: Estate Plan

The predatory nature of T. Rowe Price (TRP) when trying access to my parents assets

Below is a copy of a review I left on trust pilot. It’s hardly any consolation that I was not the only person to experience their deceptive tactics. See link below: (https://www.trustpilot.com/review/troweprice.com)
This review is in response to T.Rowe Price’s (TRP) concerted efforts to prevent me from getting access to my parents assets after their passing. As an executor and trustee I had full and legal rights to these funds. My estate attorney was “quite frankly ASTOUNDED” by their refusal to share information with me in spite of my status of trustee.

Read more »

The Status of Inherited IRAs in 2025

Here is the link to Christine Benz of Morningstar interviewing Ed Slott, who many consider THE expert in the country on the IRS’s interpretation of IRA laws/rules for 2025.
Ed is a gold mine of information as to how to decide on whether to convert traditional IRAs to Roths, and it’s effect on your beneficiaries.
https://app.mscomm.morningstar.com/e/er?utm_source=eloqua&utm_medium=email&utm_campaign=MorningDigest&utm_content=None_62004&utm_id=32087&s=1258972516&lid=91893&elqTrackId=894e84e4e6dd4e4ea71a9bc97420afd2&elq=c1c50cb96d48485491b4d81fbe5a229d&elqaid=62004&elqat=1&elqak=8AF55770D8A5B2AC19A42DE86CB56351215EDD04764F052A1F72EA4FA79B9C459194

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Exit Strategy

IF YOU’RE LIKE ME, you aren’t eager to spend down your investments. What fun is that? Aren’t you curious to see how big your portfolio could grow? Of course, you are.
After my wife and I are gone, my son will have dibs on the money we’ve amassed. We’ve set up a special needs trust to provide him with income when we’re no longer around. My son has no siblings, so we needed the trust to make sure he’s taken care of.

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Tempus Fugit, Vol II

Last month, I wrote about a spate of funerals my wife and I attended.  Since then, I recently found out that a close friend and colleague in his early 60s was diagnosed with a “butterfly glioblastoma,” a rare and aggressive form of brain tumor. It’s a recent diagnosis, and his treatment plan is being finalized. A few friends and I drove an hour and a half to take him out to lunch earlier in the week,

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When to share estate plans and net worth with your adult children

My husband and I are in our early 70s and have been retired for 5+ years. Our net worth is significant and we are fortunate to have a generous retirement income and lifestyle.  Our adult children are in their 40s,  have good incomes and various retirement benefits. Is there a good, better, best time and way to share our estate plans, net worth or other details about our future plans with your adult children?

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One Life to Live

DURING A GATHERING of retired friends, the topic of wills came up. Many had completed their wills and had their finances in order, while others were working on updating their wills. But there were several who hadn’t even started thinking about it. One of them said, “As a retiree, I’m just starting to enjoy my freedom and have some fun. It’s too stressful to think about death. I’ll get to it someday.”
As you might imagine,

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Spotlight: Kesler

Ignoring the Rules

ONE HALLOWEEN, SOME of my teenage buddies and I were having a great time throwing water balloons at trick-or-treaters. It was a lot of fun—until we got caught. After getting hauled down to the police station for a lecture, and then receiving another one when I got home, I’ve been pretty much on the straight and narrow ever since, including when it comes to money. Over the years, I’ve discovered various tried-and-true rules of investing and those have been the keys to my success. In my personal Investor Hall of Fame, I’d include Warren Buffett for his lessons on patience and the value of letting compounding work to your benefit. I’d also include Burton Malkiel for the classic he authored, A Random Walk Down Wall Street. It taught me that the markets were so efficient that I’d be better off buying index funds than individual stocks. And, of course, there would be a place for Vanguard Group founder John Bogle, who made it possible to follow Malkiel’s advice by creating the low-cost index fund. These wise sages, along with others, provided me with the rules needed to succeed. But despite my reverence for time-tested wisdom, I give myself a little wiggle room. Most of us can’t always invest like robots. Sometimes, we want to do something with our money that doesn’t follow the established rules for investment success. A popular compromise: Set up a “fun money” account. I allow myself to play with 5% or 10% of my portfolio. Here are four examples of how I’ve had fun by not following the rules. 1. I’m a little embarrassed to admit that I have a position in bitcoin. Crazy? Yes, I know. Buffett calls it “rat poison squared.” But even Buffett gets some things wrong. It isn’t unusual in the history…
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Say No to FOMO

I’VE LATELY FACED one of the investment world’s greatest dangers: It’s called FOMO, or fear of missing out. If you pay attention to the financial news, you may be wrestling with this one, too. Let’s start with bitcoin. I’ve studied it, but never invested. I’ve got friends who own the digital currency. I’m thrilled they’ve been wildly successful. But you know how awkward you feel when somebody tells an inside joke that you don’t get? Similarly, it’s a lonely feeling when those around you are enjoying a phenomenal rise in wealth—and you’re missing out. I pulled up a chart as I type this. It shows that in the last 52 weeks bitcoin has surged from less than $10,000 to almost $45,000, an increase of some 350%. Or take a look at Tesla. I heard Elon Musk talk a few years ago and knew he was capable of great things. But I never saw the potential in Tesla. The company wasn’t making any money back then. Tesla is up 420% in the last 12 months. How should we deal with FOMO? Having lived through many market cycles, I have six suggestions. First, we need to be comfortable with who we are and what our goals are. I love entrepreneurs and the risks they take. But I have a confession: I never wanted to work 80 hours a week, like many entrepreneurs do. I love having a good work-life balance. And I don’t like concentrating my assets in one or two stocks, because I like to sleep at night. I’m thankful that the world has risk-takers like Elon Musk. When I heard him talk, he was leveraged to the point where he didn’t have any more borrowing capacity. To be less than “all in” might lead him to lose focus, Musk said. I…
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Labor Pains

I ALMOST MADE a waitress cry yesterday. It isn’t what you think. I didn’t yell at her for poor service. Quite the contrary. My wife and I went out for lunch at an Irish pub. I noticed the help wanted ad on the front door as we went inside. When it came time to pay our bill, I simply shared my heartfelt appreciation that she was willing to work and serve us in the midst of the current labor shortage. She teared up and told us how hard it is to offer good service when they’re short-staffed. I was so moved by her emotional reaction that I gave her a 30% tip. That’s a big deal for a frugal guy like me. I spent 40 years in banking working with Main Street businesses, but I’ve never seen anything like the current labor situation. And it isn’t just anecdotal evidence. We’ve set new records for job openings in each of the past three months. Labor shortages are disrupting everything. Banks are closing branches. New businesses are delaying opening. Restaurants are running at half-staff. Hospitals are losing nurses. In fact, nurses willing to travel are making more than $3,000 a week as contract laborers. It’s a mess. What should we do? I think about my dad and how he joined the army in the Second World War to fight fascism. He was a member of the Greatest Generation—a moniker they earned with their selfless giving. Perhaps we need some of that attitude for a time like this. Instead of asking how quickly we can retire, maybe we should ask how we can help even more. As we find our wait times growing, maybe we’ll once again view work not as a burden, but as a way to be of service to others.
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The Joy of Work

I’VE HAD SOME dreadful jobs in my life. I spent one summer putting metal plates under a huge press for eight hours a day. Once the plates were in the right position, I’d push some buttons that would cause the press to crash down and shape the metal into something useful. The goal was to work fast because that meant more pay. Some of the workers disabled the safety features so they could produce more widgets and earn extra money. It was a joyful day when I walked out of that factory for the last time with all 10 fingers still attached. Factory jobs made me appreciate landing a job in finance. The industry pays above-average wages, it isn’t back-breaking work and you get to use your brain to find creative solutions for customers. But even a cushy finance career came with some curses. Granted, they weren’t physical curses, but more mental in nature. For one thing, everyone in finance is focused on the money. As a result, I think there are more fights over salaries and bonuses than in other industries. Those experiences partly explain why I find retirement so liberating. And I’m hardly alone. In retirement, many of us can, for the first time, untether the value of our work from the paycheck it generates. The habit of thinking about work as something we do to make money is deeply ingrained. We can scarcely imagine what a Copernican revolution it is to evaluate work without considering the dollars involved. Are you enjoying financial freedom or hoping to get there one day? Here are four suggestions to help you rethink the relationship between work and money. First, take the idea that work is what we need to do to live, and turn it on its head. The goal is…
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Secret Sauce

I’VE READ A LOT OF retirement books touting the “keys to a successful retirement.” Some have great ideas. But I think they miss a key ingredient. My contention: To have a successful retirement, we need to start with a proper understanding of work. Admittedly, it’s a counterintuitive way of looking at retirement. But sometimes looking at a problem backward can help us find creative solutions. In other words, examine the opposite of retirement for lessons about retirement. To that end, ponder this: What is it about work that’s rewarding that we never want to lose—and, once retired, what is it about work that we want to eliminate? If you can answer those two questions, you’ll be well on your way to designing the ideal retirement. As I see it, work offers five rewards that we should strive to hang on to. First, it allows us to feel part of something bigger than ourselves. Many of us started our career with a vision of how we could change the world for the better. Teachers and health care workers epitomize this desire. For some people, this drive is a reflection of their faith. In many religious traditions, work is seen as a way to honor God, care for the world he created and help others to thrive. Meanwhile, non-religious folks often get a similar sense of satisfaction from their work, especially when they feel it helps others to prosper. In all cultures, we see this universal desire to contribute to society—a desire that typically doesn’t disappear when we leave the workforce. Second, I don’t think I’ve ever felt as alive as when I was fully engaged in creative learning at work. There’s something exhilarating when we have an “aha moment” and learn something new or find an innovative solution to a vexing…
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The Case for Kids

I RECENTLY HIT THE “pay now” button on what I believe will be the last of 20 years of college tuition bills. That’s right, we have five kids. All went to college. None took out student loans. Was it worth it—not just paying the tuition bills, but the decision to have children in the first place? It’s a pressing question. A birth dearth is hitting the U.S. and other countries around the world, as many adults opt to go childless. Today, roughly half of all countries have fertility rates that are so low that the population is either stagnant or shrinking. That brings me to today’s topic: the case for children. It’s a complex subject. I don’t want to suggest I know how others ought to decide. Everybody’s situation is unique and shouldn’t be judged by anyone else—and certainly not by me. Still, I think those of us with good stories about raising kids should share our experiences. We can balance out today’s narrative that children are more trouble than they’re worth. I remember the subtle pressure in the 1980s and ‘90s from others, as our family kept growing. Folks expressed concerns about having so many children. I suppose that, if you treasure a quiet and peaceful life above all else, having kids may not be a good idea. Children are messy and bring chaos. I remember answering the door, only to come face to face with our upset neighbor. He was a prominent doctor in the community and complained about my kids shooting at the deer in the backyard from our second story bedroom windows. “Thank you, Dr. Smith, for letting me know. I’ll take care of it.”  Ugh. But probably the greatest reason the U.S. no longer has a fertility rate necessary to maintain a stable population is related…
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