Saving for retirement is life’s toughest financial task. Generating retirement income is the trickiest.
ACCORDING TO OXFORD Languages, the word invest means to “expend money with the expectation of achieving a profit.”
I like this definition better than some others because it includes the word “expectation,” which therefore should exclude casino gambling and sports betting. But what if you have an expectation of winning? Couldn’t casino gambling and sports betting both be considered investments? As Zach Galifianakis’s character said in The Hangover, “It’s not gambling if you know you’re going to win.”
How can one create this expectation?
THEY SAY THAT TAKING a cruise is a poor man’s idea of a rich man’s vacation. As an unsophisticated traveler, all I knew of cruises were the glowing reports I heard from others who had taken them—and the romanticized versions I saw in the movies.
My aspirations were based on a movie I saw starring Doris Day, Romance on the High Seas. It’s about a glamorous, adventurous and romantic cruise with beautifully dressed people,
THIS IS MY FIRST article for HumbleDollar. I’m new to the site, but not new to writing for the public and, indeed, I’ve contributed regular columns to some small newspapers.
My life has had more twists and turns than going down a Kentucky country back road filled with hillbillies, of which I am one. Kentucky is either the poorest state in the country or next to it by any measure you want to look at.
PERHAPS YOU’VE SEEN charts like the one below, which comes from Dimensional Fund Advisors. The message: Investors who try to time the market in search of better returns often end up damaging their results. To many investors, this seems intuitive, because trading isn’t easy.
But to others, market timing appears to make a lot of sense. For instance, for years, Yale University professor Robert Shiller has been maintaining a measure of market valuation known as the cyclically adjusted price-earnings (CAPE) ratio.
I DON’T TRACK MY finances that closely and I don’t make big financial moves very often. Partly, it’s because I’m so busy with other things. But partly, it’s because I’ve come to see the virtue in benign neglect.
Still, this is shaping up to be a surprisingly busy year. I’ve taken a handful of financial steps—with three key goals in mind:
No. 1: Prepaying retirement. Like many others as they approach retirement,
NASSIM NICHOLAS TALEB has written a trilogy on the topic of chance: Fooled by Randomness, The Black Swan and Antifragile. I didn’t find these three books to be easy reading, plus Taleb has strong opinions, which may turn off some readers. Still, there’s a host of investment lessons to be culled from his works.
Taleb argues that randomness plays a powerful role in financial markets and,
MANY RETIREMENT savers fund tax-deferred accounts—with good reason: The money we contribute pre-tax to an IRA or 401(k) reduces our taxable income, plus that money grows tax-deferred until withdrawn.
But there are two lesser-known benefits that are worth keeping in mind. First, with IRAs and solo 401(k)s, you can contribute for last year right up until the tax-filing deadline in April of the following year. That means you can calculate your tax bill, make an IRA contribution that’s credited to last year—and voila—cut the tab you owe Uncle Sam.
MY FATHER-IN-LAW Carson was a stereotypical engineer—organized and precise. All four of his children know the motto “measure twice, cut once.” Carson applied these traits to his finances, which he managed on behalf of himself and Mary Jean, his wife. Mary Jean depended on this.
As they aged, Carson maintained his mental acuity, but he was the first of the two to deteriorate physically. Mary Jean was strong physically but slowly surrendered to Alzheimer’s.
I CAN’T TAKE IT ANY more: I need to rant about health care.
There’s absolutely no reason to continue the current health-care payment system, none, not one. Where’s the rationale for having private insurance, Obamacare, Medicare, Medicaid, TRICARE and the Children’s Health Insurance Program (CHIP)? Each was developed to deal with the same issue—paying for health care.
Some form of Medicare for all, or M4A as it’s sometimes known, is the only system that makes sense.
WE BEGAN IN 2019 to think seriously about what we wanted our retirement to look like. My husband had retired in 2018. I was aiming to leave my job in 2022. We were hoping to have a plan in place long before my final day of work.
Our first step was to decide where we wanted to live. We were both eager to escape the Pacific Northwest, so we zeroed in on a couple of potential destinations.
NO. 42: IT’S HARD to distinguish skill from luck. Suppose that, after all investment costs, there’s a 45% chance of beating the stock market each year. Over a dozen years, probability suggests that, out of a million investors, 69 “investment geniuses” would beat the market in all 12 years. But were these stock pickers truly skillful—or just very lucky?
BUY A USED CAR. While leasing or buying a new car may be alluring, purchasing a used one is usually the better financial choice. By buying a three-year-old car, you’ll sidestep the steep depreciation that new vehicles suffer, but the car should still have plenty of good miles ahead of it—and you should have ample choice, thanks to all the cars coming off lease.
FIXED COSTS. Our fixed monthly expenses include items like mortgage or rent, car payments, insurance premiums, utilities and groceries. The higher these costs, the less we’ll have for savings and for discretionary spending. The latter includes things like vacations, concerts, eating out and hobbies—typically the spending that brings the greatest happiness.
NO. 74: WHATEVER the nightmare scenario—recession, inflation, deflation—the answer’s the same: We need stocks to notch long-run gains, with enough bonds and cash to survive the rough spell.
DELAYING SOCIAL Security until age 70 will get you the largest possible monthly benefit, and that’s the right strategy for many retirees. But what’s right for many folks won’t necessarily be right for you—and you may want to file at 62, the youngest possible age, so you maximize your total lifetime benefit.
If you’re single with no dependents, you should probably file at age 62 if you’re in poor health or your family doesn’t have great genes,
IN AN EARLIER ARTICLE, I wrote about a catastrophic stock market loss that taught me—the hard way—about the benefits of diversification and the importance of managing my own investments. That loss derailed our plans to build a large and expensive home in the hills overlooking Austin, Texas.
We were heartbroken at the time. This had been our dream for several years. But it’s funny how life works out sometimes—and it may have been the best thing that ever happened to us.
I LOVE THE PRICE war among index-fund providers, because it puts pressure on all money managers to lower fees. But I don’t think investors should pay much heed to differences in annual expenses that amount to just 0.01% or 0.02% a year, equal to 1 or 2 cents for every $100 invested—and they certainly shouldn’t switch funds for those potential cost savings.
To check I wasn’t missing something, I set out to do apples-to-apples comparisons among index funds in four highly competitively segments of the indexing market: large-cap U.S.
I’VE BEEN READING about how people aren’t saving enough money, and how almost half of all Americans carry a balance on their credit cards. Looking to be more financially prudent? Here are 10 pointers on how to build wealth and gain financial security over your lifetime:
1. Save—for a reason. Saving money is the key to building a substantial portfolio. One secret to being a good saver: Have something worthwhile to save for. It might be homeownership or early financial independence.
MEIR STATMAN, a finance professor at California’s Santa Clara University, argues that financial decisions—like everyday consumer purchases—have three benefits: utilitarian (what it does for me), expressive (what it says about me) and emotional (how it makes me feel).
As we manage our finances, we insist our goal is strictly utilitarian, and that all we want to do is make money. But in truth, we often make decisions for expressive or emotional reasons—and these other motivations can hurt our stated goal of greater wealth,
NO. 74: WHATEVER the nightmare scenario—recession, inflation, deflation—the answer’s the same: We need stocks to notch long-run gains, with enough bonds and cash to survive the rough spell.
BUY A USED CAR. While leasing or buying a new car may be alluring, purchasing a used one is usually the better financial choice. By buying a three-year-old car, you’ll sidestep the steep depreciation that new vehicles suffer, but the car should still have plenty of good miles ahead of it—and you should have ample choice, thanks to all the cars coming off lease.
NO. 42: IT’S HARD to distinguish skill from luck. Suppose that, after all investment costs, there’s a 45% chance of beating the stock market each year. Over a dozen years, probability suggests that, out of a million investors, 69 “investment geniuses” would beat the market in all 12 years. But were these stock pickers truly skillful—or just very lucky?
FIXED COSTS. Our fixed monthly expenses include items like mortgage or rent, car payments, insurance premiums, utilities and groceries. The higher these costs, the less we’ll have for savings and for discretionary spending. The latter includes things like vacations, concerts, eating out and hobbies—typically the spending that brings the greatest happiness.
DELAYING SOCIAL Security until age 70 will get you the largest possible monthly benefit, and that’s the right strategy for many retirees. But what’s right for many folks won’t necessarily be right for you—and you may want to file at 62, the youngest possible age, so you maximize your total lifetime benefit.
If you’re single with no dependents, you should probably file at age 62 if you’re in poor health or your family doesn’t have great genes,
IN AN EARLIER ARTICLE, I wrote about a catastrophic stock market loss that taught me—the hard way—about the benefits of diversification and the importance of managing my own investments. That loss derailed our plans to build a large and expensive home in the hills overlooking Austin, Texas.
We were heartbroken at the time. This had been our dream for several years. But it’s funny how life works out sometimes—and it may have been the best thing that ever happened to us.
I LOVE THE PRICE war among index-fund providers, because it puts pressure on all money managers to lower fees. But I don’t think investors should pay much heed to differences in annual expenses that amount to just 0.01% or 0.02% a year, equal to 1 or 2 cents for every $100 invested—and they certainly shouldn’t switch funds for those potential cost savings.
To check I wasn’t missing something, I set out to do apples-to-apples comparisons among index funds in four highly competitively segments of the indexing market: large-cap U.S.
I’VE BEEN READING about how people aren’t saving enough money, and how almost half of all Americans carry a balance on their credit cards. Looking to be more financially prudent? Here are 10 pointers on how to build wealth and gain financial security over your lifetime:
1. Save—for a reason. Saving money is the key to building a substantial portfolio. One secret to being a good saver: Have something worthwhile to save for. It might be homeownership or early financial independence.
MEIR STATMAN, a finance professor at California’s Santa Clara University, argues that financial decisions—like everyday consumer purchases—have three benefits: utilitarian (what it does for me), expressive (what it says about me) and emotional (how it makes me feel).
As we manage our finances, we insist our goal is strictly utilitarian, and that all we want to do is make money. But in truth, we often make decisions for expressive or emotional reasons—and these other motivations can hurt our stated goal of greater wealth,
What do you wish your younger self knew?
What should you look for when buying a home?
How would you define "enough"?