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Overconfident investors trade too much, damaging their returns. But heartened by their brokers’ applause, they courageously carry on.

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Lessons Learned Along the Way

"Same, as well as dangling modifiers and objects of prepositions, but I’m pretty sure it’s never gotten me anything :-)"
- Michael1
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The cost of foreign taxes on returns

"Matt, this is the reason why you CPAs get the big bucks. Thanks for posting."
- Dan Smith
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When to Leave Your Portfolio Alone

"Strikes me as simple actionable advice. To make it even simpler, don’t have any allocation targets as low as 4% to anything :-)"
- Michael1
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The Price of a Cool Pillow

"The noise is thoroughly aggravating, Mark... but worth it when it's 25 degrees C at 2AM. A small price to pay for not waking up in a pool of sweat. Argh."
- Mike Gaynes
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What’s in your portfolio ?

"In the KISS approach I’m guessing TIPS are not included…just a broad bond fund (e.g., BND)?"
- Andy Morrison
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Billy’s Certificate – 1937

"Thanks for this update. I was getting mildly worried about the over-weight in the Mag7 myself. Good to know that the lower 493 are pulling the wagon this year."
- Terry Wawro
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How do you prepare for the long term care cost as retiree?

"Ken, Just be aware it is more advantageous to utilize traditional IRA dollars to pay for long term care because you can deduct the medical portion on your taxes that exceeds 7.5% of your income. Since you pay no income tax on Roth withdrawls you lose that benefit."
- DavidHLancaster
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TSP G Fund as the only Fixed Income Investment

"Thanks Eddie. Fortunately I only use the TSP for the G Fund and keep my equities elsewhere so the “pro rata” distribution restriction won’t pose a problem for me."
- Mark Ukleja
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Still Teaching

"Rick, same understanding here — and I was actually corrected on this exact point in a comment I made here a while back."
- Mark Crothers
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Mourning the World

"Thank you for your writing, Jonathan. I'm hoping that there are unimaginable joys for you now. And that you'll be reunited with all those you love."
- Sharon Pichai
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Lessons Learned Along the Way

"Same, as well as dangling modifiers and objects of prepositions, but I’m pretty sure it’s never gotten me anything :-)"
- Michael1
Read more »

The cost of foreign taxes on returns

"Matt, this is the reason why you CPAs get the big bucks. Thanks for posting."
- Dan Smith
Read more »

When to Leave Your Portfolio Alone

"Strikes me as simple actionable advice. To make it even simpler, don’t have any allocation targets as low as 4% to anything :-)"
- Michael1
Read more »

The Price of a Cool Pillow

"The noise is thoroughly aggravating, Mark... but worth it when it's 25 degrees C at 2AM. A small price to pay for not waking up in a pool of sweat. Argh."
- Mike Gaynes
Read more »

What’s in your portfolio ?

"In the KISS approach I’m guessing TIPS are not included…just a broad bond fund (e.g., BND)?"
- Andy Morrison
Read more »

Billy’s Certificate – 1937

"Thanks for this update. I was getting mildly worried about the over-weight in the Mag7 myself. Good to know that the lower 493 are pulling the wagon this year."
- Terry Wawro
Read more »

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

"Ken, Just be aware it is more advantageous to utilize traditional IRA dollars to pay for long term care because you can deduct the medical portion on your taxes that exceeds 7.5% of your income. Since you pay no income tax on Roth withdrawls you lose that benefit."
- DavidHLancaster
Read more »

Free Newsletter

Get Educated

Manifesto

NO. 39: WE SHOULD worry less about dying early in retirement—and more about living longer than we ever imagined. Faced with that risk, we might delay Social Security and buy lifetime income annuities.

Truths

NO. 80: RETIREMENT should be your top priority, ahead of saving for a home or the kids’ college. Why? Retirement costs far more, so you need decades to amass enough, plus you should always fund a 401(k) with an employer match. There also aren’t loans available for retirement, as there are for college and home purchases, except for costly reverse mortgages.

think

SHORT-TERMISM. To have a bright financial future, we need to save diligently and invest for the long haul. Yet often we think only of today, leading us to spend and invest impulsively. What to do? Try waiting a week before acting on major spending and investing decisions, while also visualizing how great it’ll be to achieve our long-term goals.

act

TAKE STOCK of your bonds. Our financial lives are chock-full of bond lookalikes, including our paycheck, Social Security and any defined benefit pension—all paying us regular income now or in the future. Set against this income is a big income drain: our debts. Result: Our finances may be more or less risky than our bond position alone suggests.

Final Book

Manifesto

NO. 39: WE SHOULD worry less about dying early in retirement—and more about living longer than we ever imagined. Faced with that risk, we might delay Social Security and buy lifetime income annuities.

Spotlight: Cars

Connor suffers from new car envy

My 2014 Honda Accord hit 10 years recently. It has 97,000 miles. It still runs well; cosmetically it is average.  I use it as a 2nd car. We use my wife’s 2022 Honda Pilot for the majority of our driving. It’s a fine car, but not exciting.
I bought this Accord when I was driving from Valley Forge, PA to northern VA frequently. But that stopped after a few years when my company role changed. I probably put on half the mileage in the first two years.

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Car talk- Quinn likes friendliness

What do you look for when buying a car? Quality, reliability, safety features, good mileage? Yup all that plus I like technology and friendliness.
My new car has more cameras than Kodak. When I use the navigation it shows a live image of the turn so it’s hard to miss. It uses the cameras to find a space and park itself. If I get lost I just say, “Take me home.”
When I start the car it says,

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It Also Has Wheels

WE’VE OWNED OUR NEW 2023 Toyota Highlander Hybrid for six weeks. The technology and features are breath-taking. Until now, both of our vehicles were 18 years old. I feel like Rip Van Winkle, waking up in a time I do not recognize.
Here are some of the bells and whistles on our new SUV, and my evaluation of their usefulness. Please forgive me if some of this information isn’t accurate; I’m still learning about these features.

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Driving a Bargain

“NEVER BORROW MONEY to buy a depreciating asset.” This personal finance tip is often used to dissuade folks from taking out car loans. But does a car really leave folks poorer?

When we value an asset, it’s typically thought of as its dollar value on a balance sheet. The monetary value of my car might indeed decline, and quickly at that, but it has far more usefulness than my personal balance sheet shows. When I consider my car’s true value,

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Getting Used?

IN THE PAST, WE’VE always bought certified preowned cars. We know new cars lose a big chunk of their value when you drive them off the lot, so we had our eye on a used car when we started our search earlier this year.
Our goal was a Mercedes Benz GLC 300 AWD 4MATIC. My husband enjoys the negotiating and drama that comes with buying a car, so he investigated choices, checked out prices at dealerships and was ready to start his usual two-to-three-month car hunt.

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Our Chosen Road

CONSUMER REPORTS and other authorities will tell you that you get the greatest value for your car-buying dollar by purchasing a two- or three-year-old vehicle. They also often recommend selling your current car after you’ve owned it for about seven years.
We favor a different strategy—one that suits our family but certainly isn’t for everybody.
My wife’s No. 1 priority is that her vehicle be reliable. She insists that every time she gets in the car,

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Spotlight: Friedman

Lighten the Load

WE SPEND TOO MUCH time thinking about what’ll make us happy. We’re always looking for the next high. This morning, we plan our Starbucks coffee in hopes it’ll somehow makes us feel happy. If that doesn't work, we look for something else, perhaps lunch at a nice restaurant or a weekend getaway to a favorite location. Don't get me wrong: There’s nothing wrong with trying to find happiness with these types of experiences. But I think we’re missing the other half of the happiness equation: We should also focus on what makes us unhappy. I have to admit, I'm kind of a "glass half-empty" person. Maybe I focus on the pessimistic side of life too much. But it doesn't hurt to take a daily inventory and ask yourself, “What are some of the unpleasant things in my life that I'd like to offload?” I think that, if we spent more time trying to eliminate the things that make us unhappy, we could lead more satisfying lives—an idea that’s backed up by academic research. Do you ever wake up in the morning and think about all the unpleasant projects that are on your plate? Fixing the leaky faucet, painting the living room, cleaning the house, mowing the lawn and countless other unpleasant experiences all have the potential to ruin your day. If we spend our money on offloading these nagging projects onto someone else, our daily lives would be enriched. We’d also have more time to enjoy the things that do make us happy. I spent much of one day trying to fix a leaky 40-year-old outdoor faucet. I explored every hardware store in town looking for the right size washer to fit this obsolete fixture. After finally finding a washer that barely fit, I said, “Never again.” I'm not going to…
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Better Than Ever

MY WIFE WENT TO New York for five days with a friend. I don’t mind because I could use the rest. Over the past year, we’ve traveled from the West Coast to Europe three times, flown across the country to visit my sister and brother-in-law in Tennessee, and taken a number of car trips. My wife loves traveling and has a lot of energy. Because of all the air miles she’s logged, she’s now qualified for United Airlines Premier Gold status. She can board the plane early and get a free economy-plus seat with extra leg room. These benefits also apply to me when we’re traveling together. If we were a younger, working couple, I might not be as enthusiastic about my wife traveling with her friends, while I’m doing my own thing. But we still have plenty of quality time together and, at our age, I like that she has friends she can turn to if something happened to me. There’s also an age difference between us. At 73, I’m six years older than Rachel. That might not sound a lot when you're in your 40s or 50s. But as you grow older, that six-year gap can seem significant. I realize there’ll come a time when I might not be able—or willing—to keep up with my wife. I walk about seven miles most days, do weight-bearing exercises and try to make good food choices. But there’s only so much you can do to slow down Father Time. You can hit a wall where your mobility declines fairly quickly. After my father passed away, I would take my mother to Georgia to visit her family. We would fly into Atlanta, which is a large airport. It required quite a bit of walking to get to the rental car agency. But…
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A Bridge to My 70s

WHEN I RETIRED IN 2009, I had two main goals: I wanted to buy a used Volkswagen van—and I didn’t want to touch the money in my tax-deferred retirement accounts. Instead, I wanted to let that money compound for as long as possible. What was so important about the VW van? When I was growing up in the 1960s, those vans were a symbol of freedom. While I was in college, I remember a friend spending most of his days surfing. He lived out of his van and worked a few odd jobs whenever he needed money. I admit it, I envied him. The vans were also emblematic of a nomadic lifestyle. That’s what I wanted to do when I retired—travel from one place to another. I was planning to load a VW van with an air mattress, sleeping bag, cooler and a few other belongings. I didn’t particularly care where I was going. I just wanted to go. Unfortunately, things didn’t work out as planned. A few months after I retired, my father was diagnosed with cancer. Later, I became a caregiver for my mother. Then I married a lovely lady who has no desire to sleep in a van while crisscrossing the country. I must confess, now that I’m older, roughing it in a van doesn’t sound so appealing to me, either. I had better luck with my other retirement goal: leaving my tax-deferred retirement accounts untouched. My plan was to live solely off my taxable investment account during my early retirement years. I had a good chunk of money in a Vanguard Group account. Even though I was only age 58, I thought that money could last me until I started taking my first required minimum distribution (RMD) from my retirement accounts in the year I turned age…
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Finding Your Balance

If I were 40 years younger, I might be rattled by the stock market selloff on Thursday, the day after the President's tariff announcement. Back then, I was living in a studio apartment above a garage on an alley, trying to make ends meet while saving to buy a home. My investments were mostly in the U.S. stock market and cash. Today, Rachel and I find ourselves in a different place. We're a retired couple whose house is paid off, and our investment portfolio doesn't only consist of U.S. stocks; we also own plenty of bonds and international stocks that helped cushion the selloff yesterday. Our broad-diversified portfolio of 45% stocks, 45% bonds, and 10% cash will never earn us bragging rights in the investment arena, but it does give us a steely spine in times like this. I’m not advocating for an asset allocation like ours because we all have different financial goals, time horizons, and risk tolerances. But this old-fashioned approach of investing in low-cost, diversified index funds spread across U.S. stocks, international stocks, and bonds seems to have worked for us over the years. I don’t think anyone knows how long this economic upheaval will last, but I do believe we have enough cash and high-quality bonds to ride out this stock market downturn. More importantly, I sleep well at night. At age 73, I realize there are other things in life that can be more unsettling than the horrendous selloff we just experienced. Losing your health or a loved one can put things in perspective when facing a down market, especially when holding on to diversified investments usually doesn’t result in a loss. I admit we did make one emotional decision before the tariffs took effect. We sped up the purchase of a laptop computer and…
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Are We There Yet?

PREPARING FOR retirement is like running a marathon. It requires dedication, discipline and endurance. But there’s also a crucial difference. When you cross the finish line in a marathon, you know the race is over. But when you quit the workforce, it’s much harder to figure out whether you’ve successfully reached retirement. Why? A happy and prosperous retirement is about money, but it’s also about so much more than money. Here are 15 signs that a wonderful retirement likely lies ahead: You don’t need an online calculator to tell you that you have enough money, because it’s so obvious you can do the math yourself. Your Social Security benefit will cover your fixed living expenses—and you can afford to wait until age 70, so you get a larger check. Your Social Security and required minimum distributions from retirement accounts will together cover all your expenses, discretionary and nondiscretionary. You don’t pay attention to the stock market’s daily movements, because you’re confident you have enough, pretty much no matter what happens. You decide to get a part-time job not because you have to, but because you want to. You have a spouse or significant other who does little things, like straighten your shirt or hold your hand, to let you know that he or she will be there for you to the very end. Your adult children visit you not to borrow money or drop off the grandkids, but to say “hello” and ask how you’re doing and if you need anything. You wake up in the morning thinking it’s Thursday and you need to rush to meet Diane and Stan for breakfast. But a few seconds later, you realize it’s only Wednesday and you have a lunch engagement with Cindy and Steve. You turn 65 and enroll in a Medicare prescription drug plan.…
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Why I Own Bonds

SOME INVESTORS TODAY are avoiding bonds because rising interest rates could cause the price of bonds to fall. I’m not one of them. Bond funds continue to play a significant role in my investment portfolio. Here are eight reasons I’m sticking with my funds: This isn’t a good time to sell. Bonds have already factored in the market’s expectation that rates will rise. Interest rates have climbed this year, causing a decline in bond prices. It may be too late to gain any benefit from changing my asset allocation. There’s no better fixed-income alternative. Bonds have better yields than money market funds. Certificates of deposits have liquidity issues—there’s a penalty for early withdrawals. That penalty can mean forfeiting all the interest you’ve earned. Today’s higher bond yields mean greater interest income. Even if interest rates continue to rise, reinvesting my interest payments allows me to take advantage—and should boost my returns over the long term. Having bonds in my investment portfolio is a good way to reduce volatility and risk. When stocks fell almost 16% from January through March 2020 because of the COVID-19 pandemic, bonds worldwide returned just over 1%. I’d rather own a bond fund than buy individual bonds. I’d have to own a large number of bonds to achieve the diversification that I get with my bond funds. Also, it would take a lot of time and effort to research and manage those individual bonds. As a retiree who depends on his investment portfolio for income, an all-stock portfolio would be too risky. Maybe most important, thanks to my bonds, I sleep better because I’m less bothered by the ups and downs of the stock market.
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