Unpaid bills. Unprepared for financial emergencies. No retirement savings. No will. How’s that denial working for you?
EVERY YEAR, the NCAA basketball season concludes with the March Madness playoffs. Many Americans engage in bracketology—trying to figure out which teams will get knocked out in each round and which will advance. Warren Buffett even offers an annual bracket-picking challenge, where Berkshire employees can win $1 million a year for life.
This year, however, Americans with substantial retirement accounts might also want to try another form of bracketology: studying the 2017 tax law—and asking whether it offers a unique opportunity to convert hefty amounts of traditional IRA money to a Roth IRA.
AS I DRIVE around town these days, I notice a lot of cars with temporary license plates—an indication they were recently purchased. What’s the reason? When I turn on the TV, I see a commercial for a local car dealership that’s offering to accept your tax refund as the down payment on a new car. Now it starts to make sense.
The dealership knows consumers are about to receive an influx of cash. It wants to make it as painless as possible to buy a new car.
IN MY ROLE as a financial planner, I hear a lot of stories. By far the most appalling and upsetting relate to life insurance. All too often, insurance salespeople leave clients with policies that are simultaneously overpriced, inadequate and inappropriate.
Are you evaluating a policy? Here’s a quick summary of the most important considerations:
What type of coverage should I have? Life insurance comes in two primary flavors: term and permanent. Term insurance,
AS THE SAYING goes, “If you don’t stand for something, you’ll fall for anything.” So what do HumbleDollar’s readers stand for? What are the key principles that should govern how we manage our money? In recent weeks, I’ve been drawing up a manifesto for the site.
It’s a work in progress. I’ve included a dozen of the principles in our latest newsletter—and, in the months ahead, you’ll find further additions appearing every few days on the homepage.
THERE’S AN abundance of advice on how to plan for retirement. Oh, it’s good advice. But it’s also a bit complicated, often requires discipline and always necessitates actually doing something.
And let’s face it: Who needs advice? Who wants to actually do something? Here are 20 ways to ignore the experts—and wreck your chances of a financially comfortable retirement:
1. Keep thinking retirement is so far in the future that there’s no need to act now.
WHEN I TAUGHT economics, I would present students with the financial misunderstandings that people often have—and which the study of economics can help them avoid. Examples? Here are five widespread misconceptions:
Mistake No. 1: The rarer something is, the more valuable it is. Economics really doesn’t care about rare things—meaning those things that are few in number. Instead, economics deals with scarce things, which are things for which there’s greater demand than current ways to fulfill that demand.
IF YOU EARN $20,000, 55% of Americans would consider you poor, according to YouGov.com. But at $30,000, only 32% say you’re poor, while 50% would deem you neither rich nor poor. Meanwhile, a majority (56%) consider you rich once you earn $100,000.
AS I’VE BUILT out HumbleDollar.com over the past few years, I’ve come to view the site not merely as a place where folks can learn about financial issues, but as a community that thinks about money in a unique way.
This shows up repeatedly in articles from guest contributors, with their focus on topics like spending thoughtfully, helping family, behavioral finance, indexing and achieving financial freedom. It’s a community where folks are trying to be rational about money,
NO. 48: A HOME is a lousy source of capital gains and a great source of imputed rent. The upshot: We should buy a house we can comfortably afford and that’s big enough for our family—but no bigger.
NO. 33: MOST INVESTORS trail the market averages. That’s true whether a market is considered efficient or inefficient. Before investment costs, we collectively earn the results of the market averages. After costs, we must earn less. In fact, investors—as a group—will trail the market by a sum equal to their investment costs.
THINK OF YOUR assets as income. If you retired today, how much income would your nest egg generate? One rule of thumb says that, in the first year of retirement, you can withdraw 4% of your portfolio’s value, equal to $4,000 for every $100,000 saved. It’s a sobering way to assess your retirement readiness—and it might prompt you to save more, postpone retirement or work part-time in retirement.
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.
HumbleDollar is edited by Jonathan Clements, former personal finance columnist for The Wall Street Journal.
EVERY YEAR, the NCAA basketball season concludes with the March Madness playoffs. Many Americans engage in bracketology—trying to figure out which teams will get knocked out in each round and which will advance. Warren Buffett even offers an annual bracket-picking challenge, where Berkshire employees can win $1 million a year for life.
This year, however, Americans with substantial retirement accounts might also want to try another form of bracketology: studying the 2017 tax law—and asking whether it offers a unique opportunity to convert hefty amounts of traditional IRA money to a Roth IRA.
AS I DRIVE around town these days, I notice a lot of cars with temporary license plates—an indication they were recently purchased. What’s the reason? When I turn on the TV, I see a commercial for a local car dealership that’s offering to accept your tax refund as the down payment on a new car. Now it starts to make sense.
The dealership knows consumers are about to receive an influx of cash. It wants to make it as painless as possible to buy a new car.
IN MY ROLE as a financial planner, I hear a lot of stories. By far the most appalling and upsetting relate to life insurance. All too often, insurance salespeople leave clients with policies that are simultaneously overpriced, inadequate and inappropriate.
Are you evaluating a policy? Here’s a quick summary of the most important considerations:
What type of coverage should I have? Life insurance comes in two primary flavors: term and permanent. Term insurance,
AS THE SAYING goes, “If you don’t stand for something, you’ll fall for anything.” So what do HumbleDollar’s readers stand for? What are the key principles that should govern how we manage our money? In recent weeks, I’ve been drawing up a manifesto for the site.
It’s a work in progress. I’ve included a dozen of the principles in our latest newsletter—and, in the months ahead, you’ll find further additions appearing every few days on the homepage.
THERE’S AN abundance of advice on how to plan for retirement. Oh, it’s good advice. But it’s also a bit complicated, often requires discipline and always necessitates actually doing something.
And let’s face it: Who needs advice? Who wants to actually do something? Here are 20 ways to ignore the experts—and wreck your chances of a financially comfortable retirement:
1. Keep thinking retirement is so far in the future that there’s no need to act now.
WHEN I TAUGHT economics, I would present students with the financial misunderstandings that people often have—and which the study of economics can help them avoid. Examples? Here are five widespread misconceptions:
Mistake No. 1: The rarer something is, the more valuable it is. Economics really doesn’t care about rare things—meaning those things that are few in number. Instead, economics deals with scarce things, which are things for which there’s greater demand than current ways to fulfill that demand.
IF YOU EARN $20,000, 55% of Americans would consider you poor, according to YouGov.com. But at $30,000, only 32% say you’re poor, while 50% would deem you neither rich nor poor. Meanwhile, a majority (56%) consider you rich once you earn $100,000.
NO. 48: A HOME is a lousy source of capital gains and a great source of imputed rent. The upshot: We should buy a house we can comfortably afford and that’s big enough for our family—but no bigger.
THINK OF YOUR assets as income. If you retired today, how much income would your nest egg generate? One rule of thumb says that, in the first year of retirement, you can withdraw 4% of your portfolio’s value, equal to $4,000 for every $100,000 saved. It’s a sobering way to assess your retirement readiness—and it might prompt you to save more, postpone retirement or work part-time in retirement.
NO. 33: MOST INVESTORS trail the market averages. That’s true whether a market is considered efficient or inefficient. Before investment costs, we collectively earn the results of the market averages. After costs, we must earn less. In fact, investors—as a group—will trail the market by a sum equal to their investment costs.
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.
AS I’VE BUILT out HumbleDollar.com over the past few years, I’ve come to view the site not merely as a place where folks can learn about financial issues, but as a community that thinks about money in a unique way.
This shows up repeatedly in articles from guest contributors, with their focus on topics like spending thoughtfully, helping family, behavioral finance, indexing and achieving financial freedom. It’s a community where folks are trying to be rational about money,
HumbleDollar is edited by Jonathan Clements, former personal finance columnist for The Wall Street Journal.