Bouncing Back

Dennis E. Quillen

IN SUMMER 2005, my 40-year marriage officially ended. My previous world, with its hopes and dreams, was no more. My life as a single individual became the new reality. Part of the new reality was financial in nature. Previously developed long-term plans became fiction. New plans, by necessity, appeared on the drawing board.

My personal net worth had dropped by roughly 50%. I no longer owned my historic neighborhood condo. I lost two of our three cars, and I lost all or portions of our mutual funds and cash investments. But there were two bright spots: I kept my retirement income annuity and I still had my Social Security benefits.

The costs of the unwanted divorce impacted my financial well-being in other ways. I was facing, for the first time in four decades, many of the costs of simply being single again, notably paying taxes at a single rate rather than a joint rate. I also needed to replace items retained by my ex-spouse, including appliances and furniture.

In addition, I lost the built-in efficiencies that couples enjoy with such things as grocery shopping and restaurant two-for-one deals. Other inefficiencies included hotel rooms—they cost the same for one person as two—and cruise lines, which charge a penalty for single occupancy.

But I slowly began to see opportunities for greater financial security. My net worth was at a modern low. I recognized that my two main income sources—my state retirement benefits and Social Security—were both indexed to the cost-of-living. I was also noticing modest increases in my dividends and capital gains from the investments I retained.

The biggest bright spot: My new expenses were substantially lower than my income. What did I do with the money?

  • I increased my savings. In my initial single years, I saved about 50% of my annual income. Today, it’s still at around 30% to 40%.
  • I moved my Vanguard Group mutual funds into so-called Admiral shares to lower my fund expenses. I moved my brokerage account to benefit from lower trading fees.
  • I moved my mutual fund money into index funds and out of actively managed funds.
  • I limited my number of individual stock holdings. I’m currently at four companies and have never owned more than five. I plan to keep three of the stocks indefinitely; the fourth is on “life support.”
  • I changed my mind twice about my bond allocation. I lowered my percentage in bond holdings at first, which helped my results. More recently, I have increased my bond holdings, though the percentage allocation is still quite low.

I’ve been pleased with the rebirth of my retirement plan over past 13 years. I successfully weathered the Great Recession stock market drop and have benefited from the long-running bull market that followed. Only in one year did my investment net worth show a loss—a drop of 12.1%. My portfolio’s compound annual growth rate for the entire period, reflecting both investment gains and new savings, has been 18.6%. It’s a nice figure, but it’s unrealistic to expect a continuation at this level. Still, if I should live as long as my late Mom, who died at age 99, I may yet see the day when I become that multimillionaire next door.

Dennis E. Quillen is a retired economic geographer and university professor. In addition to blackjack, he loves long-term investing. His previous articles were Starting Over and Getting Comped.

Do you enjoy HumbleDollar? Please support our work with a donation. Want to receive daily email alerts about new articles? Click here. How about getting our weekly newsletter? Sign up now.

Browse Articles

Notify of
Inline Feedbacks
View all comments

Free Newsletter