WE BUY ALL KINDS of investments and financial products. But what is it that you haven’t bought, do you have a good reason for not buying—or is there a gaping hole in your finances?
Below are some of the investments and financial products I’ve chosen not to own. The list, of course, isn’t comprehensive—and I didn’t bother to touch on financial products that are beyond the pale. Equity-indexed annuities, anyone? How about leveraged exchange-traded funds? Yeah, I didn’t think so.
Savings bonds. I’ve never bought a savings bond—though I once won a $75 EE bond, since cashed in, for finishing second in a local 5K. Series I bonds have enjoyed a heap of buzz over the past year or so. But I haven’t joined the buying stampede. Simply matching inflation or earning slightly more doesn’t strike me as terribly compelling, especially given the restrictions on buying and selling savings bonds, as well as the need to set up a TreasuryDirect account.
Longer-term bonds. When I covered mutual funds for Forbes magazine, I remember a Neuberger Berman bond manager telling me that, with five-year bonds, you get most of the yield of longer-term bonds with a fraction of the risk. That insight has always stayed with me, and it’s one reason I keep almost all my bond-market money in short-term government bond funds.
High-yield “junk” bonds. At various times, I’ve owned junk-bond funds, but I’ve come to view them as an unhappy compromise between stocks and bonds. When junk bonds are on sale—meaning they offer a hefty yield premium over Treasury bonds—stocks are typically also in the tank, and the latter should deliver much better performance when there are glimmers of economic improvement and markets come roaring back.
Municipal bonds. A dozen years ago, I owned a muni fund, which I sold to buy an apartment. I never repurchased the fund. Why not? Instead of owning munis in a taxable account, it strikes me as smarter to buy higher-yielding taxable bonds in my IRA, while using my taxable account to own stock-index funds. What if I suddenly need cash and it’s a bad time to sell stocks? It’s easy enough to sidestep that problem, as you can learn here.
Foreign bonds. I’ve never liked the idea of owning foreign bonds because you introduce currency fluctuations into the conservative part of a portfolio. What if the bonds are currency hedged? The folks at Vanguard Group believe hedged foreign bonds add portfolio diversification and, indeed, such bonds make up a small but significant part of the firm’s target-date funds. I’m not inclined to argue with Vanguard. Still, in the name of simplicity, I don’t own an international bond fund—hedged or unhedged—and I’m not sure I’m missing much.
Individual stocks. Over my lifetime, I’ve owned a dozen individual stocks, but only two in the past two decades—both were shares of my employer—and I haven’t owned any individual stocks since 2014. Those dozen stocks were enough to teach me I have no ability to pick market winners. That’s why all my stock-market money is in index funds. Indeed, I think my only investment superpower—other than a willingness to buy fearlessly when the stock market plunges—is my enduring humility about my own investment abilities.
Immediate fixed annuities. I intend to delay claiming Social Security until age 70, so I get the largest possible monthly check. But I’d like some additional guaranteed lifetime income on top of that, which is why I plan to sink some money into immediate fixed annuities. But I don’t need that income right now—I still earn enough to cover my living expenses—so I’ve held off buying. That means I should get more income when I do finally pull the trigger.
Deferred income annuities. Also known as longevity insurance, I think deferred income annuities are an intriguing idea. The notion: You pony up money at, say, age 65 to lock in a stream of income that starts at perhaps age 85. This can be a relatively low-cost way to hedge against the risk of a surprisingly long life. Still, I prefer the idea of getting income from the get-go, which would then allow me to keep less money in bonds and more in stocks, and that’s why I favor immediate-fixed annuities.
Gold. I think gold stocks have the potential to be a good diversifier for the broad stock market, with the chance to earn a performance bonus by rebalancing between the two. That’s why I owned Vanguard’s precious metals fund for a few years. But Vanguard kept changing the fund’s investment objective, so I dumped the fund and no longer bother with precious metals. Among folks I admire who still like gold stocks, their favored fund is VanEck Gold Miners ETF (symbol: GDX).
Commodities. Two decades ago, there was much buzz about commodity futures, which had delivered long-run returns that rivaled stocks but whose performance was uncorrelated with either the stock or bond market. I briefly owned a commodity fund in my 401(k), but quickly concluded that past performance was a rotten guide to the future and I dumped the fund—which was just as well. The iShares S&P GSCI Commodity-Indexed Trust (GSG) sports a -5.1% average annual return since its 2006 launch.
Real estate investment trusts. I owned a U.S. and an international REIT fund for many years, but I ditched both funds in 2020. Interest rates had reached rock-bottom levels and I figured any rise in rates would hurt REITs, which many folks buy for their yield. On top of that, I was on a campaign to simplify my portfolio, and I figured my total U.S. and international stock market index funds already gave me some REIT exposure.
Rental properties. Like many folks, I’ve toyed with buying rental properties. Who doesn’t like the idea of owning an asset that seems to scream stability and permanence? But I’ve never followed through—because I didn’t want to take on extra debt, deal with the hassles of another home and face the possibility that tenants might trash the place.
Long-term-care insurance. At age 60, if I were to buy LTC insurance, now is the time. But I’m confident I have enough saved to pay LTC costs out of pocket. On top of that, I hear too many horror stories about insurers both jacking up premiums and denying claims. As I mentioned in an earlier article, I have no desire to end up in any form of senior housing, let alone a nursing home. But if my thinking changes as I grow older, I’d lean toward a continuing care retirement community, a form of risk-pooling that strikes me as preferable to LTC insurance.
Life insurance. When my youngest child was perhaps seven or eight years old, I realized I had enough socked away to cover both kids’ expenses through college graduation. That’s when I dropped my term-life insurance. What about cash-value life insurance instead? Despite the praise heaped on these policies by self-interested insurance salespeople, I see scant reason to buy a cash-value policy. If you need life-insurance coverage, you’ll likely fare far better if you buy a term policy and then stash the premium savings, relative to cash-value insurance, in a retirement account.
Disability insurance. When I left my last fulltime job nine years ago, I lost my employer-provided disability coverage and didn’t bother replacing it with an individual policy. As with dropping my life insurance and avoiding LTC coverage, it all came down to my nest egg’s size: I figured that, if I never earned another dime, I’d have enough to cover my living costs for the rest of my life.
Flood insurance. In 2021, a year after I moved to Philadelphia, the Schuylkill River overflowed its banks and flooded some nearby homes. My nonagenarian neighbor, who has lived in the area her entire life, said the river had also badly flooded in the 1970s but, on that occasion, the water also didn’t reach our street. Still, in this era of climate change and extreme weather, I’m a tad concerned—and my to-do list includes calling Travelers to find out what it would cost to add flood insurance to my homeowner’s policy.
Powers of attorney. Okay, this doesn’t really count as a financial product. But I’m embarrassed to say I haven’t drawn up either a health-care or a financial power of attorney. With this admission, I’m hoping to shame myself into action. I do have an up-to-date will, the correct beneficiary designations on all retirement accounts and a letter of last instruction. But the powers of attorney are missing. Feel free to throw rotten tomatoes.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier articles.
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In my opinion, the way to buy annuities is not to buy immediate annuities or the extreme where the deferred annuities payout is delayed to something like age 85(unless someone has a life situation that deems this option to be appropriate). For someone who is going to wait for SS until age 70, the idea should be to possibly buy the annuity at an age 3 to 5 years prior to proposed payout period rather than an immediate annuity. Prior to buying either, it is best to analyze the payout of buying the immediate vs deferred option to see which gives larger payout. Remember, that in a situation like yours, it is not likely that the funds paid out to insurance co will likely not be needed during the deferred period(3-5 yrs). Balance the lost earnings of the premium $ paid out of your retirement savings balance vs the possible additional $ that could possibly be earned on a monthly basis from a deferred annuity rather than an immediate annuity.
It is best to buy a LTC insurance from a state LTC partnership program. Since I bought mine, the increase in cost over a 15 yr plus period has increased at less than 3% average rate per year plus I get a 20% state tax credit on premiums paid. To date my policy is currently worth $.5M.
So, what do you invest in? Do you keep 10 to 15 investments that provide alternative income streams, different investment classes?
You can read a description of my portfolio here:
Perhaps there could be a followup article someday on tackling POA or related tasks for those not fortunate enough to have responsible, caring adult children or close family/friends they feel will act in the person’s best interests?
Many face this dilemma. Do they resign themselves to no solution and just hope they pass away quickly – or are there any viable options to protect themselves?
A CCRC can offer daily custodial and medical care, but there’s still the question of financial management + regular welfare visits/checking on CCRC to ensure no abuse, etc.
Let me add my two cents worth about flood insurance. Everybody knows about a black swan event. I lived in Houston for 25 years and always carried flood insurance. My house was above, not the 100 year flood plain, but above the 500 year flood plain. So many times, although the insurance was cheap, I felt rather silly keeping the policy. Until Harvey visited the town. Actually, Harvey didn’t flood me, the Army Corps of Engineers did. They released water in stages from a reservoir about 6 miles away. The fourth of six releases put 6 inches of water in my home. So my $300 policy finally paid off to the tune of about $250,000. Just saying
I can’t tell you how grateful I am to my mom for getting her POAs done (I’m near certain your family will feel the same).
Of course it worked out to avoid long term bonds last year, but you missed out on 40 years of capital gains from 1981 to last year.
That’s true. But the question is, what role do you want bonds to play in your portfolio? For me, they’re a source of cash when stocks are underwater, which is why I favor short-term bonds with their lower volatility. If I bought long-term bonds, that money would need to come from the volatile portion of my portfolio — stocks — and the net result would be lower long-run returns, even over the very favorable period for long-term bonds that we’ve seen over the past four decades.
For many years I didn’t considered I Bonds for many of the same reasons you mention, but then last fall I bought some and it was so easy. They seem like a reasonable vehicle for a portion of your bond holdings. Zero Cost inflation index 5-yr U.S. Treasury bond. I bought more this year with money that would have otherwise gone into a CD ladder.
Regarding what to avoid I would also include most things that are not readily marketable. Transaction costs are generally too high and it can be difficult to get your money when needed (e.g. BRRIT).
As always, your article makes me pause and reflect (a good thing). I agree with you mostly (like you I am fan of total index funds [VTI, VXUS, BND] and most of my investments are here),
Last year I TLHd BND and bought BIV and now am at a gain. But which is a better long term holding?
The process for changing banks on TreasuryDirect has changed. I was able to go in and change mine pretty quickly recently just like on any other financial website without any paperwork.
Thank you, this is good to know.
Jonathan’s old Mum writing — I live in a CCRC in South Florida — a few facts and opinions. I moved in when I was 79 years old. My apartment is on the first floor, approximately 1300 sq. feet. I have a large living area with two bedrooms and 2 bathrooms, and a charming patio. Residents live in 3-storey buildings on a beautifully landscaped campus of about 80 acres. In late 2018 I paid $300.000 which allows me to live here until I die — I may move into Assisted Living or Skilled nursing when appropriate. My monthly fee which includes dinner and utilities is a little more than $4,000. We have a state of the art gym, daily exercise classes, wellness centers, and other activities such as you would expect in a community of lively and increasingly younger residents. Having been raised in post war Britain, my first reaction was this place where I had decided to spend my latter years was a cross between boarding school and a cruise ship that didn’t move!
How nice to see you posting! I hope I will be as happy with my CCRC. I, too, grew up in post-war Britain (I was born in 1947), but I would just as soon not be reminded of the girls’ grammar school (not boarding) that I attended!
How delightful to read your comments, Mrs. Dosik. I think this is one of Jonathan’s best articles.
Best wishes to you. Enjoy many good years
of health and happiness in what seems like an ideal place to live.
Ms. Dosik, great to see your comment and you must be very proud of your boy—he’s helped many people navigate the financial waters. And your living situation sounds pretty peachy!
After reading you for decades, starting with your column in the Wall Street Journal, I can finally thank you for your advice by giving you some of my own: Get those medical and financial powers of attorney done! As a lawyer, I never prepared estate planning documents without including POAs. Wills are important after death, and trusts have their role, but POAs can benefit you and your loved ones while you’re still alive, should you become incapacitated. I relied on POAs countless times while caring for a relative during his ten years of dementia, before he died in his nineties. They allowed me to access his accounts, life insurance policies, safe deposit boxes, etc., and monitor his health care, including ensuring respect for his end-of-life wishes. You’ve helped so many of us with your advice — now please get this done for yourself!
You Johnathan are amongst a good friends top 10% columnists. This good friends now approaching 90, appears 65/70 tops, still fits into his armed services duds.
With his 100s as his final ages goal, his father made it.
He’s a realist. I’ve know many people that surrender at 60/65.
Mindset counts more than currently recognized-imo-
His father walked home from WWIs germanic regions P.O.W camps when released,..to Italys boot. Italy had been aligned with the Germanic ideology and it was bankrupt. He recounts his fathers stories of the long walk home from the P.O.W camps, to Italys boot.There was no other way to get home right?
Jump trains in motion, fix abandoned USA troops transportation, little doubt. They then immigrated to MA.
He & his father were engineers. He was a primary contributor to BOS’s big dig engineering.
His father had been told you’ll never starve in the USA.
When he returned from WWII from the Air-Force & been given a letter of reference for employment back in BOS all worked out.
Like Goldman,*State, Private, State, Private, State., just different levels of employment.
That worked out well.
Consider hundreds of thousands of men returning from WWII was going to make employment in BOS neighborhoods tenuous. He gathered his appreciation of reading your well written contributions during employment and during the trains back & forth headed in town to Northeastern for continuing educational insights,.. nights.
It took a while but paid off in the long run.
Your contributions then and now, backed by a great teacher, your experience & education seem to have paid off also.
You are reinvigorating your youths contributions.
Sorry to bring up a depressing subject, but in addition to Health Care and financial POAs, you need to start considering end of life care. I have a Living Will which spells out in detail what treatment I do or do not want if I am incapacitated (almost entirely the latter). I also have a Do Not Resuscitate order signed by my doctor. I keep copies in my apartment, my handbag and my car. Before I signed up with the CCRC I expect to enter in the fall I made sure that they were fine with DNRs (I recently encountered an anaesthesia nurse who clearly was not.) I was told that it should be kept in the freezer so it could be found easily in an emergency. I believe that DNRs are subject to state law.
I have discussed my wishes with my Health Care POA and am satisfied that we are on the same page. Also, she is extremely good at saying “no”, and will continue to say it if necessary until honored. My healthcare documents are backed up at DocuBank, and I have its card in my wallet and stickers with its contact information on my insurance cards.
I have been getting LTC insurance quotes and also trying to determine if I, and my wife, can afford to self-insure possible LTC costs. Below is my attempt to determine if I can self-insure. I put this out to the HD readers and encourage them to say if they see flaws in the logic of this determination.
We know that “Women need care longer (mean 3.7 years) than men (mean 2.2 years), and one-third of today’s 65 year-olds may never need long-term care support, but 20 percent will need it for longer than 5 years” (source: https://acl.gov/ltc/basic-needs/how-much-care-will-you-need ), also that women tend to be the later survivors. So I budget for 5 years of full-time care for me (male). I am playing the odds that I’ll need care first, and that my wife if she needs care after I am gone, or I am in care, can sell the house she’ll no longer need to pay for more than several years of full time LTC, if the remaining retirement assets are not sufficient for her costs. For me, the current yearly cost of nursing home LTC is $112,000 (I won’t be demanding and semi-private is fine) (source: https://www.genworth.com/aging-and-you/finances/cost-of-care.html). So, 5 years currently cost $560,000. Next, I subtract $560,000 from our retirement savings (we have only a minuscule pension from a few years of school teaching work, so we really have only SS and investments, a two-legged stool). I put that $560,000 in a separate account only for LTC costs. Then, I look at what remains in our pool of SS and investments, and I determine if we can live our retirement on that starting balance (waiting until 70 for SS). If we can, then I conclude we can afford to self-insure. Thoughts and errors? Thanks for any thoughts or insights provided. (I have to say in advance that if you reply and I think I should comment back to you, I have not figured out how to comment back to a specific reply, I’ve only figured out how to add a new comment to the main original article. If someone can send me instructions to reply to a specific comment, or a link to instructions, I’d love to learn).
I was going to echo what James has mentioned, even though I have the ability to self-insure, I had cash value money from a whole life policy that I had bought in the 80’s (term life wasn’t as popular back then or at least I didn’t them as well). Anyways, I used some of that money to buy a (single premium, this will insure against any premium increases) hybrid (really an annuity with a LTC rider) LTCI, the idea being that it will cover some 60-70% of the expense if needed. Any unused money will go the heirs. As James says, “use a smaller amount” – I used $90k for a joint policy. But as always YMMV
I should have added that the money move from life insurance to LTCI was via a 1035 (meaning I didn’t have to pay money on the gains from the insurance)
rgscl: Thanks for taking the time to respond. I don’t have an old whole life policy to convert to LTCI, so not an option for me.
Ah but you don’t need to have a whole life policy cash, although you will need a chunk of change upfront. I just happened to have the WL cash that I didn’t want to cash out and pay taxes. So this worked out.
How much you will pay upfront will obviously vary on a bunch of factors (it was 90k for a joint in my case). The policy I bought was an annuity with a LTC rider.
I liked New York Life Asset Flex although I didn’t go with them since they wouldn’t allow a 1035.
rgscl: Thanks for the further information. I had read a mention of an annuity with LTC rider at the end of this HD article <https://humbledollar.com/money-guide/hybrid-insurance-policies/ >, plus I have carefully re-read this article and your related comments <https://humbledollar.com/2022/09/prepare-for-care/> . “dizzying” as you say there. I’ll look at the one you mentioned above. Thanks.
You should look at hybrid LTC quotes. Instead of parking the $560000 somewhere(?) for a much smaller amount you could buy a hybrid LTC policy and actually be insured.
James McGGlynn: Thanks for taking the time to respond. I did look at a hybrid Whole Life with LTC rider. I found that compared to a traditional LTC policy from the same company, the hybrid policy provided less LTC coverage for a higher premium, albeit a fixed premium, while adding life insurance I didn’t need.
If you are logged in you should see a “reply” option at the bottom of the comment.
I chose not to take out LTCi, thus saving a lot of money in premiums. Instead, I expect to move to a CCRC (Continuing Care Retirement Community, aka Life Plan Community) in the fall. Of course, that isn’t cheap either, but I get ongoing value for money, whereas I might never need the LTCi. I chose a non-profit CCRC which has a benevolent fund to back up its promise not to throw me out if I run out of money. You do generally need to make the move while still able to live independently.
mytimetotravel: Thanks for taking the time to respond. If I were single I would be shopping for a place to put a CCRC deposit, due to what I have learned of them from HD content including your previous postings, and other research done. I visited one several years ago when a student on mine was doing a summer internship there, and I left after a few hours thinking that once I can’t manage a home, that place would be great. I have some future discussions with my wife to see if she will agree. Also, thanks for the tech support help.
I don’t wish to be morbid, but it is overwhelmingly likely that at some point either you or your wife will be single. In my area, at least, CCRCs have lengthy wait lists, so that discussion would definitely be worthwhile.
A couple of years ago at an annual physical my primary care doctor offered free advance care (healthcare quality of life and treatment) plan and appointment of health care agent documents which included the necessary witness signatures and notarization and allowed me to select those named to direct health care decisions if I am unable. I took Doc up on the offer. Those executed documents are both protected in a fireproof box with a copy retained by my primary Doc and and a copy to my named agent(s) who agreed to serve in that capacity.
My major non retirement assets would currently pass under the manner (mostly JWROS) in which they are currently owned or titled (home and cars) or via primary or contingent beneficiary designations on retirement accounts. I no longer have life insurance.
I expect that when my wife or I die the survivor may then need to execute a will to name a personal representative.
My state, like most, has a will for those who die intestate and those provisions are adequate for me for those minor assets not passing via ownership or beneficiary designation. If my wife and I die at the same time the intestate rules in my home state mirror my current intentions. Wills seem to become stale after 10 years or so and I will likely get one at age 80, if I move to another state or upon an adverse medical diagnosis.
I revisit my thinking about having a will at least annually. I also assure that my ownership and beneficiary designations reflect my intent.
Please execute a will, even if an on-line version for the short-term, until you engage an attorney. I had to deal with 2 uncles who died intestate. A lot of extra fees were paid for the one who lived in VA, (plus tears, swearing, gnashing of my teeth!) & the multi-year process was one of the most stressful things I’ve overcome. Please do it for your executor’s sake.
Perhaps a Trust as well, no? (to avoid the probate process)
To avoid probate I use named beneficiaries on everything and Transfer on Death Deeds on RE
My PoA lists non-existent things NOT to waste time looking for such as:
Unknown spouses and/or children
Anyone else authorized to transact in my name.
Older copies of my Will
Rented lockers, bank deposit or PO boxes.
Stuff buried in the ground, hidden in the garage, attic, crawlspace, wall or taped to the bottom of a drawer like aunt Ruth did.
Hi! Longtime reader and fan of Jonathan and now others on Humble Dollar. Thanks for all the great insights. Finally getting around to creating a log in to join in the conversation, and will send a donation via check next week. I’m also interested in longevity planning, so I welcome articles about CCRC, Qlac and other DIA choices, LTC insurance, etc. Looking forward to growing old together 🙂
Thanks for commenting. You can find info on the various topics you mentioned in these two chapters of the site’s money guide:
If a property is in any sort of flood hazard zone, mortgage lenders often require flood insurance. It’s quite expensive when compared to normal homeowner’s insurance.
My parents pay $700/year and their house is not even by a body of water! (Their lot is in a subdivision that flooded in 1996 from a one hundred year rain.)
Should you set up a revocable trust; especially if you are married, have kids and grandkids and have a manageable inheritance strategy? Two major reasons to set up the Trust:
There are other pros and cons; however, the pros outweigh the cons.
Risk mitigation. I grew up on the gulf coast. Went thru several hurricanes. Folks without flood insurance were gambling with their home investments. Tidal surges would severely damage or completely destroy homes and/or businesses. I currently have earthquake insurance as our home is in an area at high risk for earthquakes. Its an add-on to our insurance policy. Yes, it raises the cost of our home insurance, but it’s worth it to me to have this risk covered. I reckon its wise for each person to evaluate the risks in their current situation and decide whether insurance is a cost effective way to mitigate the risk(s).
I first bought I bonds five years ago, before inflation spiked. I wanted something with cash/T-bill safety and inflation resistance for healthcare expenses in retirement, to complement our HSA. Read a piece by Bud Hebert on I Bonds for exactly that purpose. Bonus: they wouldn’t increase my taxable income until cashed. Setting up a TD account was easy (for me) and the $10k/person limit per year wasn’t a deal breaker. I can see why they wouldn’t be broadly appealing.
Agree. Seems to be a good place to park our emergency fund once you pass the one year unable to sell mark. I have generally been happy with my decision to buy I-bonds and if I am gone before my wife she understands how to access them as beneficiary.
Jonathan, thank you for this list. Your insights are always very helpful. Is there a way to digitally save these articles? There are so many good bullet points I want to save for future reference, and I don’t want to have to print them all out and place in 3 ring binders.
Glad you found the article helpful. To save the article digitally, you could either save the URL or, alternatively, hit the print button and then opt to save as a PDF instead of actually printing.
I use Instapaper https://www.instapaper.com/ and I love it. We can create folders, tags etc to organize everything. Even the pid subscription doesn’t cost much and is very useful. I had actually saved this article to it.
We bought LTC insurance starting in our mid-40s, which I know was probably too early, through group coverage offered by our employers, and yes, over the years, the premiums have gone up. Would I do it again, maybe at a later starting age? Perhaps. Besides residential senior facilities, LTC can cover in-home caregivers. In fact, we’re about to activate that for my mother-in-law, who has Alzheimer’s. They could self-insure, and maybe so could we, but the insurance is an expense we’re used to and provides some peace of mind.
As it happens, just yesterday we signed our updated will/trust docs, including powers of attorney.
We, too, were early in obtaining our LTC policies. But I say get them while you’re insurable! If you’re self-employed as a sole proprietor, you could ask your tax preparer about writing off your premiums on your Sch C.
We are actively searching for a nursing home for my dad–best prospect is just under $10k/ mo. He has a LTC policy whose benefit cap is now frozen…the premiums became too expensive for my parents. At least they’ll have some coverage.
He was reasonably active and healthy for his 1st 70 years. Now at 88 he is ailing in every area. No one should think poor health can’t happen to them, because it can in a heartbeat, literally.
Thanks for this list. I compared it with my actions over many years. Turns out my throwing darts at investments comes up different – but I’m not claiming better or even right.
I’m still cashing in Savings Binds as they hit 30 years. They were my first real investment and it was so easy to set and forget with payroll deductions.
I started buying municipal bond funds when I started SS while still employed- short, intermediate and long term funds. Today they are giving off monthly tax-free income equal to about 3/4 my net SS benefit – after taxes and IRMAA.
My wife and I were talked into deferred annuities when I was 45. Small, but we didn’t know what we were doing. We each still have them, but not using.
We both have LTC insurance as a result of a group plan. The insurance company is doing all it can to get us to cancel. Doubling premiums and cutting benefits even though we have had the policies for over thirty years.
We also have life insurance. My group insurance, still subsidized by my old employer, and two small paid up policies as a result of GUL many years ago.
I own two stocks. My old employer which was mostly acquired as part of compensation. One a few shares of one other.
We have avoided the rest as you did, except we have all the powers of attorney in place – but I’m much older than you
Your avoidance of such things came from experience and knowledge, mine seat of the pants “investing” and luck, not sure which kind.
I was surprised by this list – especially coming from an experienced investor. Index funds seem to be your only vehicle and perhaps your personal residence. No Gold, REIT, I-bonds, annuities, rental properties or individual stocks ?? And why would you include Flood insurance in this article? This whole thing strikes me as extremely limiting. I’ll re-read, I must have missed the point.
Index funds are guaranteed to outperform the majority of folks investing in the same market sector. Why would the rational investor own anything else?
I’m curious are you suggesting that investors pick and choose markets sectors to invest in or should they invest in a total market index fund.
It seems the best way to evaluate investment choices that deviate from the total market is to compare the results of your investments to a total market index fund, not a specific market sector fund which may correspond with temporary stock allocation. Whether it is the over or under weighting of certain sectors or individual stock selection it seems the appropriate measure to compare to is the default of the the whole market index. Otherwise, it seems you are always moving the goalposts.
If you’re an active investor in, say, U.S. bonds or foreign stocks, you could claim to “outperform the market” over some short time period if you compared your results to a broad U.S. stock market index. That’s why it’s important to do an apples-to-apples comparison.
There are a few out there that out perform the market over the long term but not many… a lot less stress and basically ZERO fees 🙂
I’ve yet to see convincing evidence that the number of funds that outperform the market over the long run is greater than chance.
Or that you can predict which one(s) out of a large field will beat the odds.
Flood insurance will be a completely separate policy – it’s not an add-on to your homeowner’s policy.
You should be able to obtain a policy from the same agency as your homeowner’s, but the policy will almost certainly be through the federal government (FEMA-sponsored National Flood Insurance Program). There are only a few private insurance companies that sell flood insurance.
On the West coast, the equivalent is earthquake insurance. The cost is on the order of a homeowners policy. As with floods, the homeowner policy doesn’t cover earthquake damage (which could take out your entire house).
Is it worth it? It seems expensive and it is unlikely that a big earthquake will hit my area in any given year. Given the cost of rebuilding these days, though, you have to give careful consideration whether you have enough money to rebuild if your home is totaled. That would put a big hole in our retirement assets, so the $1K a year offers peace of mind.
Check premiums nowadays. They are way up with no explanation other than it is what it is! As they used to say “there is no such thing as a free lunch”. If you need it, suck it up and pay!
There is a perfectly good explanation. First, the policies have been way under-priced for many homes at high risk; second, climate change is increasing the number and cost of floods. For a good discussion see: https://www.nytimes.com/2021/09/24/climate/federal-flood-insurance-cost.html
“Series I bonds have enjoyed a heap of buzz over the past year or so. But I haven’t joined the buying stampede. Simply matching inflation or earning slightly more doesn’t strike me as terribly compelling, especially given the restrictions on buying and selling savings bonds, as well as the need to set up a TreasuryDirect account.”
Yep. I’m almost embarrassed to say I succumbed to that “buzz” last August, without fully reflecting on “the restrictions on buying and selling” Ibonds. 1) There is no Ibond secondary market (ie, other than the US government). 2) Absolutely no means to liquidate Ibonds within the first year of ownership. 3) Three months interest penalty on Ibond sales within the first 5 years of ownership. Ugh.
If I had it to do over again, I wouldn’t go near an Ibond. Others feel differently, but for me those factors should have set off the warning bells.
5 years pass in the blink of an eye, at least they have for me. I know for you there won’t be a next time, but for others, buy bonds in varying denominations, ie $500, $750, $1000, $2500, etc. Then if you need to cash a bond you can allow the other money to ride. I view it like laddering cds.
Exactly, if it was a good deal, the government would not “limit” the amount you could buy and they threw in the 5 year holding period penalty. I would like to hear from a CFA or RIA that recommends this investment and the reasons pro and con and not just the high points.
The only reason IMO to buy them would be to supplement a “College” savings strategy to supplement a great 529 plan, which are few and far between.
I also succumbed to the buzz about ibonds in 2022 and bought the max, $10k for one year. It added complexity to my finances, and even if I buy for many years, it will take some time for that to impact my AA. In my continuing simplification, I will cash in when I can.
I view them as our “set it & forget it” money. Someday the balance will buy a car when we need a replacement, or help pay for medical expenses or sons’ wedding rehearsal dinners! They’re another savings bucket for us, but for longer-term expenses.
Anybody know why LT care insurance isn’t offered on a true insurance against catastrophe basis? I’m sure I could cover the cost for a few years, but not nearly so sure about twenty years. I wish they would sell policies that let you pick your exclusion period.
I am in complete agreement and have been looking for a policy with a 5+ year exclusion period for years. I have spoken to some regulators and insurance companies, but haven’t made any progress. I would like to collaborate with others who are interested and see if we can make some progress on this. I have looked into hybrids and they can accomplish some of this but not fully.
Here is a good article by Kitces about the topic:
The hybrid LTC policies are the best compromise for this issue. Because the lump sum premium is spent before the insurance company is on the hook they are designed to be catastrophic coverage. i.e. after your lump sum is spent then the insurance company can pay indefinitely.
Many years ago, a senior executive at New York Life told me he’d love to offer an LTC policy with, say, a three-year exclusion period, but state insurance regulators would balk. Don’t know whether that’s still true today.
I’d bet lots of Rich investors(Buffett)have massive muni bond portfolios. What would you say when they were paying double dig it returns the end of the last century.
Vanguards Hi Yield Bond Fund has a great track record
So much food for thought. Thank you. Brief comments:
Thanks for the comments. HumbleDollar has run two articles on continuing care retirement communities:
But I’d open to running more.
If you think you might want to go to a CCRC, now is the time to investigate them and get on one or more priority lists. The better ones often have long wait times, and the waits are getting longer as the population gets older.
And you didn’t even mention cryptocurrencies. Are you hinting at something?
As far as I’m concerned, they fall in the “beyond the pale” category.
There is no way Jonathan would buy cryptos—he is saving all his money for NFTs.
I-bonds make me happier than having my online 3%+ savings accounts. I earn a better rate and incur no state income tax on the earnings in my tax-happy state of IL. C’mon Jonathan, give them a chance! As you’re purchasing the bond you can name a beneficiary (or a co-owner.) Get an account set up & then you can poke around & get giddy with the good rates… then take the plunge. Plus, don’t forget you can direct that your income tax refund be used to purchase savings bonds. (I haven’t done that yet to know how the tax refund conversion works, but hopefully it’s easy.
PS get going on your POA’s–make a future difficult situation easier for your children. No more dilly-dallying! Your doctor can probably hook you up with a standardized version the medical system they work in provides. 🍅
I did the $5,000 I bond tax refund purchase last year but found it to be too much of a hassle to do it again. Treasury insists on mailing you the actual bonds. In order to add them to your online account you have to fill out a form on TreasuryDirect and then mail the bonds to their office in Minneapolis.
Yes, I have gone thru the paper to electronic process. My husband had payroll deductions back in the late 80s to purchase his paper bonds…the ones that hadn’t been cashed for my engagement ring got converted. It’s not horrible, but Treasury Direct does create a new subaccount under your existing account, at least they have in the past. Government efficiency? Those bonds had a great rate thru the years, & were our little kitty for emergencies back when we had big dreams and little savings…
Thanks for letting me know that’s how the tax refund/bond purchase works, parkslope.
Hi Jonathan. I’m a big fan and greatly appreciate the time and effort you make to share terrific, transformative information with your readers.
Regarding POA: please just do it. You can take care of it in less than one hour and it will help those you love to help you. And it will make their lives much easier. When.the need arises, whether through hospitalization, long-term care, or death, their lives are going to be difficult enough. Not having a POA will make it harder on those you love and those who love you most – the last thing you want to do in the hour of grief. “Regret minimization” is a wonderful general approach, and it certainly applies here. Help your family in this way and you will be glad you did. If you don’t, you may not live to regret it, but your family will.
May God bless and keep you always.
Hard to argue with most of these. There’s logic, common sense, and experience behind most of your decisions.
Except for the power of attorney. It’s basic and important. And was central to the advice I just got from my lawyer when I updated our family’s personal planning docs. How did a/he let you get out of the office without doing one?