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I’VE BEEN HAVING DOUBTS about some of the financial decisions I’ve made. I don’t know if it has to do with age. They say you tend to lose confidence as you grow older. Life-altering events, such as the death of loved ones, health issues and retirement, can weigh heavily and sow doubt.
For instance, I’ve been thinking about whether I should have sold my condo in 2020, during the pandemic. If I’d kept it, it would be worth quite a bit today. But what bothers me even more is the missed opportunities to spend more time with my friends in the area. Our new home is about 25 miles from my old neighborhood and the traffic can be brutal.
On the other hand, I never wanted to be a landlord and we wouldn’t get much use out of it as a second home. We were able to use part of the proceeds from the sale to renovate our new home in 2020. We didn’t have to tap our savings. Also, I was able to take advantage of the $250,000 capital-gains tax exclusion on the sale.
Another money issue I’ve been pondering has to do with converting our investment holdings from mutual funds to the exchange-traded fund (ETF) version. Was that a wise move?
We were able to reduce our annual fund expenses. But I feel like we’re locked into our current holdings because of the bid-ask spread, which is a transaction cost we’d incur if we sold our ETFs. We were considering reducing the number of our fund holdings to two or even one. But I’m reluctant to pay the transaction costs on our seven-figure portfolio to make that wholesale change.
I’ve even been having doubts about using Vanguard Group’s Personal Advisor Select to manage our investments. Every time I log into our account and see the amount in advisory fees we paid, I ask myself if we’re getting our money’s worth.
But I do sleep well at night and we’re meeting all our financial goals. I like to think having a trusted advisor would make life easier for the one left behind, whenever Rachel or I die.
For now, I’ll follow a friend’s advice: “If it ain’t broke, don’t fix it.”
Although I have these doubts about my financial life, I’m confident we got it right on two of the most important decisions confronting a retiree: choosing the right Medicare plan and when to take Social Security.
We’re enrolled in federally run Medicare, UnitedHealthcare’s Medigap Plan G and Wellcare Value Script’s prescription drug plan. Because we have traditional Medicare, we’re allowed to see any doctor who accepts Medicare and there are no preapproval requirements. We pay more in premiums than we would for a Medicare Advantage plan. But I believe having more control over my health care is worth it.
When I was eligible for Medicare, I was a healthy senior who only needed to see my primary physician and ophthalmologist once a year. But after my father’s cancer diagnosis, I knew good health can disappear suddenly. I wanted a health care plan that would provide me with the best medical care.
When I turned age 70, I started experiencing a number of health issues: gross hematuria, leukopenia and melanoma. When I had a CT scan to find what was causing the blood in my urine, they saw atherosclerotic calcifications in the aorta, the main artery from the heart that supplies oxygen-rich blood to the rest of the body.
I was able to assemble a wonderful team of physicians, including a geriatrician, urologist, hematologist, cardiologist and dermatologist to address my medical needs in a timely manner. Having traditional Medicare makes me feel safe knowing I can get the care I need when I need it.
Taking Social Security at age 70 was another decision I never questioned. I knew exactly what I wanted—a larger monthly check. I’ve mentioned before how we want to limit our retirement spending to our Social Security benefits and required minimum distributions, or RMDs. If we’re lucky to avoid major health care expenses, we should never run out of money.
How are we doing? When I took my RMD in 2024, my combined withdrawal rate was 3.7% from my traditional IRAs. But if you add our Roth IRAs and other saving accounts, our total burn rate for our investment portfolio was about 2%, well below the often-recommended 4% rate.
Our expenses for health care were higher this year because we had to pay a premium surcharge, or income-related monthly adjustment amount (IRMAA), for Medicare Part B ($13,416) and Part D ($1,790). After our marriage, Rachel sold her home in 2022, increasing our income for IRMAA purposes two years later, in 2024.
Some other big expenditures we’ve incurred in 2024 include travel ($43,500), estimated federal and state income-tax payments ($20,500), homeowners’ association fees ($6,300), insurance premiums ($6,200) and property taxes ($2,200). Still, our Social Security benefits and my RMD should provide enough income to cover all of our 2024 expenses, including charitable donations.
Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor’s degree in history and an MBA. A self-described “humble investor,” he likes reading historical novels and about personal finance. Follow Dennis on X @DMFrie and check out his earlier articles.
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Hi Dennis, I am pretty sure you can file a one time exception with social security with respect to IRMAA. I advised a friend to do this when they sold their house back in 2019, and they did not have to pay IRMAA based on that one time extra income.
Hope it works for you, too.
-Mary
Most don’t realize that risk control or risk-adjusted performance is the most critical of their portfolio in retirement. Indexes and typical funds can’t do it.
I’m invested mostly at 99+%, not MM/CD/cash, but in the right funds.
We never had an emergency fund either because you don’t need it.
Medicare is a local issue. In big cities with many options, advantage could be the right choice. I used to be on Original but after I did the numbers, Advantage PPO made more sense. I can see all MDs and hospitals in the area, and I saved in premiums of about $4500 annually. Then, add benefits such as dental, eye check+glasses, free LA Fitness, over-the-counter spending and more and it’s over $6K per year.
It’s true that selecting Original is easy vs the more complicated Advantage, but that’s exactly where I am today with a lot more money. You got to be an expert in all money matters.
Real estate is similar. The numbers never worked for me. Making money in the market is a lot easier, and I never got a phone call from anybody or dealt with tenants, attorneys, taxes and more. BTW, we only owned one house and 2 vehicles, never a pool, a boat, or an RV. If we need one, we just pay for it as we use it.
Could you give us a hint as to what your “right funds” are? If you hold little or no cash, how do you deal with emergencies during a bear market?
It’s my understanding that physicians can leave Medicare Advantage networks. Wouldn’t this pose a problem if the physician you are seeing becomes unavailable when the provider changes the roster of physicians in it’s network?
Even in a big city, if you need to see a specialist outside your network, you might pay out of pocket for the privilege. It seems that would reduce the savings you currently enjoy.
I commend you for never owning a pool. I once owed a house with a small pool and found that the continuous year-round maintenance was a money pit. Never again.
I’m a bond fund slow trader. It’s beyond the scope of this site. If you want to learn more, just to get a taste of it read
https://fd1000.freeforums.net/thread/25/putting-all
In 2024 I owned mainly HOSIX+CBYYX
https://schrts.co/KiAtxWjg.
Remember, my portfolio is pretty big, I need only about 1% from it annually and why risk control is so important. BTW, the performance beat portfolios with 70-80% stocks and very low volatility.
My PPO includes all my MDs + the best I could find + anyone I have ever wanted. As I said before, you must do your homework. Not all Advantage plans are equal, in fact only 3 out of 65 are good IMO.
More than 50% now are on Advantage. There in no way Original would be much better and they will let Advantage be so inferior.
I can see any specialist out of network because it’s a PPO, I just pay 40%, but if I start at 5-6K ahead annually, I will be just fine. If I save just $2000 annually for 30 years, I will be $100K richer. I look at everything thru making money.
I feel like it’s easy to go back and tick off all the things you might’ve done differently. Yet I think we overlook where we made a great choice or were just plain lucky on how things turned out. Thanks for sharing your reflections.
There are two sides to every coin. Yes, maybe the home or other investment you sold would have become much more valuable. But at the same time, you took the proceeds and probably reinvested them in a new home or something else that probably became more valuable, too, or that brought you greater happiness. I’ve noticed that the house I sold in 2018 had appreciated tremendously by 2022, and I lost that appreciation. But I also saved almost $20,000 a year in real estate taxes and utility bills by moving to a different East Coast state, and the house I bought has also appreciated quite a bit since I bought it. So, I don’t think I missed out on anything. As long as your decisions are based on some thought and research, it is unlikely that they will ever really be “wrong”, and if there was a financial penalty at all, it was likely small.
Thank you Dennis, and everyone else, for being so open about your finances and decisions. This is a wonderful place for us to learn from one another. There is tremendous power in sharing and being open. We all benefit greatly from our collective experience and judgement.
Don’t live out of the rear-view mirror, live out of the windshield. You’re doing great. Keep enjoying life. Cheers!
Dennis, in your seventh paragraph, you answer all your own questions. If you sleep well at night and you’re meeting your goals, nothing else matters.
According to a Yahoo!Finance article the bid/ask spread on somewhat thinly traded EFTs is about one-half a percent and on popular ones like SPY it’s 0.02% Even if all your EFT’s are thinly traded. See https://finance.yahoo.com/news/why-bid-ask-spread-costs-130014865.html
Most of my Vanguard ETFs have a spread of a penny, and Vanguard seems to split the difference, at least when you buy, in my experience.
Financially speaking, you are clearly in a safe position with your burn rate. Thanks for reminding us that “opportunity costs” are not limited to financial matters.
The good news is that – in spite of your misgivings, everything has turned out OK. Sounds like you and Rachel are doing very well considering the circumstances. I’ll second everyone else’s hope that you have all medical issues resolved and under control.
We all second-guess ourselves at times, but there shouldn’t be a need to beat oneself up over it.
I admire and respect the HD tradition of putting real numbers into articles to help quantify our decisions. Thanks, Dennis, for your honesty about taxes, insurance costs, etc.
Which leads me to the “costs” of bid-ask spreads on ETF trades. For most of the big, liquid ETFs (Vanguard, Schwab, Fidellity, iShares) that HD readers own, the spreads during midday trading are likely about a penny per share. I doubt that I’d incur $2 in spread costs if I liquidated a large position in my account. Yeah, it’s there, but not worth stressing over. Think of it as far less than the commission we used to pay for execution of a trade. Even with the tendency to second-guess oneself, I’d say that Dennis got this one (conversion from mutual funds to avoid unintended cap gain distributions) completely right.
Having lived 70+ years I think part of my second guessing comes from having seen outcomes go differently than expected for others who have made, or failed to make, their decisions under similar conditions.
I would add that in regards to health care financial decisions, your reference to leukopinia, struck a note with with me. If one gets a referral from a dentist to a oral surgeon for a consult for a mouth sore you may financially benefit by inquiring if the oral surgeon has agreed to accept Medicare part B for service and make a change if the practice does not accept Medicare.
When my wife and I moved from our first home to our current one 20+ years ago I made the initial decision to keep and rent our first home. The combination of the typical headaches from a number of years of being a landlord followed by a wind storm event and a pine tree at the old house falling on a neighbor’s home and vehicle it became clear to me that I had made a poor decision for us to keep the old house to rent. The time for our being eligible for the IRC 121 gain exclusion on the sale of a primary residence had passed and thus I had lost my ability to use the exclusion amount when I later sold our old home.
I am trying hard to learn from the outcomes of the decisions of others when I come to a similar fork in the road. Thanks for sharing yours Dennis.
When you only withdraw 2%, over time, your assets will be increasing. All of those other little niggling fears like bid-ask spreads are just noise.
I’m not concerned about the bid-ask spread on my RMD withdrawal. I’m more concerned about the transaction costs of doing a large scale change to my portfolio. For example, reducing the number of fund holdings from six to two.
Dennis, what I took away from stelea99’s comment (and others) is that with your current low burn rate and the growth you will likely see in overall portfolio as a result, the transaction cost to convert your whole portfolio to two ETFs is minimal in the grand scheme of things.
I agree. Bid-ask spreads might be a worry for people continually trading in and out of ETFs, but that’s not what you’re contemplating. In your case I think it’s a bit of a red herring, and if you’d be happier with a two ETF portfolio I wouldn’t let that stop you.
Thanks for another nice article.
Michael,
Thanks for your advice.
I guess you could use some of the proceeds from your condo sale to Uber back to your old neighborhood and spend a few nights in a hotel there. I second guess myself a lot too. Then I think about comparing my life to my grandfather’s life and the difference would totally amaze him (he died in 1956 at the age of 65 from something that would not have killed him today). He thought he saw a lot of changes in his life but if he had seen from 1956 to today, he would have been blown away. Which gets me to hindsight, second guessing, etc.
Any second guessing disappears after the above reflection. I made mistakes but nothing the crippled my plan. I think I watch too much American Greed and after every episode I think, “Well, at least I missed that bullet.”
Things for me could maybe be a little better but it’s not terribly bad and I’ll take that.
People frequently misunderstand the decision between medigap and medicare advantage. As you say, you didn’t purchase more healthcare, rather you purchased the power to be in charge of your healthcare decisions instead of a health insurance company.
My 2 cents, well worth the cost.
Dennis,
Another great post! Thanks for sharing your thoughts on all these issues.
I’m glad you were able to have your medical needs addressed in a timely manner.
At 70 we’ve found Medicare to be a huge help too.
Stay safe, happy and healthy!
And please keep posting!!
Dennis. Best of luck with your medical issues. I too tend to question some of my decisions, but I also realize we’ve done OK on the big issues, like saving and investing. Please let us know how you guys are doing.
You got Medicare right for sure. Medicare choices are unnecessarily complicated.
I think the best benefit of choosing Plan G is healthcare cost certainty. You know that after paying your Federal deductible for healthcare your only other expense is your Part D premium and the a maximum of 2K out of pocket (starting next year). This makes it easier to estimate your total healthcare expenses going forward. In a case like me who is cheap it also means I’m more likely to address a health issue which arises because I know it won’t cost me any more than is already budgeted.
The only other related cost is for long term care, but for most who don’t have a policy to cover such an expense is a roll of the dice anyway.
Where I am, my G- high deductible annual premium difference is exactly equal to the higher out of pocket max. Thus there is no cost downside to G-HD vs G.
The Plan G premium in my area is huge (will be increasing to $4,800 /year), and I am considering switching to the G-HD for me and my husband – which has a $2,800 deductible. I can’t see a downside to this, as long as there is a max out of pocket. My former employer will contribute $1,500 towards an HSA for me and $750 for my husband, which we can use towards the deductibles. In the past 4 years the Med Supplement hasn’t come close to providing that amount annually, so I will save it for future years when we might need it. Does anyone see a flaw in my analysis?
It is comforting to know that others have similar doubts as they age.
Denise, your thoughts and details on Medicare decisions in your articles are always a big help to me.