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Generating retirement income would be laughably easy—if we had one piece of information: how long we’ll live.

Playing Their Part

OUR RETIREMENT INCOME is built on a slew of financial products and strategies. But we should think less about the gory details of each—and more about the role they play in our overall retirement finances.
The fact is, while each of us comes to retirement with different levels of wealth and different desires, we all want both a sense of financial security today and confidence about our financial future. How can we best meet those twin goals?

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Youth May Triumph

LET ME PLAY THE contrarian. A dominant narrative today is that—compared to earlier generations—younger workers are both economically disadvantaged and less inclined to do anything about it.
Such notions have been bandied about for at least 2,000 years. Horace wrote that “the beardless youth… does not foresee what is useful, squandering his money.” For a more modern take, check out these comments from HumbleDollar contributors and readers lamenting the financial plight of today’s younger generation:

Company “loyalty to employees in large measure no longer exists.”
“Young people are forced to contend with the twin challenges of relatively low salaries and high student loan burdens.”
Baby boomers are “fortunate in a way that’s nearly impossible for Americans today.”
“Many workers are strapped today,

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Recent Writing

A Healthy Sum

AS A KID, I WAS usually one of the last chosen for pickup games, be it softball, basketball or football. My athletic prowess was limited to being the fastest kid in my neighborhood, but it seems I lived in a slow neighborhood. I had moderate success on a local swim team, but again found that success didn’t translate to surrounding communities.
Into my teen years, I was plagued by allergies and asthma. It wasn’t until the late 1970s,

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Gardeners Needed

“SOME PEOPLE automatically sell the ‘winners’—stocks that go up—and hold on to their ‘losers’—stocks that go down—which is about as sensible as pulling out the flowers and watering the weeds,” argued Peter Lynch in his 1989 book One Up on Wall Street.
My father worked for Sears for 30 years, delivering washers, freezers and other appliances. Sears rewarded employees with stock, even delivery men like my dad. Over time, through splits and spin-offs,

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Our Good Fortune

HOW DO WE MEASURE societal wealth? And what triggered this thought?
I started pondering the issue early last year. I had a total left knee joint replacement in January 2023. Not long after, I was sitting in my living room with an ice pack on my knee, having just completed a strenuous set of stretches and exercises.
The room was being warmed by a modern gas fireplace, lit by a remote control. No wood to split,

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Delayed Reaction

IF YOU’VE READ MY articles, you know I don’t respond to readers’ comments very often. It’s not because I’m quiet or shy. Rather, it’s because I like to be thoughtful in my responses, rather than firing off a quick one- or two-sentence answer in the comments section.
That brings me to four comments that I’ve found myself pondering, often months or even years after the article appeared. Here’s my belated response to each.
Trading up.

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Home Call to Action

Happy Conclusion

FOR THE PAST FEW years, I’ve been on a Radiohead kick. For the uninitiated, Radiohead is an English rock band whose lead singer is Thom Yorke, known for his distinctive whining vocals—I mean that in a good way—and innovative songwriting.
As I read about Yorke, a quote from him leaped off the page: “When I was a kid, I always assumed that [fame] was going to answer something—fill a gap. And it does the absolute opposite.”
I immediately thought of the financial corollary.

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There Is a Season

THE FIRST ROCK concert I attended was The Byrds at Bowdoin College in Maine. We stayed nearby at a cabin in the woods. It was there that I had my first experience with marijuana. It was not a good experience—thank goodness. My drug days were short-lived.
One of the songs made famous by The Byrds is Turn! Turn! Turn! The song was written by Pete Seeger, who derived it from verses in the Bible.

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Non-Leading Indicators

IN TRYING TO FORETELL the economy’s direction, former Federal Reserve Chair Alan Greenspan has shown “a keen interest in men’s underwear,” according to CNN Business. “He sees underwear sales as a key economic predictor.”
This isn’t because Greenspan is preoccupied with nether garments. Rather, says an NPR reporter, he believes that “the garment that is most private is male underpants because nobody sees it except people like in the locker room.”
Yes, the men’s underwear index exists.

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Not Just Numbers

IN THEIR NEW BOOK The Missing Billionaires, Victor Haghani and James White make an interesting argument. Looking at the number of millionaires in the U.S. in 1900 and doing some math, they estimate that there should be many more billionaires today—thousands more, in fact—than there are. The question Haghani and White ask: Where did they go? Or, more specifically, where did their wealth go?
The authors consider possible explanations, including taxes—especially estate taxes—and the 1929 crash.

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Get Educated

Truths

NO. 128: THE BIGGER our portfolio, the more stock and bond market returns matter. In our 20s, market performance is almost immaterial—and instead the big driver of our nest egg’s growth is the dollars we sock away. By contrast, how markets fare in the years before and after we retire is crucial, because that’s when our portfolio is typically at its largest.

Act

SHARE YOUR PAYSTUB and financial statements with your kids. This show and tell will give you a chance to discuss the importance of saving, the power of compounding, and how much of your income goes toward taxes, housing and other items. Any one conversation might be brief and appear to have little impact. But over time, your children will learn a lot.

Think

MARKET EFFICIENCY. As news breaks that effect the economy and individual companies, investors immediately buy and sell stocks in response, so share prices reflect all publicly available information. Because the market is so efficient, it’s all but impossible for investors to beat the market averages over the long haul, especially after figuring in their own investment costs.

Money Guide

Active Fund Managers

WANT TO PUT together a portfolio of actively managed mutual funds? Your first hurdle: the overwhelming number of funds to choose from. You could narrow your focus by sticking with one of the big three no-load mutual fund companies—Fidelity Investments, T. Rowe Price Group and Vanguard Group—and then picking from among their funds. But you may be shortchanging yourself. Other fund families worth checking out include American Century Investments, Artisan Partners Funds, Baron Funds, Charles Schwab, Dodge & Cox, Janus Henderson, Loomis Sayles, Nicholas Funds, Pimco Funds, Oakmark Funds, TIAA and William Blair Funds. Also spend some time investigating fund companies that have a distinctive investment approach, like Conestoga Capital, Fairholme Fund, FPA Funds, Longleaf Partners Funds, Mairs & Power, Royce Funds, Selected Funds, Sound Shore Fund and Tweedy, Browne. These firms all specialize in a single part of the market or are renowned for a particular stock-picking style. Perhaps that focused effort will pay off. It can be a paperwork nightmare if you buy funds directly from a host of fund companies. An alternative: Use one of the mutual fund marketplaces that are operated by many brokerage firms, including the brokerage arms of major fund companies like Fidelity and Vanguard. If you use one of the marketplaces, you may have to pay a transaction fee when you trade funds or the funds might charge slightly higher annual expenses. Still, that might seem like a small price to pay, given the convenience of holding all your funds in one place. To find actively managed funds that hold promise, you’ll need to play detective. Head to the library and leaf through back copies of Forbes and Kiplinger’s Personal Finance. Check out The Wall Street Journal’s regular section devoted to mutual funds. Spend some time on Morningstar.com. Soon enough, you will have a list of funds that have decent returns for the past three or five years. But will that market-beating performance continue? That’s the big question with actively managed funds—and, much of the time, the gamble doesn’t pay off. Next: Mental Mistakes Previous: ETF Managers
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Manifesto

NO. 57: WE FAVOR possessions for their lasting value, but often we get greater happiness when we spend money on experiences. Forget the new car. Instead, take the family to Paris.

Voices

How much allowance should children receive?

"Children should not receive “allowances”. They need to be taught the relationship between labor and reward. Pay them fair wages for labor rendered. Then teach them what to do with it."
- Bruce Keller
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What investment will perform best over the next 10 years?

"This would make a great research paper. All of the comments here save one are from at least ten months ago, and all but three are from at least a year ago. Anyone want to check the performance of the various investments discussed here? (The last year itself isn't very helpful. You could have invested a dollar in stocks by using a dartboard a year ago, and if you picked it up today, it'd probably be worth $1.20.) When I think out 10 years, all sorts of prejudices of mine rise up - unrest and corruption in emerging markets, radical shifts in the policy pendulum in the United States, an increasingly litigious world, technology that tends to become obsolete faster and faster, and big bets on initiatives that don't match the hype. All of this leads me to look at what I feel from a lifetime of watching is going to be most dependable - firms based in the United States, firms with good reputations, firms with strong market shares in established markets (especially if they have a few barriers to entry), firms that have continuous if unexciting growth, firms that have earnings based on actual sales of necessary products and services, and firms who pay a dividend and don't need to borrow or sacrifice investment to pay it."
- Martin McCue
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What's the best strategy for charitable giving?

"Donor advised funds can be another excellent way to optimize charitable giving. Early DAFs often had expenses around 1%, which felt a little high to me. I have been studying daffy.org as a potential vehicle for my DAF. Since this organization is a relatively recent addition to the options available, there is not a lot of history available, but their fee structure appears to be far superior to that of others. Comments from other readers with more experience or expertise than I have would be appreciated."
- Bill Woolf
Read more »

Second Look

Retirement

Senior Class

FORGET BUYING A HOME or paying for college. In terms of complexity and cost, nothing comes close to retirement—a topic that encompasses saving, investing, taxes, Social Security, health care expenses and countless other financial issues.
Fortunately, there’s a growing body of research to guide us, and some of the best studies come from Boston College’s Center for Retirement Research (CRR). Here are just some of the insights I’ve lately garnered from CRR studies:
Valuing annuities.

Read more »

Family Finance

Running Up the Tab

A FEW DAYS AGO, I RAN the numbers on our likely 2023 taxes, and reached two conclusions: We have a small refund coming—and we should find a way to pay more taxes.
How can both be true? I project that our 2023 taxable income will be well below $190,750, which is the top of the 22% tax bracket for those married filing jointly. Getting taxed at 22% strikes me as a good deal, given the likelihood that we’ll be taxed at an even higher rate later in retirement.

Read more »

Investing

All the Right Reasons

WHAT’S A GOOD REASON to dial down your stock market exposure? A year after Donald Trump was elected president, many folks are still smarting from their decision to bail out of stocks. Clearly, we shouldn’t lighten up on shares just because we don’t like the guy in the White House.
We also shouldn’t bail out just because stocks sport high price-earnings ratios and skimpy dividend yields. No doubt about it, stocks today are expensive.

Read more »

Lists

Looks Can Deceive

WHEN I TURNED AGE 24, a friend and I took a road trip from San Francisco to Vancouver. It was 1975. I was excited—it would be my first visit to Canada.
I didn’t know what to expect when we got to the Canadian border. All I knew was we didn’t need passports. The border officer gave us a suspicious look. After being on the road for a spell, we didn’t look our best. I was unshaven and wearing my usual T-shirt and jeans.

Read more »
Home Call to Action

Mindset

It’s What We Do Next

BOXING CHAMPION Mike Tyson famously said, “Everybody has plans until they get hit for the first time.”
I’ve only been punched in the face once in my life. It occurred in sixth grade. I was alone in the boys’ bathroom when a bully came in. He said something to me and didn’t like my response, so he attempted to kick me.
I saw this happening out of the corner of my eye and I lifted his leg up,

Read more »

Free Newsletter

Get Educated

Manifesto

NO. 57: WE FAVOR possessions for their lasting value, but often we get greater happiness when we spend money on experiences. Forget the new car. Instead, take the family to Paris.

Act

SHARE YOUR PAYSTUB and financial statements with your kids. This show and tell will give you a chance to discuss the importance of saving, the power of compounding, and how much of your income goes toward taxes, housing and other items. Any one conversation might be brief and appear to have little impact. But over time, your children will learn a lot.

Truths

NO. 128: THE BIGGER our portfolio, the more stock and bond market returns matter. In our 20s, market performance is almost immaterial—and instead the big driver of our nest egg’s growth is the dollars we sock away. By contrast, how markets fare in the years before and after we retire is crucial, because that’s when our portfolio is typically at its largest.

Think

MARKET EFFICIENCY. As news breaks that effect the economy and individual companies, investors immediately buy and sell stocks in response, so share prices reflect all publicly available information. Because the market is so efficient, it’s all but impossible for investors to beat the market averages over the long haul, especially after figuring in their own investment costs.

Money Guide

Begin Here

Active Fund Managers

WANT TO PUT together a portfolio of actively managed mutual funds? Your first hurdle: the overwhelming number of funds to choose from. You could narrow your focus by sticking with one of the big three no-load mutual fund companies—Fidelity Investments, T. Rowe Price Group and Vanguard Group—and then picking from among their funds. But you may be shortchanging yourself. Other fund families worth checking out include American Century Investments, Artisan Partners Funds, Baron Funds, Charles Schwab, Dodge & Cox, Janus Henderson, Loomis Sayles, Nicholas Funds, Pimco Funds, Oakmark Funds, TIAA and William Blair Funds. Also spend some time investigating fund companies that have a distinctive investment approach, like Conestoga Capital, Fairholme Fund, FPA Funds, Longleaf Partners Funds, Mairs & Power, Royce Funds, Selected Funds, Sound Shore Fund and Tweedy, Browne. These firms all specialize in a single part of the market or are renowned for a particular stock-picking style. Perhaps that focused effort will pay off. It can be a paperwork nightmare if you buy funds directly from a host of fund companies. An alternative: Use one of the mutual fund marketplaces that are operated by many brokerage firms, including the brokerage arms of major fund companies like Fidelity and Vanguard. If you use one of the marketplaces, you may have to pay a transaction fee when you trade funds or the funds might charge slightly higher annual expenses. Still, that might seem like a small price to pay, given the convenience of holding all your funds in one place. To find actively managed funds that hold promise, you’ll need to play detective. Head to the library and leaf through back copies of Forbes and Kiplinger’s Personal Finance. Check out The Wall Street Journal’s regular section devoted to mutual funds. Spend some time on Morningstar.com. Soon enough, you will have a list of funds that have decent returns for the past three or five years. But will that market-beating performance continue? That’s the big question with actively managed funds—and, much of the time, the gamble doesn’t pay off. Next: Mental Mistakes Previous: ETF Managers
Read more »

Voices

How long before retirement should you dial down risk?

"I think it's pretty clear by the question that portfolio risk is being equated with stock market volatility. However, it is key here to clarify what risk really is and how it varies with timeframes. To me financial risk is anything that could prevent achieving my financial goals. For long term goals (>10years) the biggest risk is inflation, for shorter timeframes the biggest risk is market volatility. So, the general answer to the question is one should always try to minimize their risks relative to their financial goals and timeline. How you choose to do this really depends on a lot of factors: portfolio size, expected spending needs, life expectancy etc. That said, as you get closer to retirement reducing portfolio volatility to the extent you can weather a significant stock market decline without needing to sell those assets is important. Personally, as my wife and I approached retirement we moved about 7 years of living expenses to short term T-bills and money market funds, while maintaining a 60/40 stock bond mix. Also, given the current interest rate environment we've kept the duration on our bond holding on the short side."
- Adam Starry
Read more »

What criteria should you use to pick a retirement location?

"My parents retired to the Outer Banks, enjoying the low taxes, ocean fishing, and warm weather. However, medical care at that time (1990s) was non-existent. My mother often had to drive 90 minutes each way to Virginia Beach for appointments. My wife and I were influenced by that experience when we considered retiring in the Methow Valley (WA). We love it there, best XC skiing in North America, great gravel and mountain biking and a terrific community. But, many people there have to drive 2 hours each way to Wenatchee for health care (the closest hospital is an hour away, but has serious financial problems). So, we sold our cabin in the Methow Vallley 2020 and bought a Sprinter van. We either stay with friends there now or rent a place for a few weeks. We are sticking with Tacoma for now. Yes, our climate is not "sunny and warm", but (spolier alert) it doesn't rain any where near as much as the media would have you believe, and we get sun even on rainy days. We just completed a two month, 9000 mile trip around the US, visiting 30 states. While there are many places (Finger Lakes, the "music triangle" south of Memphis, Flint Hills (KS), and western CO/eastern UT) that we'd like to spend more time, we love Tacoma. We bike to do all our errands, we have an excellent restaurant an cultural scene now, and SeaTac airport is just 35 minutes drive (also frequent bus service) away. Between Alaska and Delta, we can fly nonstop anywhere we want to go to visit family and for holidays. Turkish recently started non-stop service to Istanbul, and likewise Finnish Air to Helsinki. Yes, traffic sucks here, but we can avoid it. And, we found that traffic sucks in many places in the US (surprisingly Bentonville area, AR, and there's no mass transit there so you have to drive everywhere). We'd consider long-term apartment rental in Andalusia, Spain, where we have friends or around Nice (ditto). Rentals there are very affordable as long as you are a block or two inland from the water."
- Christopher James
Read more »

What popular financial advice do you ignore?

"Keep a record of your expenses and budget. I always save at least 10% of my income. Usually much more than that, maxing my company's 457 plan and funding a traditional IRA also (we need the tax break). It doesn't matter how I choose to spend my money if I see my savings increase each month."
- Dominique Simonian
Read more »

Second Look

Retirement

Senior Class

FORGET BUYING A HOME or paying for college. In terms of complexity and cost, nothing comes close to retirement—a topic that encompasses saving, investing, taxes, Social Security, health care expenses and countless other financial issues.
Fortunately, there’s a growing body of research to guide us, and some of the best studies come from Boston College’s Center for Retirement Research (CRR). Here are just some of the insights I’ve lately garnered from CRR studies:
Valuing annuities.

Read more »

Family Finance

Running Up the Tab

A FEW DAYS AGO, I RAN the numbers on our likely 2023 taxes, and reached two conclusions: We have a small refund coming—and we should find a way to pay more taxes.
How can both be true? I project that our 2023 taxable income will be well below $190,750, which is the top of the 22% tax bracket for those married filing jointly. Getting taxed at 22% strikes me as a good deal, given the likelihood that we’ll be taxed at an even higher rate later in retirement.

Read more »

Investing

All the Right Reasons

WHAT’S A GOOD REASON to dial down your stock market exposure? A year after Donald Trump was elected president, many folks are still smarting from their decision to bail out of stocks. Clearly, we shouldn’t lighten up on shares just because we don’t like the guy in the White House.
We also shouldn’t bail out just because stocks sport high price-earnings ratios and skimpy dividend yields. No doubt about it, stocks today are expensive.

Read more »
Home Call to Action

Lists

Looks Can Deceive

WHEN I TURNED AGE 24, a friend and I took a road trip from San Francisco to Vancouver. It was 1975. I was excited—it would be my first visit to Canada.
I didn’t know what to expect when we got to the Canadian border. All I knew was we didn’t need passports. The border officer gave us a suspicious look. After being on the road for a spell, we didn’t look our best. I was unshaven and wearing my usual T-shirt and jeans.

Read more »

Mindset

It’s What We Do Next

BOXING CHAMPION Mike Tyson famously said, “Everybody has plans until they get hit for the first time.”
I’ve only been punched in the face once in my life. It occurred in sixth grade. I was alone in the boys’ bathroom when a bully came in. He said something to me and didn’t like my response, so he attempted to kick me.
I saw this happening out of the corner of my eye and I lifted his leg up,

Read more »