Take a deep breath, and read this article (actually, DON'T read the article, JUST the HEADLINE): Strategic Income Outlook: Magic 8-Ball Says, “Cannot Predict Now” https://www.advisorperspectives.com/commentaries/2025/01/16/strategic-income-outlook-magic-8-ball-cannot-predict
This is fantastic basic advice. (I write this drinking a cup of self-made drip coffee, not a take-out artisan latte, so, I guess JL Collins would approve) If you have a decently constructed portfolio and enough F-U funds so you do not have to draw a sizable portion each year, the sequence of returns risk lessens, and, inflation is thus not too much to worry over. The portfolio will likely grow to meet or exceed inflation over several years. The one thing missing, as you’ll find as you get closer to and then in retirement, particularly post age 60, is the tax man. He is the perhaps ultimate F-U guy. For those who are say 50+ (even earlier if you have the inclination), now is the time to start prepping for how to shift your money around to lessen that impact. Planning for IRMAA, RMDs, NIIT, ROTH conversions, yada, yada, are best done perhaps over the 10+ years prior to your farewell luncheon. Personally, I didn’t know any of that stuff, or, at least I did not fully appreciate the large impacts, and thus having been scrambling over the last several years to get my ducks in their proper order.
Another good summary of guiding tenets. Om item #1, “growth” has been killing it and I have certainly benefited. But I had noticed that too in my portfolio analysis when large-cap growth kept getting a bigger and bigger share of all the equities, particularly with just a few companies as you imply. It would be tempting to put everything in there right now, but we all know how that would likely turn out. So, re-balancing this year has tended to favor value by shifting some out of tech. When the next plunge happens, I figure people might not need a new graphics chip, but they’ll still need eat.
This is so good. I have known all this for years, and yet, being human (damn), I still find it difficult to stay the course. So, this article is a keeper. I think I’ll print it out and staple it to my forehead. Thanks.
One may be competent for all this at age 98, another not competent anymore even at age 70. The issue becomes: if one is becoming irrational in dealing with finances and/or any other aspects of life, that person will not know it, by definition. Thus the extreme difficulty for that person to give up control. And, by that person's reckoning, it seems it is the others that are irrational. For decades I spent much time hiking and backpacking in remote areas, always alone. One thing that I learned is that if I was too cold, or too tired, or too hungry, or too afraid, I might start making bad decisions on how to survive, i.e., I could become irrational in my decision making. But in the moment, alone, I would of course think I was being rational. People who are dying of hypothermia in the wild have been known to strip off all their clothes because they are “too warm” – seems like a good decision to them. So, anyone who is “losing their mind” (and I don’t mean that in a pejorative or trying-to-be-funny way) will likely not know it. A year ago my parents (90+) were living mostly independently in a CCRC, with one of them still driving. Now they are both in nursing care in that CCRC. It has been a tough year, but certainly enlightening. Similar to Hemingway's description of how bankruptcy happens, it was “gradually, then suddenly”. They were doing fine, until little things, like discarding some tax documents, getting confused on which day it was in terms of medical appointments, and other little things started becoming more obvious the family. And, to be perfectly honest, no one in the family wanted to be “right” on their suspicions of the decline: no one wants to enter that stage of life, and no one who loves them wants to see it happen either, so, perhaps everyone involved is looking through the proverbial rose-colored glasses. But, it becomes difficult to deny reality forever, so here we are (although I see that some can go on in denial for a very, very long time). It was the director of the CCRC that got us together (without our parents) for a “come to Jesus moment”. I realized that this person has no doubt seen this before, and, sees it regularly. While the transition was probably as smooth as it could be, that does not mean it was smooth – there was still a lot of denial, particularly for one of my parents. Mr. Quinn hit it spot on – it’s all about dignity. The people who have commented on the original post who have parents who realized they needed help and, more importantly, were willing to relinquish control – you are certainly fortunate as I think that is perhaps the major battle here. I don’t have any real answers. I am not sure there is any single best way of handling all this, even for any specific person in this situation. Lucky are the few who make it through without a lot of heartache and tears. The analogy is kind of like how many want to die (and, often how we plan): to be perfectly physically and mentally healthy up to some advanced age, then go to bed one night, and, the next morning, wake up dead. It does happen, but only to a very lucky few.
This is somewhat backwards way of addressing the issue and ends up being a guess rather than based on any data. I would not recommend this approach. A much better approach is to track your expenses for a few years before you retire. A simple excel or google spreadsheet will suffice. Whenever you go over your credit card statements is a good time to assign the amounts spent to categories. If you use cash, keep a mental note or jot down what you spent it on. In the spending tracker sheet, major categories can be used (e.g. food, entertainment, health, utilities, autos, house maintenance, etc.) and then refined a bit more if you are inclined (e.g., for cars: gas, maintenance, insurance, etc.) Even after one year you will have a really good idea of how much you spend and perhaps more important, how much you NEED to spend (food, shelter, etc.,) vs. how much is discretionary (that $15 dollar artisan latte). Data: don’t make a major decision without it.
To be fair, it is a pain to set up. BUT... years ago, perhaps about 20 years now, I read an interview with someone who had their identity stolen. This was before most people knew this could happen. Anyway, this person, due to the laws at the time (and I think still) was made "whole" again by the various accounts that had been created or hacked or stolen from - so, she ended up losing very little if any money. BUT, the thing that struck me most, as she recounted, was that it took her about a thousand hours on the phone and over a year to get it all straightened out. That is time I would rather spend doing anything else but what she had to do. Anyway, in short order I sent letters to all credit bureaus to freeze my credit, as it has been ever since. So, everyone assesses their own risks they are willing to take, and acts accordingly. Personally, I would rather have spent the (guessing here) 15-20 hours over the past year putting in place the stuff above then having to go thru some of the nightmares I have read about. And I didn't do it all at once. I thought about how I could implement fairly consistent measures across all my accounts that I will not have to change (too) often. Now that it is all in place, there is no more effort to access and use the money than before. And, every time I see another data breach, I don't get flustered, as I have done most all I can do up to this point. In the end, if some gang of cyber thieves wants my money, I am not likely going to be able to stop them. So, OTOH, because of my defenses, if your accounts are more attractive to them, well, just sayin' :). Remember, your house does not have to be "Fort Knox" to deter the burglars, it just has to be more secure than your neighbors...
Adam, Thanks for another one of your periodic articles on good security practices. Your article of last year (https://humbledollar.com/2023/09/stop-bank-robbers/) got me moving to change some of my account access procedures. Regarding item #1 in your list about check washing, someone else on HD had posted a suggestion that I subsequently did and I think bears repeating. Since I have one primary account where most money comes in and goes out of, it would be quite a mess if that account got caught up in a check-washing scheme – if the account was frozen all my automatic deposits, bill payments and such would have to be reconfigured. The answer was to establish another checking account, at the same institution, and use the 2nd account ONLY to write checks from. I keep only a small amount in the second account. If I am about to write a check, I transfer that amount into it to cover the check. Another issue is 2FA (2nd factor authentication) using cell phones because of the potential for SIM-swapping. As you pointed out in your 2023 article, cell phone numbers can be hijacked and used to reset your account passwords. And yet, not all financial institutions allow use of non-text based 2FA. While my cell carrier requires a PIN over the phone for verification of the caller about the account, that still relies on a human to accept the PIN or not, and humans are generally subject to social engineering, so I don’t want to completely count on that. Anyway, a solution to that is to establish and use a google voice number for 2FA that it itself is only authenticated using a password and a hard authenticator such as a yubi-key. I have done so for all my financial accounts. Thus, if someone were to hijack my and my wife's cell phone numbers, they still could not get 2FA to any of our financial accounts. On accounts that allow use of it, I use only a password and yubi-key for 2FA, with no phone numbers involved. I also use passkeys when allowed, but, quite frankly, I am still not sold on the safety of biometrics for validation, and so have avoided all use of biometrics thus far. Perhaps someone can enlighten me, but I still see the potential for fingerprints, facial recognition, et al., to be spoofed, and, I don’t know how one could recover from that since I can’t change my face (as much as others might want me to). On item #8, debit cards are just a fraud waiting to happen. I agree to not use it for purchases. I only use it for ATM withdrawals, and, when I am not withdrawing from an ATM, I “lock” the debit card using the online feature at my bank. Unlocking it prior to a withdrawal takes only a minute. On item #10, I think, in light of all the huge security breaches in the past year or so (I have received at least 3 letters this year advising me of my data potentially being compromised, one at a company I have had no interaction with in perhaps 15 years), I believe it is now realistic to assume that all bad actors have my Social Security Number, name, home address, email, cell phone number, probably even the name of my dog and pet gerbil, and, to design/use protections for ones accounts accordingly. In my former life, I did some work in security where the focus was on the concept of “defense in depth”. The idea is that nothing is completely secure, and, it would be virtually impossible to use (and cost prohibitive) if it was. So, you keep adding layers to make it harder, so the thief hopefully gives up and goes somewhere else. It is a continuing battle – I have little doubt that I will need to continually change security practices and procedures, trying to always keep one step ahead.
You mean including the $3.4M I cashed out of the market this past Monday and stuffed in my mattress? (kidding). Seriously, when the power goes out in an area due to storms or fires or whatever, not a lot of the merchants are going to be able to accept much else than cash. So, have some for a few days of that. Or, at least, when the storm is a cumin, hit the ATM well before (well before everyone else that is). And of course, nowadays, cyber crime is something that could impact cash flow too.
Comments:
Take a deep breath, and read this article (actually, DON'T read the article, JUST the HEADLINE): Strategic Income Outlook: Magic 8-Ball Says, “Cannot Predict Now” https://www.advisorperspectives.com/commentaries/2025/01/16/strategic-income-outlook-magic-8-ball-cannot-predict
Post: Is There a Change Coming in the Direction of the Markets’ Winds?
Link to comment from January 16, 2025
This is fantastic basic advice. (I write this drinking a cup of self-made drip coffee, not a take-out artisan latte, so, I guess JL Collins would approve) If you have a decently constructed portfolio and enough F-U funds so you do not have to draw a sizable portion each year, the sequence of returns risk lessens, and, inflation is thus not too much to worry over. The portfolio will likely grow to meet or exceed inflation over several years. The one thing missing, as you’ll find as you get closer to and then in retirement, particularly post age 60, is the tax man. He is the perhaps ultimate F-U guy. For those who are say 50+ (even earlier if you have the inclination), now is the time to start prepping for how to shift your money around to lessen that impact. Planning for IRMAA, RMDs, NIIT, ROTH conversions, yada, yada, are best done perhaps over the 10+ years prior to your farewell luncheon. Personally, I didn’t know any of that stuff, or, at least I did not fully appreciate the large impacts, and thus having been scrambling over the last several years to get my ducks in their proper order.
Post: Forget You
Link to comment from December 19, 2024
Another good summary of guiding tenets. Om item #1, “growth” has been killing it and I have certainly benefited. But I had noticed that too in my portfolio analysis when large-cap growth kept getting a bigger and bigger share of all the equities, particularly with just a few companies as you imply. It would be tempting to put everything in there right now, but we all know how that would likely turn out. So, re-balancing this year has tended to favor value by shifting some out of tech. When the next plunge happens, I figure people might not need a new graphics chip, but they’ll still need eat.
Post: Time to Check
Link to comment from December 15, 2024
This is so good. I have known all this for years, and yet, being human (damn), I still find it difficult to stay the course. So, this article is a keeper. I think I’ll print it out and staple it to my forehead. Thanks.
Post: Sharing Lessons
Link to comment from December 14, 2024
One may be competent for all this at age 98, another not competent anymore even at age 70. The issue becomes: if one is becoming irrational in dealing with finances and/or any other aspects of life, that person will not know it, by definition. Thus the extreme difficulty for that person to give up control. And, by that person's reckoning, it seems it is the others that are irrational. For decades I spent much time hiking and backpacking in remote areas, always alone. One thing that I learned is that if I was too cold, or too tired, or too hungry, or too afraid, I might start making bad decisions on how to survive, i.e., I could become irrational in my decision making. But in the moment, alone, I would of course think I was being rational. People who are dying of hypothermia in the wild have been known to strip off all their clothes because they are “too warm” – seems like a good decision to them. So, anyone who is “losing their mind” (and I don’t mean that in a pejorative or trying-to-be-funny way) will likely not know it. A year ago my parents (90+) were living mostly independently in a CCRC, with one of them still driving. Now they are both in nursing care in that CCRC. It has been a tough year, but certainly enlightening. Similar to Hemingway's description of how bankruptcy happens, it was “gradually, then suddenly”. They were doing fine, until little things, like discarding some tax documents, getting confused on which day it was in terms of medical appointments, and other little things started becoming more obvious the family. And, to be perfectly honest, no one in the family wanted to be “right” on their suspicions of the decline: no one wants to enter that stage of life, and no one who loves them wants to see it happen either, so, perhaps everyone involved is looking through the proverbial rose-colored glasses. But, it becomes difficult to deny reality forever, so here we are (although I see that some can go on in denial for a very, very long time). It was the director of the CCRC that got us together (without our parents) for a “come to Jesus moment”. I realized that this person has no doubt seen this before, and, sees it regularly. While the transition was probably as smooth as it could be, that does not mean it was smooth – there was still a lot of denial, particularly for one of my parents. Mr. Quinn hit it spot on – it’s all about dignity. The people who have commented on the original post who have parents who realized they needed help and, more importantly, were willing to relinquish control – you are certainly fortunate as I think that is perhaps the major battle here. I don’t have any real answers. I am not sure there is any single best way of handling all this, even for any specific person in this situation. Lucky are the few who make it through without a lot of heartache and tears. The analogy is kind of like how many want to die (and, often how we plan): to be perfectly physically and mentally healthy up to some advanced age, then go to bed one night, and, the next morning, wake up dead. It does happen, but only to a very lucky few.
Post: When should one give up control over finances?
Link to comment from December 12, 2024
This is somewhat backwards way of addressing the issue and ends up being a guess rather than based on any data. I would not recommend this approach. A much better approach is to track your expenses for a few years before you retire. A simple excel or google spreadsheet will suffice. Whenever you go over your credit card statements is a good time to assign the amounts spent to categories. If you use cash, keep a mental note or jot down what you spent it on. In the spending tracker sheet, major categories can be used (e.g. food, entertainment, health, utilities, autos, house maintenance, etc.) and then refined a bit more if you are inclined (e.g., for cars: gas, maintenance, insurance, etc.) Even after one year you will have a really good idea of how much you spend and perhaps more important, how much you NEED to spend (food, shelter, etc.,) vs. how much is discretionary (that $15 dollar artisan latte). Data: don’t make a major decision without it.
Post: The 80% Rule
Link to comment from December 5, 2024
I guess I'm old, because I don't think I need all this. I really don't want my dishwasher talking to my lawn mower - only bad things could result. :)
Post: Wi-Fi 7: Hit Snooze by David Powell
Link to comment from December 2, 2024
To be fair, it is a pain to set up. BUT... years ago, perhaps about 20 years now, I read an interview with someone who had their identity stolen. This was before most people knew this could happen. Anyway, this person, due to the laws at the time (and I think still) was made "whole" again by the various accounts that had been created or hacked or stolen from - so, she ended up losing very little if any money. BUT, the thing that struck me most, as she recounted, was that it took her about a thousand hours on the phone and over a year to get it all straightened out. That is time I would rather spend doing anything else but what she had to do. Anyway, in short order I sent letters to all credit bureaus to freeze my credit, as it has been ever since. So, everyone assesses their own risks they are willing to take, and acts accordingly. Personally, I would rather have spent the (guessing here) 15-20 hours over the past year putting in place the stuff above then having to go thru some of the nightmares I have read about. And I didn't do it all at once. I thought about how I could implement fairly consistent measures across all my accounts that I will not have to change (too) often. Now that it is all in place, there is no more effort to access and use the money than before. And, every time I see another data breach, I don't get flustered, as I have done most all I can do up to this point. In the end, if some gang of cyber thieves wants my money, I am not likely going to be able to stop them. So, OTOH, because of my defenses, if your accounts are more attractive to them, well, just sayin' :). Remember, your house does not have to be "Fort Knox" to deter the burglars, it just has to be more secure than your neighbors...
Post: Stay Safe Out There
Link to comment from September 22, 2024
Adam, Thanks for another one of your periodic articles on good security practices. Your article of last year (https://humbledollar.com/2023/09/stop-bank-robbers/) got me moving to change some of my account access procedures. Regarding item #1 in your list about check washing, someone else on HD had posted a suggestion that I subsequently did and I think bears repeating. Since I have one primary account where most money comes in and goes out of, it would be quite a mess if that account got caught up in a check-washing scheme – if the account was frozen all my automatic deposits, bill payments and such would have to be reconfigured. The answer was to establish another checking account, at the same institution, and use the 2nd account ONLY to write checks from. I keep only a small amount in the second account. If I am about to write a check, I transfer that amount into it to cover the check. Another issue is 2FA (2nd factor authentication) using cell phones because of the potential for SIM-swapping. As you pointed out in your 2023 article, cell phone numbers can be hijacked and used to reset your account passwords. And yet, not all financial institutions allow use of non-text based 2FA. While my cell carrier requires a PIN over the phone for verification of the caller about the account, that still relies on a human to accept the PIN or not, and humans are generally subject to social engineering, so I don’t want to completely count on that. Anyway, a solution to that is to establish and use a google voice number for 2FA that it itself is only authenticated using a password and a hard authenticator such as a yubi-key. I have done so for all my financial accounts. Thus, if someone were to hijack my and my wife's cell phone numbers, they still could not get 2FA to any of our financial accounts. On accounts that allow use of it, I use only a password and yubi-key for 2FA, with no phone numbers involved. I also use passkeys when allowed, but, quite frankly, I am still not sold on the safety of biometrics for validation, and so have avoided all use of biometrics thus far. Perhaps someone can enlighten me, but I still see the potential for fingerprints, facial recognition, et al., to be spoofed, and, I don’t know how one could recover from that since I can’t change my face (as much as others might want me to). On item #8, debit cards are just a fraud waiting to happen. I agree to not use it for purchases. I only use it for ATM withdrawals, and, when I am not withdrawing from an ATM, I “lock” the debit card using the online feature at my bank. Unlocking it prior to a withdrawal takes only a minute. On item #10, I think, in light of all the huge security breaches in the past year or so (I have received at least 3 letters this year advising me of my data potentially being compromised, one at a company I have had no interaction with in perhaps 15 years), I believe it is now realistic to assume that all bad actors have my Social Security Number, name, home address, email, cell phone number, probably even the name of my dog and pet gerbil, and, to design/use protections for ones accounts accordingly. In my former life, I did some work in security where the focus was on the concept of “defense in depth”. The idea is that nothing is completely secure, and, it would be virtually impossible to use (and cost prohibitive) if it was. So, you keep adding layers to make it harder, so the thief hopefully gives up and goes somewhere else. It is a continuing battle – I have little doubt that I will need to continually change security practices and procedures, trying to always keep one step ahead.
Post: Stay Safe Out There
Link to comment from September 22, 2024
You mean including the $3.4M I cashed out of the market this past Monday and stuffed in my mattress? (kidding). Seriously, when the power goes out in an area due to storms or fires or whatever, not a lot of the merchants are going to be able to accept much else than cash. So, have some for a few days of that. Or, at least, when the storm is a cumin, hit the ATM well before (well before everyone else that is). And of course, nowadays, cyber crime is something that could impact cash flow too.
Post: Cash On Hand
Link to comment from August 7, 2024