Mike, great post. And I fully agree that a Vanguard advisor provides one of the least biased cheap approaches to financial planning. But as a young widow and someone helping aging and passing parents well into their 80s I have worked with many institutions and professionals and family members over the past several years. The things I’ve heard, seen and experienced? Yuck! Bias is everywhere and entirely, 100% unavoidable! Bias is everywhere and is entirely 100% unavoidable! My most recent bias was from a Vanguard Advisor on my dad’s accounts. Their “model” does not consider my dad’s unmanaged cash bucket for his wife’s now late stage Alzheimer’s care. By not considering that bucket he wanted to create a taxable transaction to sell equity. Only about 35% of my dad’s total portfolio is left in equity when you include the unmanaged cash bucket but was reaching 55% in the managed portion of his portfolio. A tax event is not necessary or desirable at this time. An unbiased institution would recognize this but I still have to sit down with my dad today to help him approve a portfolio over-ride so that the tax event does not occur. I’m grateful for sufficient financial literacy to understand how the game is played and to know losing is unavoidable but hopefully everyone can keep enough to live well?
Won’t this trigger the pro-rata rule and become partly taxable if the participant has and will be maxing their non-taxable contributions? Or are 401k balances outside that tax rule? Would it be in their best interest to convert taxable contributions if they are in a high tax bracket?
From 1993 to 2000 the highest effective federal tax rate was 39.6% compared to 37% for the last 9 years. Also note that the lowest effective tax rate was 15% from 1988 to 2001 compared to 10% ever since 2002. This doesn't take into consideration if current tax rates are being applied to a comparable level of income relative to the last time there was a budget surplus in 2001. Do we have an economic or a tax problem? What happens to the annual deficit if all rates are adjusted with the lowest rate at 12% and the highest rate at say 38.5%. Note - The 22% bracket should not be impacted by this 2% to 1.5% increase on taxable income as it is already very regressive to middle class Americans.
Berkshire owns insurance, utilities and railroads. All of these entities have very long term debt structures (I don’t know about 50 but definitely 30 year issuances) due to their underlying highly leveragable assets and need for very long term consistent cash flows.
Yes - But if your partner is under the RMD age and at a lower tax rate following your death, they can take distributions at any age without penalty and may want to consider getting some of the money out of the IRA before they have to take big fat RMDs and get thrown into a higher tax bracket. Why pay the IRS money they could use sooner or save for heirs in a less onerous tax structure than a traditional IRA! They can always roll the BDA IRA into their own IRA down the road.
I am more than a little surprised by how many believe punting this to an estate attorney will provide your heirs with the advice they need to make the best financial decisions with inherited IRAs? Unfortunately, I have now gone through this scenario from several very unimaginable angles and I can tell you that I have yet to talk to an estate attorney (of which I have talked to four) who can provide any form of good IRA advice. That is not what they do! They provide a legal structure and the hopefully the enforcement of that structure for your assets. Not tax and or investment advice. Frankly, they could care less about the assets, except that they can get paid. CPA's have more experience but here again I have experienced a very wide range of knowledge and received some very poor advice more than once. Fortunately, I did not accept their answers and kept asking questions, doing more research, and found a very good CPA, eventually. Talk to your CPAs now and run through scenarios that pertain to you and determine if they can respond? Hopefully, you have a partner who WILL NOT accept the easy answer - especially if they are on the young side (< 67) or on the old side (>80) with heirs that may be involved in some of the decisions and who will eventually inherit the IRA. Can your CPA answer: What is a BDA IRA? What is a good example of when a spouse should do a BDA IRA? When might it be an advantage for heirs? If they don't know what a BDA IRA is or can't answer quickly the advantages of a BDA IRA, run! If they immediately say, "You should never do that, your partner should roll it into their IRA," without at least preferencing your and your partner's ages and/or asking you more questions about your partner's tax rate after your death and your heirs potential needs, Run! Please consider thinking of this seriously before your death so that your partner and heirs aren't at the mercy of attorneys and CPAs who do not have sufficient IRA tax and financial planning experience.
No, estate attorneys are the worst! Especially, with IRAs and how they will apply to the unique financial situations that your heirs’ inherit when you pass. Even finding a CPA with on point knowledge is very difficult. Do not leave this to a novice spouse and whoever drafted your estate docs. Please!!!!!
I just finished the Psychology of Money. One of Housel's points is do we know who we are playing with? If we are long-term investors playing with short-term investors we will eventually feel a burn. This is why so many (thank you Adam) are talking about diversification right at this moment. If you are well diversified and have excellent cash flow or cash buckets you wont suffer a third degree burn - hopefully. Today I read a Morningstar article about the significant increased capital expense rate at the big tech AI aggregators who also happen to be Microsoft, Google, Meta, Amazon. Several of these companies are well below Morningstar's "fair value" even though capital expenses are now over 30% to sales for a couple of the companies and into the high teens and climbing at all. The end of the article did warn that all of these companies will eventually have to demonstrate a return on this investment to justify their high PE ratios. How can you say that they are discounted to fair value and then report on a potential material unknown delink between expenses and sales? What % of the S&P do these companies represent?
Thank You!! More articles like this please! I have/had 4 sets of patents. Based on where all 4 couples have ended up, well into their 80s they could have retired sooner or could have/could spend more. I know this is because of the fantastic economy we have lived in over the last 40ish years of their lives. That may be vastly different the next 40. But if it is bad we will all be financially hurt in ways we can’t predict today. What is the value of living an independent life as soon as you can? Or giving when alive instead of living in fear of running out of money? I don’t know the answer but I’m very interested in more stories on early retirement or giving!
Comments
Mike, great post. And I fully agree that a Vanguard advisor provides one of the least biased cheap approaches to financial planning. But as a young widow and someone helping aging and passing parents well into their 80s I have worked with many institutions and professionals and family members over the past several years. The things I’ve heard, seen and experienced? Yuck! Bias is everywhere and entirely, 100% unavoidable! Bias is everywhere and is entirely 100% unavoidable! My most recent bias was from a Vanguard Advisor on my dad’s accounts. Their “model” does not consider my dad’s unmanaged cash bucket for his wife’s now late stage Alzheimer’s care. By not considering that bucket he wanted to create a taxable transaction to sell equity. Only about 35% of my dad’s total portfolio is left in equity when you include the unmanaged cash bucket but was reaching 55% in the managed portion of his portfolio. A tax event is not necessary or desirable at this time. An unbiased institution would recognize this but I still have to sit down with my dad today to help him approve a portfolio over-ride so that the tax event does not occur. I’m grateful for sufficient financial literacy to understand how the game is played and to know losing is unavoidable but hopefully everyone can keep enough to live well?
Post: The Quiet Failure of Good Advice
Link to comment from June 6, 2026
Won’t this trigger the pro-rata rule and become partly taxable if the participant has and will be maxing their non-taxable contributions? Or are 401k balances outside that tax rule? Would it be in their best interest to convert taxable contributions if they are in a high tax bracket?
Post: Mega Backdoor Roth
Link to comment from June 6, 2026
From 1993 to 2000 the highest effective federal tax rate was 39.6% compared to 37% for the last 9 years. Also note that the lowest effective tax rate was 15% from 1988 to 2001 compared to 10% ever since 2002. This doesn't take into consideration if current tax rates are being applied to a comparable level of income relative to the last time there was a budget surplus in 2001. Do we have an economic or a tax problem? What happens to the annual deficit if all rates are adjusted with the lowest rate at 12% and the highest rate at say 38.5%. Note - The 22% bracket should not be impacted by this 2% to 1.5% increase on taxable income as it is already very regressive to middle class Americans.
Post: Inflation and Innovation
Link to comment from May 26, 2026
Berkshire owns insurance, utilities and railroads. All of these entities have very long term debt structures (I don’t know about 50 but definitely 30 year issuances) due to their underlying highly leveragable assets and need for very long term consistent cash flows.
Post: Resilient Investing
Link to comment from May 19, 2026
Yes - But if your partner is under the RMD age and at a lower tax rate following your death, they can take distributions at any age without penalty and may want to consider getting some of the money out of the IRA before they have to take big fat RMDs and get thrown into a higher tax bracket. Why pay the IRS money they could use sooner or save for heirs in a less onerous tax structure than a traditional IRA! They can always roll the BDA IRA into their own IRA down the road.
Post: The IRA Decision That Affects Your Kids
Link to comment from April 21, 2026
I am more than a little surprised by how many believe punting this to an estate attorney will provide your heirs with the advice they need to make the best financial decisions with inherited IRAs? Unfortunately, I have now gone through this scenario from several very unimaginable angles and I can tell you that I have yet to talk to an estate attorney (of which I have talked to four) who can provide any form of good IRA advice. That is not what they do! They provide a legal structure and the hopefully the enforcement of that structure for your assets. Not tax and or investment advice. Frankly, they could care less about the assets, except that they can get paid. CPA's have more experience but here again I have experienced a very wide range of knowledge and received some very poor advice more than once. Fortunately, I did not accept their answers and kept asking questions, doing more research, and found a very good CPA, eventually. Talk to your CPAs now and run through scenarios that pertain to you and determine if they can respond? Hopefully, you have a partner who WILL NOT accept the easy answer - especially if they are on the young side (< 67) or on the old side (>80) with heirs that may be involved in some of the decisions and who will eventually inherit the IRA. Can your CPA answer: What is a BDA IRA? What is a good example of when a spouse should do a BDA IRA? When might it be an advantage for heirs? If they don't know what a BDA IRA is or can't answer quickly the advantages of a BDA IRA, run! If they immediately say, "You should never do that, your partner should roll it into their IRA," without at least preferencing your and your partner's ages and/or asking you more questions about your partner's tax rate after your death and your heirs potential needs, Run! Please consider thinking of this seriously before your death so that your partner and heirs aren't at the mercy of attorneys and CPAs who do not have sufficient IRA tax and financial planning experience.
Post: The IRA Decision That Affects Your Kids
Link to comment from April 21, 2026
No, estate attorneys are the worst! Especially, with IRAs and how they will apply to the unique financial situations that your heirs’ inherit when you pass. Even finding a CPA with on point knowledge is very difficult. Do not leave this to a novice spouse and whoever drafted your estate docs. Please!!!!!
Post: The IRA Decision That Affects Your Kids
Link to comment from April 21, 2026
Yes!
Post: A Very Sensible Conclusion
Link to comment from February 21, 2026
I just finished the Psychology of Money. One of Housel's points is do we know who we are playing with? If we are long-term investors playing with short-term investors we will eventually feel a burn. This is why so many (thank you Adam) are talking about diversification right at this moment. If you are well diversified and have excellent cash flow or cash buckets you wont suffer a third degree burn - hopefully. Today I read a Morningstar article about the significant increased capital expense rate at the big tech AI aggregators who also happen to be Microsoft, Google, Meta, Amazon. Several of these companies are well below Morningstar's "fair value" even though capital expenses are now over 30% to sales for a couple of the companies and into the high teens and climbing at all. The end of the article did warn that all of these companies will eventually have to demonstrate a return on this investment to justify their high PE ratios. How can you say that they are discounted to fair value and then report on a potential material unknown delink between expenses and sales? What % of the S&P do these companies represent?
Post: Index Fund Bubble
Link to comment from January 28, 2026
Thank You!! More articles like this please! I have/had 4 sets of patents. Based on where all 4 couples have ended up, well into their 80s they could have retired sooner or could have/could spend more. I know this is because of the fantastic economy we have lived in over the last 40ish years of their lives. That may be vastly different the next 40. But if it is bad we will all be financially hurt in ways we can’t predict today. What is the value of living an independent life as soon as you can? Or giving when alive instead of living in fear of running out of money? I don’t know the answer but I’m very interested in more stories on early retirement or giving!
Post: Early Retirement
Link to comment from January 17, 2026