Fred Miller

Comments:

• Eludom, I agree there is purpose in suffering; sometimes we find out/figure out the purpose, and other times we don't. The book of Job is a prime example of someone (Job) not knowing why he was suffering. Job did not sin or do anything wrong, so why did he suffer? Ultimately, he suffered because God allowed Satan to test Job's faith. In the end, Job did not get a definite answer to his suffering, but Job continued to have faith in God. It is a great story and one that I led a discussion on. It is a story that I refer to when I go through difficult times, especially when I cannot understand why "this is happening to me." Job was a rich young farmer, who according to God was blameless and upright, which some translate blameless and upright to mean "a man of integrity". Life was going well for him. He was rich, had servants, was blessed with 10 children, and so forth. Then Satan comes along and tells God that the only reason Job is faithful is because you (talking to God) have blessed him so richly and that Job would curse you (talking to God) if everything Job had was taken away. Thus, God allowed Satan to take everything away. A long story short, Job lost his servants, oxen, camels, all 10 children, and finally, his health. His wife even told him that he should "curse God". Three good friends of Job's came to mourn with him, but eventually (I think it was 7 days later), all three accused him of sinning and told him that is why he was suffering. When I go through hardships, I think of this story because all my hardships up to this point have been far less than what Job experienced. If you read the story in the Book of Job, you will get much more from it then what I mentioned above. For instance, towards the end of the Book, chapter 42, God restores most of Job's fortunes. As other's here have hinted about, there is a balance to preparing and having faith. We need to prepare for a long, healthy life by doing things that can help us, as Jonathan pointed out (i.e., exercising regularly, avoiding certain foods, and building a nice financial nest egg). Even though doing these things helps the majority of people live a long, healthy, financially secure life, sometimes things happen (e.g., God has other plans, as was the case for Job). As a person of faith, this is when I tell myself that even though I did all these things (regular exercise, avoid certain foods, prepared financially) that lead to a long, quality, and financially secure life, things happen and if something happens, to have faith there is a purpose in the suffering even if I don't know that purpose.

  Post: The Risks We Miss

  Link to comment from July 13, 2024

• I agree the tax code needs simplified. I have also realized though many people don't even try to understand taxes (educate themselves). For example, my parents never put forth any effort (that I saw) to educate themselves about taxes. I feel it was a mix of being lazy and not having interest in doing so. Thus, they always had a tax preparer do their taxes. I did the same in my early 20s and was always hoping, like my parents, to get a refund. However, since late 20s (I am now in my forties), I have educated myself on taxes and am still doing so. The education was a result of interest in taxes and effort. I have now completed my own taxes for the last 20 years and am so thankful and grateful that I learned about taxes because it has saved me thousands of dollars and stress. Plus, I now don't hope for a refund, since now through planning, via understanding taxes, I try to break even so I don't have to pay or get a refund. So, yes, I wish the tax code was more straightforward, but that is out of my control, unfortunately. What is in my control is educating myself so I can make better decisions on how to manage my money and avoid paying "extra" in taxes and when it comes to tax time, not having to hope/stress about getting a refund or paying. Thus, it is awesome that several HumbleDollar readers and writers help people with their taxes. Thank you for doing so. I hope to do so someday myself.

  Post: Many Unhappy Returns

  Link to comment from July 6, 2024

• What about ETF/mutual funds that include non-qualified dividends? If the ETF/fund distributes 100% qualified dividends, then I agree that mathematically there "is no significant difference between paying 15% tax on steady dividends versus paying 15% capital gains tax when you sell shares, assuming the same total return". However, three of four of my index funds in my taxable account distribute non-qualified dividends and thus I have to pay ordinary income tax on those. For example, one of my index funds distributes roughly $1,000 in dividends, 30% of those are non-qualified. Thus, I have to pay ordinary income tax rate on the $300 and capital gains rate on $700. If I just sold $1,000 worth of shares, all $1,000 would be taxed at the capital gains rate (assuming I held the shares more than 1 year). Thoughts?

  Post: Perspicacious Perplexity

  Link to comment from July 6, 2024

• Hi Andy, I enjoyed reading about your time with Jack. I can only imagine how much you learned from being in his presence. I never met him, but I have learned a little about him through books (e.g., The Little Book of Common Sense Investing, Bogle Effect, and Enough), watching interviews of him, and via people's comments here and on Bogleheads. I can't thank him enough for how he helped change the financial industry via index investing and giving people like me a chance to become wealthy. I feel most (not all) financial advisors are expensive (>0.7% AUM) and create portfolios for their best interest and not the investor. Thus, Jack comes along and provides hope for the individual investor through lost cost index funds that do better than active funds over time (see SPIVA report). What more can I ask for other than say, "Thank you, Jack". I hope you share more "Jack" wisdom here at Humble Dollar. I look forward to reading it.

  Post: The Apprentice

  Link to comment from June 29, 2024

• I think a better question is what are your expected expenses? This avoids the issue with using gross vs. net income and several other issues when trying to calculate a percent of one's salary needed for a comfortable retirement. Using expenses is more simple. For example, I have tracked my expenses for the past three years with Personal Capital (Empower now) and have averaged $45k. Thus, I can easily calculate using 25x expenses (4% rule) that I will need roughly $1,125,000 for retirement or to be more conservative, I can use the 33x expenses (3% rule) and will need roughly $1,500,000. I can then just add lets say $20k to my current expenses for travel and other unexpected expenses. Thus, if I add $20k to my current average yearly expenses of $45k, then I will need approximately $65k per year in retirement. Using a conservative 3% withdrawal in retirement, then I will need approx. $2,166,666 ($65,000 / 0.03). Of course, I am ignoring social security (I won't have a pension), so my necessary savings is less. I am also ignoring inflation and thus will need to adjust my necessary retirement savings pending how inflation affects me personally. However, inflation, social security, and pension are all things that need to be considered whether one is using a % of salary or tracked expenses. If I use a % of my salary (mine and wifes), then I need to first calculate what percent I spend vs. save and then decide whether to use gross or net income. One can easily do this too, but I find using expenses is more simple and straightforward. Of course, I am at least 10 years from retiring and plan to continue to track my expenses and make adjustments as needed. Just my 2 cents :)

  Post: What percentage of your salary do you need for a comfortable retirement?

  Link to comment from June 15, 2024

• Hi William, Thanks for the article. Below is a great Boglehead's article explaining how placing cash needs, such as an emergency fund or home down payment, in a tax-advantaged account can improve the overall tax efficiency of an investment portfolio. Be sure to read the entire article (e.g., how it works, why it works, fine points, etc.) so you understand it well. It only takes 5-10 minutes to read it. I have to admit though, I read the "How it works" section a couple of times before I really understood it. Hope this helps. Placing cash needs in a tax-advantaged account - Bogleheads

  Post: Seeking Shelter

  Link to comment from June 8, 2024

• You may want to rethink this logic. As mentioned by mytimetotravel, it doesn't take much time to manage one's portfolio, but it can cost a lot of time in working "extra hours" in the office/at the job to makeup for the 1% fee one pays a financial advisor. For example, it may take 10 hours or so of reading personal finance books to learn enough to manage your portfolio. This would be year 1. After you have the knowledge, it only takes maybe 1 or 2 hours per year thereafter to manage your portfolio. So, let's pretend, for ease of calculation, John has a 1 million dollar portfolio. Based on your thinking, John would rather pay a financial advisor to manage it, so he can spend more time doing other things he enjoys (e.g., time with grandchildren). Thus, he pays $10,000 per year for this time ($1,000,000 x .01). However, lets pretend John decides to manage it himself because he learned that passive index funds (see SPIVA report) outperform over 5 plus years active managed funds and because he would actually save a lot of money and time managing it himself. Asssuming he spends approximately 10 hours in the first year to learn enough about how to self-manage his portfolio, what would his hourly rate be if he paid himself the 1% fee? His hourly rate would be $1,000 ($10,000/10 hours). John makes a lot less than $1,000 per hour at his job. John makes $50 per hour at his job. How many hours would John have to work to make up for this $10,000 fee? John would have to work an "extra" 200 hours ($10,000/$50 per hour) to make up for this 1% fee. 200 hours is equivalent to 5 "extra" weeks (200/40hr work week) of work to pay this 1% fee. So, if John really wants to "buy" time or have extra time doing other things, he just realized that it would only cost him about 10 hours to do it himself and about 200 hours (5 weeks of work) to have a financial advisor do it. John decides he would much rather spend 10 hours or so learning how to manage his own portfolio then an extra 200 hours of work. He also realizes this is only the case for year 1. After year 1 and spending 10 hours or so learning how to manage his own funds, then the time requirement for him to continue to manage his own portfolio drops considerably, to maybe 1 or 2 hours per year. To summarize, paying someone else, like a financial advisor a 1% fee, to manage one's portfolio actually often times does the opposite of freeing up time to do other things, because those people will have to work more in the "office" to make up for that 1% fee.

  Post: Is a good financial advisor worth 1% of assets per year?

  Link to comment from June 1, 2024

• Yes, depending on how you acquired the "too much" money. Bill Perkins book "Die with Zero" comes to mind as I think about this question. He discusses how people often focus on accumulating more money and unfortunately in some cases neglect their health and time. For example, lets say you need $80,000 per year to live on in retirement. According to the 4% rule (or 3% if you want to be more conservative), you would need $2 million (or $2.6 million if following 3%). Lets say your 40 and want to retire at 60. Based on several retirement calculators you are on track to retire at 60 with $3 million, above your goal number. Then lets pretend your boss says he can promote you, but it will result in working more hours, however, you would get a 20% increase in pay. What would you do? A person that is mainly concerned with just accumulating more money would likely take the promotion, even though it would require more hours in the office. However, Bill would suggest rethinking that decision. Why? Because more hours in the office means less time you have to do other things (like time with family, hobbies, etc.) and likely less time to devote to keeping yourself healthy (e.g., if I am working more, I won't have time to exercise or eat healthy). So, he would suggest maybe passing up that promotion and spending those extra hours that you would have in the office, doing things (experiences) at age 40 that you will likely not be able to do in retirement (e.g., water ski). So, yes, it is very possible to have too much money if it results in one neglecting their health and giving up time in one's younger years (or just giving up one's time period no matter your age). Keep in mind, there is so much more to this book, then this example. I just used this example as it related to the topic of whether it is possible to have too much money. I do encourage everyone to read the book as it will likely get you thinking about what accumulating more money may cost you in time and your health. It did for me.

  Post: Is it possible to have too much money?

  Link to comment from May 11, 2024

• Nice article Richard, I feel too often, as you mentioned and at times I am guilty of, people voice opinions about topics without first understanding it. I have been reading the recent 29th edition of Nolo's book called, "Social Security, Medicare & Government Pensions" by Attorney Joseph Matthews. In chapter 1 (Social Security: The Basics), he has a section starting on page 11 called "Saving Social Security" and lists 4 simple ways to fix the social security system. Here they are: 1) remove cap on earnings subject to social security (FICA) tax, 2) reduction against early benefits for nonearned income, 3)delay full retirement age, 4) slight reduction in benefits for high-income recipients. He states that ...."any of the adjustments discussed above would make a significant contribution to the long-term stability of social security." After reading this and other books/websites about the simple/easy ways the government can fix social security, I now feel more educated about the topic and am less prone to listen to those who say, "Don't plan for social security to be there when you retire." Oftentimes, I ask the person who says this blanket statement, "Can you tell me how social security works, so I can better understand why you feel this way?" Of course, their answer is always, "I don't know how it works, I just know that it won't be there for future generations." It makes me laugh, because I think to truly know if social security is going to be there, you probably should first understand how it works and what possible "fixes", as mentioned by Nolo, that could be made to really decide if one thinks social security will be there for future generations. I used to be uneducated on this topic (social security) and would think like many "That social security won't be there for future generations" until I did some reading on the topic and thus now feel it will be there. As someone above pointed out, the main voters are the older generation, and thus I don't feel they are going to vote for someone who isn't going to fix social security, as many people rely on it. Anyways, just my 2 cents worth :) THanks for posting!

  Post: Making Claims

  Link to comment from April 6, 2024

• Nice article Larry. Another withdrawal method that I found very interesting was recently posted by Mad Fitentist (The Problem with the 4% Rule (and Why You Could Retire Even Sooner) (madfientist.com). He talks about the problem with the 4% rule and gives, I think, a good solution. He basically bases one's withdrawal percentage on the person's discretionary income and the stock market's performance. His method is very interesting. It may or may not be your choice of withdrawal method, but will at least get you thinking.

  Post: Our Exit Strategy

  Link to comment from July 21, 2023