AUTHOR: BenefitJack on 8/16/2025 FIRST: Neil Imus on 8/17 | RECENT: Brent Wilson on 8/18
Comments
Great observation/quote: “No amount of sophistication is going to allay the fact that all knowledge is about the past, and all decisions are about the future.” The corollary to that comes from a danish proverb, which baseball fans often attribute to Yogi Berra, a pro baseball player whose stats put him in the top 10 players of all time (15-time All-Star, 3-time AL MVP, 10-time World Series Champ): "It's tough to make predictions, especially about the future."
Please excuse the delay in my response. No, HSAs are the best for funding - where else can you pay LTC premiums and out of pocket LTC expenses with triple tax preferred dollars? Just as important, the HSA assets are available "along the way and throughout retirement, tax preferred for all IRC 213 qualifying expenses. Where not needed for medical or LTC, they can provide a tax preferred source of retirement income, and, a survivor benefit to named beneficiaries after death."
The only thing more "regressive" than FICA and FICA-Med taxes are the benefits they fund. Social Security and Medicare are VERY progressive, not regressive in the least. There was a cap on FICA-Med wages until removed by President Clinton in 1993. President Clinton recognized the funding shortfall but never got Congress to take action, otherwise. Certainly, some people immensely profited from Social Security’s formula, with highly progressive bend points, with the unfunded 1977 Social Security changes. That was certainly true for the Greatest Generation. Consider Medicare Part A, Part B, Part D and Medicaid. I once calculated what the FICA-Med taxes an individual reaching age 65 in 2021 needed to pay, to qualify for non-contributory, dual eligible, 100% coverage – 40 quarters of FICA-Med contributions of $723.84 during ten years in the 1970’s (plus an additional, equal amount from the employer)! Keep in mind that the estimated monthly premium for Part A coverage in 2021 was $471, so, the cost of Medicare Part A coverage alone could exceed the worker’s FICA-Med contributions in as little as 2 months (actually one month if there is a spouse the same age who did not work for wages). To fill out the comparison, consider that almost all of government funding of Medicare Part B, Medicare Part D, and Medicaid comes from general revenues, and, most of that comes from income taxes – where 40% of American households with income pay NO income taxes, and where half of American households pay only about 3% of income tax revenues (resulting from significant changes to a much more progressive income tax structure in 21st Century compared to the 20th Century). Social Security and Medicare are wealth transfer systems – from higher income to lower income, from younger generations to older generations. So long as Congress can continue to buy votes through changes such as the Social Security Fairness Act, providing benefits to public sector employees who did not pay FICA taxes on their wages, we won't solve the funding deficit,
Thanks Bogdan. Great work. I may be wrong, but I think the main difference between 529 and UGMA and Trump Accounts is the target population. Trump Accounts are targeted for the everyday American child - newborn to age 18. The vast majority of individuals in 529 or UGMA accounts are children of folks like me, guided by experts like you. Here's my take - the Trump Accounts are only a few steps away from what I was pitching for the last five or so years, what I call the Ben Franklin Child Roth IRA. And, as a corporate benefits professional, I see a great employee benefits oppotunity for employers to $1 for $1 match up to $2,500 per employee (or dependent) annually to a Trump Account (payroll deducted, after tax employee contributions) - deducting the cost on the corporate return, but excluding the contribution from the employee’s gross income. Even if the $2,500 is one time and not annual, seems like a great corporate engagement opportunity for every worker who has a child under age 18. The timing is pretty good because of the forthcoming "Silver Tsunami" where Silents and Baby Boomers with accumulated wealth are in a position to make inter-vivos and testamentary gifts to children and grandchildren - to enable super long term investing, a la Ben Franklin. But, unlike Ben, to do long term investing "right", avoid giving the government control over the accounts, decision-making. See: https://401kspecialistmag.com/let-ben-franklin-create-middle-class-millionaires-eradicate-poverty-in-america/ Myself, I put $1,000 in a tax deferred annuity per the UGMA back in 1984 and 1987 coincident with the birth of each of my children. The investment allocation was 100% in US equities - hoping for an average annual return over the next 60 years of 12% (the S&P 500 return from 1946 to 1984 averaged about 11.3%). Despite the higher than normal fees due to the tax deferred annuity, both children are on track to becoming middle class millionaires, upon reaching age 60 (ignoring sequence of returns risk). Over time, I changed the funds from the UGMA tax deferred annuities into Roth IRAs - substituting what were my Roth 401k deferrals for the taxable monies. Unfortunately, SECURE 2019 interrupted my plans when Congress removed the stretch IRA. Bottom line, if it works, each child will be a tax free middle class millionaires, someday ... all they had to do is put up with dear ol dad's droning on about long term investing and Ben. I encourage you to read the book, Ben Franklin's Last Bet, by Michael Meyer. I met Professor Meyer earlier this year before presenting my long term investing story at the 2025 World at Work Total Rewards Conference. My point is, every parent or grandparent can learn from Ben. Perhaps once President Trump leaves office in 2029, we can rename the accounts for Ben Franklin, and change from Traditional to Roth IRA - applying the same rules as the (renamed) Kay Bailey Hutchinson Spousal IRA, which has been available for over 45 years.
Thanks Adam. 250 analysts? Consistently, achieved a 20%/year return since 1982, over 43 years? I guess I would be more convinced if you could point us to someone he hired in 1982 or 1983, who watched the sausage being made, later went off on her/his own and achieved comparable results. Typically, that's the only way to test theories, investment or science, can you independently duplicate the results. Else it may be a one off, something unique, a Musk, Bezos, Gates. Interesting story. Best to you, Jack
From a British pension blog, from across the pond, following the Executive Order: "... Private markets – have been suffering significant liquidity shortage issues – and valuations are often highly questionable – which have resulted in a plethora of continuation vehicles (better known as extend and pretend) including most recently a spate of ‘evergreen’ funds (that is perpetual funds). Secondary funds buy PE assets at discounts ranging from around 5% to 50% or more of their published NAVs. But when sold to ‘evergreen’ funds these holdings are valued by most funds at NAV. Lovely ‘business’ for the managers of these ‘evergreen’ funds and miraculous gains for the secondary funds. Lambs to the slaughter comes to mind in the case of 401K savers. ..."
After 31 years in the same home, we moved in 2019 from a traditional two-story (bedrooms and full baths upstairs) to a ranch. Turned out to be fortuitous timing, location - we now live within two miles of my brother, my wife's sister, and one of my wife's nieces. Between my ankle injuries and my wife's hip replacement surgeries ... We live only five miles further from church - we are both in the choir and are very active in the Church's life. There is a walking/bicycle path to a close-by park, the bank, the local high school, the library, golf course, even Wendy's and ice cream and doughnuts. In a few more months, we will be able to walk to a brand new grocery store and to a new medical office complex. There's even a vet, if we had a pet. Lots of convenience. That said, in May, we went to Florida to visit our daughter and her husband, and in June, we visited our son in Greece. Both are moving this summer or a year from now. So, don't know where they will end up, but, whenever their location finally looks to be indefinite, we might consider a change.
Hopefully, the new retiree enjoyed her work, and started doing some of those things she always dreamed of long ago ... instead of waiting to do them in retirement, as she is now age 65. What is her marital status? If she is married, does the spouse have comparable financial status - less, more? That is important if only because of the spouse's benefit and surviving spouse's benefit from Social Security. Does she have legacy goals in mind - perhaps gifts she wasn't prepared to make prior to retirement. If so, I would not wait until death to make those gifts, but incorporate them in year after year spending objectives. Unclear what her health status is, or what her anticipated medical spending will be. No mention of Health Savings Accounts. No mention regarding any post-retirement health coverage from her employer - the 401k balance suggests 25 or more years of service/participation (unless there were substantial rollovers into the plan). Even if there isn't an employer-sponsored plan, Medicare Advantage options offer superior value at a modest cost to those who retire in good health. I assert that it is all about replacing 100% of regular, everyday, anticipated spending. No information about liabilities. So, while her take home was $48,031, would need to know whether she was spending all of that, less than that, or limiting her spending to include every dollar that came home. Assuming no debts, and home ownership, the cash savings suggests she may have been spending less than 100% of her take home. Given her savings, I suspect she was effectively managing everything else. I would still ask. So, my guidance would be to ensure that she had sufficient, guaranteed, inflation-indexed income to match 100% of her regular, everyday, anticipated spending. That is, I would bridge to the age 70 Social Security benefit - treating it on the same basis as if it were an annuity purchase. I would encourage her to consider a QLAC, and gap fill by spending 401k assets, first to age 70 (about $225,000), and then to age 85 (another $250,000 or so until QLAC commences). With respect to sequence of returns risk, I would consider a five year bond ladder with TIPS, MYGA, or a HECM to age 70 - unless her 401k, like my 401k, allowes a participant to initiate a plan loan after separation from service. If her 401k allowed such loans, I would leverage that to prepare for sequence of return risks - adjusting investment allocations as necessary so that the plan loan principal becomes part of the fixed income allocation - what plan loan principal actually is. Finally, almost all of us who survive through our 80's, slow down and slow our spending as well - the retirement income "smile".
After you have read that book, you might consider:
S. Pollan, Die Broke: A Radical Four-Part Financial Plan Paperback, 1998, Harper Business "... Your work life should be a journey up and down hills, rather than a climb up a sheer cliff that ends with a jump into the abyss. ..."
My take: https://401kspecialistmag.com/maximize-outcomes-not-incomes-die-with-zero/ And: https://401kspecialistmag.com/most-young-people-should-not-save-for-retirement-in-their-401k/ Gifts today are arguably more valuable than testamentary legacies. We are making annual, inter-vivos gifts to each child - not much difference in those gifts compared to investments we previously made in each child's post-secondary education. And, despite potential long term care expense, there should be plenty left after the second of us dies ... or not.
Comments
Great observation/quote: “No amount of sophistication is going to allay the fact that all knowledge is about the past, and all decisions are about the future.” The corollary to that comes from a danish proverb, which baseball fans often attribute to Yogi Berra, a pro baseball player whose stats put him in the top 10 players of all time (15-time All-Star, 3-time AL MVP, 10-time World Series Champ): "It's tough to make predictions, especially about the future."
Post: Navigating the Unknowns of Financial Decisions
Link to comment from September 13, 2025
Please excuse the delay in my response. No, HSAs are the best for funding - where else can you pay LTC premiums and out of pocket LTC expenses with triple tax preferred dollars? Just as important, the HSA assets are available "along the way and throughout retirement, tax preferred for all IRC 213 qualifying expenses. Where not needed for medical or LTC, they can provide a tax preferred source of retirement income, and, a survivor benefit to named beneficiaries after death."
Post: How Are You Planning to Pay for Potential Long Term Care Expenses?
Link to comment from September 6, 2025
The only thing more "regressive" than FICA and FICA-Med taxes are the benefits they fund. Social Security and Medicare are VERY progressive, not regressive in the least. There was a cap on FICA-Med wages until removed by President Clinton in 1993. President Clinton recognized the funding shortfall but never got Congress to take action, otherwise. Certainly, some people immensely profited from Social Security’s formula, with highly progressive bend points, with the unfunded 1977 Social Security changes. That was certainly true for the Greatest Generation. Consider Medicare Part A, Part B, Part D and Medicaid. I once calculated what the FICA-Med taxes an individual reaching age 65 in 2021 needed to pay, to qualify for non-contributory, dual eligible, 100% coverage – 40 quarters of FICA-Med contributions of $723.84 during ten years in the 1970’s (plus an additional, equal amount from the employer)! Keep in mind that the estimated monthly premium for Part A coverage in 2021 was $471, so, the cost of Medicare Part A coverage alone could exceed the worker’s FICA-Med contributions in as little as 2 months (actually one month if there is a spouse the same age who did not work for wages). To fill out the comparison, consider that almost all of government funding of Medicare Part B, Medicare Part D, and Medicaid comes from general revenues, and, most of that comes from income taxes – where 40% of American households with income pay NO income taxes, and where half of American households pay only about 3% of income tax revenues (resulting from significant changes to a much more progressive income tax structure in 21st Century compared to the 20th Century). Social Security and Medicare are wealth transfer systems – from higher income to lower income, from younger generations to older generations. So long as Congress can continue to buy votes through changes such as the Social Security Fairness Act, providing benefits to public sector employees who did not pay FICA taxes on their wages, we won't solve the funding deficit,
Post: Does Social Security work?
Link to comment from August 30, 2025
Thanks Bogdan. Great work. I may be wrong, but I think the main difference between 529 and UGMA and Trump Accounts is the target population. Trump Accounts are targeted for the everyday American child - newborn to age 18. The vast majority of individuals in 529 or UGMA accounts are children of folks like me, guided by experts like you. Here's my take - the Trump Accounts are only a few steps away from what I was pitching for the last five or so years, what I call the Ben Franklin Child Roth IRA. And, as a corporate benefits professional, I see a great employee benefits oppotunity for employers to $1 for $1 match up to $2,500 per employee (or dependent) annually to a Trump Account (payroll deducted, after tax employee contributions) - deducting the cost on the corporate return, but excluding the contribution from the employee’s gross income. Even if the $2,500 is one time and not annual, seems like a great corporate engagement opportunity for every worker who has a child under age 18. The timing is pretty good because of the forthcoming "Silver Tsunami" where Silents and Baby Boomers with accumulated wealth are in a position to make inter-vivos and testamentary gifts to children and grandchildren - to enable super long term investing, a la Ben Franklin. But, unlike Ben, to do long term investing "right", avoid giving the government control over the accounts, decision-making. See: https://401kspecialistmag.com/let-ben-franklin-create-middle-class-millionaires-eradicate-poverty-in-america/ Myself, I put $1,000 in a tax deferred annuity per the UGMA back in 1984 and 1987 coincident with the birth of each of my children. The investment allocation was 100% in US equities - hoping for an average annual return over the next 60 years of 12% (the S&P 500 return from 1946 to 1984 averaged about 11.3%). Despite the higher than normal fees due to the tax deferred annuity, both children are on track to becoming middle class millionaires, upon reaching age 60 (ignoring sequence of returns risk). Over time, I changed the funds from the UGMA tax deferred annuities into Roth IRAs - substituting what were my Roth 401k deferrals for the taxable monies. Unfortunately, SECURE 2019 interrupted my plans when Congress removed the stretch IRA. Bottom line, if it works, each child will be a tax free middle class millionaires, someday ... all they had to do is put up with dear ol dad's droning on about long term investing and Ben. I encourage you to read the book, Ben Franklin's Last Bet, by Michael Meyer. I met Professor Meyer earlier this year before presenting my long term investing story at the 2025 World at Work Total Rewards Conference. My point is, every parent or grandparent can learn from Ben. Perhaps once President Trump leaves office in 2029, we can rename the accounts for Ben Franklin, and change from Traditional to Roth IRA - applying the same rules as the (renamed) Kay Bailey Hutchinson Spousal IRA, which has been available for over 45 years.
Post: Trump Accounts: A Deep Dive into Kids’ Savings
Link to comment from August 23, 2025
Thanks Adam. 250 analysts? Consistently, achieved a 20%/year return since 1982, over 43 years? I guess I would be more convinced if you could point us to someone he hired in 1982 or 1983, who watched the sausage being made, later went off on her/his own and achieved comparable results. Typically, that's the only way to test theories, investment or science, can you independently duplicate the results. Else it may be a one off, something unique, a Musk, Bezos, Gates. Interesting story. Best to you, Jack
Post: How to Beat the Market
Link to comment from August 23, 2025
From a British pension blog, from across the pond, following the Executive Order: "... Private markets – have been suffering significant liquidity shortage issues – and valuations are often highly questionable – which have resulted in a plethora of continuation vehicles (better known as extend and pretend) including most recently a spate of ‘evergreen’ funds (that is perpetual funds). Secondary funds buy PE assets at discounts ranging from around 5% to 50% or more of their published NAVs. But when sold to ‘evergreen’ funds these holdings are valued by most funds at NAV. Lovely ‘business’ for the managers of these ‘evergreen’ funds and miraculous gains for the secondary funds. Lambs to the slaughter comes to mind in the case of 401K savers. ..."
Post: Hedge funds, venture capital. private equity, etc. in a 401k. BAD IDEA!
Link to comment from August 9, 2025
After 31 years in the same home, we moved in 2019 from a traditional two-story (bedrooms and full baths upstairs) to a ranch. Turned out to be fortuitous timing, location - we now live within two miles of my brother, my wife's sister, and one of my wife's nieces. Between my ankle injuries and my wife's hip replacement surgeries ... We live only five miles further from church - we are both in the choir and are very active in the Church's life. There is a walking/bicycle path to a close-by park, the bank, the local high school, the library, golf course, even Wendy's and ice cream and doughnuts. In a few more months, we will be able to walk to a brand new grocery store and to a new medical office complex. There's even a vet, if we had a pet. Lots of convenience. That said, in May, we went to Florida to visit our daughter and her husband, and in June, we visited our son in Greece. Both are moving this summer or a year from now. So, don't know where they will end up, but, whenever their location finally looks to be indefinite, we might consider a change.
Post: Let’s revisit the pros and cons of relocating upon retirement
Link to comment from August 2, 2025
Thanks, Adam. Enjoyed the article. Please keep those "War Stories" coming.
Post: Worth 1,000 Words
Link to comment from August 2, 2025
Hopefully, the new retiree enjoyed her work, and started doing some of those things she always dreamed of long ago ... instead of waiting to do them in retirement, as she is now age 65. What is her marital status? If she is married, does the spouse have comparable financial status - less, more? That is important if only because of the spouse's benefit and surviving spouse's benefit from Social Security. Does she have legacy goals in mind - perhaps gifts she wasn't prepared to make prior to retirement. If so, I would not wait until death to make those gifts, but incorporate them in year after year spending objectives. Unclear what her health status is, or what her anticipated medical spending will be. No mention of Health Savings Accounts. No mention regarding any post-retirement health coverage from her employer - the 401k balance suggests 25 or more years of service/participation (unless there were substantial rollovers into the plan). Even if there isn't an employer-sponsored plan, Medicare Advantage options offer superior value at a modest cost to those who retire in good health. I assert that it is all about replacing 100% of regular, everyday, anticipated spending. No information about liabilities. So, while her take home was $48,031, would need to know whether she was spending all of that, less than that, or limiting her spending to include every dollar that came home. Assuming no debts, and home ownership, the cash savings suggests she may have been spending less than 100% of her take home. Given her savings, I suspect she was effectively managing everything else. I would still ask. So, my guidance would be to ensure that she had sufficient, guaranteed, inflation-indexed income to match 100% of her regular, everyday, anticipated spending. That is, I would bridge to the age 70 Social Security benefit - treating it on the same basis as if it were an annuity purchase. I would encourage her to consider a QLAC, and gap fill by spending 401k assets, first to age 70 (about $225,000), and then to age 85 (another $250,000 or so until QLAC commences). With respect to sequence of returns risk, I would consider a five year bond ladder with TIPS, MYGA, or a HECM to age 70 - unless her 401k, like my 401k, allowes a participant to initiate a plan loan after separation from service. If her 401k allowed such loans, I would leverage that to prepare for sequence of return risks - adjusting investment allocations as necessary so that the plan loan principal becomes part of the fixed income allocation - what plan loan principal actually is. Finally, almost all of us who survive through our 80's, slow down and slow our spending as well - the retirement income "smile".
Post: 100% Base Pay Replacement: What Does It Mean?
Link to comment from July 26, 2025
After you have read that book, you might consider:
- S. Pollan, Die Broke: A Radical Four-Part Financial Plan Paperback, 1998, Harper Business "... Your work life should be a journey up and down hills, rather than a climb up a sheer cliff that ends with a jump into the abyss. ..."
My take: https://401kspecialistmag.com/maximize-outcomes-not-incomes-die-with-zero/ And: https://401kspecialistmag.com/most-young-people-should-not-save-for-retirement-in-their-401k/ Gifts today are arguably more valuable than testamentary legacies. We are making annual, inter-vivos gifts to each child - not much difference in those gifts compared to investments we previously made in each child's post-secondary education. And, despite potential long term care expense, there should be plenty left after the second of us dies ... or not.Post: Die With Zero? Hell No
Link to comment from July 19, 2025