THREE YEARS AGO, I wrote an article suggesting I had 7,000 days to go, at least according to the Social Security Administration’s life expectancy calculator. The 1,000 days since then represented a significant 14% share of my remaining actuarial life.
The good news is, the Social Security calculator now estimates that my life expectancy is about 6,400 days. I’ve enjoyed 1,000 days of life but only used up 600 days of life expectancy. That’s like a 40% return on life over the past three years.
OVER THE PAST FEW weeks, my wife and I did something we hadn’t done in four years: We bought bonds.
Specifically, we parked some money in one- to two-year Treasurys paying 4.3% to 4.6%—the highest rates in 15 years. Our portfolio now approaches 5% bonds, and we plan to buy more. We’re waiting to capture higher rates following the expected Federal Reserve rate increases.
Bonds represent a seismic shift for us. In early 2020,
IN MY FIRST ARTICLE for HumbleDollar nearly four years ago, I said I’d claim Social Security benefits at my full retirement age of 66 and two months. By claiming mid-way between 62 and 70, I intended to hedge my bets, because I couldn’t know such relevant variables as my lifespan or future tax rates, inflation rates and investment returns.
And I did indeed claim Social Security recently, though—full disclosure—it was nine months after my full retirement age.
THE WILLS, POWERS of attorney and advance directives drawn up for my wife and me were drafted according to the laws of another state—and were badly out-of-date.
For example, these various documents included guardianships for our then-young children, with a trust to make gradual payouts until they turned age 35. Both our children have since graduated college, become professionally employed and demonstrated they’re financially responsible.
Despite all that, I’m embarrassed to admit that we procrastinated over getting new wills.
IN AN EARLIER ARTICLE, I noted that my savings journey began in 1960 with a couple of jars of pennies that I started collecting at age five. I was following family ancestor Ben Franklin’s maxim that “a penny saved is a penny earned.”
One of my uncles also had an interest in coin collecting. He and I began to actively search through countless penny rolls to find pennies with dates that we didn’t have.
NEW HAMPSHIRE’S state motto is “live free or die.” But for my wife and me, the first part might be better expressed as “live tax-free.”
We just moved to New Hampshire from Maryland. The move’s main purpose is to be near our kids, enjoy lake and mountain activities, and experience cooler summers. But New Hampshire’s zero tax rate on earned income, pensions and capital gains is a major bonus.
Eight states have no tax on personal income,
WE NEEDED MONEY to close on a new home. The mortgage process progressed smoothly—until the underwriters suddenly rejected the property right before closing. To get together the money needed to close, my wife and I had to resort to loan sharks—ourselves.
We borrowed from our IRAs. The rules allow tax-free distributions for either a 60-day rollover to a new IRA or reinvestment back into the same IRA. When we called Vanguard Group to execute our “rollovers,” the phone reps were well-versed on this short-term,
I LEARNED A LOT about finance and life from my uncle. He was an early investment advisor and published a book on wealth management. Even though he was not a registered investment advisor or a Certified Financial Planner, our family proudly extolled his ideas when I was growing up.
My family first introduced me to my uncle’s doctrines when I was a child of five or six. I had been given a small piggybank to store my life’s savings.
I’M DEBATING whether my life is better described by Tom Cochrane’s Life Is a Highway or Eddie Rabbitt’s Driving My Life Away. In a recent article, I noted that our family has driven our cars about 1.9 million miles. Since I’m the family’s King of the Road, I’ve been along for at least two-thirds of that ride.
I’m also, alas, the king of lost time.
The average commuting speed in the Washington,
IN HINDSIGHT, my wife and I made a mistake by over-saving in tax-deferred accounts. It’s not that we saved too much overall. Rather, we ended up with retirement savings that aren’t diversified among different account types. In fairness, this was caused by the limitations of our work-sponsored retirement plans, coupled with the stock market’s handsome appreciation in recent years.
The classic approach is to build a three-legged stool for retirement—Social Security, a pension if available,
THIS PAST YEAR marked my 50th anniversary of driving. Over that time, our family has owned 19 cars and driven them roughly 1.9 million miles. While latte purchases frequently evoke financial debate, cars seem less discussed, despite being Americans’ second-largest expenditure after housing. The purchase, ownership, maintenance and sale of cars can all get pretty complicated.
Cars are considered a depreciating asset, but not always. My first car was a 1967 Mercury Comet, which I bought for $400 in 1973.
A 2021 SURVEY by the Employee Benefit Research Institute found that three-quarters of retirees said the value of their financial assets was the same or higher than when they first retired. This finding was consistent from the poorest respondents to those with the most wealth. The typical time in retirement for the respondents was seven to 10 years.
One implication: Retirees may be underspending their accumulated wealth. EBRI examined five reasons for this possible underspending:
Saving assets for unforeseen costs later in retirement
Don’t feel spending down assets is necessary
Want to leave as much as possible to heirs
Feel better if account balances remain high
Fear of running out of money
The first two reasons—”saving for tomorrow” and “no current need to spend”—were reported by almost half of respondents.
INTEREST RATES HAVE been low for years, with 10-year Treasury notes now yielding some 1.4%. How about dividend-paying stocks instead? Many pay twice what Treasurys currently yield, though obviously with more risk. My strategy: Instead of a classic 60% stock-40% bond mix, I’ve landed at roughly 70% stocks, with another 15% to 25% in individual stocks against which I’ve written call options.
By selling call options, I give the buyers the right to purchase the underlying stock from me at a specified price—the so-called strike price—at any time between now and when the options expire.
ONE WAY TO MAXIMIZE long-term family wealth is through a teenager’s summer or after-school job. How do these small paychecks add up to serious money? Probably the best investment we can make for our children and grandchildren: Stash their earnings in a Roth IRA.
A teenager’s Roth has three things going for it: little or zero taxes owed on the small bits of income earned, 70 or 80 years of investment compounding, and zero taxes owed when those gains are withdrawn.
SOME FAMILY MEMBERS recently asked me to help them find a financial advisor. As luck would have it, soon after, Barron’s published a perfectly timed article, “America’s Best RIA Firms,” which listed 100 highly ranked registered investment advisors (RIAs). Similar lists are available from CNBC and the Financial Times.
It was time for me to get to work. Who wouldn’t want to recommend a “top” firm to his or her family?