I enjoyed Jonathon's article, especially since it is pretty close to our experience over the years.
One potential expense I would add is long-term health care. You may or may not need it, but if it comes up it can really foul up the best laid plans. I paid into a plan over 10 years and am now fully vested - no further premiums! I purchased it while in my 50's which was far less expensive than paying for a program now in my 70's. Today the plan will pay about $275/day for in-home or nursing home care for up to 3 years for myself and my wife, and the daily benefit rises a guaranteed 5%/year. It may not be enough to fully pay for all care but it will provide a nice buffer should the need arise. Of course, if neither of us needs it we will have lost the 10 years of premiums which could have gone into investments, but the peace of mind is worth it to us.
Visicalc was my first software purchase after buying an Apple II in the early 80's, followed couple of years later by Quicken. Excel has supplanted Visicalc. These programs have allowed me to set up mechanisms to track income, spending, and taxes. Now in retirement my biggest problem is predicting how much tax will be owed next year. I can get reasonably accurate estimates of social security, interest, and dividend income. The bugaboo is capital gains. I use a guesstimate based on inflation-adjusted personal capital gains data over the past 20 years and try to fine tune it the last 2-3 weeks in December. but it's still just an educated guess.
Thank you for an excellent article. It should be a must-read for financial beginners. Re: #2 Paying for higher education.
I roughly estimated costs for post-secondary education for my 2 children and started investing the year they were born. I chose to establish a bond ladder scheduled to mature throughout the 8-9 years I anticipated they would be in college and possible grad school. During their grade school years I purchased zero-coupon single state municipal bonds (federal and state tax-free). This approach didn't accumulate as many dollars as a taxable equity/bond account but it was a think once and forget-about-it process. I didn't want to fret about trying to maximizing returns while minimizing risk. I was happy with the results.
For our grandson I have been funding a 529 plan with a $10,000 annual gift which also reduces my estate. It is in my name with him as beneficiary so if he decides to forgo higher education or become a drug-addled slacker I can always gift the account to a needy local kid, or, heaven forbid, go back to school myself.
I am about 50/50 buying new versus used.
One caveat about buying used. Do NOT trust Carfax.
I purchased a late model low mileage (~15,000 miles) VW Jetta for my daughter after several weeks surveying the greater Denver market online.
I used the VIN for each candidate and did a Carfax search for potential problems and only considered cars that "passed."
I bought from a large VW dealer in Denver and everything was fine until 6 months later when the dashboard electronics went out. I later learned this is not uncommon after flood damage due to deterioration of the wiring.
A year later the driver side headlamp was damaged by a rock and I did a DIY replacement. The wheel boot had to be removed and I discovered 6 to 8 inches of dried leaves and mud layered inside.
The car was clearly a flood damaged vehicle and almost certainly was "totaled" somewhere out of state. Carfax completely missed this. I didn't followup with the dealer but will never again trust a clean Carfax report.
Comments:
I enjoyed Jonathon's article, especially since it is pretty close to our experience over the years. One potential expense I would add is long-term health care. You may or may not need it, but if it comes up it can really foul up the best laid plans. I paid into a plan over 10 years and am now fully vested - no further premiums! I purchased it while in my 50's which was far less expensive than paying for a program now in my 70's. Today the plan will pay about $275/day for in-home or nursing home care for up to 3 years for myself and my wife, and the daily benefit rises a guaranteed 5%/year. It may not be enough to fully pay for all care but it will provide a nice buffer should the need arise. Of course, if neither of us needs it we will have lost the 10 years of premiums which could have gone into investments, but the peace of mind is worth it to us. Visicalc was my first software purchase after buying an Apple II in the early 80's, followed couple of years later by Quicken. Excel has supplanted Visicalc. These programs have allowed me to set up mechanisms to track income, spending, and taxes. Now in retirement my biggest problem is predicting how much tax will be owed next year. I can get reasonably accurate estimates of social security, interest, and dividend income. The bugaboo is capital gains. I use a guesstimate based on inflation-adjusted personal capital gains data over the past 20 years and try to fine tune it the last 2-3 weeks in December. but it's still just an educated guess.
Post: Where It Goes
Link to comment from April 13, 2024
Thank you for an excellent article. It should be a must-read for financial beginners. Re: #2 Paying for higher education. I roughly estimated costs for post-secondary education for my 2 children and started investing the year they were born. I chose to establish a bond ladder scheduled to mature throughout the 8-9 years I anticipated they would be in college and possible grad school. During their grade school years I purchased zero-coupon single state municipal bonds (federal and state tax-free). This approach didn't accumulate as many dollars as a taxable equity/bond account but it was a think once and forget-about-it process. I didn't want to fret about trying to maximizing returns while minimizing risk. I was happy with the results. For our grandson I have been funding a 529 plan with a $10,000 annual gift which also reduces my estate. It is in my name with him as beneficiary so if he decides to forgo higher education or become a drug-addled slacker I can always gift the account to a needy local kid, or, heaven forbid, go back to school myself.
Post: Money Misconceptions
Link to comment from January 13, 2024
I am about 50/50 buying new versus used. One caveat about buying used. Do NOT trust Carfax. I purchased a late model low mileage (~15,000 miles) VW Jetta for my daughter after several weeks surveying the greater Denver market online. I used the VIN for each candidate and did a Carfax search for potential problems and only considered cars that "passed." I bought from a large VW dealer in Denver and everything was fine until 6 months later when the dashboard electronics went out. I later learned this is not uncommon after flood damage due to deterioration of the wiring. A year later the driver side headlamp was damaged by a rock and I did a DIY replacement. The wheel boot had to be removed and I discovered 6 to 8 inches of dried leaves and mud layered inside. The car was clearly a flood damaged vehicle and almost certainly was "totaled" somewhere out of state. Carfax completely missed this. I didn't followup with the dealer but will never again trust a clean Carfax report.
Post: Driving Me Crazy
Link to comment from March 15, 2023