If I were running a marathon (and I have no such intentions,) I would definitely try to pace myself. But I would also reassess my pace every so often, maybe each mile but definitely every few miles. When I reassess, someone might say that shows you were wrong last time and you'll probably be wrong again this time, so what's the point?
I would say the point is to keep running. To apply this metaphor, I might say such things as:
1) If you can spend 4.7% and you're spending less, then you're not running full out. That's okay, for sure. And if you always spend less, perhaps as some have said, this exercise is not that personally relevant.
2) If you spent 4.7% but you made 14.7% last year, you could probably up your spending pace a bit this year without unnecessary angst. This would be more true if it happens several years in a row.
3) If it was the other way around--you made 4.7% but spent 14.7%, it might be a good idea for the long term to slow down a bit ;-).
As I read the comments, it reminds me of some early memories. Here are two:
I collected soda/coke bottles off the street and turned them in at the grocery store in the next block for the deposit. 2 cents each. More for the big ones, if they showed up.
I quit middle school football when my loaned equipment broke and took my friend's paper route (on the wealthy side of Ferguson Rd.) The first thing I bought was a stylish (banana seat, etc) used bike. It had bad bearings and low gears and I regretted it every time I rode home from the paper route. In buying it I forsook the ugly messenger bike which was the precursor to the mountain bikes such as I bought years later with some of the money I saved by replacing my own roof on my vacation time instead of paying to have it done. (Aside from my desperate longing for style, it would have been the perfect bike for the paper route!)
Risk fools us because we interpret the data selectively, but rebalancing is about gaining similar returns most of the time with less risk of sudden disaster.
Rebalancing can apply to many things. When it comes to bonds and stocks or their proxies, as with other balances, the problem may be that the original balance was not actually worth pursuing. Is my original balance actually worth maintaining? Why, exactly? I have previously written on Humble Dollar that I haven't found bonds to be an attractive part of my investment mix.
But if you hold an index, you cannot easily rebalance within that index. The assumption is that the index is the balance. You could, of course, supplement that index, but that ruins the attractive simplicity--unless you use a contrary index. For example, an S&P 500 fund has over 4% of several high growth stocks. But none of those are in a typical dividend fund, so owning 25% of a dividend fund lowers the volatility of an S&P 500 fund (or total market fund, both capital weighted) essentially by 25%. I would consider this for anyone who owns an S&P fund in an attempt to avoid the volatility of individual stocks.
Regarding frequency of rebalancing, Shiller cites research that shows frequency is only limited by the hassle factor. In other words, while more frequent rebalancing is more efficient, the increase in frequency becomes progressively marginal in its utility. Part of this equation, then, becomes what I would otherwise be doing with that time.
I certainly resonate with both the strategy and the result. In my case it was driven by a conviction that I would never be better off than I was in my 20s and 30s, formed in part by watching my parents' journey and my own career choices. As with you, it turned out that these habits, shared wholeheartedly by my wife, reaped an unexpected harvest of financial security beyond my earlier imagination. Who knew?! I sure didn't. When I realized, I wish I had adjusted some of my more severe habits sooner.
As someone who has lived internationally, I can promise you that other countries are not interested in ceremonial certificates, only the legal, properly authenticated, government documents :-). Some of our US procedures are a bit quirky, perhaps due to our "federal" form of government.
As a financial coach, not an advisor, I often explain that it is necessary for advisors to provide a great enough level of complexity and activity to convince their clients they are doing something worthwhile. I find that tends to be about 10 funds for a fund-based advisor and at least 10 transactions a year. Generally they also generate PR/educational materials that arrive at least that often, indicating or inferring that ongoing adjustments are needed.
Since these are practice-building activities, I would suggest they are more essential to successful advisors than things like simplicity and inaction people are recommending in these comments.
When I was in my 20s we bought a charitable gift annuity, which provides lifetime income along with some charitable giving, another way of pooling risk. It was a great deal for us as the rates were quite favorable in the early 1980s. My recollection is that the internal rate of return was 6%. Of course we only had a limited amount of money to commit to it. But it goes back to the point several have made in this discussion, including Jonathan, that people don't actually understand annuities.
One way of looking at it is that annuities bet you will die while life insurance bets you won't. They both provide some protection from uncertainty at the cost of some return.
In both cases, the cash products can have lower fees and offer simpler propositions. Of course, people also don't understand that insurance companies and their contracts offer different levels of financial security, and very few people even consider the rating of the insurance company when they are comparing contracts.
As others have said, having the ability to understand and compare such things is not common to all people and whatever ability we have is a gift, in my opinion. I am grateful although I don't always what to do with whatever gift I have.
A note about the tax implications of losing a spouse. It was a surprise to me to realize that having fully funded the tax liability on the joint return provided no protection against underpayment penalties on the single return because it was viewed as "a different taxpayer." Maybe there was a way around that, but if so I missed it and was surprised when my family member incurred a small underpayment penalty the next year.
Comments
From Gal Keep: [ ] Everywhere: FiV 2%, Club 1%, AmzV 1%, CoV 1% [ ] Grocery: AmzV 5% 3q25, AmBlu 3% [ ] Gas: AmzV 5% 3q25, Dis, FF 5% 3q25, CoV if not a grocery 4%, CoV Costco 5% [ ] Dining/Restaurant: AmzV 5% 3q25, CoV + Unl 3%, Club 2% [ ] Modernmarket united or Costco [X] Dept Store Free 4q 5%, also PayPal, Chase Pay [ ] Home impr: AELo 5% + 2% + reduced delivery, Dis 5% 1q25 [ ] Wholesale club: Club 3% 4q24, CostcoV 2%@Costco [ ] United, Forex: Club 1%+no forex, 4% on UA, CoV 1% + no forex [ ] Travel: Club 2% trains, transit, car rentals, hotels, tolls, transit Dis 5% 2q24 [ ] Dept Store Club 3% 4q24 [ ] Office supply and cell provider: AESil 5%, else AELo 3% [ ] REI: 5% REI [ ] Amazon 5% AmzV [ ] Martha FiV 2% [ ] Use Schwab debit to get cash [ ] AEBlu= American Express blue [ ] AELo = American Express Lowes [ ] AESil = American Express Silver (business) [ ] AmzV = Amazon Visa [ ] Club = United Club Visa [ ] CoV = Costco Visa [ ] Dis = Discover [ ] FF=freedom flex [ ] FiV = Fidelity Visa, 1602=SnL, 3438=MDR [ ] REI = REI Mastercard [ ] Walmart: [ ] Scan list from top looking for best card
Post: What is your credit card rewards strategy?
Link to comment from September 13, 2025
An easy misunderstanding. I guess I have a vinyl resting place in the den and also on a shelf somewhere. Vinylly!
Post: A Record Journey
Link to comment from August 23, 2025
If I were running a marathon (and I have no such intentions,) I would definitely try to pace myself. But I would also reassess my pace every so often, maybe each mile but definitely every few miles. When I reassess, someone might say that shows you were wrong last time and you'll probably be wrong again this time, so what's the point? I would say the point is to keep running. To apply this metaphor, I might say such things as: 1) If you can spend 4.7% and you're spending less, then you're not running full out. That's okay, for sure. And if you always spend less, perhaps as some have said, this exercise is not that personally relevant. 2) If you spent 4.7% but you made 14.7% last year, you could probably up your spending pace a bit this year without unnecessary angst. This would be more true if it happens several years in a row. 3) If it was the other way around--you made 4.7% but spent 14.7%, it might be a good idea for the long term to slow down a bit ;-).
Post: Is 4.7% the New 4% Safe Withdrawal Rate
Link to comment from August 23, 2025
As I read the comments, it reminds me of some early memories. Here are two: I collected soda/coke bottles off the street and turned them in at the grocery store in the next block for the deposit. 2 cents each. More for the big ones, if they showed up. I quit middle school football when my loaned equipment broke and took my friend's paper route (on the wealthy side of Ferguson Rd.) The first thing I bought was a stylish (banana seat, etc) used bike. It had bad bearings and low gears and I regretted it every time I rode home from the paper route. In buying it I forsook the ugly messenger bike which was the precursor to the mountain bikes such as I bought years later with some of the money I saved by replacing my own roof on my vacation time instead of paying to have it done. (Aside from my desperate longing for style, it would have been the perfect bike for the paper route!)
Post: My Money Memories
Link to comment from August 12, 2025
Risk fools us because we interpret the data selectively, but rebalancing is about gaining similar returns most of the time with less risk of sudden disaster. Rebalancing can apply to many things. When it comes to bonds and stocks or their proxies, as with other balances, the problem may be that the original balance was not actually worth pursuing. Is my original balance actually worth maintaining? Why, exactly? I have previously written on Humble Dollar that I haven't found bonds to be an attractive part of my investment mix. But if you hold an index, you cannot easily rebalance within that index. The assumption is that the index is the balance. You could, of course, supplement that index, but that ruins the attractive simplicity--unless you use a contrary index. For example, an S&P 500 fund has over 4% of several high growth stocks. But none of those are in a typical dividend fund, so owning 25% of a dividend fund lowers the volatility of an S&P 500 fund (or total market fund, both capital weighted) essentially by 25%. I would consider this for anyone who owns an S&P fund in an attempt to avoid the volatility of individual stocks. Regarding frequency of rebalancing, Shiller cites research that shows frequency is only limited by the hassle factor. In other words, while more frequent rebalancing is more efficient, the increase in frequency becomes progressively marginal in its utility. Part of this equation, then, becomes what I would otherwise be doing with that time.
Post: Rethinking Rebalancing
Link to comment from July 5, 2025
I certainly resonate with both the strategy and the result. In my case it was driven by a conviction that I would never be better off than I was in my 20s and 30s, formed in part by watching my parents' journey and my own career choices. As with you, it turned out that these habits, shared wholeheartedly by my wife, reaped an unexpected harvest of financial security beyond my earlier imagination. Who knew?! I sure didn't. When I realized, I wish I had adjusted some of my more severe habits sooner.
Post: Spend Nothing
Link to comment from June 28, 2025
As someone who has lived internationally, I can promise you that other countries are not interested in ceremonial certificates, only the legal, properly authenticated, government documents :-). Some of our US procedures are a bit quirky, perhaps due to our "federal" form of government.
Post: Am I Really Married?
Link to comment from May 13, 2025
As a financial coach, not an advisor, I often explain that it is necessary for advisors to provide a great enough level of complexity and activity to convince their clients they are doing something worthwhile. I find that tends to be about 10 funds for a fund-based advisor and at least 10 transactions a year. Generally they also generate PR/educational materials that arrive at least that often, indicating or inferring that ongoing adjustments are needed. Since these are practice-building activities, I would suggest they are more essential to successful advisors than things like simplicity and inaction people are recommending in these comments.
Post: Financial Advisor – NEVER AGAIN
Link to comment from May 13, 2025
When I was in my 20s we bought a charitable gift annuity, which provides lifetime income along with some charitable giving, another way of pooling risk. It was a great deal for us as the rates were quite favorable in the early 1980s. My recollection is that the internal rate of return was 6%. Of course we only had a limited amount of money to commit to it. But it goes back to the point several have made in this discussion, including Jonathan, that people don't actually understand annuities. One way of looking at it is that annuities bet you will die while life insurance bets you won't. They both provide some protection from uncertainty at the cost of some return. In both cases, the cash products can have lower fees and offer simpler propositions. Of course, people also don't understand that insurance companies and their contracts offer different levels of financial security, and very few people even consider the rating of the insurance company when they are comparing contracts. As others have said, having the ability to understand and compare such things is not common to all people and whatever ability we have is a gift, in my opinion. I am grateful although I don't always what to do with whatever gift I have.
Post: RDQ Sorry folks, I still see annuities, including deferred annuities, as a viable option for creating steady retirement income.
Link to comment from April 26, 2025
A note about the tax implications of losing a spouse. It was a surprise to me to realize that having fully funded the tax liability on the joint return provided no protection against underpayment penalties on the single return because it was viewed as "a different taxpayer." Maybe there was a way around that, but if so I missed it and was surprised when my family member incurred a small underpayment penalty the next year.
Post: Taxing Situations
Link to comment from April 26, 2025