I've come to look at these market corrections as "stress tests" for investing. In real time, if you feel an overpowering urge to mass-sell your stock holdings at this point, your stock allocation is probably too heavy; if you feel an overpowering urge to mass buying, your stock allocation may be too light. If you just shrug your shoulders and say "meh", or maybe want to tweak a little around the edges, then your stock/bond allocation is probably about right.
Experience is a great teacher...and a way to learn things that theory taught in the classroom can't seem to match.
I would hasten to add that, so far at least, the bonds in our 60/40 portfolio are providing the comforting ballast that we usually expect (unlike 2022). Our diversified holdings are down something like 6-7% from where they started the year, hardly a bloodbath. Like others, I'm mostly in a wait-and-see mode the right now; at this point, big changes seem uncalled for, but a few tweaks here and there feels like a good idea. After all, "you never want to let market mayhem go to waste." Love it!
Always a pleasure reading you Steve! That last paragraph is about as classic an example of putting lipstick on a pig that I can think of. Can you imagine what would happen to the poor sop who actually wrote a more fact-based headline--say, something like "Index Funds take Hot Shot Active Fund Managers to the Woodshed...Again!" (lol)
Thanks for crafting (another) great (evidence-based) read.
I'm not trying to be pedantic here, but...if we'd just spent the cost of a new car, or a new house, (or a new bath remodel), and my wife wasn't satisfied, and all it would take to fix that perception would be to spend another $1k...honestly, even cheap-skate me would see spending that as a no-brainer. I've long since learned around here, if the lady of the house says she don't like it, I take her literally at her word-- *she don't like it*. Just a thought.
That AARP tax calculator is one of the best quick-estimator tools out there, for Federal taxes. Of course, using the previous year's tax software is also a great way to get a handle on the current year's bill. This should also give you a pretty good picture of your state tax as well--provided, of course, your state hasn't had any major tax-law changes since the previous year.
The main limitation of the AARP calculator (and other quick estimators as well), is it won't calculate certain tax credits; you have to figure these out on your own, and manually put them in. For example, take a retired married couple where one has a little "earned" income, where they contributed to a 401k, and the other has only pension income. A sharp-eyed tax preparer would immediately recognize, this is one of those few times that the tax code might give a more favorable outcome to MFS vs MFJ. Since the potential Saver's credit would disappear with pension income if filed MFJ, filing MFS might allow that couple to qualify for the saver's credit (one of the few that doesn't disappear with filing MFS).
Such a circumstance of course probably won't affect most of the high rollers that frequent HD, since much of the readership has six-figure+ incomes. But this is just the kind of thing that several of the volunteer preparers might run into in their work at the local senior center, where incomes tend to be more modest, and might keep an eye out for.
We really enjoy All Creatures as well. I grew up around my grandparent's dairy farm, and from that experience I'm pretty impressed with the show's realism when dealing with the various animals (and people!) Definitely looking forward to the new season! Like you, I see travel as more of a means to an end, rather than a luxury good to be consumed. Thanks for the perspective.
Time required to pay off can depend on a bunch of factors, including income sources, and how/if state taxes are in the equation. For example, if he's filing single and has no other sources of income besides Social Security, brokerage account income, and retirement account withdrawals, there's a high likelihood such a conversion wouldn't pay off in his lifetime, since his marginal tax rate on the converted amount would exceed his effective tax rate, probably by a considerable amount. Although, he still might want to do some conversions, if he's looking to lower the tax hit for his heirs. But if all he's looking for is a tax payoff in his lifetime, I doubt very much that Roth conversions are going to be able to deliver that.
Doing Roth conversions won't affect the allowed amount of capital loss carry forward; your friend is still stuck with the annual $3,000 limit to offset the ordinary income reported from his retirement accounts used for the conversions. So from that standpoint, whether or not it makes sense to do the conversions won't be (significantly) impacted by his capital loss carry forward amount, IMO.
If your friend is in the 32 percent bracket or higher, there's a higher likelihood that having to pay tax on money used to pay tax (!) on the conversions would probably put the conversions in the "don't really make sense" category. At the very least, it will likely mean that the time needed for the conversion to actually pay off will be that much longer.
+1 for Schwab! This past year I had a very technical question about Form 5498, and the gentleman on chat was able to answer it on-the-fly, quickly and accurately! I was very impressed.
A shout-out here for mentioning the late Charles Givens. I too was introduced to his work "More Wealth Without Risk" sometime in the early '90's. In fact, (this will probably offend some of the minimalists out there, sorry) I still have it, and peruse it from time to time, for nostalgia as much as anything. Definitely a throw-back to a by-gone era.
Occasionally, in trying to figure out where I want to go, I find it useful to look back from time to time and see where I've been. Thanks for sharing.
Comments
I've come to look at these market corrections as "stress tests" for investing. In real time, if you feel an overpowering urge to mass-sell your stock holdings at this point, your stock allocation is probably too heavy; if you feel an overpowering urge to mass buying, your stock allocation may be too light. If you just shrug your shoulders and say "meh", or maybe want to tweak a little around the edges, then your stock/bond allocation is probably about right. Experience is a great teacher...and a way to learn things that theory taught in the classroom can't seem to match.
Post: Reality Check
Link to comment from April 6, 2025
I would hasten to add that, so far at least, the bonds in our 60/40 portfolio are providing the comforting ballast that we usually expect (unlike 2022). Our diversified holdings are down something like 6-7% from where they started the year, hardly a bloodbath. Like others, I'm mostly in a wait-and-see mode the right now; at this point, big changes seem uncalled for, but a few tweaks here and there feels like a good idea. After all, "you never want to let market mayhem go to waste." Love it!
Post: Making Lemonade by Jonathan Clements
Link to comment from April 6, 2025
Always a pleasure reading you Steve! That last paragraph is about as classic an example of putting lipstick on a pig that I can think of. Can you imagine what would happen to the poor sop who actually wrote a more fact-based headline--say, something like "Index Funds take Hot Shot Active Fund Managers to the Woodshed...Again!" (lol) Thanks for crafting (another) great (evidence-based) read.
Post: Active vs. Passive Funds in 2024: It’s Deja Vu (All Over Again) by Steve Abramowitz
Link to comment from March 9, 2025
I'm not trying to be pedantic here, but...if we'd just spent the cost of a new car, or a new house, (or a new bath remodel), and my wife wasn't satisfied, and all it would take to fix that perception would be to spend another $1k...honestly, even cheap-skate me would see spending that as a no-brainer. I've long since learned around here, if the lady of the house says she don't like it, I take her literally at her word-- *she don't like it*. Just a thought.
Post: Replacing the Replacement
Link to comment from March 7, 2025
That AARP tax calculator is one of the best quick-estimator tools out there, for Federal taxes. Of course, using the previous year's tax software is also a great way to get a handle on the current year's bill. This should also give you a pretty good picture of your state tax as well--provided, of course, your state hasn't had any major tax-law changes since the previous year. The main limitation of the AARP calculator (and other quick estimators as well), is it won't calculate certain tax credits; you have to figure these out on your own, and manually put them in. For example, take a retired married couple where one has a little "earned" income, where they contributed to a 401k, and the other has only pension income. A sharp-eyed tax preparer would immediately recognize, this is one of those few times that the tax code might give a more favorable outcome to MFS vs MFJ. Since the potential Saver's credit would disappear with pension income if filed MFJ, filing MFS might allow that couple to qualify for the saver's credit (one of the few that doesn't disappear with filing MFS). Such a circumstance of course probably won't affect most of the high rollers that frequent HD, since much of the readership has six-figure+ incomes. But this is just the kind of thing that several of the volunteer preparers might run into in their work at the local senior center, where incomes tend to be more modest, and might keep an eye out for.
Post: How do you check your tax return? Bill P comes through
Link to comment from March 3, 2025
We really enjoy All Creatures as well. I grew up around my grandparent's dairy farm, and from that experience I'm pretty impressed with the show's realism when dealing with the various animals (and people!) Definitely looking forward to the new season! Like you, I see travel as more of a means to an end, rather than a luxury good to be consumed. Thanks for the perspective.
Post: No “Go-Go” by Kristine Hayes Nibler
Link to comment from January 6, 2025
Time required to pay off can depend on a bunch of factors, including income sources, and how/if state taxes are in the equation. For example, if he's filing single and has no other sources of income besides Social Security, brokerage account income, and retirement account withdrawals, there's a high likelihood such a conversion wouldn't pay off in his lifetime, since his marginal tax rate on the converted amount would exceed his effective tax rate, probably by a considerable amount. Although, he still might want to do some conversions, if he's looking to lower the tax hit for his heirs. But if all he's looking for is a tax payoff in his lifetime, I doubt very much that Roth conversions are going to be able to deliver that.
Post: Roth Conversions with Capital Loss Carryforward?
Link to comment from December 23, 2024
Doing Roth conversions won't affect the allowed amount of capital loss carry forward; your friend is still stuck with the annual $3,000 limit to offset the ordinary income reported from his retirement accounts used for the conversions. So from that standpoint, whether or not it makes sense to do the conversions won't be (significantly) impacted by his capital loss carry forward amount, IMO. If your friend is in the 32 percent bracket or higher, there's a higher likelihood that having to pay tax on money used to pay tax (!) on the conversions would probably put the conversions in the "don't really make sense" category. At the very least, it will likely mean that the time needed for the conversion to actually pay off will be that much longer.
Post: Roth Conversions with Capital Loss Carryforward?
Link to comment from December 23, 2024
+1 for Schwab! This past year I had a very technical question about Form 5498, and the gentleman on chat was able to answer it on-the-fly, quickly and accurately! I was very impressed.
Post: Too Big to Succeed by Jonathan Clements
Link to comment from December 14, 2024
A shout-out here for mentioning the late Charles Givens. I too was introduced to his work "More Wealth Without Risk" sometime in the early '90's. In fact, (this will probably offend some of the minimalists out there, sorry) I still have it, and peruse it from time to time, for nostalgia as much as anything. Definitely a throw-back to a by-gone era. Occasionally, in trying to figure out where I want to go, I find it useful to look back from time to time and see where I've been. Thanks for sharing.
Post: Money Stress in Childhood
Link to comment from December 14, 2024