I JUST COMPLETED my fourth year preparing tax returns as part of the federal government’s Volunteer Income Tax Assistance (VITA) program. I’ve seen first-hand how confusing our tax code can be for many taxpayers. Here are the 10 areas of confusion I’ve encountered most often:
1. Income. Anyone looking through a tax return will see multiple definitions of income. There’s total income, adjusted gross income (AGI), modified adjusted gross income, provisional income and taxable income.
A FRIEND ASKED ME recently if I got paid for the writing I do. She assumed that I’d be compensated, especially for research articles published in scholarly journals.
“Yes,” I replied. “I’m paid generously—in psychic income.”
“What’s psychic income?” she asked.
I explained. “Instead of earning a paycheck for my paper, I earn the satisfaction of this well-respected periodical running my article.” That’s also the way it is for my short stories and poetry that appear in specialty publications.
SOMEBODY OUT THERE is buying and holding longer-term bonds—but you probably shouldn’t. Yes, they’ll notch big gains if interest rates fall, but perhaps suffer even bigger losses if the upward trend in rates continues.
To be sure, investors in almost all bonds have been hit this year, with the iShares Core U.S. Aggregate Bond ETF (symbol: AGG) down 9.6% in 2022 through May 13. Shorter-term funds have fared better but are also in the red,
DON PHILLIPS is a former CEO of the research firm Morningstar. In a recent commentary, Phillips discussed what he called the “four horsemen of the investor apocalypse.” I hasten to add that Phillips isn’t predicting any kind of apocalypse. Rather, he wanted to highlight factors that can cause problems for investors. Phillips’s four horsemen are complexity, concentration, leverage and illiquidity. It’s worth taking a closer look at each, especially amid today’s rocky financial markets.
MY 1975 GRADUATION from college was a momentous occasion for my parents. We had emigrated from Germany, first to Canada and then to New Jersey. They didn’t have college degrees, but they had worked hard and epitomized the American dream. Proud that they’d been able to pay for my education but also relieved that college costs were over, they were looking forward to the start of my career.
Wait, what about marriage and a house in the suburbs?
INVESTING MAY BE simple, but it’s far from easy. Our mettle is tested during market extremes, whether it’s bubbles or bear markets. Today, both U.S. and international stocks are close to bear market territory. Amazingly, even major bond market segments are sporting double-digit losses, with Vanguard Total Bond Market ETF (symbol: BND) down almost 10% in 2022.
What makes years like this one so difficult is our deep aversion to losses. Successful investing is about balancing risk and reward.
MARCH 31 MARKED the fifth anniversary of my retirement from fulltime work. Back then, I didn’t think I was retiring and I’m still not sure I really have retired. Instead, over the past five years, I’ve described myself as semi-retired. But a recent HumbleDollar article provided a better description of my situation: I’m in a “phased retirement.”
How have things gone, what have I learned and what would I have done differently?
WHEN I STUDIED FOR the Chartered Financial Analyst (CFA) exams, I snagged extra prep time by listening to textbooks while commuting. As boring as that sounds, it helped me absorb the dry curriculum—and it made listening to financial information part of my daily routine.
While I no longer commute—or even own a car—I continue to plug in my earphones to catch up on the latest investment insights, often during my afternoon walks. Here are my eight favorite podcasts:
The Long View.
WANT A HAPPIER, more fulfilling retirement? You work your entire life to get there, and you want to make the most of the time you’re given. But how? Here are my 10 rules for retirement:
1. Have a purpose and a plan, but be flexible. You might have devoted more than 70,000 hours to your career, so it wouldn’t be a big surprise if your work has become a huge part of your identity.
I’VE BEEN GIVING salient and sagacious financial advice to HumbleDollar readers for coming up on two years. Before that, I’d shared my wisdom for as long as I can remember with family, friends and—in a few cases—complete strangers. Sometimes, though, you need to listen.
Recently, I attended a presentation given by Carlson Financial, where various personal finance issues were discussed while I ate a complimentary eight-ounce filet mignon. One of the issues raised: When determining the total cost of a financial advisor,
BOXER MIKE TYSON observed, shortly before he bit Evander Holyfield’s ear, that, “Everyone has a plan until they get punched in the mouth.”
Well, the bond market has me black and blue and gnashing my teeth. Have Treasury bonds lost their diversifying power in these inflationary times? For decades, they’d mostly held their ground or gained during stock market routs. Not this year.
My longstanding plan has been to invest in conventional short- and intermediate-term Treasury funds to cushion volatility and as a source of money to add to my stock funds when the market tanks.
A FRUSTRATING reality: Uncertainty is always a factor in personal finance. Still, some aspects are somewhat predictable. Among them is the connection between interest rates and other parts of the economy. Consider four key relationships:
1. Interest rates and inflation. Inflation has been the financial topic of the year. The Federal Reserve has hiked interest rates twice so far in 2022, including a larger-than-average increase last week, as it tries to rein in rising prices.
WHEN I THINK ABOUT my financial journey, I’m reminded of a line from a famous Grateful Dead song: “What a long, strange trip it’s been.” My journey has indeed been long and, on occasion, somewhat strange.
I was born in 1957, the second of three sons. My parents provided us with a loving home and an excellent education. At college, I studied to become an engineer and spent my career in aerospace engineering. No surprise,
THE FEDERAL RESERVE has a daunting responsibility. Among its jobs is “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” This is commonly referred to as its dual mandate of maximum employment and price stability.
Yet those two aims are often at odds. That’s because of the inverse relationship between unemployment and inflation, embodied by the Phillips Curve. Attempts to maximize employment—or minimize unemployment—often stoke the flames of inflation.
I BECAME INVOLVED with employer health benefits in 1962. Back then, my job was to screen medical claims before sending them to the claims’ administrator for processing.
In the decades that followed, I designed, negotiated and managed health plans for a company with 15,000 employees and 4,000 retirees. My job was twofold: to make sure the health benefits were working correctly and to manage costs. The first goal was relatively easy. The second was nearly impossible.