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EVERYBODY WANTS easy answers. But often, things aren’t so simple, especially when it comes to financial conundrums. Consider the four common money questions below—and the rules of thumb that folks frequently rely on.
1. How much do I need saved for retirement? Type this question into Google and most of the answers will recommend that you save some multiple of your income. Some suggest eight-to-10 times income, while others recommend as much as 25 times.
FOR REASONS THAT make lots of sense to my clients, many of them place their homes, securities and other assets in joint ownership with their spouse or children. A characteristic of joint ownership is the right of survivorship—the co-owner who dies first loses all ownership in the property and the surviving co-owner acquires all ownership.
Many individuals mistakenly believe that joint ownership relieves them of the need to write a will. To be sure,
IN AUGUST 2004, venture capitalist Peter Thiel sat down to listen to a pitch from a 20-year-old entrepreneur named Mark Zuckerberg. It didn’t take long for Thiel to make up his mind. According to most accounts, they met in the morning and, after a short break for lunch, Thiel committed to buying 10% of Zuckerberg’s new company, Facebook.
In hindsight, this was clearly a smart move, making Thiel a billionaire. But while it was certainly a great investment,
THERE ARE MANY WHO claim to speak with authority on Social Security. I am not one of them. But I’m nothing if not curious. I recently set about testing some notions I have heard with regard to Social Security retirement benefits. A family member had asked for help understanding her Social Security statement, so I had some real numbers to work with. The statement predicted that her monthly benefits would be as follows, depending on when she begins benefits:
$1,907 at age 62.
AT SEVEN O’CLOCK THIS morning, as my wife and I tried in vain to wake our children for school, we heard a similar response as we went from room to room: “My head hurts.” Nobody wanted to get up.
I have to say, I don’t blame them. It’s the middle of winter here in Boston. The sky is gray and the thermometer seems stuck below zero. It can be hard for anyone to feel motivated,
JUST BEFORE SANTA arrived in 2017, President Trump signed legislation officially titled the Tax Cuts and Jobs Act, which was described by both supporters and opponents as the most comprehensive overhaul of the Internal Revenue Code since the Tax Reform Act of 1986.
The many new rules that are now on the books are mostly prospective, meaning they apply to returns to be filed for calendar years 2018 through 2025. They aren’t retroactive to calendar year 2017.
THE TAX LAWS severely restricts deductions for losses claimed by individuals whose homes, household goods and other properties suffer damage or are destroyed due to events that, in IRS lingo, are “sudden, unexpected, or unusual.”
In many cases, the allowable write-offs turn out to be shockingly smaller than anticipated. Furthermore, those with high incomes and low losses will find they can’t claim any deductions. What follows are answers to some often-asked questions.
What are the usual restrictions on writing off casualty losses?
IMAGINE AN IDEALIZED chart that summarizes our finances over the course of our lives. What would the chart look like? Picture these five lines:
Our nest egg grows, slowly at first and then ever faster, hitting a peak of around 12 times our final salary when we retire.
Our portfolio in our 20s stands at perhaps 90% or even 100% stocks. We dial down our allocation in the years that follow, especially during our final decade in the workforce,
I RECENTLY LEARNED a new expression, TL;DR, which stands for “too long; didn’t read.” Twitter users and bloggers use it when they want to summarize an idea for readers who are short on time. It’s the modern equivalent of saying, “Here’s the executive summary.”
Coincidentally, this week, two people separately asked me what I see as the most important principles in personal finance. In other words, they wanted the TL;DR version, without too much commentary.
SOME OF MY CLIENTS are political junkies; others don’t follow politics. Either way, they’re mostly aware that the Affordable Care Act, a.k.a. Obamacare, overhauled the rules for medical insurance. But lots of them are unaware that ACA’s overhaul also significantly changed some tax laws—and those changes adversely affected their pocketbooks.
I remind my clients that ACA included a provision that increased Medicare taxes for employees with high incomes. Similarly, it increased self-employment taxes for freelancers with high incomes.
WHEN IT COMES TO your home, ignorance about taxes isn’t bliss—and it could be disastrous. I often field tax questions from homeowners. Most don’t understand how they’re affected by continuously changing tax rules. Even worse, they’re totally unaware that the rules have changed.
Want to save thousands of dollars? What follows are reminders of how to sidestep tax pitfalls and take maximum advantage of frequently missed—but perfectly legal—opportunities:
Mortgage points. Do you plan to purchase a new dwelling around year-end?
YOU’VE PROBABLY already asked yourself this question: Is it better for my credit score to have just one credit card—or many?
There’s no magic number, because it isn’t really about how many credit cards you have. Rather, what matters is your financial situation and how you handle your cards. For example, if you are just beginning to build a credit history, it’s best to have a single card. Try to follow three rules:
Pay your bills on time—and avoid late payments at all costs.
WHAT’S THE BIGGEST challenge facing investors? Forget politics, low interest rates or high stock market valuations. I would argue there’s an even bigger challenge: How do you find financial advisors who are worth their fee?
On offer are brokerage firms, insurance companies, banks, mutual funds, accountants and independent advisory firms, all of them employing charming people who would love to help you. Problem is, there isn’t a lot of uniformity in the products and services they offer,
IN THE 1990S, WHEN I started working fulltime, conventional wisdom suggested two possible routes to a comfortable retirement: Find a public sector job that offered a traditional pension plan or, alternatively, join the private sector and set aside 10% of my salary each year in my employer’s 401(k) plan. I was led to believe that if I followed either recommendation, I could sit back, let compound interest do its magic and achieve a financially secure retirement.
SINCE THE EARLY 1990s, Jonathan has written a novel and eight personal finance books—or nine, if you count the two editions of the Jonathan Clements Money Guide. All can be found on Amazon. But his latest book isn’t a solo effort, but rather a collaboration with 29 others: My Money Journey: How 30 People Found Financial Freedom—And You Can Too, published by Harriman House in April 2023.
Meanwhile, his 2018 book,
