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Actively Subtracting

A NEW RESEARCH report confirms that there are darn few reasons to consider an actively managed fund over an index fund—and, indeed, this year’s bear market has made the case for active funds even weaker.
Remember active fund managers, those stars of TV and magazines in days of yore? Purportedly, they could beat their relevant indexes by buying the best-performing stocks and bonds, shifting sector and country weights, and sidestepping market pitfalls. That notion seems almost quaint today—because it’s been proved so thoroughly and repeatedly wrong.

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Better Than a Budget

I’VE TALKED IN EARLIER articles about asset-liability matching. It’s ​a concept popular with insurance companies to manage investment risk. It’s a very formal approach and not one I would expect an individual investor to follow too literally. But it’s a notion that, in general, can help individuals make asset allocation decisions.
In his book, The Outsiders, William Thorndike highlights another well-known principle in corporate finance that can also be applied to personal finance: It’s called capital allocation.

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D Is for Delay

REMEMBER THE OLD sayings that “the cobbler’s children have no shoes” and “the carpenter’s house is falling down”? That’s how I felt last month as I frantically tried to enroll in Medicare.
My 65th birthday was in early September. Medicare has an initial enrollment period that lasts seven months. It starts three months before you turn age 65, includes your birth month, and ends three months after the month you turn 65. Suppose you were born on Sept.

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Six Tips on Term Life

I RECENTLY LISTENED to a podcast during which the speakers lamented the death of a colleague who was in his 30s. They mentioned a GoFundMe campaign to assist his family, so I assume the deceased had no life insurance. According to LIMRA, which collects data on the life insurance industry, less than 50% of millennials have individual life insurance.
There are two major types of life insurance: term and whole life. Term insurance is intended to cover a specific period,

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Roth to the Max

WITH THE FINANCIAL markets down sharply, this is a great time to fund a Roth IRA, with its promise of tax-free growth. But the rules can be tricky.
The basics: You place part of your after-tax earned income in a Roth, invest it and—ideally—just leave it to grow. As long as the money stays there until you reach age 59½, and you wait at least five years, you can tap the account without owing a dime in taxes.

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That First Step

I WAS IN NEW YORK visiting my sister a few weeks ago when I saw a sign that read “Delay = Denial.” For me, that simple yet profound statement immediately struck a chord.
The sign was referring to climate change. Yet I could see how this plays out in other areas of my life. I began asking myself, what causes us to delay or deny the obvious?
I reached one clear conclusion: complexity. The things we tend to delay the longest are the things we believe to be too complicated.

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Misjudging the Speed

FOR ELON MUSK, IT HAS—to use his own words—been a “very intense seven days.” Just over a week ago, Tesla demonstrated a new prototype product, a robot called Optimus. A week ago, it announced that it had delivered a record number of new vehicles in the third quarter. And, on Wednesday, a rocket built by SpaceX, one of Musk’s other companies, completed a successful launch from Cape Canaveral, carrying astronauts to the International Space Station.

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Looks Can Deceive

WHEN I TURNED AGE 24, a friend and I took a road trip from San Francisco to Vancouver. It was 1975. I was excited—it would be my first visit to Canada.
I didn’t know what to expect when we got to the Canadian border. All I knew was we didn’t need passports. The border officer gave us a suspicious look. After being on the road for a spell, we didn’t look our best. I was unshaven and wearing my usual T-shirt and jeans.

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Spend the Time

A FAVORITE QUOTE in the world of personal finance comes from Ernest Hemingway’s 1926 novel The Sun Also Rises.
“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually, then suddenly.”
Money troubles are a common theme throughout literature. Charles Dickens probably summed it up best. In David Copperfield, a fellow named Micawber laments: “Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds,

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Once Upon a Dime

AS A RELATIVE newcomer to the wonderful world of personal finance and investing, I’m quickly learning that there’s more to money than numbers. I’m discovering from my own experiences, as well as that of others, that psychology plays a huge role in how we handle our finances.
We’re human beings, not machines. We aren’t completely logical. Yes, logic helps the process, but logic isn’t how we regularly process and digest information. Instead, we’re driven primarily by our emotions.

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Everything Compounds

I’VE ALWAYS BEEN fascinated by compounding. I discovered the concept at a young age. The idea of money making money was earth-shattering to me. Do you mean to tell me I don’t do any physical work and the money just grows? Yes, and—with enough time and interest—it can grow at lightspeed.
I was all in. I searched for everything I could on the subject. This is where my love for financial planning began. I wanted to follow all the rules of compounding: save early,

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Get Rich Slow

THE FINANCIAL WORLD generates a lot of noise. As a financial planner, I see that every day. Being in my 20s, it’s fun to learn about new alternative investments or imagine getting rich quick thanks to one stock or following the advice of one social media post.
But I know that’s all it is—fun. Instead of imagining my way to wealth, I take control of my finances by creating rules to live by. Rules are driven by values.

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A Home Run

MY WIFE SARAH AND I recently dusted off our old Scrabble board. We reviewed the rules and were reminded of the Scrabble Bingo—the 50-point bonus awarded to a player who figures out how to play every letter tile from the tray on a single turn.
Neither of us could remember ever achieving the Scrabble Bingo. That wasn’t surprising, we reasoned, because it’s rare for all the stars to align. You’d need the right combination of seven letters,

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A Hardship Indeed

BORROWING FROM MY 401(k) helped my wife and me buy our home in 1997. I’m grateful I was able to reach inside my retirement plan for the money we needed for the house down payment.
Experts often warn against 401(k) loans because, even if the loan is repaid, the money borrowed can miss out on investment gains. That’s certainly a risk. Still, there’s a second way of taking money out of a 401(k)—and it’s far more harmful to retirement savings.

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Working Away

EVEN BEFORE COVID-19, I was no stranger to working remotely. From 2011 until I retired in 2018, I worked for a major bank from my home office. I started working remotely a few days a week and then, in 2013, requested to work fulltime from home. This was met with skepticism from friends, colleagues and supervisors.
They had concerns that working remotely would make it difficult to connect with others and to get promoted.

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