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U.S. STOCKS ARE DOWN almost 19% so far this year. The broad bond market, surprisingly, has also lost money, sliding almost 11%.
At times like this—when the headlines are almost all negative—the standard advice is to avoid panicking and stay focused on the long term. I agree with that, and indeed the data are clear: Investors who attempt to time the market with “tactical” trades often suffer whipsaw. But that doesn’t mean we should bury our heads in the sand.
I’M NOT IN THE HABIT of celebrating half-birthdays, but my next one has me thinking. In a few days, I’ll turn age 59½.
That, of course, is the age at which you can tap your retirement accounts without paying the 10% early withdrawal penalty. Though I don’t currently need to pull spending money from my retirement accounts, I like the feeling that I can now do so penalty-free.
Even without that 10% penalty, however,
A FEW WEEKS AGO, my net worth hit the $1 million mark. It was a milestone I’d been looking forward to for years.
Almost a decade ago, I performed my first net worth calculation. Back then, I was recently divorced and living on my own for the first time in my life. My only assets were three retirement accounts and a seven-year-old car, plus half the proceeds from the sale of a house my ex and I had owned.
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.
THERE’S AN OLD JEST that goes, “How can you tell if someone is a runner?” The answer: “Don’t worry, they’ll tell you.”
I’m a runner and have enjoyed running for more than 20 years. For me, it’s not about aspiring to go farther and be faster. It’s more about being outdoors, getting my heart rate up, clearing my head and just moving my body.
This spring finds me training for a half marathon that I’ll run with my son.
ROUGHLY 20 YEARS AGO, I left the world of corporate finance. I saw some of the ugly, high-fee undiversified products many of my friends owned—and how those differed from the ultra-low cost, disciplined investing at the companies where I had been a financial officer. I wanted to change things.
But after two decades, I’d say I’ve struck out. Still, there are lessons to be learned from my failures, as well as some encouraging changes occurring within the financial industry.
AS I NOTED LAST WEEK, investing can be maddening. But it isn’t just investing. Many other personal-finance questions can also drive us crazy. Why is that?
One reason: The stakes are often high, so mistakes can be costly. A second reason: By definition, all data are historical, but all decisions are about the future. To the extent that the future doesn’t look like the past, we have a problem.
Those two factors are very real.
IT’S OFTEN SAID THAT beauty is in the eye of the beholder. The same could be said of fairness in taxation.
A recent article by Kelly Phillips Erb addresses this contentious topic. Erb, who tweets as @TaxGirl, is the team lead for insights and commentary at Bloomberg Tax and Accounting. Her article was titled, “Did you pay your ‘fair share’ of federal income tax this year?”
The piece discusses the history and current state of U.S.
WE NEEDED MONEY to close on a new home. The mortgage process progressed smoothly—until the underwriters suddenly rejected the property right before closing. To get together the money needed to close, my wife and I had to resort to loan sharks—ourselves.
We borrowed from our IRAs. The rules allow tax-free distributions for either a 60-day rollover to a new IRA or reinvestment back into the same IRA. When we called Vanguard Group to execute our “rollovers,” the phone reps were well-versed on this short-term,
I’VE FINALLY DECIDED when to claim my Social Security benefit. Along the way, I realized that calculating the ideal start date is easy—provided you can predict your retirement income needs (doable), your investment returns (hard), the inflation rate (hard), your future tax rate (hard), your date of death (hard) and what Congress will do in the future (impossible).
This particular financial journey began when I was preparing a recent blog post on the knotty issue of when to file.
LOTS OF RESEARCH has been done on the best way to generate retirement income. It’s one of the most popular topics on HumbleDollar. I think this popularity is driven by two things: its obvious importance—and the fact that there’s no one right answer.
By contrast, figuring out how much we need to save for retirement is relatively easy. It isn’t hard to pick a future retirement date, or at least a range of years during which we’ll likely retire,
VIEW ANY NUMBER of YouTube videos on retirement planning, and you’ll find advice on how much you need to save each month, how to invest, how much to accumulate and how to generate retirement income. The same is true for the experts who write blogs.
All this information relates to the retiree. Rarely—actually never—have I seen a discussion about survivor benefits. Even the 4% rule uses an assumed 30-year retirement period, apparently ignoring the possibility that retirement income needs to last over two lifetimes that may extend beyond 30 years,
I RECENTLY RETIRED and have a lump sum from my former employer to invest. For months now, I’ve presumed that I would just add it to our existing investments in the same proportions, easy-peasy. In practice, however, one consideration has led to another, so I’ve made no firm decisions.
Within our 70% stock-30% bond portfolio, I’ve long had a soft rule of keeping well over a third of our stocks in broad market index funds.
HARRY MARKOWITZ WAS a graduate student in economics at the University of Chicago. It was 1954, and he had just finished defending his thesis. Most of the committee accepted his work. But Milton Friedman, an economist with a national reputation and easily the most influential member of the economics faculty, had a problem. While he found no errors in Markowitz’s work, the problem was that it contained no economics. Markowitz’s thesis was about investments and,
DURING A RECENT vacation, my son Max and I played Monopoly. I was amazed at all the personal finance lessons you can learn from the game—one that was first produced in 1935.
We played by the actual Monopoly rules. That includes not getting money just by landing on Free Parking. It also means not auctioning off properties if the person landing on them decides not to pay the list price.
