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31 Rules of the Road

31 Rules of the Road
Below is a modestly revised version of the Jonathan Clements Money Guide 2015‘s final chapter. 
Looking to improve your money management? Here are 31 rules for the financial road ahead:
1.      Check your retirement progress by taking your nest egg and applying a 4 percent annual portfolio withdrawal rate, equal to $4,000 a year for every $100,000 saved. Will you have enough retirement income—or should you be saving more?

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Ruled by Rules

MOST OF US STRUGGLE with self-control. We eat too much, exercise too little and spend excessively. One solution: Adopt rigid rules of behavior.
For instance, I make it a rule to exercise every morning for at least 40 minutes, always buy whole wheat bread, avoid caffeine after 9 a.m. and eat fruit as a midmorning snack. I’ve followed these rules for so long that they’re no longer rules, but rather ingrained, unquestioned habits.
Not surprisingly,

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Belt and Suspenders

I’M IN NO HURRY TO retire—but I am making sure I’m prepared. I’m age 56, and I plan to work full-time until 70 and part-time until 75. I’m an English professor, and I enjoy teaching, service and scholarship. I also enjoy having three weeks off at Christmas and two months in the summer.
I received a fairly large inheritance, which has been growing over the years and which will allow me to do some special things in the years to come.

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An Annuity Instead?

IN A RECENT ONLINE discussion, I compared the benefits of an immediate-fixed annuity with the 4% retirement-income rule. The 4% rule suggests that investors can withdraw 4% from a well-balanced investment portfolio in the first year of retirement, and then add annual inflation adjustments without fear of running out of money over a 30-year retirement.
Using the NewRetirement annuity calculator, I found that a 65-year-old man could purchase an immediate annuity for $1 million,

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Time for a Checkup

AS WE HEAD INTO year-end, many are cheering the financial markets’ returns. The S&P 500 has gained nearly 25% and now sits just a hair below its all-time high. Bonds are also looking more attractive, with yields at 15-year highs.
As a result, many investors are feeling a whole lot better about their portfolio balances. That’s certainly one way to measure financial progress, and it’s an important one. But as you make plans for 2024,

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Retirement Roulette

IT’S HARD TO OVERSTATE how challenging it is to generate retirement income: We need our money to last at least as long as we do, and yet we don’t know how financial markets will perform, what the inflation rate will be, whether we’ll get hit with hefty long-term-care costs and how long we’ll live.
Moreover, the generic advice offered inevitably doesn’t work for many—and perhaps most—folks because we all start retirement with different attitudes,

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A Profitable Read

I RECENTLY FINISHED reading the second edition of William Bernstein’s The Four Pillars of Investingtwice. This new edition is a significant rewrite of the first edition that was published in 2002. Even if you’ve read the first edition, reading the second edition is worth your time.
Though I’ve read most of the books written by well-known investment luminaries familiar to HumbleDollar readers, there were still pearls of wisdom I gathered from this second edition.

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Our Exit Strategy

IT’S CHALLENGING TO GO from saving during our working years to spending in retirement. Our solution: Use a modified version of the 4% rule.
Financial planner William Bengen was the first person to articulate the 4% rule. He wanted to know how much people could withdraw from their investments each year and still not run out of money. Through extensive back-testing, he found that if folks withdrew 4% in the first year, and thereafter increased this amount each year for inflation,

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Foolishly Fixated

GOOGLE THE QUESTION, “How many Americans live on a fixed income?” You won’t find an answer. But we all know “fixed income” is used endlessly to describe the plight of us seniors.

For example, there’s this from the National Council on Aging: “Living on a fixed income generally applies to older adults who are no longer working and collecting a regular paycheck. Instead, they depend mostly or entirely on fixed payments from sources such as Social Security,

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Spending Tip: Don’t

I’VE DECIDED TO SELL some of my investments and buy a Bentley. The one I admire would cost about $300,000, including taxes and fees.
Just kidding. Besides, I couldn’t face my four children after such an indecent splurge, knowing that they’re dealing with high-deductible health plans, saving for college and socking away money for retirement—just like millions of other Americans.
While that Bentley purchase would be possible in theory, it would substantially reduce my assets,

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Ten Ways to Simplify

TODAY MARKS MY 300th weekly contribution to HumbleDollar. Over time, one key theme has emerged: While personal finance can be complicated, it doesn’t have to be. How can you simplify your financial life? Below are 10 ideas.
1. Tracking donations. In the old days, it wasn’t too difficult to track charitable gifts. You would simply refer back to your checkbook. But today, most people use debit and credit cards,

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Searching for Answers

MY DAYS WRITING for HumbleDollar may be numbered. I recently started playing with Google’s Bard, OpenAI’s ChatGPT and Microsoft’s version of the ChatGPT artificial intelligence (AI) platform, and was curious to see how they might perform in providing basic financial guidance. Their answers were generally sensible and aligned with HumbleDollar’s approach—though also occasionally flawed.
You might think that AI can’t possibly replace articles penned by contributors, since the charm of HumbleDollar is the contributors’ personal stories.

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Beyond Valuations

WHERE DOES THE STOCK market stand? After 2022’s decline, is it now fairly valued—or still overvalued?
When I think about questions like this, I’m reminded of an opinion piece written by Robert Shiller a few years back. By way of background, Shiller is a professor at Yale University and a Nobel Prize recipient. Along with a colleague, he created one of the more well-known and well-regarded measures of market valuation: the cyclically adjusted price-earnings ratio (CAPE).

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Be Like the Smiths

NETFLIX BEGAN AN experiment in 2003 that seemed crazy to management experts. It instituted a policy of unlimited vacation time for its employees. In the years since, a number of other companies have followed Netflix’s lead, offering employees unlimited paid time off.

The results have run counter to intuition: Employees who are offered unlimited vacation end up taking less time off than those working for companies with traditional vacation policies. Why? A common explanation is that people struggle when they lack clear guidelines.

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Riding the Rails

“HOW MUCH CAN I withdraw from my portfolio each year?” It’s one of the most common questions that retirees ask.
In the past, I’ve talked about the 4% rule, a popular tool for addressing this question. Among the reasons it’s so popular is its simplicity: In the first year of retirement, a retiree withdraws 4% of his or her portfolio, and then that amount increases each year with inflation. If you have a $1 million portfolio,

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