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Behavior

Seeking Advice

MANY OF LIFE’S decisions can be handled solo, without fretting over lasting negative outcomes. So what if we pick a lousy movie or choose a second-rate restaurant? Our suffering is short-lived, and our budget barely scratched. But what about the more crucial questions of life, when trying to wing it on our own or trusting the results of a quick internet search might yield painful consequences? Here are four areas of life where paying for expert guidance can be worth the price of admission: 1. Picking winners. Many fellow HumbleDollar readers are fairly confident about choosing investments to grow our money and keep it safe until needed. As an added bonus, some of us think tending money is among life’s most engaging pursuits. But what about folks who get anxious at the thought of trusting themselves with their life savings, or who just don’t want the bother? No worries. There’s no shortage of firms clamoring for the chance to direct our dollars as they see fit. Trouble is, too often their service comes at a steep price, in the form of high commissions and fees. That’s important, because seemingly small increases in expense can knock thousands of dollars off portfolio growth over time. What to do? One option is a fee-only financial planner. With this choice, we side-step a commission, though we’re still faced with how to pay.  We might pick a flat fee arrangement, perhaps, or one based on a percentage of our invested assets. Along with investment advice, our money will probably buy detailed guidance on other aspects of our finances, like retirement and estate planning. The National Association of Personal Financial Advisors can help locate a fee-only advisor at NAPFA.org. Searching for the lowest cost and not concerned with face-to-face contact? Check out the suggestions for online advice here. A few years back, I helped a close friend find low-cost financial advice from one of the suggested companies that’s a leader in providing investment choices with rock-bottom management fees.  Not long after he retired, a friend disclosed to me that he had rolled his 401(k) into an IRA with a financial services company. He didn’t know his cost, but I suspected a healthy slice was coming off the top. Turns out, between the management fee and fees charged by the active mutual funds he was invested in, he was forking over more than 3% annually.  My friend is intelligent, but not focused on managing money and has little interest in learning. Still, he recognized gaining ground against that level of expense was an uphill run. At my suggestion, he shifted his money to index funds at Vanguard Group and chose to pay for their Personal Advisor Services, for a total cost of under 0.4%. We both thought that move was the wisest decision for him. 2. Paying the toll. Tax reporting is not one of life’s simpler chores, even for a relatively uncomplicated mix of income, deductions and credits. But add in, say, tracking rental income and costs, selling investments, interpreting trust rules or a host of other possible scenarios, and the task can grow beyond the layperson's ability or confidence level. It’s no wonder over half of tax filers pay a professional to prepare their returns (see Table 1). Even so, is a tax professional really worth her salt? It depends. If we’re confident our tax filing captures every available deduction and credit while navigating each nuance of the thousands of pages of federal tax code, then maybe not. But if we’re wrong, we could be among those who, according to the IRS, leave billions of dollars in deductions and credits unclaimed. Or–shudder–we might get an invitation to defend our point of view. While hiring a CPA can’t guarantee the IRS won’t come calling, the extra layer of scrutiny may help avoid the possibility. Even for skilled self-preparers, certain situations make hiring a CPA the prudent choice. When a debilitating illness forced my wife’s brother to sell his house in California prior to relocating near us in Georgia, she felt there were good reasons to hire a CPA to handle his taxes for that year. For one, the added complexity spawned doubt about figuring his tax liability. In addition, she felt the weight of fiducial responsibility, and wanted documented assurance for herself and her siblings that she had fulfilled her commitment. In addition to toting up the annual tax bill, a professional can help in another key area: tax planning for retirement. The complexity of the tax code makes finding the optimal path through the maze of differing rules for demanding a share of our money a daunting task. Paying for clear direction might pay off by keeping the total tax bite during retirement as small as possible. 3. Poorly armed. Whoever remarked that the person who is his own lawyer has a fool for a client might have been right. The complexity of the court environment can be unfriendly to the inexperienced. According to one study, nearly 200 discrete tasks are required to take a case through court, ranging from finding the appropriate court to negotiating a settlement. Even so, when faced with a civil court case, many folks choose to go it alone–and they nearly always lose. Why do so many people show up for a courtroom fight without a lawyer? Fear of unaffordable fees keeps some from hiring an attorney. Another reason is ignorance of the law. The 2021 Justice Gap Measurement Survey found that, compared to low-income households, higher-income Americans have more confidence in their ability to find an affordable lawyer. They also tend to have more favorable views of the legal system. Yet, more than two-thirds of both groups failed to recognize that a lawyer could help them with their civil legal problems. Thankfully, I’ve avoided being a litigant in a court case. Still, when a misunderstanding arose between my physical therapy state licensing board and me, I didn’t grasp that I needed an attorney to set things right. The board contended I hadn’t met my required continuing education hours for license renewal. In addition to a hefty fine, it demanded I acknowledge guilt. I balked, because I knew I was compliant. The money aside, I was concerned for my reputation, so I dashed off a letter of explanation–which the board rejected. In frustration, I called my attorney cousin, who referred me to a partner who specializes in professional liability defense. His letter, along with supporting documents, not only convinced the board of my view point, but elicited a gushing apology for the accusation. In my case, the attorney refused payment, but I would have happily handed over my money to protect my name. 4. Heeding the signs. Sometimes, failing to seek advice can cost us everything. The early signs and symptoms of a serious medical condition can be sneaky. It can be easy to ignore the occasional stumble as we walk, or a stomach ache that arrives with increasing frequency. If we do decide to question the cause, the internet’s myriad answers, along with suggested treatments to make the symptoms disappear, might not be the best choice. Even so, according to one survey of American adults, 57% first ask the internet what’s causing their health symptoms. Many searches lead people to self-diagnose any of an array of medical conditions, with mental health being a common concern. But rather than comforting help, most respondents report feeling more anxiety after an internet consultation. Is self-directed health research really that bad for us? It depends. If our quest leads to a trusted website, maybe not. We might be alerted to early disease signs of which we were unaware. But taking the next step is vital: research that identifies a possible medical condition, or that even yields information that’s inconclusive, needs follow up by consulting with a trained medical professional.  To illustrate: Early in my physical therapy career, a patient I was treating for joint pain presented to his Monday morning appointment complaining of his third day suffering from a persistent “stomach ache” and shortness of breath with mild exertion. He looked ill, and his blood pressure was abnormally low. I told him he would get no physical therapy that day, and advised him to seek medical attention immediately. He adamantly refused, stating he preferred to wait until his regular medical check up mid-week. He never made it to that appointment. When he failed to show up for PT on Friday, I called to learn he had died of a heart attack a couple of days following his visit with me. Ed is a semi-retired physical therapist who lives and works in a small community near Atlanta. When he's not spending time with his church, family or friends, you may find him tending his garden and wondering if he will ever fully retire. Check out Ed’s earlier articles.  
Read more »

Spending

The Decaying Curve vs. the Time Value of Money

"1PF, anticipation is a very good point, and I should have counted it. That makes three payouts rather than two, and the first one arrives before you’ve even left home. I’m heading to the Canary Islands next weekend for my wife’s 60th birthday, and I’m certainly enjoying the build-up."
- Mark Crothers
Read more »

Taxes

Time to QCD

"Over the years I worked with two gentlemen whose kids benefited greatly from Shriner's Children's hospitals. Much like St. Jude's, they do heaven's work."
- Patrick Brennan
Read more »

From HumbleDollar Founder Jonathan Clements

Investing

Not Exactly True

THERE ARE FINANCIAL issues on which reasonable people can disagree. This article is not about those issues. Instead, it’s about issues where people disagree—because…
Read more »

Taxes

Mutual Funds

ON NOVEMBER 21, 2025, a mutual fund managed by Royce Investment Partners (ticker: RDVIX) saw its share price drop more than 60% overnight. What happened? In this case, nothing dramatic. But this surprising price move illustrates an aspect of mutual funds that often flies below the radar. Under IRS rules, mutual funds are obligated to distribute at least 90% of earnings to their shareholders each year to avoid being taxed themselves. That includes dividends or interest produced by the investments the fund holds. And it includes capital gains generated by the fund manager’s own trading. In the case of the Royce fund, the fund manager was particularly active last year, and as a result, generated significant capital gains. To meet the requirement to distribute the bulk of those profits by year-end, the fund manager picked that day in November and arranged for this distribution. Why did the share price drop so significantly? This is where the distribution process gets a little thorny, so we’ll walk through it step by step. On the day before the distribution, the fund’s closing share price was $5.72. Then, immediately after the market closed, a distribution of $3.77 per share was issued. The fund paid this out of its cash reserves. As a result, after the distribution, the fund was that much smaller. And because that cash was no longer in the fund but instead in investors’ hands, the fund’s share price started the next day that much lower. How did that affect the fund’s shareholders? On the day after the distribution, their shares were worth $3.77 less, but they’d also received $3.77 in cash. So from investors’ perspective, they were no worse off.  If that’s the case, though—that shareholders were no worse off—then why are fund distributions worth discussion? The issue is that distributions like this are taxable as income to mutual fund shareholders, if a fund is held in a taxable account. Each shareholder in a mutual fund pays his or her own pro rata share of the fund’s tax bill, but shareholders have no choice in the matter. If a fund manager decides that he likes Apple better than Amazon and places a trade that generates a gain, shareholders have no say in that decision and aren’t even notified until later, when a distribution is announced. In many cases, distributions are modest, and nearly every fund generates some income, if only from interest or dividends. That’s to be expected. But distributions generated as a result of fund managers’ trading are worth greater scrutiny. As an investor, how can you know how actively a fund manager will be trading? There’s no way to know for sure, but two strategies can help you make an educated guess. First is to examine the fund’s track record. Past performance doesn’t guarantee future results, but it can provide clues. If a fund manager has been an active trader in the past, you might expect a similar pattern in the future. To get a sense of this, you’d simply visit the fund company’s website, where you’ll find a page detailing past distributions. If you see a pattern of big numbers in the capital gains category, that’s a red flag.  A more fundamental way to estimate what level of taxes a fund is likely to generate: Examine the fund’s strategy. In general, if it’s an index fund, it’s less likely to generate capital gains. But being an index fund is still no guarantee that a fund will be tax efficient. That’s because there are thousands of indexes out there, and some follow niche strategies that involve more trading. So always check out a fund’s track record. So far, we’ve been looking only at traditional mutual funds. What about exchange-traded funds (ETFs)?  They’re often more tax efficient because of a feature available only to ETFs and not to mutual funds: They’re able to trade “in kind” with firms known as authorized participants. In simple terms, what this means is that ETFs are able to swap assets out without actually selling them, and that allows them to make portfolio changes without triggering a taxable event for shareholders. That’s a key reason I recommend ETFs over traditional mutual funds when the same investment is available in both formats. To be sure, ETFs can still generate capital gains distributions, and some do, but it’s much less common than with mutual funds. Wondering about the tax efficiency of funds you already own? The place to start is Schedule D of your tax return. Look for a line that reads “capital gains distributions.” If there’s a material number on that line, you may want to investigate further. At the back of your tax return, there will probably be a table that breaks down the distributions, helping you identify the smoking gun. If it turns out that a fund in your portfolio is generating outsized distributions, I suggest two ways you might think about it. If you’re in retirement, you might conclude that these distributions aren’t really a problem since you’d be selling assets anyway to meet expenses. But if you’re in your working years and a net saver, that’s when you might consider ways to reduce your holdings in a fund that’s been tax-inefficient. If there isn’t much of a gain on your holding, you might simply sell it. But if it’s held at more of a significant gain, you’ll want to think about other ways to reduce the position over time. You might sell shares incrementally to spread out the tax impact or use them for charitable giving. In the meantime, one easy step is to confirm that you aren’t automatically reinvesting distributions. At the margin, this can help in reducing your exposure to tax-inefficient funds. Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
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Insurance

Umbrella insurance

"Agree with you that having the insurance lawyers involved is the major benefit. I know we have excellent driving records and most likely we will have the wisdom to know when to stop driving , and we won't have heavy drinking and driving guests in our homes , but I suppose there's always the possibility we'll drive through a store front window someday . Or someone in my small New England town sues me for slander for something I said. (not likely ,but it happened to someone I know)."
- Julie C
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Life Events

A Gift, Not A Given

"Dave, I’m sorry that settling your mother’s estate was followed by such a painful family rift. It’s sad when an inheritance becomes tied to hurt and mistrust, especially while everyone is grieving. Your experience shows how deeply expectations can affect relationships. Thank you for sharing something so personal, and for your thoughtful words about the article."
- Andrew Clements
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Investing

Financial literacy is not the problem nor the solution.

"Basic knowledge of both investing fundamentals and the emotional aspects of decision making are key. Buffett said the investing game is not "won" by those with the highest IQs, but rather those with emotional discipline."
- Jack Hannam
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Investing

Bond Lookalikes

"Rick, interesting exercise. I agree that Social Security and pensions give us the freedom to take more risk with our investments. But I'm not sure I'd count them as bonds. Bonds also provide liquidity, help cushion market declines, and give us something to rebalance from when stocks fall. Guaranteed income can't do those things. And there's another question worth considering. Once our retirement spending is comfortably funded, aren't we effectively investing much of the remaining portfolio for our children or charities? If so, perhaps we should be thinking about their investment horizon rather than our own. Perhaps the real question isn't how much of our guaranteed income we should count as bonds, but why we need to hold bonds in the first place."
- Mark Gardner
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Taxes

Roth Conversions

AMONG THE MOST COMMON debates in personal finance is whether Roth conversions are a wise strategy. Especially as the end of the year approaches, it’s worth looking at both sides of this question. If you aren’t familiar with it, the idea behind a Roth conversion is that individuals can choose, at any time, and at any income level, to move money out of a pre-tax traditional IRA into a Roth IRA. There’s a catch, though: In the year that you complete a conversion, you must pay income tax on the amount that you convert. So, the bet you are making with a conversion is that your tax rate today will be lower than it will be in the future, when you otherwise would have taken those dollars out of your IRA. For example, if you could pay a tax of just 22% today to convert dollars from your pre-tax IRA to your Roth IRA, you would happily do that if you expected your tax rate down the road to be much higher—say, 32%.  This seems straightforward, but not everyone agrees. For starters, Roth conversions’ detractors point to the uncertainty inherent in the exercise. Predicting future tax rates is an imperfect science, and if rates end up going lower in the future, that could turn the benefit of a conversion upside down. You could end up paying a higher rate today than you would’ve in the future. Given the state of federal finances, it might seem unlikely to expect tax rates to go down, but no one can say that with certainty. Congress often changes the rules, and as recently as the late-1980s, the highest ordinary income tax rate was nine percentage points lower than it is today (28% vs. 37%). In addition, it can be difficult to predict our own future income with precision. Consider required minimum distributions (RMDs) from retirement accounts. They’re a key component of most retirees’ income, but because they’re dependent on future investment returns, the best any of us can do is to estimate this figure. Roth conversions, in other words, involve uncertainty along multiple dimensions. This is a point even supporters acknowledge. That’s why, to help manage this uncertainty, I look at Roth conversion candidates as falling into one of three categories. The first category: When a taxpayer’s marginal tax rate is currently in one of the two lowest brackets, either 10% or 12%, I see it as an easy decision to complete a conversion. That’s because it’s hard to imagine that their future tax rate would be any lower. At worst, in that case, a Roth conversion in one of these two lowest brackets might just be a wash. The second category: When a taxpayer’s marginal rate is over 30%, I see that as an easy decision as well, but for the opposite reason. Roth conversions rarely make sense at that level because it’s hard to make the argument that a taxpayer in a very high bracket might end up in a bracket that’s even higher. To be sure, it can happen—and I’ll describe one clear case below—but it’s hard to have confidence in that expectation. For that reason, a conversion at a rate over 30% typically doesn’t make sense. The third category: If your marginal rate is in one of the middle brackets—either 22% or 24%—that’s when the conversion decision doesn’t have an easy “yes” or “no” answer, and it’s worth examining other factors. When would a conversion in this middle range make sense? If the composition of your assets is such that you have significant balances in pre-tax accounts and you haven’t yet hit RMD age (either age 73 or 75), that’s when you’d want to sharpen your pencil. If your RMD based on your current pre-tax balances would push your income into a much higher tax bracket, then it would be safe to assume that, with some additional investment growth, your tax bracket will almost certainly be higher down the road. That’s a clear case for a Roth conversion. Similarly, if you have other income sources, such as a pension, that are guaranteed, that too would make the conversion decision easier. What if the comparison between your current and projected future tax rates isn’t conclusive? Suppose, for example, your taxable ordinary income today is $210,000. For someone married and filing jointly, that would translate to the 22% marginal tax bracket. Even if your income rose sharply in future years with required minimum distributions, up to $300,000, for example, the tax impact would be modest. Income of $300,000 would translate to a marginal bracket of just 24%. So a Roth conversion might not seem like an urgent priority. In that case, there’s another factor that might be a tie-breaker. If one spouse passed away, the surviving spouse would be subject to the tax brackets for single taxpayers. Continuing with this same example, $300,000 of income would result in a substantially higher marginal bracket of 35%. If that were the case, then a conversion today at 22% might make good sense. The upshot: If you’re doing Roth conversion math, and the results look inconclusive, consider what might tip the scales. Another potential tie-breaking factor to consider, if the math isn’t conclusive, would be the estate tax. At the federal level, a tax of 40% applies to assets over $15 million, or $30 million for a married couple. For someone with a balance sheet at that level, Roth conversions can make a lot of sense because they have the result of reducing the size of an estate without reducing the after-tax value of the assets. Consider a simple example: If you complete a conversion of $200,000 that results in $40,000 in taxes, that $40,000 is no longer in your estate, and thus no longer subject to estate tax. This is the only case in which I see an argument for conversions at rates over 30%, because any tax below 40% would still be less costly than the future estate tax levy. Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
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Taxes

IRS Inflation Updates

"Thanks Bogdan. It's always interesting to see what is indexed to inflation, and what isn't."
- Rick Connor
Read more »

Behavior

Seeking Advice

MANY OF LIFE’S decisions can be handled solo, without fretting over lasting negative outcomes. So what if we pick a lousy movie or choose a second-rate restaurant? Our suffering is short-lived, and our budget barely scratched. But what about the more crucial questions of life, when trying to wing it on our own or trusting the results of a quick internet search might yield painful consequences? Here are four areas of life where paying for expert guidance can be worth the price of admission: 1. Picking winners. Many fellow HumbleDollar readers are fairly confident about choosing investments to grow our money and keep it safe until needed. As an added bonus, some of us think tending money is among life’s most engaging pursuits. But what about folks who get anxious at the thought of trusting themselves with their life savings, or who just don’t want the bother? No worries. There’s no shortage of firms clamoring for the chance to direct our dollars as they see fit. Trouble is, too often their service comes at a steep price, in the form of high commissions and fees. That’s important, because seemingly small increases in expense can knock thousands of dollars off portfolio growth over time. What to do? One option is a fee-only financial planner. With this choice, we side-step a commission, though we’re still faced with how to pay.  We might pick a flat fee arrangement, perhaps, or one based on a percentage of our invested assets. Along with investment advice, our money will probably buy detailed guidance on other aspects of our finances, like retirement and estate planning. The National Association of Personal Financial Advisors can help locate a fee-only advisor at NAPFA.org. Searching for the lowest cost and not concerned with face-to-face contact? Check out the suggestions for online advice here. A few years back, I helped a close friend find low-cost financial advice from one of the suggested companies that’s a leader in providing investment choices with rock-bottom management fees.  Not long after he retired, a friend disclosed to me that he had rolled his 401(k) into an IRA with a financial services company. He didn’t know his cost, but I suspected a healthy slice was coming off the top. Turns out, between the management fee and fees charged by the active mutual funds he was invested in, he was forking over more than 3% annually.  My friend is intelligent, but not focused on managing money and has little interest in learning. Still, he recognized gaining ground against that level of expense was an uphill run. At my suggestion, he shifted his money to index funds at Vanguard Group and chose to pay for their Personal Advisor Services, for a total cost of under 0.4%. We both thought that move was the wisest decision for him. 2. Paying the toll. Tax reporting is not one of life’s simpler chores, even for a relatively uncomplicated mix of income, deductions and credits. But add in, say, tracking rental income and costs, selling investments, interpreting trust rules or a host of other possible scenarios, and the task can grow beyond the layperson's ability or confidence level. It’s no wonder over half of tax filers pay a professional to prepare their returns (see Table 1). Even so, is a tax professional really worth her salt? It depends. If we’re confident our tax filing captures every available deduction and credit while navigating each nuance of the thousands of pages of federal tax code, then maybe not. But if we’re wrong, we could be among those who, according to the IRS, leave billions of dollars in deductions and credits unclaimed. Or–shudder–we might get an invitation to defend our point of view. While hiring a CPA can’t guarantee the IRS won’t come calling, the extra layer of scrutiny may help avoid the possibility. Even for skilled self-preparers, certain situations make hiring a CPA the prudent choice. When a debilitating illness forced my wife’s brother to sell his house in California prior to relocating near us in Georgia, she felt there were good reasons to hire a CPA to handle his taxes for that year. For one, the added complexity spawned doubt about figuring his tax liability. In addition, she felt the weight of fiducial responsibility, and wanted documented assurance for herself and her siblings that she had fulfilled her commitment. In addition to toting up the annual tax bill, a professional can help in another key area: tax planning for retirement. The complexity of the tax code makes finding the optimal path through the maze of differing rules for demanding a share of our money a daunting task. Paying for clear direction might pay off by keeping the total tax bite during retirement as small as possible. 3. Poorly armed. Whoever remarked that the person who is his own lawyer has a fool for a client might have been right. The complexity of the court environment can be unfriendly to the inexperienced. According to one study, nearly 200 discrete tasks are required to take a case through court, ranging from finding the appropriate court to negotiating a settlement. Even so, when faced with a civil court case, many folks choose to go it alone–and they nearly always lose. Why do so many people show up for a courtroom fight without a lawyer? Fear of unaffordable fees keeps some from hiring an attorney. Another reason is ignorance of the law. The 2021 Justice Gap Measurement Survey found that, compared to low-income households, higher-income Americans have more confidence in their ability to find an affordable lawyer. They also tend to have more favorable views of the legal system. Yet, more than two-thirds of both groups failed to recognize that a lawyer could help them with their civil legal problems. Thankfully, I’ve avoided being a litigant in a court case. Still, when a misunderstanding arose between my physical therapy state licensing board and me, I didn’t grasp that I needed an attorney to set things right. The board contended I hadn’t met my required continuing education hours for license renewal. In addition to a hefty fine, it demanded I acknowledge guilt. I balked, because I knew I was compliant. The money aside, I was concerned for my reputation, so I dashed off a letter of explanation–which the board rejected. In frustration, I called my attorney cousin, who referred me to a partner who specializes in professional liability defense. His letter, along with supporting documents, not only convinced the board of my view point, but elicited a gushing apology for the accusation. In my case, the attorney refused payment, but I would have happily handed over my money to protect my name. 4. Heeding the signs. Sometimes, failing to seek advice can cost us everything. The early signs and symptoms of a serious medical condition can be sneaky. It can be easy to ignore the occasional stumble as we walk, or a stomach ache that arrives with increasing frequency. If we do decide to question the cause, the internet’s myriad answers, along with suggested treatments to make the symptoms disappear, might not be the best choice. Even so, according to one survey of American adults, 57% first ask the internet what’s causing their health symptoms. Many searches lead people to self-diagnose any of an array of medical conditions, with mental health being a common concern. But rather than comforting help, most respondents report feeling more anxiety after an internet consultation. Is self-directed health research really that bad for us? It depends. If our quest leads to a trusted website, maybe not. We might be alerted to early disease signs of which we were unaware. But taking the next step is vital: research that identifies a possible medical condition, or that even yields information that’s inconclusive, needs follow up by consulting with a trained medical professional.  To illustrate: Early in my physical therapy career, a patient I was treating for joint pain presented to his Monday morning appointment complaining of his third day suffering from a persistent “stomach ache” and shortness of breath with mild exertion. He looked ill, and his blood pressure was abnormally low. I told him he would get no physical therapy that day, and advised him to seek medical attention immediately. He adamantly refused, stating he preferred to wait until his regular medical check up mid-week. He never made it to that appointment. When he failed to show up for PT on Friday, I called to learn he had died of a heart attack a couple of days following his visit with me. Ed is a semi-retired physical therapist who lives and works in a small community near Atlanta. When he's not spending time with his church, family or friends, you may find him tending his garden and wondering if he will ever fully retire. Check out Ed’s earlier articles.  
Read more »

Spending

The Decaying Curve vs. the Time Value of Money

"1PF, anticipation is a very good point, and I should have counted it. That makes three payouts rather than two, and the first one arrives before you’ve even left home. I’m heading to the Canary Islands next weekend for my wife’s 60th birthday, and I’m certainly enjoying the build-up."
- Mark Crothers
Read more »

Taxes

Time to QCD

"Over the years I worked with two gentlemen whose kids benefited greatly from Shriner's Children's hospitals. Much like St. Jude's, they do heaven's work."
- Patrick Brennan
Read more »

From HumbleDollar Founder Jonathan Clements

Investing

Not Exactly True

THERE ARE FINANCIAL issues on which reasonable people can disagree. This article is not about those issues. Instead, it’s about issues where people disagree—because…
Read more »

Taxes

Mutual Funds

ON NOVEMBER 21, 2025, a mutual fund managed by Royce Investment Partners (ticker: RDVIX) saw its share price drop more than 60% overnight. What happened? In this case, nothing dramatic. But this surprising price move illustrates an aspect of mutual funds that often flies below the radar. Under IRS rules, mutual funds are obligated to distribute at least 90% of earnings to their shareholders each year to avoid being taxed themselves. That includes dividends or interest produced by the investments the fund holds. And it includes capital gains generated by the fund manager’s own trading. In the case of the Royce fund, the fund manager was particularly active last year, and as a result, generated significant capital gains. To meet the requirement to distribute the bulk of those profits by year-end, the fund manager picked that day in November and arranged for this distribution. Why did the share price drop so significantly? This is where the distribution process gets a little thorny, so we’ll walk through it step by step. On the day before the distribution, the fund’s closing share price was $5.72. Then, immediately after the market closed, a distribution of $3.77 per share was issued. The fund paid this out of its cash reserves. As a result, after the distribution, the fund was that much smaller. And because that cash was no longer in the fund but instead in investors’ hands, the fund’s share price started the next day that much lower. How did that affect the fund’s shareholders? On the day after the distribution, their shares were worth $3.77 less, but they’d also received $3.77 in cash. So from investors’ perspective, they were no worse off.  If that’s the case, though—that shareholders were no worse off—then why are fund distributions worth discussion? The issue is that distributions like this are taxable as income to mutual fund shareholders, if a fund is held in a taxable account. Each shareholder in a mutual fund pays his or her own pro rata share of the fund’s tax bill, but shareholders have no choice in the matter. If a fund manager decides that he likes Apple better than Amazon and places a trade that generates a gain, shareholders have no say in that decision and aren’t even notified until later, when a distribution is announced. In many cases, distributions are modest, and nearly every fund generates some income, if only from interest or dividends. That’s to be expected. But distributions generated as a result of fund managers’ trading are worth greater scrutiny. As an investor, how can you know how actively a fund manager will be trading? There’s no way to know for sure, but two strategies can help you make an educated guess. First is to examine the fund’s track record. Past performance doesn’t guarantee future results, but it can provide clues. If a fund manager has been an active trader in the past, you might expect a similar pattern in the future. To get a sense of this, you’d simply visit the fund company’s website, where you’ll find a page detailing past distributions. If you see a pattern of big numbers in the capital gains category, that’s a red flag.  A more fundamental way to estimate what level of taxes a fund is likely to generate: Examine the fund’s strategy. In general, if it’s an index fund, it’s less likely to generate capital gains. But being an index fund is still no guarantee that a fund will be tax efficient. That’s because there are thousands of indexes out there, and some follow niche strategies that involve more trading. So always check out a fund’s track record. So far, we’ve been looking only at traditional mutual funds. What about exchange-traded funds (ETFs)?  They’re often more tax efficient because of a feature available only to ETFs and not to mutual funds: They’re able to trade “in kind” with firms known as authorized participants. In simple terms, what this means is that ETFs are able to swap assets out without actually selling them, and that allows them to make portfolio changes without triggering a taxable event for shareholders. That’s a key reason I recommend ETFs over traditional mutual funds when the same investment is available in both formats. To be sure, ETFs can still generate capital gains distributions, and some do, but it’s much less common than with mutual funds. Wondering about the tax efficiency of funds you already own? The place to start is Schedule D of your tax return. Look for a line that reads “capital gains distributions.” If there’s a material number on that line, you may want to investigate further. At the back of your tax return, there will probably be a table that breaks down the distributions, helping you identify the smoking gun. If it turns out that a fund in your portfolio is generating outsized distributions, I suggest two ways you might think about it. If you’re in retirement, you might conclude that these distributions aren’t really a problem since you’d be selling assets anyway to meet expenses. But if you’re in your working years and a net saver, that’s when you might consider ways to reduce your holdings in a fund that’s been tax-inefficient. If there isn’t much of a gain on your holding, you might simply sell it. But if it’s held at more of a significant gain, you’ll want to think about other ways to reduce the position over time. You might sell shares incrementally to spread out the tax impact or use them for charitable giving. In the meantime, one easy step is to confirm that you aren’t automatically reinvesting distributions. At the margin, this can help in reducing your exposure to tax-inefficient funds. Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
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Insurance

Umbrella insurance

"Agree with you that having the insurance lawyers involved is the major benefit. I know we have excellent driving records and most likely we will have the wisdom to know when to stop driving , and we won't have heavy drinking and driving guests in our homes , but I suppose there's always the possibility we'll drive through a store front window someday . Or someone in my small New England town sues me for slander for something I said. (not likely ,but it happened to someone I know)."
- Julie C
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Life Events

A Gift, Not A Given

"Dave, I’m sorry that settling your mother’s estate was followed by such a painful family rift. It’s sad when an inheritance becomes tied to hurt and mistrust, especially while everyone is grieving. Your experience shows how deeply expectations can affect relationships. Thank you for sharing something so personal, and for your thoughtful words about the article."
- Andrew Clements
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Investing

Financial literacy is not the problem nor the solution.

"Basic knowledge of both investing fundamentals and the emotional aspects of decision making are key. Buffett said the investing game is not "won" by those with the highest IQs, but rather those with emotional discipline."
- Jack Hannam
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Free Newsletter

Get Educated

Manifesto

NO. 74: WHATEVER the nightmare scenario—recession, inflation, deflation—the answer’s the same: We need stocks to notch long-run gains, with enough bonds and cash to survive the rough spell.

act

WRITE YOUR OWN obituary, and list which newspapers and other publications you’d like it sent to. Your family will appreciate having details about your life’s milestones. It will also give you a chance to ponder the achievements you’re most proud of—and it may spur you to consider the work that's unfinished. What else would you like to accomplish?

Truths

NO. 23: WE’LL NEVER be satisfied. Bigger homes, new cars, pay raises and promotions almost always disappoint—thanks to hedonic adaptation. We quickly become dissatisfied with what we have and what we’ve achieved, and we start craving something new. To counter hedonic adaptation, pause every so often and ponder your good fortune.

humans

NO. 48: WE MAY believe an investment is an obvious buy or sell, but never forget somebody’s on the other side of the trade. Investing isn’t like playing tennis against a wall. Rather, you’re up against champion players—perhaps company insiders, or a hedge fund, or a Wall Street trading desk. What are the chances you know something they don’t?

Financial life planner

Manifesto

NO. 74: WHATEVER the nightmare scenario—recession, inflation, deflation—the answer’s the same: We need stocks to notch long-run gains, with enough bonds and cash to survive the rough spell.

Spotlight: Markets

Farrell Behavior

The 2008 financial crisis and the Great Recession were unsettling. People lost jobs, homes, and a good chunk of their nest eggs. The S&P 500 saw an almost 40% drop in 2008 alone. The 24-hour news cycle and social media offered up plenty of data,…
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Recency Bias (or: You’re Running Buggy Software)

Felt a little uneasy with the market wobbles over the last while? Maybe some quiet anguish watching your numbers dip into the red? If so, welcome back to an old friend, recency bias, because that's almost certainly what you're experiencing. Step back and look at…
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Open Questions

AS WE CELEBRATE 250 years since the Declaration of Independence, I’m reminded of an expression that’s popular in the investment world: “This time is different.” The phrase dates to a 1993 publication titled “16 Rules for Investment Success,” authored by the veteran investment manager Sir…
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Any concern?

Prices are not coming down, inflation is rising, mortgage rates are rising, the stock market is near bear territory. Given all the planning and various strategies that have been discussed on HD, do those retired have any concerns about weathering this storm? How about those…
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Market Risks

YOU MAY BE familiar with a concept known as Pascal’s wager. Named for Blaise Pascal, a devout seventeenth-century French mathematician, it was a thought experiment in which he tried to weigh, in logical terms, the costs and benefits of believing in God. His conclusion: The…
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The $5,000 Thought Experiment

A $5,000 payment for every adult citizen. Talk about feeling jealous from the other side of the pond. So I thought I'd create a thought experiment to make myself feel better. On a purely personal level, it's easy to imagine how that cash might be…
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Spotlight: Flack

Making the Call

WHEN I NOTICED MY iPhone 3—that’s not a typo—had a small black spot on its screen, I started thinking that maybe I needed to replace it. Maybe. It was a difficult decision. It was the first smartphone I’d ever owned and, since 2010, it had served me well. I liked it because it was small. It had a cool retro…
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NUA Anyone?

Net unrealized appreciation (NUA) is the difference between the cost basis and the current market value of shares of employer stock held in an employer-sponsored retirement account. If certain criteria are met (death, disability, separation from service, or reaching age 59 ½) an investor can transfer everything in their 401(k) to a rollover IRA—except their employer’s stock. These shares, instead,…
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Inflation Nation

IT SEEMS EVERYONE in the personal finance world is flipping out about inflation. Some are lamenting the cost to fill up their F-150—with the optional 7.2kw onboard generator for tailgate parties no doubt. Others are decrying the $6.39 it takes to buy two liters of ginger ale or the $198 million required for a Rembrandt. Hey, I don’t like higher…
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Not Cool

SHOULD A REASONABLE real estate buyer expect the multiple listing service (MLS) to provide a reasonable description of the property being purchased? What if it doesn’t? All the previous times I’ve purchased real estate, the MLS accurately described the property I was buying. I realized that disclosures were also provided by the seller, and those specified the finer points of…
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Off the Spectrum

LET’S START WITH TWO definitions: Specʹtrum, n. a trade name of Charter Communications used to market avaricious cable television, internet, telephone and wireless services.   Vig’or•ish, n.[via Yid., from R. výigryš, lit., gain, winnings.] interest owed a loan shark in consideration for credit. Abbrev: vig. I bought a home a few months back and, besides trying to meet the neighbors, I had the pleasure of trying…
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Voyage to Nowhere

"REGRETS, I'VE HAD a few. But then again, too few to mention." What was true for Frank Sinatra most definitely isn’t true for me. I’ve had more than a few regrets, and I want to mention the most recent one. Late last year, Mark Cuban offered me $100 in bitcoin to download the Voyager app, deposit $100 and make a…
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HumbleDollar · https://humbledollar.com/ · printed Nov 14, 2026

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