RETIREMENT MAY MARK the end of fulltime work—but that doesn’t mean we should stop working on our finances. Even after we quit the workforce, there’s much we can do to strengthen our retirement plan and, indeed, that may be necessary if we find we’re drawing down our nest egg too quickly. Are you concerned that you might outlive your savings? Consider these six financial tweaks: 1. Work part-time. I’ve heard folks claim that if you’re still doing some work for pay, you aren’t truly retired. I think that’s silly—as silly as the related notion that a happy retirement is one devoted to blissful nothingness. My contention: Working part-time in retirement is not only a great way to bolster our retirement finances, but for some folks it may also be the key to a happier retirement, because it delivers the sense of purpose they need. Working a day or two each week may not be as appealing or even possible later in retirement, but it could be a smart strategy during our initial retirement years. Think of it this way: If you could earn $10,000 a year by working part-time, that’s like having a nest egg that’s $250,000 larger, assuming a 4% portfolio withdrawal rate. 2. Spend less. During our working years, we often temporarily cut back on discretionary spending if we find ourselves out of work or if we get hit with large, unexpected expenses. Even after we quit the workforce, such spending adjustments should remain a key weapon in our financial arsenal. Facing steep medical bills? Worried because stocks are down sharply? Temporarily reducing spending could get your finances back on track. Thanks to the pandemic, most of us have discovered there’s plenty of fat in our budget. Think about how much you saved over the past 14 months by not going on vacation, cooking at home and avoiding the shopping mall. During retirement, if your nest egg looks a little depleted, perhaps you should adopt a “pandemic budget” for six months or a year. 3. Delay Social Security. The math is crystal clear: As long as you live until at least your late 70s or early 80s, you’ll come out ahead financially if you cover costs in your early retirement years by spending down your cash and bond holdings, while delaying the start of Social Security benefits, so you lock in a larger stream of government-guaranteed, inflation-adjusted income. [xyz-ihs snippet="Mobile-Subscribe"] What if you’ve already claimed benefits and realize you’ve made a mistake? If you’re younger than your full Social Security retirement age (FRA) of 66 or 67 and you claimed benefits within the past 12 months, you can repay the benefits you received and reverse the decision. Alternatively, if you’ve already reached your FRA, you can suspend benefits. You can then leave your monthly check to grow at eight percentage points a year, plus any inflation increase, up until age 70. 4. Buy income annuities. Another way to squeeze more income out of your nest egg is to use a slice of your savings to buy immediate fixed annuities that pay lifetime income. Yes, that means turning over a chunk of your portfolio to an insurance company. But unless you die early in retirement, it could be a smart move. As I’ve mentioned before, I plan to put a significant sum into immediate fixed annuities. The resulting regular income will allow me to invest my remaining portfolio more heavily in stocks—and that could mean a larger inheritance for my kids, despite the money I “lost” by buying the immediate annuities. My plan is to purchase those immediate annuities in my 60s. But buying annuities could also salvage your later retirement years. Suppose you and your spouse are age 80 and have $300,000 left in savings. A 4% withdrawal rate would give you $12,000 a year. What if, instead, you stashed the entire $300,000 in an immediate fixed annuity? You’d collect annual income of almost $24,000, according to a quote from Charles Schwab. Note that this income would be fixed. If you wanted the income to rise each year by, say, 2%, so you have some protection against inflation, the initial income would be somewhat lower. 5. Keep at least 30% in stocks. Retirees often favor bonds and cash investments. But if you want your nest egg to generate a healthy stream of income that keeps up with inflation, you should stash part of your savings in stocks. To understand why, check out Vanguard Group’s retirement nest egg calculator. It uses something called Monte Carlo analysis to see how a retirement portfolio might perform in a host of market scenarios. Suppose you’re looking to fund a 30-year retirement and want to use a 4.5% withdrawal rate. If you play around with the calculator, you’ll see that a very high stock allocation probably won’t hurt your chances of funding that 30-year retirement—but a low allocation likely will. Indeed, once your stock allocation drops below 30%, things start looking pretty grim, especially if you stash the remaining money heavily in cash investments. If anything, I’d favor a minimum stock allocation closer to 40% or even 50%. Why? Vanguard’s calculator is built on historical returns. At today’s miserably low bond and cash yields, such conservative investments will struggle to keep up with inflation. To be sure, future stock returns may also be disappointing by historical standards, given today’s rich valuations. But at least stocks give investors a decent shot at outpacing the twin threats of inflation and taxes. 6. Tap home equity. Downsizing to a smaller, less expensive home is a hassle, but it strikes me as the smartest way to use home equity to pay for retirement. Done right, it should allow retirees to convert part of their current home’s value into spending money, while also lowering their monthly living costs. I’m less keen on reverse mortgages or accessing home equity by remortgaging a home. Both should be viewed as last resorts, I believe. Still, I wouldn’t rule them out. You only get one shot at retirement—and I’d rather see folks take out a reverse mortgage than spend their final years pinching pennies. Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier articles. [xyz-ihs snippet="Donate"]

ON WALL STREET, there’s a story—apocryphal, I suspect—that’s told about an old trader, a young trader and the 1962 Cuban missile crisis. Old trader: “They say this could lead to nuclear war.” Young trader: “So we should buy bonds, right?” Old trader: “No, we should buy stocks. If we don’t get war, the stock market will rally. And if we get a nuclear war, it won’t matter what we own.” Today’s pandemic won’t lead to nuclear war (except perhaps in the Oliver Stone movie version). But many folks seem to fear the economic equivalent: that we’ll suffer a downward GDP death spiral that sends us back to the Stone Age. Needless to say, this would not be good for share prices. But do you imagine you’d be any better off if you had your money in bonds, Krugerrands or certificates of deposit? Let’s face it: If the economy ceases to function, it won’t matter what you own. What if the economy recovers, which everybody—except your crazy uncle—expects will happen eventually? Stocks will go up. In other words, owning stocks is an asymmetrical bet. As with bonds and cash investments, the most we can lose in the stock market is 100% of our investment. But with stocks, your potential gain is far larger. In fact, it’s infinite. To be sure, we haven’t yet reached infinity—and even the most bullish Wall Street strategists aren’t anticipating that any time soon—but we’ve been doing pretty well. Over the past 100 years, the S&P 500 has climbed 1,573,425%, including reinvested dividends. True, there have been periods—like today—when you would have been better off avoiding stocks and instead going long cash, hand sanitizer and toilet paper. But these periods typically don’t last more than a year. Indeed, to profit from a stock market downturn, you need to be right not only about the direction of share prices, but also in your timing. History tells us that almost nobody is consistently smart enough or lucky enough to succeed with such bearish bets. That leaves the rest of us—we poor wretched souls who are neither clairvoyant nor preternaturally lucky—to do the sensible thing, which is to play the lopsided odds offered by the stock market’s asymmetrical bet. Over time, we should allocate as much as we prudently can to stocks, knowing that we’ll suffer occasional rough patches, but also knowing that the stock market’s long-term direction is up. That doesn’t mean we should stash everything in stocks. If we have money in our portfolio that we’ll need to spend soon, that should be in conservative investments, so our spending plans aren’t derailed by plunging share prices. Similarly, if we’re nervous investors, we might keep more in bonds, so our portfolio’s short-term performance is less erratic. But even then, a significant portion of our portfolio should always be in stocks. At times like this, the clever cocktail crowd might view such optimism as naïve and unsophisticated. But guess what? In the financial markets, optimism—or, at least, prudent optimism—invariably wins. How can I be so sure? Forget about economic growth, dividends and corporate profits—the usual reasons given for owning stocks. Instead, simply look around. Consider how people are behaving during this extraordinary period. Here are just five examples of what I see: I’m a member of the Barnes Foundation, the fabulous museum in Philadelphia. The museum is closed because of COVID-19, but every weekday an employee posts a video discussing one of his or her favorite paintings. Across the country, protesters are demanding that governors allow local businesses to reopen. As Peter Mallouk discussed in a recent article, scam artists have rushed to take advantage of the pandemic. Unable to compete against each other in person, professional basketball players have faced off in long-distance games of HORSE, trying to make baskets from different locations on the court. Where I live, barbershops aren’t considered an essential service and should be closed. Yet my local barber—a hardworking Russian immigrant—is open, wielding his scissors while wearing a mask. What do all these folks—some inspiring, some misguided, some larcenous—have in common? They’re trying to make the best of a bad situation. It’s who we are as humans. We’re relentlessly driven to make our lives better. This impulse is especially strong in capitalist societies, because it’s often further incentivized by the prospect of financial gain. It’s the reason I’m fully confident we’ll recover, and probably recover with surprising speed, from the current economic slowdown. Want to benefit from this relentless drive? That’s why we invest in the stock market. I don’t know which stocks will fare best in the months and years ahead. Some companies—both privately held and publicly traded—will never recover from today’s economic shock. Indeed, with any one individual stock, we could end up on the wrong side of the asymmetrical bet and lose 100% of our investment. Even entire national stock markets (hint: Japan) can struggle for decades. But those who bet on the global stock market for the long haul have never lost 100%. For these investors, the asymmetrical bet has always been a winner. After every stock market decline, share prices globally have recouped their bear market losses and then headed higher. Every single time. Want this upward trend to be your friend? The formula is very simple: Buy stocks. Diversify broadly. Wait patiently. In addition to editing HumbleDollar, Jonathan is the director of financial education for Creative Planning, which is where this article first appeared. Jonathan and Creative's president, Peter Mallouk, together host a monthly podcast. Follow Jonathan on Twitter @ClementsMoney and on Facebook. [xyz-ihs snippet="Donate"]

WHO SHOULD DIET? This isn’t exactly a tough one: It’s people who need to lose weight. Who should budget? If you listen to conventional wisdom, this is another easy one: It seems we all should. Creating a written budget, and then tracking our spending against it, is considered a sign of high financial rectitude. I think this is nonsense. I have never created a written budget and I don’t track my spending—because I don't need to. I suspect many HumbleDollar readers are in the same camp. Let’s say you’re in the workforce and save at least 12% of your income. Or assume you’re retired and each year you withdraw no more than 4% or 5% of your portfolio’s beginning-of-year value. In either case, you clearly have your spending under control, so why does it matter exactly how you spend your dollars? I’m not the only one who feels this way. You would be hard-pressed to find a group of people who are thriftier than the Bogleheads, devotees of Vanguard Group founder John C. Bogle. A recent discussion on the Bogleheads’ forum focused on the need to budget. Among those who commented, an overwhelming majority said they don’t bother. In other words, budgeting really is the same as dieting. The only people who should budget are the people who need to budget—those who save too little and spend too much. And my hunch is, like so many dieters who fail to lose weight, those who budget often make scant financial progress. Why not? A written budget is no competition for our human failings. We all have weaknesses. It might be smoking, drinking, gambling, failure to exercise, infidelity or overeating. But for many, their big weakness is spending too much. A minority of folks—like those found on the Bogleheads’ forum—are supremely disciplined about money. But most people aren’t: Controlling their spending is a daily battle and, more often than not, it’s a battle they lose. A written budget could potentially help the spendthrift. But I suspect it serves mostly to deepen their sense of failure. How can we win this fight? My advice: Forget budgeting—and do what many of the Bogleheads do, which is to “pay yourself first.” That might sound trite. But it works—and the best way to put it into practice is to automate your savings program. That might mean making payroll contributions to your employer’s 401(k) or 403(b) plan, or it could mean signing up for mutual-fund automatic investment plans. Both strategies helped me get started as a saver. Indeed, when I was a young, penniless reporter at Forbes magazine, with a newborn at home and a wife in graduate school, I didn’t initially sign up for the 401(k). To my surprise, I got a call from the company’s treasurer, telling me I ought to contribute and saying I’d never miss the money. He was right. These automatic savings programs are effective, because they get money out of our paychecks and bank accounts before we have a chance to spend it. We’re then forced to live on whatever remains. Yes, there’s always a risk we’ll keep spending recklessly and rack up the credit cards instead. But if we can resist that urge and stick with our automatic savings program, we’ll likely be astonished by the results. While I don’t think there’s much virtue in budgeting, I do believe there’s great value in knowing one number: How much we spend each month on mortgage or rent, utilities, groceries, car payments and other fixed living costs. That’s crucial information if we find ourselves out of work and it should guide the size of our emergency fund. What if our fixed living costs are consuming a large portion of our income? That may be the reason we find it so hard to save. Follow Jonathan on Twitter @ClementsMoney and on Facebook. His recent articles include All Better, Archie Is Scum and Favorite Questions. [xyz-ihs snippet="Donate"]

WANT TO TAKE SOME simple steps to improve your life, as well as that of those around you? Here are 11 things to do today: Look somebody in the eye and say, “Thank you so much. I really appreciate it.” Stop talking about yourself and, instead, ask folks about their life. Throw out something you’ve been meaning to get rid of. Read an article by somebody you disagree with—and think hard about whether he or she might be at least partially right. Stop pretending to family and friends that everything is great. Tell someone about a weakness you struggle with or a problem in your life. Think about somebody rich or famous. Now ask yourself: Is his or her life as great as you imagine—or is it a mixture of good and bad, just like yours? Arguably, the rich and famous have it worse than the rest of us: They have far more than others and yet they’re almost certainly dissatisfied. But at the same time, they can’t complain, because people will think they’re a bunch of whiners. Spend five extra minutes exercising. Donate to a charity. Get in touch with someone you haven’t spoken to in a while. Ponder the things you’re looking forward to most in the year ahead. Take a moment to think about your favorite people and possessions—and be grateful for your good fortune. Follow Jonathan on Twitter @ClementsMoney and on Facebook. His most recent articles include Eyes Forward, Low Blows and Saving Myself. Jonathan's latest books: From Here to Financial Happiness and How to Think About Money. [xyz-ihs snippet="Donate"]

I MOVED FROM LONDON to New York City in 1986, when I was age 23. That’s when my financial education truly began. I’d previously studied economics for three years and spent a year writing about the international financial markets for Euromoney magazine. Still, I knew almost nothing about investing, insurance, homeownership and other topics crucial to managing a household's finances. [caption id="attachment_1547047" align="alignright" width="150"] Part One of Six[/caption] I’ve learned a ton since, and the focus of that education keeps changing, providing endless fodder for articles during my long career as a financial writer. The fact is, the way we think about money today is totally different from four decades ago, and that's a huge plus. How so? We're now focused less on determining the "optimal" financial products and strategies—and more on how money can be used to improve the lives of everyday individuals. Investing. As with almost everybody else, investing was where my financial journey began. I worked at Forbes magazine from late 1986 to early 1990, focusing principally on mutual funds. The standard article was the fund manager profile. It was fairly formulaic: Interview a guy (yes, it was almost always a man) with a decent track record, cook up some theme for the article, describe his investment strategy, and then offer three or four stock picks that illustrated his approach. I felt like I wouldn't be a real journalist until I worked for a daily newspaper. That opportunity came in January 1990, when The Wall Street Journal hired me to write about mutual funds. But by then, it was starting to dawn on me that few star fund managers remained stars, and it was impossible to figure out ahead of time who they’d be. Thus began my passion for index funds. As I relentlessly advocated for broadly diversified, low-cost index funds, I briefly imagined that I knew pretty much everything I needed to know about managing money. But in truth, I’d barely scratched the surface. Personal finance. With the investing problem “solved” with index funds, I went looking for other subjects to tackle in my weekly Journal column, which first appeared in 1994. In the years that followed, I found myself writing about personal-finance topics such as taxes, Social Security, college funding, insurance and estate planning. Unlike investing, where folks were unlikely to do better than a simple portfolio of low-cost index funds, there was ample room for improvement in these other areas of money management. Indeed, a modest effort could greatly bolster a family’s financial position, and yet these topics were largely ignored by financial advisors and Wall Street investment houses. Behavior. Even as I dabbled in subjects other than investing, I developed an interest in behavioral finance and evolutionary psychology. Why did investors resist indexing, despite its obvious advantages? Why did they misjudge their appetite for risk? Why do folks spend so much today and save too little for retirement? The broad parameters of what constitutes smart financial behavior are pretty much agreed upon, even if experts might quibble about the details. Problem is, knowing the right course of action isn’t enough. It’s like losing weight or improving our fitness. The big issue isn’t figuring out what to do. Rather, it’s getting ourselves to do what we know is right. That can require a huge effort—because we need to overcome our hardwired instincts. Meaning. Money isn’t simply the vehicle we use to put a roof over our head and food on the table. Instead, our relationship with money is far more complicated. We use it to try to make ourselves happier, to recreate our most treasured memories from childhood, and to tell the world who we are and what we value. In other words, we take money and we infuse it with meaning. Around 2005 or so, I became fascinated by happiness research, and whether money can indeed boost our satisfaction with our lot in life. The answer is “yes,” but the research also highlighted money’s limitations. For instance, the boost to happiness from a new car or a pay raise can be remarkably brief, while the impact on happiness of a seven-figure portfolio pales in significance compared to folks’ predisposition to be happy—whether they have a high or low happiness set point. Self-knowledge. Behavioral finance helps us understand why we behave the way we do, while happiness research offers ideas for how to get more satisfaction out of our dollars. But which insights resonate the most? The answer will be different for each of us. That brings me to what, I suspect, will be an increasing focus of the financial world: offering folks insights into who they are, so they can be better managers of their own money. How can we figure out what our true risk tolerance is? What mix of the five personality types do we possess, and how does that affect our financial decision making? What from our past continues to play a role in the financial choices we make today? These, I think, are fascinating questions—and I suspect folks will be much better able to answer them in the years ahead. Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier articles. [xyz-ihs snippet="Donate"]

IT'S TIME TO PAY IT forward. That’s a phrase I often use when talking about helping the next generation. But my efforts have been mostly focused on my children and grandchildren. What about others in future generations, especially those from less affluent families? Welcome to the Jonathan Clements Getting Going on Savings Initiative and the accompanying book, The Best of Jonathan Clements: Classic Columns on Money and Life. The savings initiative aims to get young adults started in the financial markets with $1,000 contributions to Roth IRAs, with those contributions funded by both direct donations and the royalties from the book. The book consists of more than 60 of my old Wall Street Journal columns. I’d love to take credit for all of this, but my involvement has been modest. After my cancer diagnosis, there was a move to establish a journalism award in my honor. I suggested the savings initiative instead. The heavy-lifting was then done by five luminaries of the personal-finance world: Christine Benz, Bill Bernstein, Karen Damato, Mike Piper and Allan Roth. I consider all five to be friends, and all have some involvement with the John C. Bogle Center for Financial Literacy. Also working on the initiative are two other groups: J-PAL North America and the City of Boston’s Summer Youth Employment Program. Meanwhile, the fine folks at publisher Harriman House assisted with the book's design, and The Wall Street Journal allowed my old columns to be reprinted at no cost. Indeed, the program is being supported by both the Dow Jones Foundation and News Corp., the Journal’s publisher. You can read more about the savings initiative here, and also in Jason Zweig’s Wall Street Journal article from earlier today. Just to be clear, I’m not making any money from the book, and nor are any of the other participants. Want to pitch in? There are two ways: Buy copies of the book or purchase the Kindle edition. Make a tax-deductible donation. I don’t know of any other program that takes young adults and gets them so directly involved in the financial markets, providing not just the money to get started, but also the investment vehicle as well. Will it lead some of these young adults to become regular savers and investors? If it does, lives will have been transformed. How cool is that? Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier posts. [xyz-ihs snippet="Donate"]