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Tax Free Income Trap, Dealing With MAGI

"I will forever don't understand why IRS prevent seniors ability to invest into Health Saving Account, with long term care will be coming into view. It doesn't make a lot of sense."
- achnk53
Read more »

The IRA Decision That Affects Your Kids

"My understanding is yes if the state specific rules are followed and the disclaimer is filed timely. Dr. Dahle's post in the above linked post lists six key general aspects for a disclaimer to be valid. I think the need to file a disclaimer could often be eliminated with appropriate planning and action during life."
- William Perry
Read more »

Financial Tension

"Curry is smart… he will figure out how to invest."
- William Housley
Read more »

Driving a Bargain

"NEVER BORROW MONEY to buy a depreciating asset." This personal finance tip is often used to dissuade folks from taking out car loans. But does a car really leave folks poorer?
When we value an asset, it’s typically thought of as its dollar value on a balance sheet. The monetary value of my car might indeed decline, and quickly at that, but it has far more usefulness than my personal balance sheet shows. When I consider my car’s true value, I think of how much it improves my life.
I made a major change in 2018, moving from Philadelphia to Scottsdale, Arizona. I landed with two suitcases, a backpack and my cat. I had a job starting in three weeks in the heart of Old Town Scottsdale—a pricey area.
In Philadelphia, I’d never needed a car. There’s great public transportation and I could get almost anywhere by walking or taking the train. If you’ve ever been to Phoenix and its surrounding suburbs, it’s a different story. It sprawls in every direction and lacks decent public transportation.
As a young professional 2,000 miles from home, I needed to travel this big expanse. I also wanted to do some exploring in the West, so I took out a loan to buy a new car.
I don’t imagine I’ll ever recoup the money I paid for the vehicle. In fact, I suspect that my car will always be asking me for more money—for maintenance and repairs—even after I’ve paid off the loan. That’s fine. My expectations are set on this because I see so much additional value in owning a car.
Monetary benefits. Old Town Scottsdale’s rents are at least 20% higher than some surrounding areas. I can live less expensively nearby as long as I can handle a 10- to 15-minute commute.
My car also provides me access to a larger pool of jobs. On top of that, I have reliable transportation, which makes me a more dependable employee. Finally, in this gig economy, a car opens up opportunities for self-employment, a side gig or temporary income during a gap in employment. This could come from signing on with services like Uber, DoorDash and Instacart.
Emotional benefits. My car is truly liberating. It can buy me time by making travel more convenient. It allows me to live where I want and gain happiness through new experiences outside of my neighborhood. The ability to go anywhere at any time is hugely appealing.
If it takes a loan to realize these benefits, I’m willing to bear that cost. I think most Americans would agree with me. Even when you’ve decided that a car is worth buying, however, another financial argument breaks out. It’s about whether it’s better to buy a new car or a used one. [xyz-ihs snippet="Mobile-Subscribe"]
This is where I find the biggest ridicule from finance influencers. They advise never to buy a new car, and especially never to buy a new car with a loan. That’s because the moment you drive a new car off the dealer lot, it takes a big hit, thanks to depreciation.
Perhaps, in an ideal world, we’d all buy a good used car with cash. But that option isn’t available to many people. Moreover, even if you can afford to pay cash, there can be a good reason to buck the conventional wisdom. The benefit I’ve received from buying a new car can be summarized in one word: reliability.
A new car brings me peace of mind, knowing it’s unlikely I’ll be waiting on the side of the road for AAA. I don’t have to leave an extra hour early for work in case my car doesn’t get me there. I also knew I’d be traveling along dirt roads and across state lines to do some exploring, so reliability was nonnegotiable with my car purchase.
A new car works out well for me on another level. I’m not a car guy. I lack the understanding of how to take care of one. The new car warranty typically covers the scheduled service for the first few years. I’m happy to pay more to get that responsibility off my plate.
My goal has never been to turn around and sell my car for a decent sum when I’m done using it. Instead, I want to pull out all the value I can along the way. I’ll increase both my life experiences and my financial wealth through its use—and not by selling it at the end. Logan Murray is a solo financial advisor. His company Pocket Project offers subscription-based financial planning services to young professionals. For more financial insights, read Logan’s blog, connect with him on LinkedIn and check out his earlier articles. [xyz-ihs snippet="Donate"]
Read more »

The condo, HOA, senior citizen conundrum

"True in some cases, but if you can buy a $900,000 condo in one of the wealthiest town in Nj, perhaps the northeast, you likely don’t have a limited monthly budget - or shouldn’t."
- R Quinn
Read more »

Staying Rational

IT'S BEEN MORE than six years since Covid first entered our vocabulary. It goes without saying that investors have experienced a lot, and for better or worse, recent market events provide some useful lessons. The first has to do with the nature of the stock market. What drives stock prices? Open a finance textbook, and the answer will be clear: The value of a stock should equal the sum of the company’s future profits. This idea is known as intrinsic value, and it’s the textbook explanation of how stock prices work. But there’s clearly a disconnect, since stock prices bounce around far more than the math suggests they should.  How can we square this circle? Over the long term, the data tell us that intrinsic value is a valid idea. Chart the price of any given stock, then overlay the company’s profits, and there will often be a reasonably close relationship. But only if you’re Rip Van Winkle. Over shorter periods of time, anything can happen. Stocks often move far above or far below their intrinsic values in response to the news of the day.  Especially during times of economic uncertainty, intrinsic value analysis is typically cast aside and replaced by some combination of emotion, conjecture, speculation and storytelling. That’s what we saw in the early months of 2020. Stores were closed, employees had been sent home and the economy went into recession. And since no one had a crystal ball, that’s when storytellers were able to step in with their extreme predictions, causing the stock market to drop more than 30% in the space of six weeks. The lesson for investors: No one can predict when the next crisis will roll around or what form it will take. But there is one very reasonable way to be able to keep it in perspective: by remembering that, at the end of the day, intrinsic value is what matters, and ultimately that’s what drives stock prices. Basic arithmetic illustrates how this can help us manage through the next crisis. Consider that the price-to-earnings ratio of the U.S. stock market has historically averaged around 16. The average company’s total stock market value, in other words, has been equal to about 16 times its annual profits.  Now let’s imagine that the next crisis results in every company in America losing an entire year of earnings. That’s extreme and hasn’t happened since the Depression, but it’s useful as a thought experiment. In that scenario, what would be the impact to those companies’ intrinsic value? In simple terms, it would be just one-sixteenth, or a modest 6%. What if a crisis were so severe that a company lost two years of earnings? Using this simple model, the impact would be about 12%. This is meaningful, I believe, because crises typically result in stock price declines that are far more severe than just 6% or 12%. In 2000 and in 2008, the market dropped more than 50%. While every crisis is different, I think it’s useful to keep these numbers in mind whenever the next geopolitical event causes stocks to drop. When that occurs, storytellers will inevitably take over, and the news will be downbeat. But if stocks drop to an extreme degree, as they have in the past, we can probably view it as an overreaction. That won’t help anyone’s portfolio recover any faster, but it should help us tune out the worst of the forecasters and maintain our equanimity. How else can you maintain an even keel during a market crisis? It’s important to understand the impact of recency bias. This bias is the tendency to extrapolate from current conditions, to assume that the future will look like the present, and to downplay the possibility that things might change. That tendency is what contributed to the cycle of negative news during the depths of 2020, and this is why I think it’s so important for investors to be aware of market history.  Again, extensive analysis isn’t required. We need only look back across some of the crises the country has weathered, from the Civil War to the Depression to World War II. In each case, the economy recovered and went on to become larger and stronger than before. The lesson for investors: In the depths of a crisis, it’s very difficult to know when or how it will end. But a sense of history can help carry us through. Those are ways to manage through a crisis. Covid also provided a lesson on how to prepare—specifically, how to prepare our portfolios—for a future downturn. In 2022, investors were caught flat-footed when popular total-bond market funds delivered surprising losses. These funds are one pillar of the well-known three-fund portfolio and have traditionally been viewed as the default choice for a set-it-and-forget-it bond allocation. But in 2022, when the Federal Reserve hiked interest rates, these funds dropped a surprising 13%. That was during the same year that the U.S. stock market dropped nearly 20%, creating a very difficult situation for those in retirement and needing to withdraw from their portfolios. The lesson for investors: Total-bond market funds may be well diversified, but they carry risk along another very important dimension known as duration. This is a bond metric that measures, in simple terms, how long it will take for bondholders to be repaid, and it’s a key determinant of risk. The longer the duration, the greater the risk of loss when rates rise. While total-bond market funds have holdings across a broad range of durations, they average out to nearly six years. That’s why they lost so much value in 2022. What’s the alternative? Short-term bond funds tend to have a duration in the neighborhood of just two years. As a result, in 2022, short-term government bond funds like Vanguard’s Short-Term Treasury ETF (ticker: VGSH) lost a far more manageable 4% of their value. To be sure, every crisis is different, and it’s easy to rationalize about the past once it’s in the past. But these lessons, I think, can help us better prepare both our emotions and our portfolios for whatever comes next.   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.
Read more »

A Life You Build

"Thank you, Jeff, for sharing your inspiring story. One of the greatest gifts of getting older is the ability to look back at the mountains we’ve climbed and realize—despite the doubts along the way—that we did better than we ever gave ourselves credit for."
- Andrew Clements
Read more »

Penny Wise, Pound Foolish

"Martin, I resemble your remark! As a regular Costco shopper and a patron of hardware stores, I am in total agreement."
- DAN SMITH
Read more »

Carrying Humble Dollar Forward

"Thank you for the comment, retirement can definitely be scary but if it's well thought out it can be a wonderful journey."
- Andrew Clements
Read more »

Scent of a Cheapskate: Frugality Gone Wrong

"Sounds like a much, much worse version of my day spent sawing up an old rabbit hutch and taking it to the landfill myself instead of paying our waste hauler a few dollars extra to haul it away! That was 35 or so years ago, but I still remember it -- so the idea of sawing up an oil tank and dispos... let's not even go there! Thanks for posting."
- urbie53ca4a2392
Read more »

Tax Free Income Trap, Dealing With MAGI

"I will forever don't understand why IRS prevent seniors ability to invest into Health Saving Account, with long term care will be coming into view. It doesn't make a lot of sense."
- achnk53
Read more »

The IRA Decision That Affects Your Kids

"My understanding is yes if the state specific rules are followed and the disclaimer is filed timely. Dr. Dahle's post in the above linked post lists six key general aspects for a disclaimer to be valid. I think the need to file a disclaimer could often be eliminated with appropriate planning and action during life."
- William Perry
Read more »

Financial Tension

"Curry is smart… he will figure out how to invest."
- William Housley
Read more »

Driving a Bargain

"NEVER BORROW MONEY to buy a depreciating asset." This personal finance tip is often used to dissuade folks from taking out car loans. But does a car really leave folks poorer?
When we value an asset, it’s typically thought of as its dollar value on a balance sheet. The monetary value of my car might indeed decline, and quickly at that, but it has far more usefulness than my personal balance sheet shows. When I consider my car’s true value, I think of how much it improves my life.
I made a major change in 2018, moving from Philadelphia to Scottsdale, Arizona. I landed with two suitcases, a backpack and my cat. I had a job starting in three weeks in the heart of Old Town Scottsdale—a pricey area.
In Philadelphia, I’d never needed a car. There’s great public transportation and I could get almost anywhere by walking or taking the train. If you’ve ever been to Phoenix and its surrounding suburbs, it’s a different story. It sprawls in every direction and lacks decent public transportation.
As a young professional 2,000 miles from home, I needed to travel this big expanse. I also wanted to do some exploring in the West, so I took out a loan to buy a new car.
I don’t imagine I’ll ever recoup the money I paid for the vehicle. In fact, I suspect that my car will always be asking me for more money—for maintenance and repairs—even after I’ve paid off the loan. That’s fine. My expectations are set on this because I see so much additional value in owning a car.
Monetary benefits. Old Town Scottsdale’s rents are at least 20% higher than some surrounding areas. I can live less expensively nearby as long as I can handle a 10- to 15-minute commute.
My car also provides me access to a larger pool of jobs. On top of that, I have reliable transportation, which makes me a more dependable employee. Finally, in this gig economy, a car opens up opportunities for self-employment, a side gig or temporary income during a gap in employment. This could come from signing on with services like Uber, DoorDash and Instacart.
Emotional benefits. My car is truly liberating. It can buy me time by making travel more convenient. It allows me to live where I want and gain happiness through new experiences outside of my neighborhood. The ability to go anywhere at any time is hugely appealing.
If it takes a loan to realize these benefits, I’m willing to bear that cost. I think most Americans would agree with me. Even when you’ve decided that a car is worth buying, however, another financial argument breaks out. It’s about whether it’s better to buy a new car or a used one. [xyz-ihs snippet="Mobile-Subscribe"]
This is where I find the biggest ridicule from finance influencers. They advise never to buy a new car, and especially never to buy a new car with a loan. That’s because the moment you drive a new car off the dealer lot, it takes a big hit, thanks to depreciation.
Perhaps, in an ideal world, we’d all buy a good used car with cash. But that option isn’t available to many people. Moreover, even if you can afford to pay cash, there can be a good reason to buck the conventional wisdom. The benefit I’ve received from buying a new car can be summarized in one word: reliability.
A new car brings me peace of mind, knowing it’s unlikely I’ll be waiting on the side of the road for AAA. I don’t have to leave an extra hour early for work in case my car doesn’t get me there. I also knew I’d be traveling along dirt roads and across state lines to do some exploring, so reliability was nonnegotiable with my car purchase.
A new car works out well for me on another level. I’m not a car guy. I lack the understanding of how to take care of one. The new car warranty typically covers the scheduled service for the first few years. I’m happy to pay more to get that responsibility off my plate.
My goal has never been to turn around and sell my car for a decent sum when I’m done using it. Instead, I want to pull out all the value I can along the way. I’ll increase both my life experiences and my financial wealth through its use—and not by selling it at the end. Logan Murray is a solo financial advisor. His company Pocket Project offers subscription-based financial planning services to young professionals. For more financial insights, read Logan’s blog, connect with him on LinkedIn and check out his earlier articles. [xyz-ihs snippet="Donate"]
Read more »

The condo, HOA, senior citizen conundrum

"True in some cases, but if you can buy a $900,000 condo in one of the wealthiest town in Nj, perhaps the northeast, you likely don’t have a limited monthly budget - or shouldn’t."
- R Quinn
Read more »

Staying Rational

IT'S BEEN MORE than six years since Covid first entered our vocabulary. It goes without saying that investors have experienced a lot, and for better or worse, recent market events provide some useful lessons. The first has to do with the nature of the stock market. What drives stock prices? Open a finance textbook, and the answer will be clear: The value of a stock should equal the sum of the company’s future profits. This idea is known as intrinsic value, and it’s the textbook explanation of how stock prices work. But there’s clearly a disconnect, since stock prices bounce around far more than the math suggests they should.  How can we square this circle? Over the long term, the data tell us that intrinsic value is a valid idea. Chart the price of any given stock, then overlay the company’s profits, and there will often be a reasonably close relationship. But only if you’re Rip Van Winkle. Over shorter periods of time, anything can happen. Stocks often move far above or far below their intrinsic values in response to the news of the day.  Especially during times of economic uncertainty, intrinsic value analysis is typically cast aside and replaced by some combination of emotion, conjecture, speculation and storytelling. That’s what we saw in the early months of 2020. Stores were closed, employees had been sent home and the economy went into recession. And since no one had a crystal ball, that’s when storytellers were able to step in with their extreme predictions, causing the stock market to drop more than 30% in the space of six weeks. The lesson for investors: No one can predict when the next crisis will roll around or what form it will take. But there is one very reasonable way to be able to keep it in perspective: by remembering that, at the end of the day, intrinsic value is what matters, and ultimately that’s what drives stock prices. Basic arithmetic illustrates how this can help us manage through the next crisis. Consider that the price-to-earnings ratio of the U.S. stock market has historically averaged around 16. The average company’s total stock market value, in other words, has been equal to about 16 times its annual profits.  Now let’s imagine that the next crisis results in every company in America losing an entire year of earnings. That’s extreme and hasn’t happened since the Depression, but it’s useful as a thought experiment. In that scenario, what would be the impact to those companies’ intrinsic value? In simple terms, it would be just one-sixteenth, or a modest 6%. What if a crisis were so severe that a company lost two years of earnings? Using this simple model, the impact would be about 12%. This is meaningful, I believe, because crises typically result in stock price declines that are far more severe than just 6% or 12%. In 2000 and in 2008, the market dropped more than 50%. While every crisis is different, I think it’s useful to keep these numbers in mind whenever the next geopolitical event causes stocks to drop. When that occurs, storytellers will inevitably take over, and the news will be downbeat. But if stocks drop to an extreme degree, as they have in the past, we can probably view it as an overreaction. That won’t help anyone’s portfolio recover any faster, but it should help us tune out the worst of the forecasters and maintain our equanimity. How else can you maintain an even keel during a market crisis? It’s important to understand the impact of recency bias. This bias is the tendency to extrapolate from current conditions, to assume that the future will look like the present, and to downplay the possibility that things might change. That tendency is what contributed to the cycle of negative news during the depths of 2020, and this is why I think it’s so important for investors to be aware of market history.  Again, extensive analysis isn’t required. We need only look back across some of the crises the country has weathered, from the Civil War to the Depression to World War II. In each case, the economy recovered and went on to become larger and stronger than before. The lesson for investors: In the depths of a crisis, it’s very difficult to know when or how it will end. But a sense of history can help carry us through. Those are ways to manage through a crisis. Covid also provided a lesson on how to prepare—specifically, how to prepare our portfolios—for a future downturn. In 2022, investors were caught flat-footed when popular total-bond market funds delivered surprising losses. These funds are one pillar of the well-known three-fund portfolio and have traditionally been viewed as the default choice for a set-it-and-forget-it bond allocation. But in 2022, when the Federal Reserve hiked interest rates, these funds dropped a surprising 13%. That was during the same year that the U.S. stock market dropped nearly 20%, creating a very difficult situation for those in retirement and needing to withdraw from their portfolios. The lesson for investors: Total-bond market funds may be well diversified, but they carry risk along another very important dimension known as duration. This is a bond metric that measures, in simple terms, how long it will take for bondholders to be repaid, and it’s a key determinant of risk. The longer the duration, the greater the risk of loss when rates rise. While total-bond market funds have holdings across a broad range of durations, they average out to nearly six years. That’s why they lost so much value in 2022. What’s the alternative? Short-term bond funds tend to have a duration in the neighborhood of just two years. As a result, in 2022, short-term government bond funds like Vanguard’s Short-Term Treasury ETF (ticker: VGSH) lost a far more manageable 4% of their value. To be sure, every crisis is different, and it’s easy to rationalize about the past once it’s in the past. But these lessons, I think, can help us better prepare both our emotions and our portfolios for whatever comes next.   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.
Read more »

A Life You Build

"Thank you, Jeff, for sharing your inspiring story. One of the greatest gifts of getting older is the ability to look back at the mountains we’ve climbed and realize—despite the doubts along the way—that we did better than we ever gave ourselves credit for."
- Andrew Clements
Read more »

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Get Educated

Manifesto

NO. 68: AS INDIVIDUAL investors, we enjoy a key advantage: While money managers risk losing their job if their short-run results are lousy, we can invest for the truly long term.

act

BUYING A CAR? Think twice before financing it through the dealership. While dealership loans are convenient, the interest rate charged will include the dealership’s markup. You can likely get a lower rate by going to a bank or credit union—or using a home equity line of credit. One warning: Interest on home equity borrowing for a car purchase is no longer tax-deductible.

Truths

NO. 20: DOLLAR-COST averaging isn’t magical—but it is worthwhile. Investing the same sum every month in stocks supposedly improves the odds of making money. But in truth, dollar-cost averaging is about investor psychology: It helps us to overcome our reluctance to invest in stocks, instills discipline and makes stock market declines more palatable.

act

ALERT U.S. EMBASSIES to your travel plans. Before leaving on a foreign trip, sign up for the State Department's free Smart Traveler Enrollment Program and detail where you’re going. The local U.S. embassy or consulate will then contact you if, say, there’s a natural disaster or terrorist incident while you’re traveling abroad—and it may be able to offer advice or help.

Forum

Manifesto

NO. 68: AS INDIVIDUAL investors, we enjoy a key advantage: While money managers risk losing their job if their short-run results are lousy, we can invest for the truly long term.

Spotlight: Saving

Smoke and Mirrors with a $1 Million Portfolio 

Everyone wants more security for their retirement savings, and outside of Social Security, the most reliable way to achieve this is often the much-maligned annuity. The main issue for many people is losing control of a large chunk of their retirement pot—they simply don’t like the idea. But what if you could get some of the security an annuity provides without giving up control of your cash?
No solution is perfect, but this idea might be of interest.

Read more »

Cash On Hand

In addition to my dad, my mom wanted someone else to know of a stash of cash she had hidden in the hem of the bedroom curtains. A fall resulted in a hospital stay and rehab for mom, and my dad needed to move in with me due to his health. I went upstairs to retrieve mom’s mad money and found an envelope with 70 neatly stacked $100 bills.
A few years later my mother in law was forced from her condo by a fire.

Read more »

Secure Act 2.0 Reflections From Across the Pond

Almost half of working-age adults are not paying into a private or workplace pension, the government revealed this week. This headline caught my attention while browsing the BBC News website the other day, and it really made me think!
This is an awful lot of people imperiling their future lives, and with the UK’s pension auto-enrollment system, now in its tenth year of operation, seeming to be pretty successful, it would suggest people are actively going out of their way to opt out of the system.

Read more »

Financial Happiness

ACCORDING TO THE World Happiness Report, Finland ranks as the happiest nation in the world, a title it’s held for eight years in a row.
Each time this report is updated, it makes the news for a day or two but then fades. That’s for good reason, I think. As much as Finland might be a nice place, it isn’t necessarily practical to suggest that anyone pick up and move.
The good news, though,

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Living My Beliefs

I’VE ALWAYS BEEN a saver, and perhaps even pathologically frugal. Growing up, it pained me to spend money, even on food when I was hungry. Today, I have more than enough money, but I still resist paying full price for food.
Perhaps I’m just genetically frugal, or perhaps my feelings about money reflect my parents and my upbringing. My mom once shared that her aunt predicted that she’d make lots of money, but it would be like grains of rice and slip through her fingers. Meanwhile,

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In Love With Bonds

WHEN I WAS GROWING up, I’d receive Series E savings bonds as birthday gifts from my parents. It was the start of many to come. My parents had great respect for savings bonds and, as I got older, I came to hold them in high regard as well.
Savings bonds never offered the highest interest rate. At a defense plant where I worked, a guy in the accounting department questioned my bond buying. He noted that savings bonds paid less interest than the certificates of deposit then available.

Read more »

Spotlight: Quinn

Battle Over Benefits

ALMOST EVERYBODY collects Social Security at some point in their life. But it seems like that’s the only thing we all have in common. Why are there such stark differences of opinion regarding Social Security’s purpose and effectiveness? Why are so many Americans willing to believe that one administration or another stole the Social Security trust fund? Why is any effort to modify the program for future retirees immediately denounced as a cut in benefits? The roots of Social Security go back to the Great Depression. It was a time when there was great suffering, few pensions and where retirement was short—if workers did indeed retire. It was also a time when multigenerational households were more common. When Social Security was enacted by Congress in 1935, average life expectancy was age 61. Not only did that mean that benefits were paid for just a short period, but also there were many more workers to support each beneficiary. In 1960, a man’s life expectancy at age 65 was 12.8 years. By 2017, it was up to 18.1 years, and yet adjusting the Social Security formula to reflect that increase in longevity is controversial. Today, Social Security is far more than a retirement benefit. Over six million Americans and their families receive disability benefits. Another six million receive survivor income. Social Security was controversial in 1935 and perhaps more so today. From the start, the message was clear: The program’s purpose was to relieve poverty. But as of 2020, many Americans still haven’t got that message. Social Security was not intended to be sufficient to live on and yet many endeavor to do so. Among older Americans, 21% of married couples and 45% of single individuals rely on Social Security for 90% or more of their income. What role should Social Security…
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Learning by Going

SINCE FIRST VENTURING outside the U.S. 14 years ago, I’ve come to realize the tremendous value that travel offers. I began writing this article in Buenos Aires 18 months ago, shortly before a cruise around South America. We sailed on March 6, 2020—and it didn't turn out so well. But I’m not deterred. As Mark Twain observed, "Travel is fatal to prejudice, bigotry, and narrow-mindedness, and many of our people need it sorely on these accounts.” I second that. I once asked a wealthy man his favorite place in Europe. “Never been out of the country and have no interest in doing so” was the curt reply. I was shocked. Had he any idea how good he had it? He isn’t alone. Forty percent of Americans say they have never been outside the U.S. And, no, a week in Cabo or the islands doesn’t count. Can Americans appreciate our standard of living until they experience life in other countries? We have lower taxes than most European countries, but we can’t save because our lifestyle often exceeds our means. I’m guessing most Americans think a VAT is a large tub. The U.S. median income is above all but one tiny European country, not to mention several times the world average. We like to compare our health care system and medical spending with other countries, but fail to consider we’re the developed world’s most obese country. Try giving an American a sandwich with one slice of ham, as is typical in Europe. Russia, the Ukraine and the old Eastern European countries highlight the differences. I spent three weeks in Russia traveling by river from St. Petersburg to Moscow. Along the way, we stopped in villages which seemed unchanged since the 19th century. We visited the home of a widow living on a pension of $150…
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Help! Why is the total lifetime accumulated Social Security benefit more important than the monthly amount?

It’s been mentioned on HD many times. Rick Connor mentioned it today. I even asked Gemini what was most important, monthly income or total lifetime benefits. Apparently Pipers calculator uses accumulated lifetime benefit as a decision guide. My monthly pension is most important. I care less what the accumulated amount may be - unless I can become a significant actuarial loss in good health, but it’s financially irrelevant.  The fact my pension and SS are both lifetime benefits is important, but that is not the question The Gemini answer was lifetime benefits are most important for the following reasons which to me have nothing to do with the question. Doesn't this answer support the idea that monthly income amount is most important? Why Total Lifetime Benefits are More Important: Longevity Risk: The biggest fear in retirement is running out of money. Social Security provides a guaranteed, inflation-adjusted income stream for the rest of your life. If you live a long life (which is increasingly common), a higher monthly benefit that lasts for more years will result in a significantly larger total amount collected. Inflation Protection: Social Security benefits receive Cost-of-Living Adjustments (COLAs). A higher starting monthly benefit means your COLAs will be applied to a larger base, leading to even more significant increases in dollar terms over time, further boosting your total lifetime income. Spousal and Survivor Benefits: Your claiming decision can impact the benefits of your spouse and/or survivors. If you are the higher earner, delaying your own benefit can mean a substantially larger survivor benefit for your spouse if you pass away first. This contributes to the household's total lifetime benefits. Irreversibility (Mostly): While there are some limited circumstances where you can change your claiming decision (like withdrawing an application within 12 months), generally, once you start collecting,…
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Dealing with a reduction in Social Security benefits. Is there a backup plan?

A recent post on the Forum raised the issue of dealing with a cut in Social Security benefits - hopefully an unlikely or very temporary event. However, something still worth planning for.  If the status of SS is not fixed, around 2033 benefits could be reduced by 23-24%. The Committee for a Responsible Federal Budget projects a 24% cut by late 2032 for retirees, equating to an $18,100 annual reduction for a typical dual-earning couple retiring in 2033. That’s significant money. Have you calculated the possible impact on your overall retirement income? Do you have a backup plan to deal with such a possibility- even if it lasted a few months?
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Seniors are a frustrating lot. Here’s why…IMO

If there were red down arrows on Facebook I would have received so many in the last week, their system would have crashed. I have taken on the seniors who failed to plan for their retirement and now blame the system for their situation along with those who think they should not pay property taxes for schools or any taxes at all once they reach age 65 - because they paid their dues plus those Many say without a mortgage you should not pay property taxes, that with a mortgage you don’t own your home - not true of course. You own your house, but with a lien on it for the loan amount. If you didn’t own your house, how could you sell? You own your car too, even if you have a loan.  It’s not so much the warped views on paying taxes that drives me nuts, but that so many of these people seem to think no planning or saving was required during the 40 years between starting work and retirement.  Don’t believe me?  “I have done the math and I will lose my house when I retire in 5 years.”  Needless to say, this person needs to adjust his spreadsheet assumptions. 😁 I suggested he not retire in 5 years. I can’t repeat the reply, but I think he meant mind your own business. Is there such a thing on Facebook? I should have suggested a remedial math class. Yeah, ok, it’s true, I have little patience for people like this.  One reply to my comments called me an idiot, another said I don’t understand and asked how old I was. I told them I understood very well and was 82. “ You should know better,” was the reply. That’s the problem I do know better. …
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Elderly as Insult

“HELP, I'VE FALLEN AND I can't get up.” It wasn’t too many years ago that I viewed that commercial as humorous. No more. A few days ago, my wife slipped on a curb and fell. No serious injury, just a cut on her lip and a scraped leg. But she couldn’t get up. Thankfully, my sons were there to help. I couldn't do it on my own. My wife’s arthritis makes it difficult for her to walk long distances or climb stairs, hence our move to a one-floor condo. I still play golf a couple of times a week during warmer weather, and I hit the ball reasonably well for my age. I easily pick the ball off the green, but reaching to the bottom of the cup is challenging. I like to drive my car. I find it relaxing. Given that we can’t travel to Europe, we’re planning another road trip, this time to Florida. After driving several hours, getting out of the car is a mini-project. There’s a general stiffness that takes a few minutes to wear off. For all of the above, there is one thing in common—aging. It wasn't until a few years ago, when I reached age 75, that the aging thing started to kick in. Now it’s a daily reality. I’m raring to go at 5:30 a.m., but by 3:30 p.m. a short nap is no longer a joke but a necessity. Well, not a necessity, but—if I stop moving—a fact. It’s just automatic: I sit, I sleep. Don't get me wrong, we try to keep active. We both track our steps every day—I love my Apple Watch. We usually log two miles or more. While I was quarantined—both times—I walked two miles each day inside our condo. The view was a bit boring,…
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