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The never ending payday

R Quinn | May 9, 2026

"RDQ, I sleep soundly at night knowing that I could create an income stream with my 403b at TIAA. Had I annuitized that account at retirement four years ago, the annual income would have exceeded my then salary. For tax reasons, I opted not to annuitize and instead I support my spending mostly with withdrawals from a taxable account. That is still simple enough to manage for now. Time will simplify that further, what with income streams in two years from SS and in five years with RMDs from TIAA."

- Jo Bo

The reality of Social Security and Medicare- My real life experience.

R Quinn | May 4, 2026

"Does your business reimburse you for Part B, D and Medigap premiums? My old company used to do provide supplemental coverage, but terminated it and gave us an amount annually to help buy Medigap on our own."

- R Quinn

Sundry Memories of Mom

D.J. | May 7, 2026

"Thanks for sharing your memory of your mom, DJ. Both you and I are blessed to have strong and wonderful moms. I am very lucky that my mom (and dad) is still around. She lives ~2.5 hours aways, so I am visiting her just about every month. Two financial lessons I learn from her: 1) be frugual 2) be generous. My mom never got the chance to finish elementry school when growing up in rural China in 1950s, while she encouraged and allowed me to go to college. Without her, I will not be where I am with a wonderful family of my own. Thank you, mom!"

- SCao

Slow on the Draw

ArticleEdmund Marsh | May 9, 2026

RETIREMENT IS LIFE’S most expensive purchase. During our working years, we deprive our present selves of immediate pleasure by refusing to spend money for nicer cars, a bigger house or a vacation to boast about. Instead, we squirrel away those saved dollars with an eye toward keeping the future us fed, clothed and living indoors. At age 64, after decades of choosing to save and invest a large chunk of each paycheck, rather than spend it, I’ve bought a choice: Fully retire to fully embrace life after work, or carry on in a career that still adds purpose to my life. I’ve chosen to stay, but I’ve whittled down my work hours too far to handle all of my family’s spending needs. Thus, I’m faced with reaching into savings for the first time. More about that later. But first, where is our money, and why? Taking advantage. The bulk of our retirement savings is invested in tax-advantaged accounts. Until we reached our mid-30s, neither my wife nor I had invested a dime in the stock market. Since that time, however, we’ve stuffed dollars from every paycheck into our workplace savings accounts. Initially, these contributions went into traditional accounts, but we switched to the Roth option when it became available. We also topped-off Roth IRAs every year, and stashed a smaller amount in a taxable brokerage account. A little less than half of our total investments reside in future-tax-free Roth accounts. Most of the balance is tax-deferred, traditional money, which is subject to ordinary income tax rates the year it’s withdrawn. The distinction between how these two types of accounts are taxed influences where we position assets between those accounts. Accordingly, we’ve looked at two scenarios that may raise our future tax rates: One begins in a little more than a decade, when required minimum distributions (RMDs) from my traditional retirement accounts begin at age 75, followed by my wife’s RMDs a few years later, plus my Social Security, begun at age 70. The other is triggered when the first of us dies and the surviving spouse moves into the single filer tax bracket. Because we still owe ordinary income tax on the savings in our traditional accounts, we’re making Roth conversions and taking the tax hit now, at a known rate. We’re also seeking to curb the growth of our traditional accounts by keeping all our bonds there. By contrast, our Roth accounts, on which we should never owe future tax, are invested 100% in the stocks we expect to grow over time. Picking winners. In the beginning, my wife and I entertained thoughts of alternatives to stocks, such as real estate. Soon, however, we decided that maximizing market participation was our wisest wealth-building tactic. As our knowledge of finance grew, we further refined our focus by choosing broad-based, low-cost index funds over other options, for good reason: They out-perform actively-managed funds. I don’t doubt the intelligence of active fund managers. On the contrary, I suspect they carry bigger brains than me, and know they command more resources to sniff-out future winning stocks. But they swim in a tank with fish just as big, and it's tough to get a fin up on the competition. The result: Each year, index funds finish strokes ahead of their active cousins. For the same reason, we’ve shied away from individual stocks. Have we lost out? I’d argue we profited. Simple diversity. Moving into retirement, my ideal portfolio is heavily influenced by decades of working closely with older patients in my physical therapy practice. I’ve followed a number of folks as they age from their vibrant, active 60s through the years of physical deterioration. Along the way, I’ve observed the cognitive decline that affects most of us as we age. I don’t count on escaping a similar fate. Hence, rather than covering every corner of the stock market with a complicated collection of index funds, my wife and I have been shifting toward a two- or three-fund portfolio, to achieve the same result. We aim to hold shares in virtually every public company across the globe, housed in two funds, plus one bond fund. Our choice for U.S. stocks is Vanguard Total Stock Market Index Fund (symbol: VTSAX). For foreign stocks, we like Vanguard Total International Stock Index Fund (VTIAX). Tending to just two stock funds cuts complexity, especially decisions like when to rebalance and how to go about it. Aside from the biases that affect most of us, there’s that issue of our aging brains, again. Why fret about realigning our investments when just keeping track of medical appointments has become a challenge? To further simplify our lives, at a bit more expense, we could let Vanguard Group, Inc. do all the work with their Vanguard Total World Stock Index Fund (VTWAX).. Picking our peril. Our nest egg is weighted a little heavily toward stocks, which means its sum will rise and fall with the market. That can be unnerving, but it’s the price we'll pay for the extra risk that gives us a shot at outpacing inflation. Without the long-term growth provided by stocks, our buying power might not keep pace with our expected long lives. That strategy is fine when the market is riding high, but where do we go for spending money when stocks are in a slump? Selling depressed stocks in a pinch to raise cash is hazardous to our wealth. For that reason, the balance of our savings is in mostly short-term government bonds and cash, enough of a cushion to cover several years of expenses until the market regains its footing. To be sure, that money is mostly idle, but it's ready when needed. When I finally clock my last-day-forever in the clinic, we might buy an income annuity to replace earned income with insured money to add to my wife’s modest Social Security check, which she expects to start collecting in a little over a year. This combination of regular monthly paychecks would provide a floor of income to keep the household going, and bolster our courage to boot, when the market hits the skids. Drawing it down. Meanwhile, we’ve yet to settle on a plan to siphon off savings to pay the bills not covered by my part-time income. At the moment, there’s little pressure to find the perfect formula. For starters, we’re not calculating the highest withdrawal rate our investments will bear to bankroll a spending spree. Also, part of our retirement preparation included holding steady to a frugal lifestyle and eliminating debt. Our low expenses give us breathing space to decide how to replenish our cash account. Why the dithering? It turns out nailing down a withdrawal plan is my toughest financial decision to date. But it’s not the math that has me stymied. Rather, it’s the emotion. Yes, I believe the research, and I’ve run analyses that assure me our money will probably outlive us. Still, thinking of pushing start makes me queasy, so we’re sliding into the task. Instead of a rate, we’ve chosen the dollar amount that sustains our current lifestyle over the coming year. It falls short of the figure we expect to reach once we’ve limbered up our spending legs, but one allows us to work up to a rate that doesn’t outpace my level of comfort. 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.

Jonathan’s Advice for 2026 Graduates

Jonathan Clements | May 7, 2026

"I miss Jonathan's writing. I am sure many of us are. Always thoughtful and kind! Thank you, Jonathan!"

- SCao

New Face, old scam

Jim Wasserman | May 2, 2026

"Thanks for sharing, Jim. Great to read your writing here again!"

- SCao

Saving for Grandchildren

ArticleJohn Yeigh | May 2, 2026

OUR FIRST GRANDCHILD recently arrived, which naturally has us thinking about the smartest ways to build a strong financial foundation for her future. In 2019, I wrote Take a Break, which outlined saving strategies on behalf of children. Since then, the landscape has changed with the introduction of Trump accounts and Roth-conversion pathways for 529 accounts. Families have four tax-advantaged savings approaches on behalf of young children plus the Roth IRA option once the child has earned income – 529 education savings account, a Uniform Gift to Minor (UGM) custodial account, a Coverdell account, and the new Trump account. Each option offers a different mix of tax benefits, contribution requirements and withdrawal rules. 529 Accounts Pros

Tax-free growth when used for qualified education expenses
High gift-tax contribution limits: $19K per contributor per year (indexed)
New ability to convert up to $35K into a Roth IRA for the beneficiary

Cons

Relatively complex with penalties and taxes on non-qualified withdrawals
Limited, state-approved investment options
Risk of underutilization if the child does not pursue qualifying education

Caveats

Technology and AI could significantly reduce education’s cost structure in the future
Roth conversions are capped at $35K lifetime
The 529 must be open 15 years, and contributions must age 5 years before conversion
Conversions require the beneficiary to have earned income (i.e. they could Roth anyway)
Annual Roth contribution limits still apply (e.g., $7.5K in 2026), so completing the full $35K conversion would take five years

UGM Custodial Accounts Pros

Brokerage account where up to $2.7K of unearned income can be tax-free each year
High gift-tax contribution limits: $19K per contributor per year (indexed)
Broad investment flexibility — stocks, bonds, funds, etc.
Few restrictions on how funds may be used for the child’s benefit
Potential for low taxes on capital gains, but subject to marginal “kiddie tax” at parent’s rates until tax-independency or age 24

Cons

Higher income or capital gains could trigger the kiddie tax at the parents’ marginal rate
Assets count as the child’s for financial-aid purposes

Caveats

Custodians have some ability to spend down the account for legitimate child expenses if the child is a wild-child in the later teen years

Coverdell Accounts Pros

Tax-free growth for qualified education expenses
More flexible investment choices than most 529 plans

Cons

Low contribution limit: $2K per year plus income limits restrict who can contribute
Essentially irrelevant today given the expanded options within 529 plans

Trump Accounts Pros

$1K government seed deposit for children born 2025–2028
Contribution limit of $5K per year in 2026, indexed to inflation
Parent employers may contribute up to $2.5K per year (also indexed)
Tax-deferred growth with Roth-conversion opportunities beginning at age 18
No earned-income requirement for Roth conversions
Roth conversions are ideal in low-income years starting after age 18 once the child has transitioned to tax-independency of parents or at age 24 when “kiddie taxation” ends. Early tax independence could even be a combined Roth plus student financial-aid strategy
Potential to convert large account values over several years at relatively low tax rates (potentially marginal 10-12% tax-rates, but averaging less due to the standard deduction).

Cons

Investment options limited to low-cost indexed stock funds (not necessarily a drawback)
Penalty-free withdrawals must wait until age 59½, but the accounts could be advantageous even including penalties
Limited custodian control and intervention possibilities if the teen is a wild-child

Caveats

If Roth conversions are not undertaken during the child’s low-income years, a UGMA invested to capture long-term capital gains tax-rates may outperform a Trump Account taxed at ordinary income tax-rates
Watch this space as future adjustments or eligibility changes are possible

In effect, the 529 is a two-decade college savings program having some complexity and withdrawal limitations; the UGM is a reasonably flexible, 18-30-year college or house downpayment savings program; and the Trump account is a somewhat inflexible, sixty-year retirement accelerator. Resulting Playbook Here is our family’s intended playbook for tax-advantaged accounts in the grandchild's name:

Parents’ retirement account fundings remain their top priority - 401K’s at a minimum up to the match, HSAs with their triple tax advantages, and Roths as long as eligible within income limits.
A Trump account has already been initiated to secure the free $1K government seed contribution – grows to potentially $2.6K at age 18 after penalties and taxes.
Limited 529 funding has also been initiated to start the 15-year clock for potential later Roth conversions.
The family’s next priority is to fund the Trump account which starts at $5K later this year. Maximizing the Roth conversion opportunity will require ~$116K of contributions (at 3% inflation) over 18 years which we grandparents intend to help fund. I estimate the Roth converted Trump account could grow to ~$2 million of tax-free money at age 60 (6% growth) assuming early-age Roth conversions, and the Wall Street Journal projects as much as $3 million (link likely paywalled).
The subsequent priorities are to start UGM taxable account and 529 account contributions in parallel to perhaps initial levels of about $35K each. This may take our family some years depending upon available resources for contributions.

For the UGM account, a balance of $35K should capture a sizeable chunk of the annual $2.7K tax-free income limit by investing in high-yield income alternatives. For the 529 account, $35K aligns with the Roth conversion limit. On a personal note, we had extremely positive UGM outcomes with our children. We saved taxes for two decades, and each child used the ~$60K balance as down payments on their first house shortly after college. Due to the 529’s withdrawal rigidities and potential technology impacts, we are unlikely to fund the 529 to the max.

We will skip Coverdells as the alternatives offer ample savings opportunity in the child’s name ($200K+).
Depending upon spare resources available for gifting, we can always reassess future contributions.

That’s our plan, and we’re sticking to it…. until something changes. John Yeigh is an author, coach and youth sports advocate. His book “Win the Youth Sports Game” was published in 2021. John retired in 2017 from the oil industry, where he negotiated financial details for multi-billion-dollar international projects. Check out his earlier articles.

Pricing the Impossible

ArticleAdam M. Grossman | May 9, 2026

AN UNUSUAL STORY hit the news this week. GameStop, the struggling video game retailer, announced a bid to buy eBay. The offer was unexpected, but what surprised investors more was the economics of the proposed deal. eBay is many times larger than GameStop, making it difficult to understand how GameStop would be able to finance the acquisition. GameStop has offered $56 billion for eBay, comprised of cash and stock. For the cash portion, according to its May 3 press release, GameStop would use the $9 billion it has in the bank and borrow the remainder from TD Bank, which has committed up to $20 billion to the deal. But that, in a sense, is the easy part. The stock portion is what left investors with many more questions. That’s because GameStop’s total market value is in the neighborhood of just $11 billion, so it isn’t clear how it would be able to hand over $28 billion of shares. Its share price would somehow have to multiply for this to work. In an interview Monday on CNBC, GameStop’s chairman, Ryan Cohen, offered little clarity. When the reporter asked Cohen to explain his financing plan, the details were sparse. More than once, Cohen just repeated: “It’s half cash, half stock.” When the reporter challenged him to say more, Cohen stared back stone-faced. “I don’t understand your question…it’s half cash, half stock.” This went on for several minutes without much more clarity. Cohen’s parrying was amusing, and it’s an open question where this all ends up. In the meantime, this story is instructive for investors because it helps illustrate some of the stock market’s inner workings. For starters, it can help us understand the market’s seemingly split personality. At first glance, this story seems to highlight the more casino-like side of the stock market. After all, GameStop was the original “meme” stock, rising 30-fold in January 2021 when a YouTube personality promoted it to his followers. GameStop is now using its cult status as currency to support a deal that, according to conventional analysis, doesn’t add up. That said, it isn’t entirely irrational. Putting aside the financing, there is precedent for an online-only business merging with a traditional retailer. Amazon purchased Whole Foods, a grocer, in order to gain a retail footprint, and GameStop envisions something similar, where eBay customers could drop off goods at a physical location rather than hauling them to the post office. To be sure, eBay isn’t Amazon, and GameStop isn’t Whole Foods, but there is some logic to Cohen’s argument. How can we assess investors’ opinion of this deal? A pillar of Cohen’s pitch to investors is that he can make eBay much more profitable, such that it will essentially pay for itself. In an interview on Wednesday, he argued that under new management, eBay could operate much more efficiently. “There's 11,500 employees,” he said. “It doesn't make sense. I could run that business from my house. It doesn't need 11,500 employees.” The implication: Right now, it might not look like the math works for this deal, but if GameStop proceeds with the acquisition, its shares deserve to rise very considerably. Even if GameStop has to issue many new shares, in other words, each share would become much more valuable because of the addition of a newly more profitable eBay. Those additional profits, in Cohen’s view, would offset the dilution caused by the issuance of new shares. That’s the argument GameStop is making. What does Wall Street think? It turns out this question has a straightforward answer. GameStop has offered $125 per share of eBay. If investors were confident in this deal, then eBay’s shares would now be trading right around $125. That’s according to the principle of arbitrage, which says that there shouldn’t be a way to purchase a dollar for any less than a dollar. In other words, if eBay shareholders really stand to receive $125 a share, then it would be illogical for the shares to trade much below $125. But today, eBay shares are trading far below that, falling to as low as $105 on Wednesday. That tells us that investors have little confidence in the deal, most likely because of the difficult-to-explain financing. As Benjamin Graham famously wrote, in the short run, the stock market is a voting machine—a popularity contest—but in the long run, it’s a weighing machine. It’s rational. And though corners of the market often devolve into irrational and speculative excesses, that’s not always the case. More often than not, in my view, the market is better behaved than it’s commonly perceived to be, and I think that’s what we’re seeing here. eBay’s share price today tells us that investors are keeping their feet on the ground. In 1901, J.P. Morgan coordinated the acquisition of Carnegie Steel in a deal that, in its time, was the most audacious ever undertaken. Through massive leverage, it created the first company in the United States worth more than $1 billion. At the time, it was astounding. This tells us that unusual and unlikely things can happen. On the other hand, in 2001, the highly-leveraged merger of AOL and Time Warner was a disaster almost from the start. Which way will the GameStop-eBay deal go? Right now, it’s anyone’s guess. And as with most things involving great amounts of financial engineering, my recommendation is to steer clear. But this case is instructive because it illustrates many of the principles that drive the market from day to day. 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.

Long Term Care

Joe D'Alessandro | Jun 22, 2024

"LTC is a bad idea in most cases. It's expensive with loopholes you will find later. When I retired I dedicated an imaginary $500K of my total portfolio for it but invested it as normal. My portfolio more than doubled."

- Fund Daddy

Living On Autopilot

Mark Crothers | May 6, 2026

"I was sufficiently fed up with the cable company that when I moved to an apartment for a year I replaced it with internet from AT&T and YouTubeTV. This worked very well. I got all the channels I was used to watching, including the local ones, although since I don't watch sports I can't speak to the sports coverage. There were two additional advantages: YouTubeTV records anything I ask it to, and appears to have unlimited storage, and it runs on my iPad as well as my TV. My CCRC charges a mandatory $75/month for TV and internet. I don't care for the TV service, which will be replaced when the contract expires, and so far have kept YouTubeTV. That's mostly because my iPad connects to my hearing aids and my TV does not, so when I get new hearing aids that connect to my TV I will probably cancel. (Possibly interesting fact: I often have the same channel running on both my TV and iPad, and the ads are not always the same. It appears my TV has a different profile for me...)"

- mytimetotravel

Dickie and his magic beans

R Quinn | May 6, 2026

"You can usually get 2lbs of Starbucks at Costco for about $18. And buy yourself a grinder and grind what you use daily; night and day difference in smell and taste."

- Mike A

Retirement Toys

Mark Crothers | May 4, 2026

"Jeff, thanks for the link. That looks like an awesome way to spend some cash!"

- Mark Crothers

The never ending payday

R Quinn | May 9, 2026

- Jo Bo

The reality of Social Security and Medicare- My real life experience.

R Quinn | May 4, 2026

- R Quinn

Sundry Memories of Mom

D.J. | May 7, 2026

- SCao

Slow on the Draw

ArticleEdmund Marsh | May 9, 2026

Jonathan’s Advice for 2026 Graduates

Jonathan Clements | May 7, 2026

"I miss Jonathan's writing. I am sure many of us are. Always thoughtful and kind! Thank you, Jonathan!"

- SCao

New Face, old scam

Jim Wasserman | May 2, 2026

"Thanks for sharing, Jim. Great to read your writing here again!"

- SCao

Saving for Grandchildren

ArticleJohn Yeigh | May 2, 2026

Tax-free growth when used for qualified education expenses
High gift-tax contribution limits: $19K per contributor per year (indexed)
New ability to convert up to $35K into a Roth IRA for the beneficiary

Cons

Relatively complex with penalties and taxes on non-qualified withdrawals
Limited, state-approved investment options
Risk of underutilization if the child does not pursue qualifying education

Caveats

Technology and AI could significantly reduce education’s cost structure in the future
Roth conversions are capped at $35K lifetime
The 529 must be open 15 years, and contributions must age 5 years before conversion
Conversions require the beneficiary to have earned income (i.e. they could Roth anyway)
Annual Roth contribution limits still apply (e.g., $7.5K in 2026), so completing the full $35K conversion would take five years

UGM Custodial Accounts Pros

Brokerage account where up to $2.7K of unearned income can be tax-free each year
High gift-tax contribution limits: $19K per contributor per year (indexed)
Broad investment flexibility — stocks, bonds, funds, etc.
Few restrictions on how funds may be used for the child’s benefit
Potential for low taxes on capital gains, but subject to marginal “kiddie tax” at parent’s rates until tax-independency or age 24

Cons

Higher income or capital gains could trigger the kiddie tax at the parents’ marginal rate
Assets count as the child’s for financial-aid purposes

Caveats

Custodians have some ability to spend down the account for legitimate child expenses if the child is a wild-child in the later teen years

Coverdell Accounts Pros

Tax-free growth for qualified education expenses
More flexible investment choices than most 529 plans

Cons

Low contribution limit: $2K per year plus income limits restrict who can contribute
Essentially irrelevant today given the expanded options within 529 plans

Trump Accounts Pros

$1K government seed deposit for children born 2025–2028
Contribution limit of $5K per year in 2026, indexed to inflation
Parent employers may contribute up to $2.5K per year (also indexed)
Tax-deferred growth with Roth-conversion opportunities beginning at age 18
No earned-income requirement for Roth conversions
Roth conversions are ideal in low-income years starting after age 18 once the child has transitioned to tax-independency of parents or at age 24 when “kiddie taxation” ends. Early tax independence could even be a combined Roth plus student financial-aid strategy
Potential to convert large account values over several years at relatively low tax rates (potentially marginal 10-12% tax-rates, but averaging less due to the standard deduction).

Cons

Investment options limited to low-cost indexed stock funds (not necessarily a drawback)
Penalty-free withdrawals must wait until age 59½, but the accounts could be advantageous even including penalties
Limited custodian control and intervention possibilities if the teen is a wild-child

Caveats

If Roth conversions are not undertaken during the child’s low-income years, a UGMA invested to capture long-term capital gains tax-rates may outperform a Trump Account taxed at ordinary income tax-rates
Watch this space as future adjustments or eligibility changes are possible

Parents’ retirement account fundings remain their top priority - 401K’s at a minimum up to the match, HSAs with their triple tax advantages, and Roths as long as eligible within income limits.
A Trump account has already been initiated to secure the free $1K government seed contribution – grows to potentially $2.6K at age 18 after penalties and taxes.
Limited 529 funding has also been initiated to start the 15-year clock for potential later Roth conversions.
The family’s next priority is to fund the Trump account which starts at $5K later this year. Maximizing the Roth conversion opportunity will require ~$116K of contributions (at 3% inflation) over 18 years which we grandparents intend to help fund. I estimate the Roth converted Trump account could grow to ~$2 million of tax-free money at age 60 (6% growth) assuming early-age Roth conversions, and the Wall Street Journal projects as much as $3 million (link likely paywalled).
The subsequent priorities are to start UGM taxable account and 529 account contributions in parallel to perhaps initial levels of about $35K each. This may take our family some years depending upon available resources for contributions.

We will skip Coverdells as the alternatives offer ample savings opportunity in the child’s name ($200K+).
Depending upon spare resources available for gifting, we can always reassess future contributions.

Pricing the Impossible

ArticleAdam M. Grossman | May 9, 2026

Long Term Care

Joe D'Alessandro | Jun 22, 2024

- Fund Daddy

Manifesto

May 8, 2026

NO. 54: WE NEED to be great savers to amass enough for retirement. But we shouldn’t get so good at saving money that, once we’re financially successful, we can’t bring ourselves to spend.

act

May 9, 2026

LOOK FOR INSURANCE gaps. Many folks agonize over whether their policies are too large or small. A bigger danger: not having coverage at all, because our life has changed but our insurance hasn’t kept up. Just had kids? It’s time for life insurance. Grown wealthy? Consider umbrella insurance. Working for yourself? You may need disability coverage.

humans

May 8, 2026

NO. 50: WE LIKE owning assets we can see and touch—but that doesn’t mean they’re good investments. Go back a few generations, and folks put great value on art, jewelry, fine furniture and land. But most tangible assets haven’t been good investments in recent decades. Homes are the exception, but they’re also a big, undiversified risk that come with high costs.

Truths

May 8, 2026

NO. 37: IF INFORMATION is publicly available, it’s hard to make money from it. As soon as news breaks—whether it’s economic or otherwise—investors trade on the information, so it’s almost instantly reflected in stock and bond prices. True, you could get an edge by better analyzing that public information than other investors. But how likely is that?

Money Guide

Manifesto

May 8, 2026

NO. 54: WE NEED to be great savers to amass enough for retirement. But we shouldn’t get so good at saving money that, once we’re financially successful, we can’t bring ourselves to spend.

Spotlight: Taxes

Cash Balance Plan Explained

Bogdan Sheremeta | Oct 4, 2025

IMAGINE YOU ARE already doing all things possible to minimize your taxes:

You are maxing out your pre-tax 401k
You do tax loss harvesting
You did tax efficient placement
You are maximizing Roth IRA through Backdoor Roth

But what other strategies can you use to minimize taxes? You also might not want to start a business or buy real estate.
Another option that many people aren’t aware of is the cash balance plan (CBP).

Capital Gains Planning

Bogdan Sheremeta | Jan 3, 2026

THE IRS RECENTLY announced inflation adjustments for the tax year 2026.
2 quick changes:

Standard deduction

For single taxpayers, the standard deduction rises to $16,100 for 2026, an increase of $350 from 2025.
For married couples filing jointly, the standard deduction rises to $32,200, an increase of $700 from tax year 2025.

Capital Gains Rates

For single taxpayers, long-term capital gains are taxed at 0% if the taxable income is up to $49,450 ($98,900 for married couples filing jointly).

Asset Location Decisions

Bogdan Sheremeta | Nov 29, 2025

WHERE YOU PUT your investments can make a huge difference for your after-tax wealth.
As you know, we have 3 main investment accounts:

Taxable account. A traditional brokerage account where you are taxed every time you dividends or sell investments at a gain.
Tax deferred account. Traditional 401(k), 403(b), and traditional IRAs allow taxes to be deferred to the future. You pay taxes when your investments are withdrawn, and generally come with an immediate tax deduction.

New in 2025 – Code Y on 1099-R box 7 for QCD’s

William Perry | Apr 26, 2025

https://www.irs.gov/pub/irs-dft/i1099r–dft.pdf
Thanks to HD for fixing the problem in the link.

On April 15, 2025 the IRS issued draft instructions for the 2025 version of form 1099-R with a new box 7 code of “Y” to indicate the distribution is a qualified charitable distribution (QCD).
A good addition in my opinion.

Tax Gain Harvesting

Bogdan Sheremeta | Nov 8, 2025

MANY PEOPLE ARE familiar with tax loss harvesting, where you sell a losing security/ETF and rebuy a similar, not identical, security/ETF.
But often we don’t really think about the opposite side of the coin: sell a winning security/ETF and rebuy the exact same, or a different, security/ETF.
That strategy is called tax gain harvesting, and because it’s a gain, the wash sale rule doesn’t apply.

Execution
Long-term capital gains can be taxed at 0% depending on your income.

Tax estimation tools on Bogleheads Wiki

William Perry | Sep 4, 2025

I recently came across the tax estimation tools page on the Bogleheads Wiki. I found the information and links useful and think it is likely that other HumbleDollar readers will also.
It was interesting to me to learn to that the AARP free tax calculator that I often use appears to be a licensed version of the current Dinkytown program referenced in the Wiki article with the Dinkytown version being updated more frequently and thus the Boglehead’s recommend over the licensed versions.

China Market Risk

Adam M. Grossman | Jan 17, 2026

IN THE EARLY 1950S, journalist Walter Winchell popularized the term “frienemies” when he used it to describe the fraying relationship between the United States and the Soviet Union. Today, we’re seeing a similar dynamic in our relationship with China. This makes it an important topic for investors. Not long ago, the relationship between the U.S. and China was strong and mutually beneficial. Over the past 25 years, trade between the two countries has multiplied. At the same time, though, tensions have been growing. American companies operating in China have been complaining for years about intellectual property theft. According to a 2017 report by the non-partisan National Bureau of Asian Research, the cost to the U.S. economy of “counterfeit goods, pirated software, and theft of trade secrets” is at least $200 billion per year and potentially much more. As a result, over the past several years, both the first and second Trump administrations as well as the Biden administration have imposed tariffs and other restrictions on China. That, in turn, has led to various forms of retaliation by Beijing, including a restriction on “rare earth” exports to the U.S. These minerals are critical inputs for the manufacture of semiconductors, batteries and other electronics. While less overt, China has been taking other steps to undermine the United States. According to the U.S. government’s Cybersecurity and Infrastructure Security Agency (CISA), China’s government regularly perpetrates cyber attacks against the U.S. Targets include both our government and private companies. China’s relationship with the U.S. is just one reason for concern. Of equal concern: Beijing’s domestic policies, which have negatively impacted investment markets. Of most concern is president Xi Jinping’s posture toward some of China’s largest publicly-traded companies. Consider Xi’s punishment of Ant Group, a financial technology company founded by entrepreneur Jack Ma. By way of background,…

When in Doubt

Adam M. Grossman | Mar 31, 2019

HAVE YOU EVER struggled with a financial decision? If you're like most people, I suspect that the math wasn't the hard part. Instead, more often than not, what makes financial decisions a challenge is the subjective element. Financial decisions involve lots of variables—your future income, interest rates, housing prices, tax rates and more. We can make reasonable forecasts, but ultimately these decisions require us to make judgment calls without complete information, and that can be unnerving. In her 2018 book, Thinking in Bets, retired poker champion Annie Duke offers these two strategies to help make better decisions in situations like this: Never be too sure. As a poker player, Duke knows the importance of subtle cues. For that reason, she has a number of recommendations on how to communicate better. For example, whenever you're discussing a financial question—whether it's with your spouse, a business partner, a lawyer or a financial advisor—avoid asking the question, “Are you sure?” While that seems like an innocuous question, Duke suggests this alternative: “How sure are you?” This accomplishes two things. First, it acknowledges the reality that there are very few absolute truths when it comes to financial decisions. Second, it allows for a healthier exchange of ideas. The question “are you sure?” puts the other person on the defensive. It's a yes-or-no question and doesn't let someone express a less-than-certain level of confidence without feeling defeated. But the alternative formulation—"how sure are you?”—allows for a more open discussion. That, in turn, may lead to a more well-thought-out decision. How do you apply this principle to your finances? When you're making a financial decision, acknowledge that you can't be 100% certain how something will turn out. Instead, think in terms of a range of possible outcomes. Ask yourself, “What could go wrong?” Try to quantify what…

Face Plant

Adam M. Grossman | Mar 29, 2018

UNIVERSITY OF California finance professors Brad Barber and Terrance Odean published a research paper on investor behavior in early 2000. The results weren't pretty. By their reckoning, individual investors lagged the overall market by an average of almost four percentage points a year. The culprit: the costs involved in trading individual stocks. It isn’t just individuals who struggle with stock-picking. Professional money managers, on average, also trail behind the overall market. Over the past five years, S&P Global calculates that just 16% of mutual fund managers who attempted to beat the Standard & Poor’s 500-stock index actually succeeded. In other words, you would have had better luck—much better luck—guessing on a coin flip. It is research like this that provides such strong support for index funds—that is, funds that simply buy and hold large baskets of stocks, instead of attempting to pick and choose and trading in and out. It’s perhaps understandable that casual investors have a hard time picking winning stocks. But why do professional investors also have such trouble? Why is stock-picking such an uphill battle? Consider the recent sorry history of Facebook’s stock. The drama began Saturday, March 17, when The New York Times published a damaging story about the company, revealing that well-connected political consultants had improperly acquired personal data on more than 50 million Americans from Facebook. Worse still, they had been using this data to influence our elections, including the 2016 presidential election. And there was evidence that the consultants still had the data, despite pledging years ago that they had deleted it. The fallout from this story has been extensive: Congress has demanded an investigation, investors have filed class action lawsuits and Facebook's chief information security officer abruptly resigned. In the wake of all this, the company's stock suffered a double-digit loss. How does this explain why stock-picking is…

Don’t Be That Person

Adam M. Grossman | Aug 2, 2020

THE TRICKY THING about investing is that there’s no single “right” approach. In an earlier article, I described the approach I favor—what I call the five minds of the investor, which involves being part optimist, pessimist, analyst, economist and psychologist. But there are many other ways to be successful: You might invest in real estate, or follow a quantitative investment strategy, or invest in private companies. There are plenty of people who do very well with these approaches. That said, there are also many investing styles that look like they might work, but often don’t. Want to fare well financially? Here are five common approaches to investing that you should probably avoid: 1. The Raconteur. A raconteur is no ordinary storyteller. According to Merriam-Webster’s dictionary, a raconteur is “a person who excels in telling anecdotes.” That’s exactly what’s dangerous about this approach to investing. Though their evidence might be anecdotal, raconteurs truly believe they are using facts to support their views. Suppose a raconteur is trying to research a consumer electronics company. He or she might speak with someone who works for the company or might try one of its products. In both cases, the raconteur is collecting real data, but it’s too limited to be conclusive. Nonetheless, that information can be woven together into a story that sounds compelling. Raconteurs, in fact, love to invoke the concept of “buy what you know,” an idea popularized by Fidelity Investments veteran Peter Lynch. In the introduction to his book One Up on Wall Street, Lynch argued that individual investors should buy stock in companies that they know and understand. “If you stay half-alert,” he wrote, “you can pick the spectacular performers right from your place of business or out of the neighborhood shopping mall....” He goes on to describe how he discovered several winning stocks—including…

Needles in Haystacks

Adam M. Grossman | May 14, 2023

LOOK AT THE STOCK market, and you’ll see that certain stocks often do better than others. Technology shares have been standout performers over the past 10 years, and health care stocks have done very well. But research has also found that certain types of stocks have done better than others. Smaller-company stocks, for example, have outpaced those of larger firms. In the academic literature, characteristics like this, which are correlated with outperformance, are known as investment “factors.” More than 100 such factors have been identified. Below is a brief history of factor investing and thoughts on how you might—or might not—incorporate factors into your portfolio. In 1992, Eugene Fama and Kenneth French, colleagues at the University of Chicago, documented two factors that had a clear correlation with stock-market outperformance: small-cap and value. This research was broadly accepted, in large part because it was supported by intuition. It’s easier for smaller companies to grow more quickly, percentage-wise, than larger companies. And it makes sense that value stocks, which are cheaper, have more room to appreciate than those that are already expensive. Factor investing is far from perfect, though. The Fama-French factors have sometimes lagged for long stretches. Value stocks, in fact, have lagged their growth peers by a cumulative 75 percentage points over the past 10 years. Similarly, small-cap stocks have an uneven track record. Last year, when the S&P 500 index of large-cap stocks dropped 18%, smaller stocks lost 26%. Factor investing, it turns out, requires patience—lots of it. Even if you have the patience to stick with an investment factor over the long term, research has shown that good ideas often sow the seeds of their own demise. In a well-known paper from 2012, researchers David McLean and Jeffrey Pontiff looked at this question. Their study was titled, “Does…

Whither Taxes?

Adam M. Grossman | Jan 26, 2025

IN WASHINGTON, 2025 is beginning to look a lot like 2017. Republicans again control the White House, the Senate and the House of Representatives. But a key difference between then and now is that today the Republican majority in the House is far narrower. This means more negotiation will be required, and agreement on a new tax bill may take months. In the meantime, here are some key areas that investors will want to keep an eye on. Income tax rates. The 2017 Tax Cuts and Jobs Act (TCJA) cut ordinary income tax rates virtually across the board. A key feature of that legislation, however, was that the cuts were temporary. They’re set to expire at the end of this year. That’s why, in a recent interview, incoming Treasury Secretary Scott Bessent noted that his top priority is to maintain the current rates and ideally to make them permanent. This will likely be the centerpiece of any new tax package. SALT cap. The TCJA cut rates and, at the same time, broadened the income ranges covered by each bracket. Consider a married couple with gross income of $400,000 in 2024. In the absence of the TCJA, that couple would have been squarely in the middle of the 33% bracket. But with the benefit of the TCJA last year, that couple landed in a far lower 24% marginal bracket. But to help pay for those substantial cuts, the 2017 law imposed a new restriction that, for some taxpayers, resulted in a tax increase. Prior to 2017, state and local income taxes—often abbreviated as SALT—were fully deductible, providing an enormous benefit to those with higher incomes. But since 2017, the SALT deduction has been capped at $10,000. As a result, it’s not uncommon for those with higher incomes, or with high real…

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