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What is the right percentage?

R Quinn  |  Aug 9, 2026

"I think that’s true, including myriad combinations of both A and B. "
- DAN SMITH
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For most retirees, the greatest fear is not death—it is running out of money before they die.

Matt Halperin  |  Aug 6, 2026

"re: but more likely you’ll find a sad story of those actually running out as a result of dementia related fraud/romance cons etc if this is true, (and i am not saying yes or no) it could equally apply to retirees with very large portfolios, and therefore not really be due to a portfolio “failing”. "
- Mark Bergman
Read more »

Roth Conversions and Taxes

ArticleJohn Urban  |  Aug 8, 2026

EVERY ARTICLE ABOUT Roth conversions says the same thing: pay the tax from taxable money, not from the IRA. That is good advice if you have taxable money. Plenty of retirees do not. Their savings sit almost entirely in a traditional IRA, built from years of 401(k) contributions and a rollover at retirement, with little brokerage money and no cash reserve worth naming. For them, “pay from outside money” is not advice. It is a condition they do not meet. Their real choice is a self-funded conversion or no conversion at all. The familiar warning is that self-funding requires a gross-up. You withdraw money to pay the conversion tax, that withdrawal is itself taxable, so you have to withdraw a little more. Less discussed is what else that withdrawal sets off. It makes more of your Social Security taxable, it raises your Medicare premiums two years later, and in a high-tax state it enlarges the amount that has to leave the IRA. Here is what those three cost, on one household. A cautious conversion Meet Dianne, a composite rather than a real person. She is 66, single, retired to Florida, with $1 million in a traditional IRA and nothing outside it. Social Security pays her $28,000 a year. She is past 59 and a half and already on Medicare. Florida keeps state income tax out of the arithmetic for now. She converts $40,000. Careful, modest, the size people choose when they are trying not to do anything dramatic. The tax on that conversion, paid from a checking account she does not have, would be $4,234. Funding it from the IRA instead, the withdrawal that covers it is $5,125, and her tax rises to match. That extra $891 is 17.4% of the $5,125 she withdrew. Her ordinary-income bracket is 12%. Twelve of those points are the tax on the withdrawal itself, which is the gross-up everybody expects. The other 5.4 points come from $2,300 of her Social Security being pulled into taxable income by that same withdrawal. Paying from cash, $21,500 of her benefit would be taxable. Self-funding, $23,800 is. The difference is caused by how she paid, not by what she converted, and nothing on her return will label it. Not a smaller version of a large one The effect is not linear. Run the same woman at $150,000 and 85% of her benefit, the statutory maximum, is already taxable before she funds the tax. The funding withdrawal drags in nothing further, and this particular cost is zero. That is not an argument for converting more. It is an argument against assuming a small conversion is simply a smaller version of a large one. The one that looks cautious can carry the higher marginal rate. What self-funding actually costs Give Dianne the $150,000 conversion, still with no outside cash, and add the state question. Still in Florida, $195,469 has to leave the traditional IRA to put $150,000 into the Roth. Move her to California, changing nothing else, and it is $219,751. That is $1.30 of IRA spent for every dollar reaching the Roth, against $1.47, and the gap is California income tax compounded through the gross-up. If a move across state lines is anywhere in your plan, the order of operations may matter more than the size of the conversion. But $1.47 invites a conclusion it does not support, and I would rather correct that myself than let it travel. A conversion is taxable whichever pocket pays. Of the $69,751 Dianne withdraws in California, roughly $44,639 replaces cash she would have spent anyway. The incremental cost of self-funding, in wealth given up, is $25,111. About 17% of the conversion, not 47. The bill that arrives in 2028 At that $150,000 conversion, self-funding also costs Dianne $1,735 in higher Medicare premiums, a surcharge of $6,355 rather than $4,620, charged on top of the standard premium, for one year, and hers alone as a single filer. The bill arrives two years late. Medicare sets her 2028 premiums from her 2026 income, so the cost is invisible at the moment she is deciding how to pay the 2026 tax. When it can still make sense Doing nothing is not free either. Money left in a traditional IRA comes out eventually, under required distributions, at whatever rates apply then, possibly to a survivor filing single, possibly to heirs facing a 10-year deadline. Where self-funding still holds up, a few things tend to be true. The rate gap is durable rather than a one-year accident. Whether it repays a cost this size depends on time, future tax rates and investment returns. A temporary dip in income is a thin foundation. A structural window, after retirement and before Social Security or required distributions begin, is more compelling. There is runway, because shrinking the portfolio to change its tax character needs years of tax-free growth to earn back. Age 59 and a half is cleanly behind you. The converted amount is not subject to the 10% additional tax on early distributions. A separate distribution taken to pay the tax generally is, unless an exception applies. And enough is left afterward. Check the balance after the funding withdrawal, not after the conversion. Dianne’s California IRA drops to $780,249, and whether that funds the next 30 years matters more than whether the conversion was tax-efficient. A practical warning about withholding Withholding from the conversion is not a cheaper way to pay the tax. It reduces what reaches the Roth. Elect 24% on Dianne’s $40,000 conversion, as this illustration does rather than as any custodian requires, and $9,600 goes to the IRS while $30,400 lands in the Roth, against $4,234 actually owed. The cash comes back next spring as a refund. The Roth room does not come back at all. Restating the rule Pay the conversion tax from outside cash if you have it. That remains the best answer. It is not an answer for the retiree whose savings are almost entirely in a traditional IRA. For that person, “never pay from the IRA” skips the actual decision, which is whether a self-funded conversion, with its full marginal cost, beats leaving the money where it is. Before deciding, count the gross-up, the Social Security effect, state tax and the Medicare bill two years later. Sometimes that arithmetic still says no. It beats applying a rule written for somebody with a different balance sheet. ________________________________________________________________________________ John Urban is the founder of RetireSmartIRA, a retirement tax-planning app. Earlier, he founded GT Nexus, a supply-chain software company acquired by Infor in 2015. He lives in Northern California with his wife, Kathy, and enjoys time with family, travel, reading, Bay Area sports, and the occasional deep dive into the fine print of the tax code.
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Before Someone Else Decides

Kathleen Rehl  |  Aug 2, 2026

"He loves dogs, and in some ways, I think it is good for him. But he can barely use either arm because of his shoulder issues, and it’s hard for him to manage even a small (and energetic) dog without help. Right now he doesn’t have any help, so it does feel like yet another problem we may have to solve in due course. But just to put your mind at ease, no one is planning to try to take the pup away from him."
- DrLefty
Read more »

FIFA Financials

R Quinn  |  Jul 19, 2026

"Saw Plant 2 summers ago when he was touring with Alison Kraus. Outdoor concert. Pretty sure those tickets were under $200."
- Michael01670723
Read more »

Looking Back On My Hard Luck Days

DAN SMITH  |  Aug 7, 2026

"Andrew, I don’t know if it was intentional on your brother's part, but I think Jonathan nurtured the community aspect of HD in the way that he interacted with the writers. His respect and encouragement gave this unskilled writer the confidence to submit articles and make comments. I think the blog generally reflects Jonathan’s values. "
- DAN SMITH
Read more »

Short term and long term Social Security planning

William Perry  |  Aug 4, 2026

"Interesting question Robert that sent me down a rabbit hole. Using the CMS 271 page report with a transmittal letter of June 9, 2026 titled "THE 2026 ANNUAL REPORT OF THE BOARDS OF TRUSTEES OF THE FEDERAL HOSPITAL INSURANCE AND FEDERAL SUPPLEMENTARY MEDICAL INSURANCE (SMI) TRUST FUNDS" the best answer I can find appears to be that the IRMAA contributions are not broken out from the approximate 22% of total revenues that come from beneficiary premiums. Page 13 reads in part - For SMI, government contributions represent the largest source of income. These contributions covered about 75 percent of program costs in 2025. Also, beneficiaries pay monthly premiums for Parts B and D. Those premiums financed roughly 22 percent of the total cost in 2025... "
- William Perry
Read more »

Risk and Taxes

ArticleAdam M. Grossman  |  Aug 8, 2026

AFTER YEARS OF heady gains in the stock market, many investors are facing the same question: To manage risk, they’d like to cut back on one or more of their holdings. But because of the potentially costly tax bill that might result, they aren’t sure exactly how to do that. How can you square this circle? One easy option would be to donate appreciated assets to charity. But that would make sense only if it aligns with your charitable goals and, of course, if you don’t need those funds for other uses. How else could you strike a balance between managing risk and limiting taxes? Here’s how I would answer this question. Step 1. I’d start by estimating the potential risk level among your holdings. While there’s no single litmus test, you could ask the following questions. First, how large a portion of your assets does any single holding represent? As a rule of thumb, I’d focus first on individual stocks that top 5%. Why 5%? My operating assumption is that any individual stock could experience a 50% decline during a crisis. So if a holding is limited to 5%, then a 50% drop would result in an overall portfolio impact of just 2.5%. I see that as very manageable. To be sure, stocks can certainly decline by more than 50%, but I view this as a reasonable figure for risk management. While I worry most about the risk posed by single stocks, it’s also important to examine the overall composition of your portfolio. That’s because, counterintuitively, a portfolio of 30 stocks could end up being riskier than a group of just 10. Harry Markowitz, the father of Modern Portfolio Theory, explained why. In his initial work back in the 1950s, Markowitz used railroad company stocks to explain the concept of diversification. There’s nothing inherently wrong with railroad stocks, Markowitz explained. But if a portfolio consists of only railroad stocks, then that would be a problem—because companies in the same industry are often impacted by the same economic factors. In other words, a portfolio consisting of a large number of holdings might only appear diversified, so it’s important to look under the hood. Another risk factor to consider: Do you work for a public company and own the company’s stock? If so, that would be a reason to consider diversifying more quickly (within the permitted time windows). What if you own only mutual funds or ETFs? Diversified funds tend to be less risky than individual stocks, but that’s not always the case. The fund industry launches as many as 1,000 new funds each year, including many with very aggressive strategies. So it’s important to check each fund’s holdings. You can find that information on the fund company’s website or on a site like Morningstar (Here, for example, are the top holdings in Vanguard’s S&P 500 index fund). Step 2. Next, you’d want to estimate how much a loss might impact you. As with most questions in personal finance, there are two answers to consider: how it might affect you in dollar terms, and the degree to which a loss would simply be upsetting. Both are important. Step 3. If you determine the holding in question does represent a material risk, then you’d want to estimate the potential tax impact. Here are questions you might ask: What would the tax be if you exited the entire position? Would it push your income into the next capital gains bracket? Are there tax lots with less appreciation you could take advantage of? Do you have losses you could use to offset some of the gains? Do you expect to be in a higher or lower tax bracket next year? Step 4. If you conclude that the tax bill might be significant, what steps could you take to reduce a holding tax-efficiently? Here are strategies to consider: For starters, I suggest deciding on a target percentage for the holding. While ideally I prefer bringing any individual stock down to a 5% weighting, that figure isn’t a rule. All things being equal, the larger a portfolio, the more risk you can afford. After deciding on a target percentage, the simplest approach would be to set up a long-term sale plan—like dollar cost averaging but in reverse. Suppose you’d like to sell 1,200 shares of a given stock. You could sell 100 shares each month for twelve months. You’d do that regardless of whether the stock happens to be up or down that month. That 12-month schedule isn’t a rule. If your holding is very significant, you might opt for a longer timeframe. On the other hand, if you feel the stock has a particularly highflying valuation, you might choose a quicker pace. The key, in my view, is just to get started. As the writer Carveth Read wrote, “it’s better to be roughly right than precisely wrong.” Selling a stock down over time is the simplest way to reduce risk, but it’s hardly the most tax efficient. Another approach that’s been gaining in popularity is known as a 351 exchange fund. With a 351, the idea is that a group of investors, each with their own portfolios of appreciated securities, come together and collaborate to diversify their respective holdings. To provide a simplified illustration, imagine two investors, each with a concentrated holding, one in Microsoft and the other in Apple. Each would benefit by diversifying, and that’s what a 351 exchange fund allows. Each would contribute their respective shares into a common pool that would then hold some Apple and some Microsoft. This new investment would be structured as an ETF, and each investor would be issued shares proportional to the size of their contribution. Importantly, the initial creation of a 351 fund doesn’t entail any tax. Taxes are due only when an investor later sells shares of that ETF. This is a simplified example. In reality, a 351 exchange fund would hold many more than just two holdings. They’re actually required to meet various diversification requirements. As a result, investors in 351 funds may end up feeling sufficiently diversified and thus comfortable holding their fund shares for the long term. That would make this strategy potentially the most tax-efficient way to manage portfolio concentration risk. This is just an overview, though. If you’re interested in 351 strategies, I suggest further research. In July, The Wall Street Journal discussed these funds in some detail. In addition, a firm called Alpha Architect, the largest player in this area, has a number of helpful explanatory videos on its site.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
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Taxing Social Security benefits

R Quinn  |  Aug 6, 2026

"I am going on a reading strike about Social Security. If the title says Social Security I do not read."
- Nick Politakis
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“Gerontocracy” in America

Chris Rush  |  Aug 6, 2026

"Thanks for sharing this, Chris. I found Moyn’s notion that “age limits for political office are a must” ageist, and his book’s loaded, buzzword-laden title polarizing. His sprawling narrative seems to conflate a demographic anomaly (the baby boom) and long-lamented political challenges such as special interest money and the incumbency effect, among other factors. Given that, his prescribed remedies miss the root causes and aim for a more convenient target: the aged. At age 54, he might consider what his ideas mean for his own cohort: Generation X. As a considerably smaller generation, we already lack much influence. Under Moyn’s proposals, Generation X—and future generations—might have even less of a voice upon reaching our “golden years.”"
- D.J.
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Jonathan’s Parting Thoughts: No. 8

Jonathan Clements  |  Aug 7, 2026

"Rob Berger had a YouTube video published 3 years ago titled "Avantis All Equity Market ETF (ticker: AVGE) Pros and Cons" where he discussed this fund which was new as it started in 2022 and he also made some comparisons with VT. I interpret Rod Berger's main concern about AVGE was the fact that as the fund was new that the newness alone was then disqualifying for him to include in his holdings. AVGE is also a fund of funds, is actively managed, tilts toward value, tilts towards US and uses a mathematical formula to look at past profitability to help fund management project which investments will be profitable in the future. That may parallel your investing thinking but I have gone with VT, for better or worse, which tracks the appropriate world equity index. A couple of key numbers and considerations - Expense ratios (net current) - AVGE 0.23%, VT 0.06% YTD gain per Morningstar 8/6/2025 to 8/7/2026 - AVGE +28.71%, VT +23.32% The VT fund at 6/30/2026 was about 80 times the size of AVGE The AVGE has a large Bid/Ask Spread which likely is caused because it is a "fund of funds" that trades underlying small-cap and value-tilted global equities and because of lower daily trading volume compared to a much larger fund like VT."
- William Perry
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Inflation, prices, COLAs, retirement and the last 16 years

R Quinn  |  Jul 27, 2026

"I suspect the posts you read from seniors are those that do not really have adequate funds built up in IRAs (or other investment orientated savings) to act as the buffer on top of SS. The world has however changed and anyone who has retired in the past 10 years (or is coming up to retirement) should be aware of the utility in maintaining equity market exposure as a key part of managing inflation (and other life event) risks. As has been discussed before SWR is only a tool not the entire answer. If you're asking how much can I draw from $1m capital then 40k pa (rising with inflation) is a reasonable answer for a 30 year lifespan etc. That does nothing to tell you whether $40k will support your lifestyle and/or leave enough surplus for unexpected needs. Hence why you also need a budget or alternately the discipline to live within the income. I'd suggest it is wise to at least think about financial strategy in weathering unexpected needs. But it doesn't need to negate the overall drawdown strategy - for some it might be drawing at only 3.5%, for others maintaining a cash-like emergency fund or being prepared to sell a second home or whatever. My approach is to have a notional "when it's gone, it's gone" pot to cover lumpy one-off spend. Then I top it up from excess from my planned drawings or if it goes, replenish by paring back lifestyle spending a bit. Some people might need to see that as a physically separate fund/account. That's personal choice (possibly for those allergic to spreadsheets/budgeting ;) ) and largely just accounting presentation."
- bbbobbins
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What is the right percentage?

R Quinn  |  Aug 9, 2026

"I think that’s true, including myriad combinations of both A and B. "
- DAN SMITH
Read more »

For most retirees, the greatest fear is not death—it is running out of money before they die.

Matt Halperin  |  Aug 6, 2026

"re: but more likely you’ll find a sad story of those actually running out as a result of dementia related fraud/romance cons etc if this is true, (and i am not saying yes or no) it could equally apply to retirees with very large portfolios, and therefore not really be due to a portfolio “failing”. "
- Mark Bergman
Read more »

Roth Conversions and Taxes

ArticleJohn Urban  |  Aug 8, 2026

EVERY ARTICLE ABOUT Roth conversions says the same thing: pay the tax from taxable money, not from the IRA. That is good advice if you have taxable money. Plenty of retirees do not. Their savings sit almost entirely in a traditional IRA, built from years of 401(k) contributions and a rollover at retirement, with little brokerage money and no cash reserve worth naming. For them, “pay from outside money” is not advice. It is a condition they do not meet. Their real choice is a self-funded conversion or no conversion at all. The familiar warning is that self-funding requires a gross-up. You withdraw money to pay the conversion tax, that withdrawal is itself taxable, so you have to withdraw a little more. Less discussed is what else that withdrawal sets off. It makes more of your Social Security taxable, it raises your Medicare premiums two years later, and in a high-tax state it enlarges the amount that has to leave the IRA. Here is what those three cost, on one household. A cautious conversion Meet Dianne, a composite rather than a real person. She is 66, single, retired to Florida, with $1 million in a traditional IRA and nothing outside it. Social Security pays her $28,000 a year. She is past 59 and a half and already on Medicare. Florida keeps state income tax out of the arithmetic for now. She converts $40,000. Careful, modest, the size people choose when they are trying not to do anything dramatic. The tax on that conversion, paid from a checking account she does not have, would be $4,234. Funding it from the IRA instead, the withdrawal that covers it is $5,125, and her tax rises to match. That extra $891 is 17.4% of the $5,125 she withdrew. Her ordinary-income bracket is 12%. Twelve of those points are the tax on the withdrawal itself, which is the gross-up everybody expects. The other 5.4 points come from $2,300 of her Social Security being pulled into taxable income by that same withdrawal. Paying from cash, $21,500 of her benefit would be taxable. Self-funding, $23,800 is. The difference is caused by how she paid, not by what she converted, and nothing on her return will label it. Not a smaller version of a large one The effect is not linear. Run the same woman at $150,000 and 85% of her benefit, the statutory maximum, is already taxable before she funds the tax. The funding withdrawal drags in nothing further, and this particular cost is zero. That is not an argument for converting more. It is an argument against assuming a small conversion is simply a smaller version of a large one. The one that looks cautious can carry the higher marginal rate. What self-funding actually costs Give Dianne the $150,000 conversion, still with no outside cash, and add the state question. Still in Florida, $195,469 has to leave the traditional IRA to put $150,000 into the Roth. Move her to California, changing nothing else, and it is $219,751. That is $1.30 of IRA spent for every dollar reaching the Roth, against $1.47, and the gap is California income tax compounded through the gross-up. If a move across state lines is anywhere in your plan, the order of operations may matter more than the size of the conversion. But $1.47 invites a conclusion it does not support, and I would rather correct that myself than let it travel. A conversion is taxable whichever pocket pays. Of the $69,751 Dianne withdraws in California, roughly $44,639 replaces cash she would have spent anyway. The incremental cost of self-funding, in wealth given up, is $25,111. About 17% of the conversion, not 47. The bill that arrives in 2028 At that $150,000 conversion, self-funding also costs Dianne $1,735 in higher Medicare premiums, a surcharge of $6,355 rather than $4,620, charged on top of the standard premium, for one year, and hers alone as a single filer. The bill arrives two years late. Medicare sets her 2028 premiums from her 2026 income, so the cost is invisible at the moment she is deciding how to pay the 2026 tax. When it can still make sense Doing nothing is not free either. Money left in a traditional IRA comes out eventually, under required distributions, at whatever rates apply then, possibly to a survivor filing single, possibly to heirs facing a 10-year deadline. Where self-funding still holds up, a few things tend to be true. The rate gap is durable rather than a one-year accident. Whether it repays a cost this size depends on time, future tax rates and investment returns. A temporary dip in income is a thin foundation. A structural window, after retirement and before Social Security or required distributions begin, is more compelling. There is runway, because shrinking the portfolio to change its tax character needs years of tax-free growth to earn back. Age 59 and a half is cleanly behind you. The converted amount is not subject to the 10% additional tax on early distributions. A separate distribution taken to pay the tax generally is, unless an exception applies. And enough is left afterward. Check the balance after the funding withdrawal, not after the conversion. Dianne’s California IRA drops to $780,249, and whether that funds the next 30 years matters more than whether the conversion was tax-efficient. A practical warning about withholding Withholding from the conversion is not a cheaper way to pay the tax. It reduces what reaches the Roth. Elect 24% on Dianne’s $40,000 conversion, as this illustration does rather than as any custodian requires, and $9,600 goes to the IRS while $30,400 lands in the Roth, against $4,234 actually owed. The cash comes back next spring as a refund. The Roth room does not come back at all. Restating the rule Pay the conversion tax from outside cash if you have it. That remains the best answer. It is not an answer for the retiree whose savings are almost entirely in a traditional IRA. For that person, “never pay from the IRA” skips the actual decision, which is whether a self-funded conversion, with its full marginal cost, beats leaving the money where it is. Before deciding, count the gross-up, the Social Security effect, state tax and the Medicare bill two years later. Sometimes that arithmetic still says no. It beats applying a rule written for somebody with a different balance sheet. ________________________________________________________________________________ John Urban is the founder of RetireSmartIRA, a retirement tax-planning app. Earlier, he founded GT Nexus, a supply-chain software company acquired by Infor in 2015. He lives in Northern California with his wife, Kathy, and enjoys time with family, travel, reading, Bay Area sports, and the occasional deep dive into the fine print of the tax code.
Read more »

Before Someone Else Decides

Kathleen Rehl  |  Aug 2, 2026

"He loves dogs, and in some ways, I think it is good for him. But he can barely use either arm because of his shoulder issues, and it’s hard for him to manage even a small (and energetic) dog without help. Right now he doesn’t have any help, so it does feel like yet another problem we may have to solve in due course. But just to put your mind at ease, no one is planning to try to take the pup away from him."
- DrLefty
Read more »

FIFA Financials

R Quinn  |  Jul 19, 2026

"Saw Plant 2 summers ago when he was touring with Alison Kraus. Outdoor concert. Pretty sure those tickets were under $200."
- Michael01670723
Read more »

Looking Back On My Hard Luck Days

DAN SMITH  |  Aug 7, 2026

"Andrew, I don’t know if it was intentional on your brother's part, but I think Jonathan nurtured the community aspect of HD in the way that he interacted with the writers. His respect and encouragement gave this unskilled writer the confidence to submit articles and make comments. I think the blog generally reflects Jonathan’s values. "
- DAN SMITH
Read more »

Short term and long term Social Security planning

William Perry  |  Aug 4, 2026

"Interesting question Robert that sent me down a rabbit hole. Using the CMS 271 page report with a transmittal letter of June 9, 2026 titled "THE 2026 ANNUAL REPORT OF THE BOARDS OF TRUSTEES OF THE FEDERAL HOSPITAL INSURANCE AND FEDERAL SUPPLEMENTARY MEDICAL INSURANCE (SMI) TRUST FUNDS" the best answer I can find appears to be that the IRMAA contributions are not broken out from the approximate 22% of total revenues that come from beneficiary premiums. Page 13 reads in part - For SMI, government contributions represent the largest source of income. These contributions covered about 75 percent of program costs in 2025. Also, beneficiaries pay monthly premiums for Parts B and D. Those premiums financed roughly 22 percent of the total cost in 2025... "
- William Perry
Read more »

Risk and Taxes

ArticleAdam M. Grossman  |  Aug 8, 2026

AFTER YEARS OF heady gains in the stock market, many investors are facing the same question: To manage risk, they’d like to cut back on one or more of their holdings. But because of the potentially costly tax bill that might result, they aren’t sure exactly how to do that. How can you square this circle? One easy option would be to donate appreciated assets to charity. But that would make sense only if it aligns with your charitable goals and, of course, if you don’t need those funds for other uses. How else could you strike a balance between managing risk and limiting taxes? Here’s how I would answer this question. Step 1. I’d start by estimating the potential risk level among your holdings. While there’s no single litmus test, you could ask the following questions. First, how large a portion of your assets does any single holding represent? As a rule of thumb, I’d focus first on individual stocks that top 5%. Why 5%? My operating assumption is that any individual stock could experience a 50% decline during a crisis. So if a holding is limited to 5%, then a 50% drop would result in an overall portfolio impact of just 2.5%. I see that as very manageable. To be sure, stocks can certainly decline by more than 50%, but I view this as a reasonable figure for risk management. While I worry most about the risk posed by single stocks, it’s also important to examine the overall composition of your portfolio. That’s because, counterintuitively, a portfolio of 30 stocks could end up being riskier than a group of just 10. Harry Markowitz, the father of Modern Portfolio Theory, explained why. In his initial work back in the 1950s, Markowitz used railroad company stocks to explain the concept of diversification. There’s nothing inherently wrong with railroad stocks, Markowitz explained. But if a portfolio consists of only railroad stocks, then that would be a problem—because companies in the same industry are often impacted by the same economic factors. In other words, a portfolio consisting of a large number of holdings might only appear diversified, so it’s important to look under the hood. Another risk factor to consider: Do you work for a public company and own the company’s stock? If so, that would be a reason to consider diversifying more quickly (within the permitted time windows). What if you own only mutual funds or ETFs? Diversified funds tend to be less risky than individual stocks, but that’s not always the case. The fund industry launches as many as 1,000 new funds each year, including many with very aggressive strategies. So it’s important to check each fund’s holdings. You can find that information on the fund company’s website or on a site like Morningstar (Here, for example, are the top holdings in Vanguard’s S&P 500 index fund). Step 2. Next, you’d want to estimate how much a loss might impact you. As with most questions in personal finance, there are two answers to consider: how it might affect you in dollar terms, and the degree to which a loss would simply be upsetting. Both are important. Step 3. If you determine the holding in question does represent a material risk, then you’d want to estimate the potential tax impact. Here are questions you might ask: What would the tax be if you exited the entire position? Would it push your income into the next capital gains bracket? Are there tax lots with less appreciation you could take advantage of? Do you have losses you could use to offset some of the gains? Do you expect to be in a higher or lower tax bracket next year? Step 4. If you conclude that the tax bill might be significant, what steps could you take to reduce a holding tax-efficiently? Here are strategies to consider: For starters, I suggest deciding on a target percentage for the holding. While ideally I prefer bringing any individual stock down to a 5% weighting, that figure isn’t a rule. All things being equal, the larger a portfolio, the more risk you can afford. After deciding on a target percentage, the simplest approach would be to set up a long-term sale plan—like dollar cost averaging but in reverse. Suppose you’d like to sell 1,200 shares of a given stock. You could sell 100 shares each month for twelve months. You’d do that regardless of whether the stock happens to be up or down that month. That 12-month schedule isn’t a rule. If your holding is very significant, you might opt for a longer timeframe. On the other hand, if you feel the stock has a particularly highflying valuation, you might choose a quicker pace. The key, in my view, is just to get started. As the writer Carveth Read wrote, “it’s better to be roughly right than precisely wrong.” Selling a stock down over time is the simplest way to reduce risk, but it’s hardly the most tax efficient. Another approach that’s been gaining in popularity is known as a 351 exchange fund. With a 351, the idea is that a group of investors, each with their own portfolios of appreciated securities, come together and collaborate to diversify their respective holdings. To provide a simplified illustration, imagine two investors, each with a concentrated holding, one in Microsoft and the other in Apple. Each would benefit by diversifying, and that’s what a 351 exchange fund allows. Each would contribute their respective shares into a common pool that would then hold some Apple and some Microsoft. This new investment would be structured as an ETF, and each investor would be issued shares proportional to the size of their contribution. Importantly, the initial creation of a 351 fund doesn’t entail any tax. Taxes are due only when an investor later sells shares of that ETF. This is a simplified example. In reality, a 351 exchange fund would hold many more than just two holdings. They’re actually required to meet various diversification requirements. As a result, investors in 351 funds may end up feeling sufficiently diversified and thus comfortable holding their fund shares for the long term. That would make this strategy potentially the most tax-efficient way to manage portfolio concentration risk. This is just an overview, though. If you’re interested in 351 strategies, I suggest further research. In July, The Wall Street Journal discussed these funds in some detail. In addition, a firm called Alpha Architect, the largest player in this area, has a number of helpful explanatory videos on its site.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
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Taxing Social Security benefits

R Quinn  |  Aug 6, 2026

"I am going on a reading strike about Social Security. If the title says Social Security I do not read."
- Nick Politakis
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Manifesto

Aug 9, 2026

NO. 71: WE SHOULD take a broad view of our bond holdings—and include our paycheck, Social Security and other bond-like income streams. Result? We may find we have too much in bonds.

act

Aug 10, 2026

KEEP ENOUGH in cash investments to give yourself a sense of security. It’s tempting to invest as much as possible for long-term growth. But research suggests putting perhaps $5,000 in a savings account or a money market fund can greatly improve our sense of financial wellbeing. If your emergency fund isn’t that large, consider stockpiling some cash.

think

Aug 10, 2026

ENDOWMENT EFFECT. We prize the items we own. We might believe our homes are worth more than they really are and our investments have performed better than they have, making us reluctant to sell. We might also hang on to investments we inherited from our parents, because we endow them with meaning beyond their actual value.

humans

Aug 9, 2026

NO. 41: OUR APPETITE for risk isn’t stable. As we settle on a stock-bond mix, we should ponder how much risk we can reasonably take and how much we can stomach. The first part is easy, but the second part—deciding how much risk we can truly tolerate—is tough. The reason: Our risk tolerance rises as stocks climb, but can evaporate when prices fall.

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Manifesto

Aug 9, 2026

NO. 71: WE SHOULD take a broad view of our bond holdings—and include our paycheck, Social Security and other bond-like income streams. Result? We may find we have too much in bonds.

Spotlight: Retirement

Pop’s Parallel Path

Ken Cutler   |  Feb 5, 2025

In honor of my late father’s birthday today, I’ve decided to post an article I wrote many months ago but never released to Jonathan for publication. 
MY FATHER’S FINANCES has some parallels to my own. Like me, he saved his end of year paystubs. Using an inflation calculator, I was able to compare his earnings to mine. He was an accountant who rose to the highest level of his company, while I was an engineer who topped off at senior staff level,

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Rule of 55: Early Retirement

Bogdan Sheremeta   |  Nov 1, 2025

MOST PEOPLE THINK their retirement accounts are completely locked until age 59½ due to the 10% early withdrawal penalty, but that’s not really true. There are many ways to access your money earlier without the penalty, and knowing them can give you flexibility. Of course, you shouldn’t be touching your retirement accounts unless you’re ready to retire.
Here are some distributions that are not subject to the 10% penalty, per the IRS list:

Birth or adoption (up to $5,000 per child)
Series of substantially equal payments (72t)
First-time homebuyer (up to $10,000,

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IRS 2026 Updates

Bogdan Sheremeta   |  Nov 15, 2025

SECTION 415(D) OF the IRC requires the Secretary of the Treasury (IRS) to annually adjust limitations for cost-of-living increases. So, let’s dive into some of the changes:
 
401(k), 403(b), and Most 457 Plans:

For 2026, the 401(k)/403(b)/457(b) amount you can contribute is increasing from $23,500 to $24,500. If you are in a 24% marginal tax rate, that’s an additional $240 of federal taxes you can defer. If you are over age 50, the catch-up contributions are also increasing by $500,

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The Humbling Side of Aging

Dennis Friedman   |  May 30, 2026

WHEN I STARTED writing for HumbleDollar, Jonathan gave me some simple but important advice: “Don’t brag about your financial situation. You want readers to like you.” Perhaps that’s one of the reasons he named his financial site HumbleDollar.
I try to follow this advice not only regarding money, but in other aspects of my life. I know how fleeting things can be—especially when it comes to health. Life can change on a dime. It can humble you.

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Financial Happiness

Adam M. Grossman   |  Jan 24, 2026

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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Retirement Accounts

Bogdan Sheremeta   |  May 16, 2026

I WAS SCROLLING through social media recently and saw somebody dismiss retirement accounts as “paper wealth.” The argument was familiar: Your money is locked away and you’re waiting for permission to access it.

There’s a grain of truth here. Retirement accounts do come with rules. But much of the discussion online ignores how flexible these accounts actually are. More important, it ignores the enormous tax advantages.
Most people today will likely live well beyond age 59½.

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Spotlight: Bond

Long-Term Care? Who Has It?

Jeff Bond   |  Aug 10, 2024

I'm curious about how many HD readers have arranged for long term care in some way, shape, or form.  My policy seems overly complicated, unsurprising since it is an insurance policy.  I know it was explained to me at the time. In the year I turned 60 I used the cash value from a whole life insurance policy to purchase a long term care plan.  I no longer needed that life insurance.  The actuaries computed a maximum total long term care benefit, spread monthly over six years. Over the 11 years since, the monthly benefit that at the time seemed so very large, is still large, but not excessively so.  If I need long term care this policy should help keep my head above water, considering it in combination with RMDs, Social Security, and my investment account. If I never use the benefit or I don't use all of the benefit, then there is an insurance payout to my beneficiary. I'd be interested to hear what others have planned for LTC.  Thanks.
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Unsettling Experience

Jeff Bond   |  May 8, 2024

MOM AND DAD WERE products of the Great Depression. I feel like it affected every single day of their lives. Despite their difficult upbringing, they made good financial decisions that allowed them to live comfortably. Part of it was because Dad worked for the same company for almost 42 years. His pension paid him more than I earned in my first job as an engineer. When Mom died in August 2004, she was almost 84. My dad passed away in 2009, almost exactly five years later. He was 91. Mom and Dad did a good job of telling my sister, brother and me what they wanted to happen when the time came to divide their assets. They asked that everything be split equally among us three children. Mom and Dad each had a will, along with a trust that was supposed to make the distribution of their accumulated wealth as easy as possible. But that, alas, didn’t happen. I’m the oldest of the three siblings and, when Dad died, I was trustee and executor, which meant I was responsible for settling his estate. Shortly after Dad’s funeral, I took a day off work to visit the clerk of court in Alamance County, North Carolina. I live in Raleigh, so this was about an hour’s drive away. I obtained the recommended number of copies of the death certificate and letters testamentary, so I could begin work on his estate. My sister and brother were on board to help, but my sister lived in Tennessee. My brother still lived in our hometown. Our initial focus was on emptying my parents' very full house, making home repairs so the place could be sold, and dealing with their finances. My brother did the lion’s share of the work clearing out the house. Whenever my…
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Updating by Addition

Jeff Bond   |  Oct 23, 2024

MY WIFE AND I purchased a 1942 bungalow when we got married in 2013. It met many of our criteria: price, location, spacious backyard, access to greenways and more. But the place also had drawbacks—including the one described below.  The entryway to the house included a climb up seven steps to a stoop. The stoop was small, large enough for only one person to stand while opening the storm door. The only protection from the weather was an old canvas awning. The precast concrete steps were structurally sound but had shifted. This was a known issue and obvious when we agreed to purchase the place. The last step up to the stoop was around 11 inches, while the others were around seven-and-a-half inches. Rust was consuming the iron handrail. The longer we lived there, the more I thought we should remove the stoop, steps and railing, and add a front porch large enough to entertain friends. The porch would be open air, but with a roof and overhangs, have safe stairs, sturdy handrails and sufficient room to maneuver around our front door. My wife was not keen on the idea. She thought our uncovered back deck had plenty of space for entertaining. Still, we agreed to investigate cost and design ideas with a general contractor. We knew the contractor from an earlier project. He responded with double-barrel unwelcome news. First, the estimated cost was sky-high, more than we expected. Second, he said that the porch would violate zoning setback requirements, meaning it would be too close to the property line. Over time, we knew that we had to do something to address the steps. We spoke to a friend, one who’s also a contractor. He showed us his suggested design, which we liked. He thought he could do all the construction work…
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Where and When Do You Spend?

Jeff Bond   |  Mar 2, 2025

This is not a political post, but the basis is a political action. Friday, Feb. 28, was the so-called Nationwide Economic Blackout. My wife and I decided to participate. For us, this wasn't about specific retailers. We simply made no discretionary (or mandatory) purchases that day. It was not a difficult commitment. Thinking about this over the weekend, I realized that the result of that day wasn't anything special for us. There are many days that we spend absolutely nothing. By my count, we spent nothing on approximately half of the days in February, but that was only because we traveled in February. The percentage was much higher in January. All our bills are set to automatic payment, so we don't even think about a portion of those days that we do make payments. Our vehicles and house are paid for. Insurance and tax bills are paid in full when due. We just don't do a lot of shopping. If I'm in a clothing store, it's only after a lot of kicking and screaming. I'm a jeans and tee shirt guy - and I'm not hard on clothes, so they tend to last forever. If I'm in a store willingly, it's likely to be a hardware store, woodworker supply, or maybe an auto parts store. I make a lot of family grocery store runs. My biggest personal spending weaknesses?  Meeting friends for lunch a few times per month, and I still meet friends to play pool once a week. I still purchase music CDs and still listen to them. Oh, and the occasional bottle of bourbon. Most days my wife and I pursue our retirement activities, which are largely cost-free. I've written about them enough, so I won't repeat them here. My point is that we are not living lives…
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Racking Up the Miles

Jeff Bond   |  Jun 28, 2024

AS AN ENGINEER and a believer in keeping things running, I haven’t owned many automobiles during my lifetime. Instead, my focus has been on extending each one’s longevity. Among the maintenance and repairs I’ve undertaken: oil changes, spark plug and wire replacements, carburetor cleaning and adjustment, belt and hose replacements, distributor and timing settings, brake replacements (disk and drum), master and slave brake cylinder repairs, clutch adjustment, alternator repair, radiator repair, heater core repair, radiator fluid replacement, tire repair, motor mount replacement, engine and cabin air-filter replacements, wiper replacement, bulb and lens replacements, shock absorber replacement, wheel bearing renewal, tracing various electrical gremlins, and radio replacement. Doing these myself has saved significant money. An example: One winter, when the brakes on our second Dodge Caravan started to make noise, I got a quote for the repair. A mechanic said the car wasn’t safe to drive and a repair would cost more than $800. This was in the 1990s, and $800 was a huge expense for us. The van wasn’t unsafe. The brakes were just worn. This was a job I could do; I just didn’t want to. Over the following weekend—one that was cold and rainy—I put the van up on jack stands outside, because we had no garage. I replaced the front and rear brakes, rebuilt the brake slave cylinders, lubricated the rear wheel bearings, and flushed the brake fluid. The total cost for parts was less than $100. Here are the cars I’ve owned over the past half-century, all of which were bought new or almost new. 1973 Mercury Capri. This was my first car, and I paid cash for it. I bought it used, but it was only nine months old. I loved that car and it served me well while in college, as a newlywed, and…
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Home Maintenance Choices, Options, & Decisions

Jeff Bond   |  Nov 5, 2024

This is a story of two home maintenance items. One that was immediate, and I addressed it, the other must be addressed soon. Here are our thoughts associated with how to proceed. For the first project, I recently replaced a bathroom ventilation fan in one of our bathrooms. In the time we’ve owned this house it has gotten progressively louder. The bathroom in question is adjacent to our main living areas, so the noise is annoying. To replace the unit, I had to access it from both above and below to discern how it was attached to the ceiling structure, access the wiring, and evaluate the exhaust hose leading to an external vent. This meant spending time standing on a six-foot ladder in the small bathroom, but also crawling on my belly in the attic. This attic area above the bathroom only had 3 feet of clearance. We selected a replacement unit from Amazon. It was rated to have better airflow than the existing unit and be much quieter. I started this project one morning, assembling all the tools I thought I would require for the task. I invariably guess wrong and need to make many additional trips to my workbench in the garage. I went into the attic with a pry bar to loosen the attachment to the overhead rafter. After that I was able to drop the unit into the bathroom, disconnect the exhaust hose and evaluate the electrical connections. This was key, because the fan and light work independently, with two switches running from the same source. I was finally ready to start working with the replacement unit. My electrical connections worked for both the light and the fan, the fan was quiet, and air flowed through the opening. With that knowledge, I anchored the unit to…
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