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Wall Street Trap

ArticleAdam M. Grossman  |  May 2, 2026

IN THE INVESTMENT world, May 1st is a notable day. It was on May 1, 1975 that the Securities and Exchange Commission deregulated the brokerage industry. For the 183 years prior to that, trading commissions on the New York Stock Exchange had been fixed at uniformly high rates. But when deregulation arrived, competition got going. That’s when discount brokers like Charles Schwab got rolling, and over time, May Day, as it’s now referred to, has delivered enormous savings to consumers. More than 50 years later, though, Wall Street still operates in ways that are often at odds with consumer interests. As an individual investor, what are the obstacles to be aware of? At the top of the list is Wall Street’s fixation with individual stocks. For almost 100 years, the data has been clear that stock-picking is counterproductive. Probably the first to uncover this was a fellow named Alfred Cowles. Cowles came from a wealthy family and wondered whether the investment advice his family had been receiving was worthwhile. He set about answering that question and in 1933, published a paper titled “Can Stock Market Forecasters Forecast?” Cowles’s conclusion: They can’t. More recently, research by finance professors Brad Barber and Terrance Odean came to a similar conclusion. The title of their most well known paper is self-explanatory: “Trading Is Hazardous to Your Wealth.”  Along the same lines, Standard & Poor’s regularly examines actively-managed mutual funds to see how many are able to outperform the overall market. The most recent finding: Over the past 10 years, fewer than 15% of funds benchmarked to the S&P 500 managed to beat the index. Research by Jeff Ptak at Morningstar has found that the more active a fund is, the worse it performs. So-called tactical funds, which shift among different asset classes in response to economic forecasts have, in Ptak’s words, “incinerated” shareholder dollars. This data is fairly well known. The problem, though, is that trading activity generates revenue for the brokerage industry, so it has an interest in keeping investors engaged with the market. That’s why brokerage analysts are on TV every day, offering their forecasts for individual stocks, for the overall market and for the broader economy. To be sure, this makes for interesting television. The problem, though, is that it’s been shown to carry almost no value. According to research by Joachim Klement, the accuracy of Wall Street prognosticators is approximately zero. Why are they so poor at forecasting? For starters, there’s the simple fact that no one has a crystal ball. No one can know what a company—or its competitors—will do a month or a year from now, and how that will translate into stock price gains or losses. Sociologist Ezra Zuckerman Sivan uncovered a more subtle explanation. In research published after the technology selloff in 2000, Sivan found that Wall Street analysts are constrained by two obstacles. The first is that they’re dependent on access to companies’ management teams to help in their research. For that reason, it’s in their interest to maintain positive relationships with the companies that they follow. Investment banks that take a positive view on a company may also be rewarded with profitable mergers or acquisitions work when the need arises. Those factors bias stock recommendations overwhelmingly in the direction of “buy” ratings. Another reason analysts tend to avoid negative comments about the companies they cover: Sivan found that there is a community effect that tends to form among the analysts assigned to a given company, and thus an incentive develops to not “rock the boat” in saying anything too critical. People generally want to get along, and that results in a sort of self-censorship. This research is well understood, and yet Wall Street continues to generate forecasts day after day, year after year. Why? There are two explanations, I believe. The first is that it’s entertaining. I’ll be the first to acknowledge that index funds aren’t terribly interesting to talk about. It’s far more interesting to talk about smartphones or AI and the companies behind them. That makes Wall Street analysts invaluable to the media, who need to fill airtime.  And as long as they’re granted that airtime, forecasters are of great value to the brokerage industry. Since trading activity is profitable for Wall Street, it’s in brokers’ interest to generate continued interest in stocks. That brings in commission dollars for brokers. And even though commissions have shrunk in recent years, brokers benefit in other ways from active trading, including the “bid-ask spread” on each trade. That’s the difference between what buyers pay and what sellers receive, and though these spreads are tiny, they add up for the brokers who collect them. For good reason, then, Wall Street continues to promote stock-picking. At the same time, the investment industry is always busy developing new funds. In the first half of last year, for example, fund companies rolled out more than 640 new funds. Among them: funds that hold single stocks with varying degrees of leverage and other seemingly unnecessary new formulations. The result: There are now many more funds than there are stocks trading on U.S. exchanges.  Many of these new funds follow ever more esoteric strategies. They’re often opaque. And almost invariably, they carry higher fees. In a 2011 study titled “The Dark Side of Financial Innovation,” finance professor Brian Henderson and a colleague looked at one popular category of fund known as a structured product. Their conclusion: These funds were overpriced to the point that their expected return was actually a bit below zero. How were they able to market such an inferior product? Henderson’s hypothesis was that the fund companies designed them to be intentionally as complex as possible in order to exploit individual investors. The bottom line: To a great degree, Wall Street is upside down. But as an individual investor, you don’t have to be. My rule of thumb: In building a portfolio, investors should do more or less the opposite of what Wall Street recommends. That, I believe, is a reliable formula for success.   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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Retirement Toys

Mark Crothers  |  May 4, 2026

"That’s what I was wondering, thanks. I think I’ll get a great gas grill and maybe add a smoker later. We do have room in the yard. I’m even thinking about a pizza oven!"
- DrLefty
Read more »

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.  
Read more »

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

R Quinn  |  May 4, 2026

"Do you actually believe that our high school teachers could even explain finances to their students? When I took a college finance course taught by a stockbroker, he said that to compare taxable bond yield to a tax-exempt bond yield, you just double the coupon of the tax-exempt bond yield. Yikes. This was intended to be a comment on Nick's comment."
- Harry Crawford
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How much to provide a college student monthly?

Chris  |  Apr 25, 2026

"“Concerned” seems a misnomer here😎"
- R Quinn
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Is saving really that hard? Nope, not for the great majority of Americans. 

R Quinn  |  Apr 28, 2026

"Difficult requiring great discipline, yes. Impossibility, no. Simply because some people do it. Don’t focus on the $3,000, that’s an illustration. It’s the concept that is important. Many people earning double the amount claim they can’t save. An 8% return for the stock market is pretty close to the average over the last 50 years."
- R Quinn
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Investing Fundamentals: A Simple Guide for Beginners

W.D. Housley  |  Apr 24, 2026

"Excellent article. Now let’s forward it to our young relatives and friends who have limited attention spans."
- Nick Politakis
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Ageing and the Open Road

ArticleMark Crothers  |  May 2, 2026

RECENTLY I TOOK a free ride on a driverless bus trialling its proposed route, part of my local administration's ten-year rollout plan for self-driving public transport and taxis. I see real potential in this technology, and I'm hoping the infrastructure and implementation stay on schedule. That hope is mostly selfish, I'll admit. In fifteen years I'll be in my mid-seventies, and I'd love to ditch my car and rely on cheap, dependable robo-taxis instead. It would give me freedom precisely in that decade of life when driving starts to become genuinely problematic. I'm planning to change my car in 2027 for a modern hybrid, but in the back of my mind is the thought that it could be my last. If the self-driving rollout hits its targets, I can see the case for never buying another. The advantages for someone in my demographic at that stage of life would be hard to argue with. Think about what car ownership actually costs. There's the purchase price, insurance, road tax, fuel, servicing, tyres, and the occasional bill that arrives like a punch to the stomach. For most people, a car is the second most expensive thing they own after their home. In retirement, when income typically drops and budgets tighten, that ongoing drain becomes harder to justify. This is especially true when the car spends the vast majority of its time sitting on a driveway looking pretty. A robo-taxi model, where you pay only for the journeys you actually take, could represent a dramatic shift in how much personal transport really costs. The numbers, I suspect, will be compelling — with current estimates from real world operations suggesting an 80% reduction in the cost of fares being achievable. Then there's the question of independence. This is the one that matters most to me personally, and I'd imagine it resonates with anyone approaching or already in their later years. Giving up your car keys is one of those milestones that nobody really talks about, but everyone in that demographic understands. It represents a loss of spontaneity and self-sufficiency that can genuinely affect quality of life. The difference with autonomous vehicles is that surrendering the wheel doesn't have to mean surrendering the freedom. A reliable, affordable self-driving taxi available on demand restores something that previous generations simply had to go without once driving became difficult. This could be a trip to the supermarket on a weekday morning or a late evening visit to family. The safety dimension is also worth considering. Reaction times slow as we age. Night vision deteriorates. Concentration over long distances becomes harder. Most older drivers are aware of this and manage it carefully, but there comes a point for everyone where the road becomes a source of anxiety rather than freedom. Autonomous vehicles remove that calculation entirely. You get in, state your destination, and arrive, without the cognitive load of navigating, anticipating other drivers, or worrying whether your responses are still sharp enough. That peace of mind shouldn't be underestimated. There are wider social benefits too. Older people who can no longer drive are disproportionately affected by isolation. Poor rural transport links, infrequent bus services, and the general assumption that everyone has access to a car all contribute to a situation where many retired people find their world gradually shrinking. Autonomous vehicles, particularly if integrated intelligently with existing public transport, have the potential to reverse that. A robo-taxi that can be summoned by a smartphone, or even a simple voice command, could keep people connected to their communities, their families, and their routines far longer than is currently possible. There are, of course, reasons to be cautious. Technology rollouts rarely go entirely to plan. The ten-year schedule my local administration is working to is ambitious, and a lot can change in funding priorities, in public appetite, and in the regulatory environment. The early trials are promising, but promising trials and full-scale dependable infrastructure are very different things. It's worth keeping in mind, with a groan inducing pun: your mileage will vary — literally. Dense urban and suburban areas will almost certainly see reliable services first, and I'm fortunate that describes my situation. For those in more rural communities, the very people for whom isolation is already the sharpest problem, the wait could be considerably longer. I'm hopeful, but I'm not banking on it entirely. Which is why the 2027 hybrid still makes sense. It's a practical hedge, a good, modern, efficient car that will serve me well through the transition years, whatever pace that transition takes. But the fact that I'm already thinking of it as potentially my last car feels significant. A decade ago that thought wouldn't have crossed my mind. The technology has moved from science fiction to credible near-future fast enough to genuinely reshape how I'm thinking about retirement planning. If it delivers, the generation hitting their seventies in the late 2030s could be the first in history for whom ageing and mobility don't have to be in conflict. That's not a small thing. That might turn out to be one of the most personally transformative shifts of the entire autonomous vehicle revolution. It is not about the flashy early adopters or the logistics industry efficiencies. Instead, it is the simple dignity of an older person getting where they need to go, independently, on their own terms. I'm hopeful I'll be taking that ride and certain my children and grandchildren definitely will.
Mark Crothers is a retired small business owner from the UK with a keen interest in personal finance and simple living. Married to his high school sweetheart, with daughters and grandchildren, he knows the importance of building a secure financial future. With an aversion to social media, he prefers to spend his time on his main passions: reading, scratch cooking, racket sports, and hiking.
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Tax Free Income Trap, Dealing With MAGI

DAN SMITH  |  Apr 21, 2026

"Agree! When it comes to Roth conversions, tax arbitrage is usually the focus of discussion, but “portfolio return“ arbitrage (if that’s a proper term?) is usually less mentioned."
- Andy Morrison
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A Life You Build

Jeff Peck  |  Apr 19, 2026

"Jeff, That is an incredible article. One of if not the best HD articles I’ve ever read.That moved me. As I was reading I was thinking to mention a couple of the most inspiring takeaways you included but there were so many. Thank you so much for taking the time to write and share this piece with the HD community. Ideally, I hope this reaches way beyond HD. Well done on your life’s journey and well done capturing it here!"
- Andy Morrison
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Blood Money

Michael Flack  |  Mar 28, 2026

"On April 30 (with WTI closing at $105.07/bbl.) I sold another 10% of my XOM shares @ $154.413 (up nicely from it mid-month low of $146.44). Plan is to continue selling next month."
- mflack
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New Face, old scam

Jim Wasserman  |  May 2, 2026

"Thanks. Good to see you contributing again."
- Jeff Bond
Read more »

Wall Street Trap

ArticleAdam M. Grossman  |  May 2, 2026

IN THE INVESTMENT world, May 1st is a notable day. It was on May 1, 1975 that the Securities and Exchange Commission deregulated the brokerage industry. For the 183 years prior to that, trading commissions on the New York Stock Exchange had been fixed at uniformly high rates. But when deregulation arrived, competition got going. That’s when discount brokers like Charles Schwab got rolling, and over time, May Day, as it’s now referred to, has delivered enormous savings to consumers. More than 50 years later, though, Wall Street still operates in ways that are often at odds with consumer interests. As an individual investor, what are the obstacles to be aware of? At the top of the list is Wall Street’s fixation with individual stocks. For almost 100 years, the data has been clear that stock-picking is counterproductive. Probably the first to uncover this was a fellow named Alfred Cowles. Cowles came from a wealthy family and wondered whether the investment advice his family had been receiving was worthwhile. He set about answering that question and in 1933, published a paper titled “Can Stock Market Forecasters Forecast?” Cowles’s conclusion: They can’t. More recently, research by finance professors Brad Barber and Terrance Odean came to a similar conclusion. The title of their most well known paper is self-explanatory: “Trading Is Hazardous to Your Wealth.”  Along the same lines, Standard & Poor’s regularly examines actively-managed mutual funds to see how many are able to outperform the overall market. The most recent finding: Over the past 10 years, fewer than 15% of funds benchmarked to the S&P 500 managed to beat the index. Research by Jeff Ptak at Morningstar has found that the more active a fund is, the worse it performs. So-called tactical funds, which shift among different asset classes in response to economic forecasts have, in Ptak’s words, “incinerated” shareholder dollars. This data is fairly well known. The problem, though, is that trading activity generates revenue for the brokerage industry, so it has an interest in keeping investors engaged with the market. That’s why brokerage analysts are on TV every day, offering their forecasts for individual stocks, for the overall market and for the broader economy. To be sure, this makes for interesting television. The problem, though, is that it’s been shown to carry almost no value. According to research by Joachim Klement, the accuracy of Wall Street prognosticators is approximately zero. Why are they so poor at forecasting? For starters, there’s the simple fact that no one has a crystal ball. No one can know what a company—or its competitors—will do a month or a year from now, and how that will translate into stock price gains or losses. Sociologist Ezra Zuckerman Sivan uncovered a more subtle explanation. In research published after the technology selloff in 2000, Sivan found that Wall Street analysts are constrained by two obstacles. The first is that they’re dependent on access to companies’ management teams to help in their research. For that reason, it’s in their interest to maintain positive relationships with the companies that they follow. Investment banks that take a positive view on a company may also be rewarded with profitable mergers or acquisitions work when the need arises. Those factors bias stock recommendations overwhelmingly in the direction of “buy” ratings. Another reason analysts tend to avoid negative comments about the companies they cover: Sivan found that there is a community effect that tends to form among the analysts assigned to a given company, and thus an incentive develops to not “rock the boat” in saying anything too critical. People generally want to get along, and that results in a sort of self-censorship. This research is well understood, and yet Wall Street continues to generate forecasts day after day, year after year. Why? There are two explanations, I believe. The first is that it’s entertaining. I’ll be the first to acknowledge that index funds aren’t terribly interesting to talk about. It’s far more interesting to talk about smartphones or AI and the companies behind them. That makes Wall Street analysts invaluable to the media, who need to fill airtime.  And as long as they’re granted that airtime, forecasters are of great value to the brokerage industry. Since trading activity is profitable for Wall Street, it’s in brokers’ interest to generate continued interest in stocks. That brings in commission dollars for brokers. And even though commissions have shrunk in recent years, brokers benefit in other ways from active trading, including the “bid-ask spread” on each trade. That’s the difference between what buyers pay and what sellers receive, and though these spreads are tiny, they add up for the brokers who collect them. For good reason, then, Wall Street continues to promote stock-picking. At the same time, the investment industry is always busy developing new funds. In the first half of last year, for example, fund companies rolled out more than 640 new funds. Among them: funds that hold single stocks with varying degrees of leverage and other seemingly unnecessary new formulations. The result: There are now many more funds than there are stocks trading on U.S. exchanges.  Many of these new funds follow ever more esoteric strategies. They’re often opaque. And almost invariably, they carry higher fees. In a 2011 study titled “The Dark Side of Financial Innovation,” finance professor Brian Henderson and a colleague looked at one popular category of fund known as a structured product. Their conclusion: These funds were overpriced to the point that their expected return was actually a bit below zero. How were they able to market such an inferior product? Henderson’s hypothesis was that the fund companies designed them to be intentionally as complex as possible in order to exploit individual investors. The bottom line: To a great degree, Wall Street is upside down. But as an individual investor, you don’t have to be. My rule of thumb: In building a portfolio, investors should do more or less the opposite of what Wall Street recommends. That, I believe, is a reliable formula for success.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
Read more »

Retirement Toys

Mark Crothers  |  May 4, 2026

"That’s what I was wondering, thanks. I think I’ll get a great gas grill and maybe add a smoker later. We do have room in the yard. I’m even thinking about a pizza oven!"
- DrLefty
Read more »

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.  
Read more »

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

R Quinn  |  May 4, 2026

"Do you actually believe that our high school teachers could even explain finances to their students? When I took a college finance course taught by a stockbroker, he said that to compare taxable bond yield to a tax-exempt bond yield, you just double the coupon of the tax-exempt bond yield. Yikes. This was intended to be a comment on Nick's comment."
- Harry Crawford
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How much to provide a college student monthly?

Chris  |  Apr 25, 2026

"“Concerned” seems a misnomer here😎"
- R Quinn
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Is saving really that hard? Nope, not for the great majority of Americans. 

R Quinn  |  Apr 28, 2026

"Difficult requiring great discipline, yes. Impossibility, no. Simply because some people do it. Don’t focus on the $3,000, that’s an illustration. It’s the concept that is important. Many people earning double the amount claim they can’t save. An 8% return for the stock market is pretty close to the average over the last 50 years."
- R Quinn
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Investing Fundamentals: A Simple Guide for Beginners

W.D. Housley  |  Apr 24, 2026

"Excellent article. Now let’s forward it to our young relatives and friends who have limited attention spans."
- Nick Politakis
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Ageing and the Open Road

ArticleMark Crothers  |  May 2, 2026

RECENTLY I TOOK a free ride on a driverless bus trialling its proposed route, part of my local administration's ten-year rollout plan for self-driving public transport and taxis. I see real potential in this technology, and I'm hoping the infrastructure and implementation stay on schedule. That hope is mostly selfish, I'll admit. In fifteen years I'll be in my mid-seventies, and I'd love to ditch my car and rely on cheap, dependable robo-taxis instead. It would give me freedom precisely in that decade of life when driving starts to become genuinely problematic. I'm planning to change my car in 2027 for a modern hybrid, but in the back of my mind is the thought that it could be my last. If the self-driving rollout hits its targets, I can see the case for never buying another. The advantages for someone in my demographic at that stage of life would be hard to argue with. Think about what car ownership actually costs. There's the purchase price, insurance, road tax, fuel, servicing, tyres, and the occasional bill that arrives like a punch to the stomach. For most people, a car is the second most expensive thing they own after their home. In retirement, when income typically drops and budgets tighten, that ongoing drain becomes harder to justify. This is especially true when the car spends the vast majority of its time sitting on a driveway looking pretty. A robo-taxi model, where you pay only for the journeys you actually take, could represent a dramatic shift in how much personal transport really costs. The numbers, I suspect, will be compelling — with current estimates from real world operations suggesting an 80% reduction in the cost of fares being achievable. Then there's the question of independence. This is the one that matters most to me personally, and I'd imagine it resonates with anyone approaching or already in their later years. Giving up your car keys is one of those milestones that nobody really talks about, but everyone in that demographic understands. It represents a loss of spontaneity and self-sufficiency that can genuinely affect quality of life. The difference with autonomous vehicles is that surrendering the wheel doesn't have to mean surrendering the freedom. A reliable, affordable self-driving taxi available on demand restores something that previous generations simply had to go without once driving became difficult. This could be a trip to the supermarket on a weekday morning or a late evening visit to family. The safety dimension is also worth considering. Reaction times slow as we age. Night vision deteriorates. Concentration over long distances becomes harder. Most older drivers are aware of this and manage it carefully, but there comes a point for everyone where the road becomes a source of anxiety rather than freedom. Autonomous vehicles remove that calculation entirely. You get in, state your destination, and arrive, without the cognitive load of navigating, anticipating other drivers, or worrying whether your responses are still sharp enough. That peace of mind shouldn't be underestimated. There are wider social benefits too. Older people who can no longer drive are disproportionately affected by isolation. Poor rural transport links, infrequent bus services, and the general assumption that everyone has access to a car all contribute to a situation where many retired people find their world gradually shrinking. Autonomous vehicles, particularly if integrated intelligently with existing public transport, have the potential to reverse that. A robo-taxi that can be summoned by a smartphone, or even a simple voice command, could keep people connected to their communities, their families, and their routines far longer than is currently possible. There are, of course, reasons to be cautious. Technology rollouts rarely go entirely to plan. The ten-year schedule my local administration is working to is ambitious, and a lot can change in funding priorities, in public appetite, and in the regulatory environment. The early trials are promising, but promising trials and full-scale dependable infrastructure are very different things. It's worth keeping in mind, with a groan inducing pun: your mileage will vary — literally. Dense urban and suburban areas will almost certainly see reliable services first, and I'm fortunate that describes my situation. For those in more rural communities, the very people for whom isolation is already the sharpest problem, the wait could be considerably longer. I'm hopeful, but I'm not banking on it entirely. Which is why the 2027 hybrid still makes sense. It's a practical hedge, a good, modern, efficient car that will serve me well through the transition years, whatever pace that transition takes. But the fact that I'm already thinking of it as potentially my last car feels significant. A decade ago that thought wouldn't have crossed my mind. The technology has moved from science fiction to credible near-future fast enough to genuinely reshape how I'm thinking about retirement planning. If it delivers, the generation hitting their seventies in the late 2030s could be the first in history for whom ageing and mobility don't have to be in conflict. That's not a small thing. That might turn out to be one of the most personally transformative shifts of the entire autonomous vehicle revolution. It is not about the flashy early adopters or the logistics industry efficiencies. Instead, it is the simple dignity of an older person getting where they need to go, independently, on their own terms. I'm hopeful I'll be taking that ride and certain my children and grandchildren definitely will.
Mark Crothers is a retired small business owner from the UK with a keen interest in personal finance and simple living. Married to his high school sweetheart, with daughters and grandchildren, he knows the importance of building a secure financial future. With an aversion to social media, he prefers to spend his time on his main passions: reading, scratch cooking, racket sports, and hiking.
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Tax Free Income Trap, Dealing With MAGI

DAN SMITH  |  Apr 21, 2026

"Agree! When it comes to Roth conversions, tax arbitrage is usually the focus of discussion, but “portfolio return“ arbitrage (if that’s a proper term?) is usually less mentioned."
- Andy Morrison
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Manifesto

May 3, 2026

NO. 52: WE SHOULD aim to become homeowners—not because homes deliver handsome capital gains, but because owning locks in our housing costs and, with every mortgage payment, forces us to save.

Truths

May 5, 2026

NO. 111: WALL STREET tries never to send us a bill, so we’re unaware of how much we’re paying. Fund expenses and financial advisor fees are quietly subtracted throughout the year. Stock trading spreads and bond markups are built into security prices. Load mutual fund commissions are swiped from our initial investment or they're deducted when we sell.

act

May 4, 2026

GO TO THE LIBRARY. You can borrow DVDs, rather than paying to stream movies and TV shows. You can cancel your magazine and newspaper subscriptions, and peruse the library’s periodicals instead. You can borrow the latest books, rather than ordering from Amazon. All this will get you out of the house, meeting your neighbors and reading more—at no cost.

think

May 4, 2026

EVOLUTIONARY psychology. Why are we so fearful of losses, so bad at saving money and always hankering for more material goods? Evolutionary psychology explains such behavior by identifying the traits that helped our nomadic ancestors to survive. These hardwired instincts often hurt us in today’s world—and it can take great mental effort to overcome them.

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Manifesto

May 3, 2026

NO. 52: WE SHOULD aim to become homeowners—not because homes deliver handsome capital gains, but because owning locks in our housing costs and, with every mortgage payment, forces us to save.

Spotlight: Insurance

The Approaching Hurricane

Greg Spears   |  Oct 9, 2024

WHEN I WAS A NEWSPAPER reporter in Florida in the early 1980s, we were preoccupied with the chance that a hurricane would spin out of the Gulf of Mexico and slam into Florida’s West coast. It would be the biggest story of our lives if a big one struck the low-lying coastal city of St. Petersburg. It never came our way, fortunately for everyone.
The most serious storm I covered back then was called the “no-name storm” because it didn’t muster hurricane-strength winds.

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At Ease

John Goodell   |  May 25, 2020

I REMEMBER THE FIRST time we met. Josh—not his real name—and I went to rival high schools in the Washington, D.C., area. During our senior year, we competed in a track meet. Someone mentioned that we would be going to the same college in the fall, so I went over to introduce myself—a little awkwardly, as he had just annihilated me in a race. A few months later, knowing few people on campus, we were happy to discover that we’d both enrolled in the college’s Army Reserve Officers’ Training Corps (ROTC) program.

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Protecting Poppy

Kyle McIntosh   |  Sep 9, 2021

OUR DOG LIKES SOCKS. A few months after Poppy joined our family, she consumed her first sock. Since then, she’s eaten two more. After the first sock was removed, our veterinarian offered some valuable advice: Get pet insurance because Poppy is likely to do this again. Within a few days, we purchased a policy from Healthy Paws for $38 a month. The policy has proven valuable: We’ve had four other unplanned trips to the vet over the past 21 months.

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Seeing the Benefit

Ron Wayne   |  Jul 28, 2023

SOMETIMES, I’M embarrassed to live in Florida.
Late-night talk show hosts have plenty of fodder for their jokes given the behavior of residents, visitors and our politicians. Fortunately, I don’t know anyone who fits the stereotype of “Florida Man,” but such folks clearly exist, or so these memes suggest.
We also endure hurricanes, scorching summers, soaring homeowner’s insurance rates and all kinds of odd creatures, from the native alligator to invasive species such as the green iguana and the giant African snail.

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Insurance to cover losses from hacking?

eludom   |  Nov 7, 2024

I view it a matter of when, not if, large companies will be hacked. A list of breaches from this year alone  shows hacks at Truist, JPMorgan Chase, and Bank of America. I don’t think the likes of Vanguard, Fidelty or Swchab are immune. And while I practice reasonable infosec hygene (2FA wherever possible, etc) I KNOW I’m not immune: the computers, smartphones, etc that I use to manage my accounts can be hacked.
That said,

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Rental Car Runaround

Michael Flack   |  Mar 15, 2021

IF YOU’VE EVER RENTED a car, you’ll inevitability have heard the collision damage waiver (CDW) sales pitch. It sounds something like this: “I assume you want us to protect you bumper to bumper on the car, right?”
If you say, “yes, please,” then—for anywhere between $10 and $30 a day—the rental car will be covered for losses due to theft or damage, except for damage to certain portions of the car. Hint: Read the fine print.

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Spotlight: Rohleder

Grandpa’s Scholarship

Howard Rohleder   |  Mar 23, 2023

WHAT SHOULD I DO with the required minimum distributions from my rollover IRAs? I’m age 65, which means that—under last year’s tax law—I must begin taking taxable distributions in 2030, the year I turn 73. I’ve been looking at my retirement cash flow, and it appears that my wife and I won’t need the money for our living expenses. I’m investigating using the money to help fund my grandkids’ college education. I built a spreadsheet that maps my age against the age of each grandchild and determined the years they’re expected to attend college. Using an online calculator, I estimated my required withdrawals and dropped those amounts in. Currently, the six grandkids range in age from two-year-old twins to 11. My thought is to pay substantially all the cost of their junior and senior years. The kids are evenly spaced. Other than the twins, no two will have upper-class standing in the same year. I have 529 college-savings accounts for each child. Based on my current contribution levels, those accounts could be exhausted in their freshman years. Fidelity Investments’ college planning tool suggests that the average public university might cost $28,000 a year by 2031, which is when our oldest grandchild would be a freshman. The average private school might cost $64,000 by then. These costs inflate to $35,000 and $80,000, respectively, by 2038, when the twins are projected to begin college. Of course, these costs are only averages and could vary sharply depending on the specific school the grandchildren attend. On top of that, Fidelity is inflating current college costs by just 2.5% a year, which may be too conservative. For comparison, I’ve looked at the current cost of attending the private colleges my two children attended, as well as public universities in the states where the grandchildren live.…
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Copycat Crime

Howard Rohleder   |  Oct 14, 2021

I WAS SITTING AT MY computer one lunchtime when an email popped up from one of my credit card companies, saying I’d just purchased nearly $12,000 of jewelry at a store in Toronto. Within minutes, I was on the phone to the card company. I was quickly referred to the fraud unit. I told my story. The company credited my account, cancelled the card and mailed me replacements. Weeks later, I had to complete a form, signing off on my statement describing what happened. Months later, the company sent me a letter formally closing the case and saying I had no liability. What I learned was that someone had called the card company, pretending to be me, and requested a duplicate card while I was supposedly traveling in Canada. Apparently, the caller supplied enough identifying information that a card was priority shipped to Canada. This had occurred several months before the Toronto transaction. The card was presented in person at the jewelry store. I had set up a series of account alerts online, which is why I knew instantly when the fraud occurred. I suspect I was reporting the crime minutes after the fraudster had left the jewelry store. What baffled me was that there was no alert setting for receiving a duplicate card, let alone receiving a duplicate card in a foreign country. This fraud could have been easily prevented if the card company had emailed me, saying it had issued a duplicate card and shipped it to Canada. Nonetheless, fraud alerts on your banking and credit card accounts can be valuable. After the jewelry incident, I reviewed my settings and tightened them further. Different banks may have slightly different alerts. But generally, they can be categorized as security alerts, transaction alerts and payment alerts. Some are there to…
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On the Road Again

Howard Rohleder   |  Dec 30, 2022

SEEING NEW PLACES is something my wife and I have enjoyed throughout our married life. Some families have a vacation home that’s their primary destination. I can see the appeal: a place to get away to, where everything is familiar and memories are made. Others have hobbies that consume their free time. I’ve lived near the Great Lakes and know boaters who head there every weekend. Then there are the golfers. Enough said. Or the football fans who tailgate, wear team gear and go to all the home games—and maybe some of the away games, too. When our children were growing up, we wanted to expose them to a host of places. Each vacation, we’d head off in a different direction from our home in Ohio. These included visits to Washington, D.C., Boston and Chicago, lake vacations in Michigan, and seaside vacations in North and South Carolina. Then there were a couple of visits to Disney World, and big trips to Hawaii and London. Some families traveled more, certainly, but our kids got plenty of variety. Regardless of how you spend your free time during your working years, retirement opens up the chance to double down on your preferred use of free time. Ten years into retirement, traveling has become the pastime we enjoy the most. The No. 1 motivation for our travels is the grandkids. With six grandchildren in two families located two and six hours away, we spend a lot of time driving to see them. We’re a part of their lives even though they don’t live nearby. On the way home from visiting our more distant grandkids, we make side trips to see places like Gettysburg, or Monticello near Charlottesville, Virginia, or state parks. We’re always looking for interesting places to stay where we can hike. Our…
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My Time to Claim

Howard Rohleder   |  Mar 14, 2022

I'VE FINALLY DECIDED when to claim my Social Security benefit. Along the way, I realized that calculating the ideal start date is easy—provided you can predict your retirement income needs (doable), your investment returns (hard), the inflation rate (hard), your future tax rate (hard), your date of death (hard) and what Congress will do in the future (impossible). This particular financial journey began when I was preparing a recent blog post on the knotty issue of when to file. I downloaded my Social Security statement, which shows my benefit amount at various ages, and then used the statement to build an Excel spreadsheet. I expected the calculation would be relatively straightforward because my wife, who is two years older, doesn’t qualify for Social Security on her own. I started with the conventional wisdom that—because my wife and I don’t need the money for daily living expenses—I should delay Social Security until age 70. That way, I knew I’d get the largest possible benefit. But in our case, there was a complication. My wife can only begin taking her benefit when I begin mine. While my benefit increases if I delay beyond my full Social Security retirement age (FRA) of 66 years and six months, her spousal benefit is fixed at 50% of my FRA benefit. My waiting until 70 would mean forgoing years of payments that my wife is entitled to—because she wouldn’t receive her spousal benefit until age 72. In fact, I soon realized that our situation was more complex than I was able to model in Excel. Instead, I turned to the free calculator from financial blogger Mike Piper. It calculated my ideal Social Security claiming age as 69 and seven months—not far from my starting assumption of 70. “Ideal” is defined as the starting date that yields…
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Make Them Good Years

Howard Rohleder   |  Jan 4, 2024

MANY YEARS AGO, a Wall Street Journal article quoted a source as saying, and I paraphrase, “Young-old age should last as long as possible, while old-old age should last 15 minutes.” Those of us who have visited nursing homes can all relate to this. Public health initiatives and medical breakthroughs have extended lifespans significantly over the past 100 years. In his bestselling book Outlive: The Science and Art of Longevity, Peter Attia argues that we should focus not just on lifespan, but also on healthspan. The latter is a measure of how well we live, not necessarily how long.  Attia emphasizes that “longer lifespan with no improvement in healthspan is a curse, not a blessing.” His goal is to increase people’s healthspan so that they maximize their chances of avoiding chronic disease, thereby reducing the portion of their lives that they spend frail and infirm.  Attia believes that healthspan is about preserving these three elements of life for as long as possible: Brain: How long you can preserve cognition. Body: How long you can maintain muscle mass, functional movement, and strength, balance, flexibility and freedom from pain. Spirit: How robust is your social support network, as well as your happiness, mental health and sense of purpose. As an expert in longevity and preventive medicine, Attia has researched the ways we can achieve greater healthspan. He identifies four chronic conditions that have emerged in the developed world as the greatest contributors to reduced healthspan. His “four horsemen of the Apocalypse” are: Atherosclerotic disease. This includes cardiovascular disease and cerebrovascular disease. Cancer of all types. Neurodegenerative disease, including Alzheimer’s disease, Parkinson’s disease and various types of dementia. Metabolic dysfunction. This is a spectrum of everything from hyperinsulinemia to insulin resistance to fatty liver disease to Type 2 diabetes. These four diseases account…
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Silver Lining

Howard Rohleder   |  Jan 18, 2026

Back in the day when people actually got magazines in the mail, there was an axiom that said: “When Time magazine has a bull on the cover, it is time to sell; when it has a bear on the cover, it is time to buy.”   This was an easy-to-follow contrarian indicator. If the bull or the bear are so clear that the non-financial press picks up on it, the trend must be long in the tooth. I thought of this recently as all sorts of online news feeds are referencing the run up in silver and gold with the headline: “Is it time to buy?” Well, of course it’s not the time to buy. It is the time to sell. Dig out grandma’s silver and turn it into cash. I was also reminded of growing up in the 1960-70s. My father, who only used cash, collected his change in a bank on his dresser. When it got full, my job was to roll the coins for depositing in the bank after carefully extracting the pre-1964 dimes and quarters. He told me: “They will be valuable someday.”  As it happened, gold and silver both peaked in 1980. Not realizing that was the time to sell, I held and they later dropped. I tucked those coins away until shortly after my house was burgled in 2018. Fortunately, the burglar didn’t find the coins but I decided that having them lying around wasn’t so smart. I turned twenty some dollars of face value silver coins into $600 at the local gold/silver exchange. I’d held them close to 40 years, so I’m not sure it was a great return. But, unlike some stocks I have owned, neither silver nor gold will ever go to zero. I also read the recent HD article by Adam…
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