If we buy one item, we can’t purchase something else. If we spend money, we can’t save it. If we pursue one goal, we shortchange another.
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.
The table shows that the Traditional IRA would have been the better choice, producing about $3,500 more in available funds, or about 22% more. This demonstrates that the primary driver in choosing between a Roth and a traditional qualified account is a consideration of the tax rates at the time of contribution and at the time of distribution. There have been a number of changes to the tax code in the last decade that have contributed to the result, but I certainly didn’t predict any of them. If you guess wrong, you pay the price in a higher tax bill. In the example above, the extra $1,750 invested in the traditional account produced an additional $6,143.31 in earnings. The lower tax rate at the distribution of the traditional IRA results in the $3,500 in extra funds. Even though the Roth IRA had tax free earnings growth, the initial larger tax rate overcame that advantage, when compared to the traditional IRA. Because of my pension and my wife’s social security benefit, 85% of her social security benefit is taxable income, so that is not a consideration in our tax calculation. I used Dinkytown’s 1040 Calculator to run a series of estimates of our 2026 tax return to assess if we want to execute a Roth Conversion this year. We are still 4 years from taking RMDs, and I will start my Social Security in a year when I turn 70. My current thinking is a conversion of about $40,000 will keep us in the 12% bracket. There would also be a small NJ state tax impact. My simple analysis reinforces what I’ve been taught. Roth contributions make the most sense when you think your current tax bracket is lower than when you expect to withdrawal the funds. There are secondary considerations, like no tax diversification, no RMDs, and uncertainty about future tax rates. If you intend to pass the funds to heirs, it might make sense to perform Roth conversions today at the 22% tax bracket if you intend to pass these accounts to heirs who may be in their peak earnings years. Not sure? I believe I recall several HumbleDollar contributors write something about splitting the difference?
Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.NO. 24: OUR ONLY earthly immortality will be the memories of others. We should make sure those memories are good—by spending our wealth on special times with friends and family.
NO. 86: CARRYING a mortgage into retirement can cost a heap of taxes. To cover the monthly payment, you might sell winning investments in your taxable account or tap retirement accounts, thus boosting your taxable income. That, in turn, could trigger higher Medicare premiums and taxes on your Social Security benefit. Result: You suffer a double tax hit.
HIRE OTHERS TO do chores you dislike. For each of us, time—not money—is the ultimate limited resource. Research has found that those who use their money to buy time—by, say, hiring others to clean or do yardwork for them—report greater happiness. Why? These folks feel less time stressed, while also freeing up extra hours for activities they love.
NO. 97: IT’S HARD to say “no” to our adult children if they get into financial trouble—which is why we should try to raise money-savvy kids. But how? Set a good example. Talk regularly about your own finances. Tell your kids about your lean early adult years. Involve them in family financial decisions. Encourage them to save up for larger purchases.
NO. 24: OUR ONLY earthly immortality will be the memories of others. We should make sure those memories are good—by spending our wealth on special times with friends and family.
IN THE WORLD OF personal finance, there’s no shortage of formulas and frameworks for making financial decisions. But it’s also important, I think, to see these as guidelines rather than as rules. Consider the textbook view of money and happiness.
What the research says is that, all else being equal, we should opt to spend money on experiences rather than things. Let’s say the choice is between spending $1,000 on a new watch or on a weekend away.
HOW WOULD YOU DEFINE financial freedom? That’s the intriguing question I’ve been asked twice in recent weeks by journalists curious about the new HumbleDollar book, My Money Journey: How 30 People Found Financial Freedom—And You Can Too.
Financial freedom is something that pretty much everybody wants, and yet there’s no agreed-upon definition. Still, I think most folks would focus on two key elements: time and money. But I don’t think it’s a simple matter of having lots of dollars and lots of free time.
MONEY BUYS HAPPINESS—but it may not buy us very much. Indeed, no matter how much we earn and no matter what other steps we take to boost happiness, we may discover the impact is modest and fleeting.
That brings me to a recent academic debate. In 2010, Princeton University’s Angus Deaton and Daniel Kahneman noted that happiness, on average, didn’t appear to increase beyond an annual income of $75,000 or so—a finding that’s since been widely reported in the mainstream media.
AT AGE 55, I’M PERHAPS a bit young to spend time reflecting on my life. My maternal grandmother died at 101, so I could have many more decades to go. Nevertheless, I find myself more nostalgic now than I was just a few years ago.
I often think back to my childhood and how it shaped who I am today. In 1976, when I was in fourth grade, my parents purchased a two-and-a-half-acre property in a small town outside of Eugene,
I’VE BEEN WRITING FOR and reading HumbleDollar for more than six years.
I’m struck by the number of articles and comments that talk about things like divorce, job loss, health issues, adverse financial events and caring for elderly parents.
When articles discuss such experiences, the pieces are typically well read, with numerous comments, including many expressing empathy. The amount of personal information shared is amazing. No doubt readers can relate to many of these events.
I like earning money. I like having it. I like giving it away. Still, it’s worth asking: How important is money?
Yes, money can pay for the necessities we all need—food, shelter, transport—and more of it has the potential to buy us a better life. The necessities are obviously (ahem) necessary. But what about the frills that more money can buy us?
That discretionary spending has the potential to bring big smiles. Still, it’s hard to imagine that these frills would do much to offset,
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