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Market Indicators

ArticleAdam M. Grossman  |  Jul 25, 2026

WHEN IT COMES to financial decisions, many investors subscribe to an approach known as evidence-based investing. The idea, as the name suggests, is to base decisions, whenever possible, on data rather than on intuition or other informal methods. This sounds logical. It isn’t perfect, though. Economic and financial indicators have weaknesses which are important to be aware of.  Consider, for example, the Cyclically-Adjusted Price-to-Earnings, or CAPE, ratio, developed by Robert Shiller, a Yale professor and Nobel laureate, along with a colleague. Owing to its pedigree, the CAPE is highly respected. And a study by the Vanguard Group found that the CAPE had the strongest ability to predict market returns among fifteen different metrics it tested. For these reasons, many view it as the gold standard for stock market valuation. But how accurate has it been?  For years, the CAPE ratio has been flashing red. Since 2018, in fact, it’s been more elevated than it was at the peak in 1929, just before the crash. It seems to be indicating extreme risk. And yet, the market has continued to move higher with only temporary setbacks, defying the CAPE’s warnings. Even Shiller himself has acknowledged that the CAPE’s predictive abilities can fall short. In 2021, he made this seemingly contradictory statement in an opinion piece: “The stock market is already quite expensive,” he wrote, “But it is also true that stock prices are fairly reasonable right now.” Here’s how he explained this seeming contradiction: While the stock market at the time was expensive by historical standards, he noted that investors should never look at any one metric in a vacuum. Investments need to be considered in comparison to other available options. On that basis, he said, stocks were not expensive, because bonds at the time were also expensive. Recognizing how the CAPE can register misleading readings under certain conditions, Shiller and a colleague have since developed a modified version of the CAPE called the Excess CAPE Yield. This new metric helps investors compare the prospective relative returns of stocks and bonds. Shiller’s message, in other words: The original CAPE ratio on its own shouldn’t be seen as conclusive. Another well-respected metric that’s stumbled in recent years is the Sahm rule. In general terms, this rule says that when the unemployment rate begins to increase at a particular rate, a recession is likely. In back-testing, it’s been shown to be remarkably accurate. Since 1959, it would have generated just two false positives. A few years ago, however, the Sahm rule threshold was breached, theoretically indicating a recession. But Claudia Sahm, the rule’s creator, was quick to explain why investors shouldn’t be nervous. “The Sahm rule is likely overstating the labor market's weakening due to unusual shifts in labor supply caused by the pandemic and immigration,” she wrote. And in the years since, as Sahm guessed, the economy and the stock market have indeed avoided recession. The upshot: Economic indicators may work—and even work reliably—for a period of time, but then break down when something about the economy changes in a fundamental or unique way, as occurred in the wake of Covid.  Economic indicators carry another fundamental flaw: In some cases, an indicator might be correct in its prediction but less than accurate in its timing. It might tell us what’s likely to happen, in other words, but won’t tell us when that event is expected to occur. Probably the most famous occurrence along these lines was in 1996, when Alan Greenspan, then the chair of the Federal Reserve, proclaimed that the stock market was exhibiting “irrational exuberance.” Greenspan turned out to be absolutely right: A bubble was forming in the market, valuations were irrational and a crash was coming. But he didn’t get the timing right. The crash that ultimately occurred didn’t arrive until early 2000—more than three years after he issued his warning. And in those intervening three years, the market more than doubled. Investors who got more cautious in response to the initial warning would have missed out on significant gains. Along the same lines, consider what occurred with the pandemic. When Covid appeared in 2020, it seemed to arrive completely out of left field with no warning. The reality, though, is that certain experts did have pandemic risk on their radar. A 2019 risk assessment by the Federal Emergency Management Agency (FEMA) highlighted the risk of a pandemic among a short list of concerns. The problem, though, was that the report was vague, describing a risk but without any indication when it might occur. It was like a clock with no hands. It was because of examples like this that the fund manager Peter Lynch has said, “It’s futile to predict the economy, interest rates, and the stock market...If you spend 13 minutes a year on economics, you’ve wasted 10 minutes.” That’s humorous, but where does that leave us? On the one hand, we know better than to consult storefront psychics. But economic indicators aren’t terribly reliable either. Investor Howard Marks offers a helpful answer. In his book Mastering the Market Cycle, Marks offers this suggestion: Imagine, he says, a jar filled with a mix of balls of various different colors. No one can tell with the naked eye how many there are of each. But if you can at least have a sense of the mix, that can be helpful. By the same token, no economic indicator should be seen as conclusive, but taken together, they may provide a sense of where things stand. What does this mean in practical terms? Suppose, for example, you’re considering rebalancing your portfolio and wondering how aggressive to be in reducing risk. You could use Marks’s guideline in this case. If the market seems high, you might be a little quicker to reduce risk. But at the same time, we should always keep in mind the “irrational exuberance” episode as a cautionary tale. It’s a reminder to never veer too far in any one direction. As I’ve suggested before, a center-lane approach often represents the best path forward.   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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Fear of the Unknown…

gnussen623  |  Jul 22, 2026

"I was in your shoes a year ago, and you have a wonderful period of exploration ahead of you. Try different things. Reconnect deeply with the people who matter most. Read. Travel. Pick up a hobby you’ve long ignored. Build a modest daily routine that gives your days some structure. Above all, don’t look for a substitute for the status or routine that work once provided. Let this next chapter become something different rather than a replacement for the last one."
- Mark Gardner
Read more »

FIFA Financials

R Quinn  |  Jul 19, 2026

"I did wonder how so many folks from less affluent countries could afford an overseas trip to the US along with tickets. But I did spend $700 a ticket each to take my son to see Eric Clayton’s Crossroads in Austin in September. So to each his own I guess. i am learning to spend it while I can enjoy it."
- Kevin Rees
Read more »

Widow Tax

ArticleJohn Urban  |  Jul 25, 2026

THE WIDOW TAX is sold to the wrong households. It gets pitched to affluent couples as the reason to convert to a Roth or buy life insurance. The pitch says that when one spouse dies, the survivor files single, lands in a higher bracket, and gets clobbered. I ran the numbers for three couples at three incomes, and at the comfortable end the widow tax often costs nothing, or even less than nothing. The real cost lands lower down, on households nobody is selling anything to. What follows uses 2026 federal figures to show what the widow tax actually does in dollars, not in scary percentage points. The pattern runs opposite to the marketing. The higher your income, the smaller the hit, and the lower you go, the more it bites. Three Things Move When the first spouse dies, three things change, and they get bundled under one frightening label. One Social Security check stops, and a pension may shrink or end. That is lost income, and it is usually the largest of the three. It is not a tax. Spending shifts as well. The survivor pays one Medicare premium instead of two, but the mortgage still comes out of the same account. The third change is the only one the tax code causes: narrower single brackets, a smaller standard deduction and lower thresholds for the Medicare surcharge. The widow tax is that third piece alone, and the three households below measure how big it really is. The Affluent Couple Both spouses are over 65. Their income is about $360,000: $80,000 from Social Security, $210,000 from a pension and required minimum distributions, plus $30,000 in qualified dividends and $40,000 in long-term gains. They sit in the 24% bracket, and both already pay the Medicare surcharge. One spouse dies. The survivor keeps the larger Social Security check and most of the other income, landing at roughly $308,000. As a couple, they paid about $53,900 in federal income tax and a Medicare surcharge of about $9,240. As a single filer, the survivor pays about $55,000 in federal tax and a surcharge of about $6,355. The effective rate rises from 15.7% to 18.7%, which is the headline people remember. But the federal tax barely moves, up only about $1,100, because the survivor has less income to tax. The Medicare surcharge actually falls about $2,900, because two enrollees in the couple's joint tier cost more than one survivor a tier above. Net it all out, and the survivor pays about $1,800 a year less than the couple did. The rate went up, and the dollars went down. At the high end, the widow tax measured in money hands back a small refund. This is why the Roth conversion pitch aimed at comfortable couples misfires. If converting to Roth would cut the survivor's future taxable income without cutting the couple's lifestyle, the converted money was surplus. Surplus is money the survivor never needed to replace. Edward McQuarrie, a finance professor emeritus at Santa Clara University, made a version of this argument in a 2023 paper. He found the dollar hit inconsequential for affluent couples, and located any real cost lower down, where the Social Security torpedo bites. Where It Actually Bites Drop down to a couple with $180,000 of income: $60,000 from Social Security and $120,000 from a pension and required minimum distributions, all ordinary income. Both are over 65. The couple files jointly at $180,000; the survivor files single at about $150,000. As a couple, they paid about $17,148 in federal tax and no Medicare surcharge. The survivor pays about $22,737 in federal tax and a new surcharge of about $2,885. The federal tax rises about $5,600, and a surprising chunk of that comes from the collapse of the new $6,000 senior deduction, which phases out against a lower income threshold for singles. Then the survivor crosses into a Medicare surcharge tier the couple never paid. The total cost of widowhood here is roughly $8,500 a year, set against a $30,000 income loss. This is the one band where both the dollars and the rate move the wrong way. Now take a couple with $90,000 of income: $38,500 from Social Security, about the national average for two retired spouses, plus $51,500 from a pension and distributions. The survivor keeps the larger Social Security check and the full pension, landing at $73,500. As a couple, they paid about $3,433 in federal tax, at an effective rate of 3.8%. The survivor pays about $5,278, at an effective rate of 7.2%. There's no Medicare surcharge at this income, and there never will be. But the survivor's effective rate nearly doubles, because more of the Social Security benefit becomes taxable, up to the 85% ceiling, when the single thresholds replace the joint ones. The added tax is about $1,845, and the lost income is $16,500. Real money for a household least able to absorb it. It doubles the effective rate, and it hurts.  Read the three together and the widow tax points the wrong way from the marketing. At $360,000 it costs less than nothing, roughly a $1,800 annual saving. At $180,000 it costs about $8,500. At $90,000 it costs about $1,850, but the effective rate doubles. The affluent couples being sold protection don't need it. The middle couples who feel the sting are not being sold anything, and they're the ones for whom a few thousand dollars a year actually constrains a life. The tax code has three different mechanisms, and which one finds you depends almost entirely on your income. At the top, the Medicare surcharge does the work, and it falls. In the middle, the surcharge appears from zero. At the bottom, the Social Security torpedo raises the taxability of the benefit from 75% to 85%. The mechanism changes with the income, and so does the household's ability to absorb the hit. Plan Ahead This is where the widow tax conversation usually stops, and where I think it should start. The moves most likely to leave a survivor better off are the ones you make years before, and they help whether or not the widow tax ever bites. Converting traditional IRA money to Roth over several years before retirement smooths your taxable income. It lowers the required minimum distributions that will later push a single filer into higher brackets. It can also keep a survivor under a Medicare surcharge tier the couple never worried about. Drawing accounts in a sensible order, spending down the right buckets first, reduces the future tax base that a single bracket structure will tax more steeply. Managing required distributions as they grow, rather than letting them balloon off a rising balance, limits the single bracket exposure that builds across a long widowhood. A more tax-efficient bequest helps the people who inherit what is left. None of that is widow rescue. It is good multi-year planning that happens to compound in the survivor's favor. The widow tax is one input to that planning, not the reason for it. The reason is that the year your spouse dies is the worst possible year to be making financial decisions, and the more of those decisions you have already made, the fewer you hand to someone who is grieving. You can do a rough version of this at your own kitchen table, and you should, ideally long before you need to. Estimate the survivor's income after the smaller Social Security check and any pension change, then estimate the survivor's spending from your actual budget, not a generic rule of thumb. Subtract. If reliable after-tax income still supports the life the survivor wants, with margin, the tax rate was never the thing to worry about. Then project the survivor's federal tax, the net investment income tax where it applies and the Medicare surcharge as a single filer, and compare it to the couple. Keep the tax separate from the lost income, so you can see what the tax code actually did. Sometimes, as the affluent couple shows, it does you a small favor. Only then does a planning move earn a look, and only if you can answer what it costs today, what it might save later, who benefits and what has to come true for it to work. The widow tax is real, but it isn't the catastrophe it's sold as. At higher incomes it's not a cost at all. Lower down it is a real cost, and the lower you go, the more it's worth measuring, because the households it constrains have the least margin to spare. The planning that matters most is the kind you do years ahead, smoothing income, holding down future distributions, managing the surcharge tiers and putting the estate in order. Do that, and you've done right by your survivor, for reasons that have little to do with fear and a great deal to do with care. You'll have done it in the years when you still had the time, and the clarity, to do it well. ________________________________________________________________________________ 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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Degrees of Doubt: When Higher Education Misses the Mark

Mark Crothers  |  Jul 16, 2025

"As a retired career-long educator from the early 1980's to 2020, I observed the American education system transition to a focus on ever-increasing testing, largely coming from federal initiatives such as "A Nation at Risk" and "No Child Left Behind". As a result, increased amounts of time that students spend in a classroom are devoted to preparing to do well on the next standardized test and significantly less time is available for teachers to work with students to develop critical thinking and problem-solving skills. Preparing for a test is not the same as learning new concepts. Our state commissioner of education, commenting probably 25 years ago about increased testing, said something to the effect of: "I grew up on a farm. We didn't weigh our cattle more to see if they were gaining weight; we fed them more". I believe that is a very fitting analogy."
- Dave Melick
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One Person’s Luxury, Another’s Necessity

Mark Crothers  |  Jul 21, 2026

"Wendy, sorry to hear of your loss. Sport, and the social side that comes with it, has been a constant thread through my life since childhood. I'd say the social aspect matters as much for the mind as the exercise does for the body. And as you say, it doesn't happen on its own — we have to make the effort. My sporting journey has evolved with age: rough contact sports like rugby and football when I was young, faster competitive sports like tennis and badminton as I moved on from contact, and now easing into gentler ones like pickleball and padel. Through it all, the constant has been the social connection."
- Mark Crothers
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Can we be completely safe?

Ben Rodriguez  |  Dec 17, 2025

"The main problem would be picking out the millionaire next door, and distinguishing him from the guy who really is a couple hundred dollars away from being a homeless vagrant. Criminals don't even think this way; if they had money, they would flaunt it, so they are looking for people who are flaunting money."
- Ormode
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Jonathan’s Parting Thoughts: No. 9

Jonathan Clements  |  Jul 3, 2026

"May you rest in Peace Jonathan. Right on with that advice, pretty much what Buffett says also. And for me, I am 85% Index Stocks, and 15% cash, no bonds needed."
- William Dorner
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Buying a car in retirement

Julie C  |  Jul 11, 2026

"Julie, what happened was this: I was actually shopping for an SUV and was at the dealership test driving yet another one when my husband suggested I test drive the Camry. I relented and liked it. The next day after research, the salesperson wrote up the numbers and I signed and talked to Finance and was good to go. When I got home, I did an online search to send a link to a family member and lo and behold, the online price was $3000 less. I called and they (amazingly) apologized and rewrote the agreement - claiming an error was made by the internet team. If I had searched on line while I was originally sitting in front of the salesperson, I would've have found it. I was just lucky I wanted to share my purchase with my sister!"
- joanm114
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IRMAA & late filing of tax returns

Danbo  |  Jul 15, 2026

"William, your analysis is helpful."
- Danbo
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Go While You Still Can

DavidHLancaster  |  Jul 22, 2026

"Great article…and a lot of truth contained therein! Back in April I had a medical event. For two months after I lived with dizziness, every day! I am getting medical care and the prognosis is positive. 2 weeks ago, I had another medical issue. Now I am awaiting an MRI, to determine if gall bladder surgery is in my near term future. Thinking positive, I am hoping for the best, but I am reminded that no one is promised tomorrow! Travel…now..,while you have your health! Waiting for later is rarely going to be the right choice!"
- Kevin Lynch
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Costa Rica: The Richest Man On The River

Andrew Clements  |  Jul 22, 2026

"Bob, thank you so much for sharing this information and for taking the time to read my post."
- Andrew Clements
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Market Indicators

ArticleAdam M. Grossman  |  Jul 25, 2026

WHEN IT COMES to financial decisions, many investors subscribe to an approach known as evidence-based investing. The idea, as the name suggests, is to base decisions, whenever possible, on data rather than on intuition or other informal methods. This sounds logical. It isn’t perfect, though. Economic and financial indicators have weaknesses which are important to be aware of.  Consider, for example, the Cyclically-Adjusted Price-to-Earnings, or CAPE, ratio, developed by Robert Shiller, a Yale professor and Nobel laureate, along with a colleague. Owing to its pedigree, the CAPE is highly respected. And a study by the Vanguard Group found that the CAPE had the strongest ability to predict market returns among fifteen different metrics it tested. For these reasons, many view it as the gold standard for stock market valuation. But how accurate has it been?  For years, the CAPE ratio has been flashing red. Since 2018, in fact, it’s been more elevated than it was at the peak in 1929, just before the crash. It seems to be indicating extreme risk. And yet, the market has continued to move higher with only temporary setbacks, defying the CAPE’s warnings. Even Shiller himself has acknowledged that the CAPE’s predictive abilities can fall short. In 2021, he made this seemingly contradictory statement in an opinion piece: “The stock market is already quite expensive,” he wrote, “But it is also true that stock prices are fairly reasonable right now.” Here’s how he explained this seeming contradiction: While the stock market at the time was expensive by historical standards, he noted that investors should never look at any one metric in a vacuum. Investments need to be considered in comparison to other available options. On that basis, he said, stocks were not expensive, because bonds at the time were also expensive. Recognizing how the CAPE can register misleading readings under certain conditions, Shiller and a colleague have since developed a modified version of the CAPE called the Excess CAPE Yield. This new metric helps investors compare the prospective relative returns of stocks and bonds. Shiller’s message, in other words: The original CAPE ratio on its own shouldn’t be seen as conclusive. Another well-respected metric that’s stumbled in recent years is the Sahm rule. In general terms, this rule says that when the unemployment rate begins to increase at a particular rate, a recession is likely. In back-testing, it’s been shown to be remarkably accurate. Since 1959, it would have generated just two false positives. A few years ago, however, the Sahm rule threshold was breached, theoretically indicating a recession. But Claudia Sahm, the rule’s creator, was quick to explain why investors shouldn’t be nervous. “The Sahm rule is likely overstating the labor market's weakening due to unusual shifts in labor supply caused by the pandemic and immigration,” she wrote. And in the years since, as Sahm guessed, the economy and the stock market have indeed avoided recession. The upshot: Economic indicators may work—and even work reliably—for a period of time, but then break down when something about the economy changes in a fundamental or unique way, as occurred in the wake of Covid.  Economic indicators carry another fundamental flaw: In some cases, an indicator might be correct in its prediction but less than accurate in its timing. It might tell us what’s likely to happen, in other words, but won’t tell us when that event is expected to occur. Probably the most famous occurrence along these lines was in 1996, when Alan Greenspan, then the chair of the Federal Reserve, proclaimed that the stock market was exhibiting “irrational exuberance.” Greenspan turned out to be absolutely right: A bubble was forming in the market, valuations were irrational and a crash was coming. But he didn’t get the timing right. The crash that ultimately occurred didn’t arrive until early 2000—more than three years after he issued his warning. And in those intervening three years, the market more than doubled. Investors who got more cautious in response to the initial warning would have missed out on significant gains. Along the same lines, consider what occurred with the pandemic. When Covid appeared in 2020, it seemed to arrive completely out of left field with no warning. The reality, though, is that certain experts did have pandemic risk on their radar. A 2019 risk assessment by the Federal Emergency Management Agency (FEMA) highlighted the risk of a pandemic among a short list of concerns. The problem, though, was that the report was vague, describing a risk but without any indication when it might occur. It was like a clock with no hands. It was because of examples like this that the fund manager Peter Lynch has said, “It’s futile to predict the economy, interest rates, and the stock market...If you spend 13 minutes a year on economics, you’ve wasted 10 minutes.” That’s humorous, but where does that leave us? On the one hand, we know better than to consult storefront psychics. But economic indicators aren’t terribly reliable either. Investor Howard Marks offers a helpful answer. In his book Mastering the Market Cycle, Marks offers this suggestion: Imagine, he says, a jar filled with a mix of balls of various different colors. No one can tell with the naked eye how many there are of each. But if you can at least have a sense of the mix, that can be helpful. By the same token, no economic indicator should be seen as conclusive, but taken together, they may provide a sense of where things stand. What does this mean in practical terms? Suppose, for example, you’re considering rebalancing your portfolio and wondering how aggressive to be in reducing risk. You could use Marks’s guideline in this case. If the market seems high, you might be a little quicker to reduce risk. But at the same time, we should always keep in mind the “irrational exuberance” episode as a cautionary tale. It’s a reminder to never veer too far in any one direction. As I’ve suggested before, a center-lane approach often represents the best path forward.   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 »

Fear of the Unknown…

gnussen623  |  Jul 22, 2026

"I was in your shoes a year ago, and you have a wonderful period of exploration ahead of you. Try different things. Reconnect deeply with the people who matter most. Read. Travel. Pick up a hobby you’ve long ignored. Build a modest daily routine that gives your days some structure. Above all, don’t look for a substitute for the status or routine that work once provided. Let this next chapter become something different rather than a replacement for the last one."
- Mark Gardner
Read more »

FIFA Financials

R Quinn  |  Jul 19, 2026

"I did wonder how so many folks from less affluent countries could afford an overseas trip to the US along with tickets. But I did spend $700 a ticket each to take my son to see Eric Clayton’s Crossroads in Austin in September. So to each his own I guess. i am learning to spend it while I can enjoy it."
- Kevin Rees
Read more »

Widow Tax

ArticleJohn Urban  |  Jul 25, 2026

THE WIDOW TAX is sold to the wrong households. It gets pitched to affluent couples as the reason to convert to a Roth or buy life insurance. The pitch says that when one spouse dies, the survivor files single, lands in a higher bracket, and gets clobbered. I ran the numbers for three couples at three incomes, and at the comfortable end the widow tax often costs nothing, or even less than nothing. The real cost lands lower down, on households nobody is selling anything to. What follows uses 2026 federal figures to show what the widow tax actually does in dollars, not in scary percentage points. The pattern runs opposite to the marketing. The higher your income, the smaller the hit, and the lower you go, the more it bites. Three Things Move When the first spouse dies, three things change, and they get bundled under one frightening label. One Social Security check stops, and a pension may shrink or end. That is lost income, and it is usually the largest of the three. It is not a tax. Spending shifts as well. The survivor pays one Medicare premium instead of two, but the mortgage still comes out of the same account. The third change is the only one the tax code causes: narrower single brackets, a smaller standard deduction and lower thresholds for the Medicare surcharge. The widow tax is that third piece alone, and the three households below measure how big it really is. The Affluent Couple Both spouses are over 65. Their income is about $360,000: $80,000 from Social Security, $210,000 from a pension and required minimum distributions, plus $30,000 in qualified dividends and $40,000 in long-term gains. They sit in the 24% bracket, and both already pay the Medicare surcharge. One spouse dies. The survivor keeps the larger Social Security check and most of the other income, landing at roughly $308,000. As a couple, they paid about $53,900 in federal income tax and a Medicare surcharge of about $9,240. As a single filer, the survivor pays about $55,000 in federal tax and a surcharge of about $6,355. The effective rate rises from 15.7% to 18.7%, which is the headline people remember. But the federal tax barely moves, up only about $1,100, because the survivor has less income to tax. The Medicare surcharge actually falls about $2,900, because two enrollees in the couple's joint tier cost more than one survivor a tier above. Net it all out, and the survivor pays about $1,800 a year less than the couple did. The rate went up, and the dollars went down. At the high end, the widow tax measured in money hands back a small refund. This is why the Roth conversion pitch aimed at comfortable couples misfires. If converting to Roth would cut the survivor's future taxable income without cutting the couple's lifestyle, the converted money was surplus. Surplus is money the survivor never needed to replace. Edward McQuarrie, a finance professor emeritus at Santa Clara University, made a version of this argument in a 2023 paper. He found the dollar hit inconsequential for affluent couples, and located any real cost lower down, where the Social Security torpedo bites. Where It Actually Bites Drop down to a couple with $180,000 of income: $60,000 from Social Security and $120,000 from a pension and required minimum distributions, all ordinary income. Both are over 65. The couple files jointly at $180,000; the survivor files single at about $150,000. As a couple, they paid about $17,148 in federal tax and no Medicare surcharge. The survivor pays about $22,737 in federal tax and a new surcharge of about $2,885. The federal tax rises about $5,600, and a surprising chunk of that comes from the collapse of the new $6,000 senior deduction, which phases out against a lower income threshold for singles. Then the survivor crosses into a Medicare surcharge tier the couple never paid. The total cost of widowhood here is roughly $8,500 a year, set against a $30,000 income loss. This is the one band where both the dollars and the rate move the wrong way. Now take a couple with $90,000 of income: $38,500 from Social Security, about the national average for two retired spouses, plus $51,500 from a pension and distributions. The survivor keeps the larger Social Security check and the full pension, landing at $73,500. As a couple, they paid about $3,433 in federal tax, at an effective rate of 3.8%. The survivor pays about $5,278, at an effective rate of 7.2%. There's no Medicare surcharge at this income, and there never will be. But the survivor's effective rate nearly doubles, because more of the Social Security benefit becomes taxable, up to the 85% ceiling, when the single thresholds replace the joint ones. The added tax is about $1,845, and the lost income is $16,500. Real money for a household least able to absorb it. It doubles the effective rate, and it hurts.  Read the three together and the widow tax points the wrong way from the marketing. At $360,000 it costs less than nothing, roughly a $1,800 annual saving. At $180,000 it costs about $8,500. At $90,000 it costs about $1,850, but the effective rate doubles. The affluent couples being sold protection don't need it. The middle couples who feel the sting are not being sold anything, and they're the ones for whom a few thousand dollars a year actually constrains a life. The tax code has three different mechanisms, and which one finds you depends almost entirely on your income. At the top, the Medicare surcharge does the work, and it falls. In the middle, the surcharge appears from zero. At the bottom, the Social Security torpedo raises the taxability of the benefit from 75% to 85%. The mechanism changes with the income, and so does the household's ability to absorb the hit. Plan Ahead This is where the widow tax conversation usually stops, and where I think it should start. The moves most likely to leave a survivor better off are the ones you make years before, and they help whether or not the widow tax ever bites. Converting traditional IRA money to Roth over several years before retirement smooths your taxable income. It lowers the required minimum distributions that will later push a single filer into higher brackets. It can also keep a survivor under a Medicare surcharge tier the couple never worried about. Drawing accounts in a sensible order, spending down the right buckets first, reduces the future tax base that a single bracket structure will tax more steeply. Managing required distributions as they grow, rather than letting them balloon off a rising balance, limits the single bracket exposure that builds across a long widowhood. A more tax-efficient bequest helps the people who inherit what is left. None of that is widow rescue. It is good multi-year planning that happens to compound in the survivor's favor. The widow tax is one input to that planning, not the reason for it. The reason is that the year your spouse dies is the worst possible year to be making financial decisions, and the more of those decisions you have already made, the fewer you hand to someone who is grieving. You can do a rough version of this at your own kitchen table, and you should, ideally long before you need to. Estimate the survivor's income after the smaller Social Security check and any pension change, then estimate the survivor's spending from your actual budget, not a generic rule of thumb. Subtract. If reliable after-tax income still supports the life the survivor wants, with margin, the tax rate was never the thing to worry about. Then project the survivor's federal tax, the net investment income tax where it applies and the Medicare surcharge as a single filer, and compare it to the couple. Keep the tax separate from the lost income, so you can see what the tax code actually did. Sometimes, as the affluent couple shows, it does you a small favor. Only then does a planning move earn a look, and only if you can answer what it costs today, what it might save later, who benefits and what has to come true for it to work. The widow tax is real, but it isn't the catastrophe it's sold as. At higher incomes it's not a cost at all. Lower down it is a real cost, and the lower you go, the more it's worth measuring, because the households it constrains have the least margin to spare. The planning that matters most is the kind you do years ahead, smoothing income, holding down future distributions, managing the surcharge tiers and putting the estate in order. Do that, and you've done right by your survivor, for reasons that have little to do with fear and a great deal to do with care. You'll have done it in the years when you still had the time, and the clarity, to do it well. ________________________________________________________________________________ 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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Degrees of Doubt: When Higher Education Misses the Mark

Mark Crothers  |  Jul 16, 2025

"As a retired career-long educator from the early 1980's to 2020, I observed the American education system transition to a focus on ever-increasing testing, largely coming from federal initiatives such as "A Nation at Risk" and "No Child Left Behind". As a result, increased amounts of time that students spend in a classroom are devoted to preparing to do well on the next standardized test and significantly less time is available for teachers to work with students to develop critical thinking and problem-solving skills. Preparing for a test is not the same as learning new concepts. Our state commissioner of education, commenting probably 25 years ago about increased testing, said something to the effect of: "I grew up on a farm. We didn't weigh our cattle more to see if they were gaining weight; we fed them more". I believe that is a very fitting analogy."
- Dave Melick
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One Person’s Luxury, Another’s Necessity

Mark Crothers  |  Jul 21, 2026

"Wendy, sorry to hear of your loss. Sport, and the social side that comes with it, has been a constant thread through my life since childhood. I'd say the social aspect matters as much for the mind as the exercise does for the body. And as you say, it doesn't happen on its own — we have to make the effort. My sporting journey has evolved with age: rough contact sports like rugby and football when I was young, faster competitive sports like tennis and badminton as I moved on from contact, and now easing into gentler ones like pickleball and padel. Through it all, the constant has been the social connection."
- Mark Crothers
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Can we be completely safe?

Ben Rodriguez  |  Dec 17, 2025

"The main problem would be picking out the millionaire next door, and distinguishing him from the guy who really is a couple hundred dollars away from being a homeless vagrant. Criminals don't even think this way; if they had money, they would flaunt it, so they are looking for people who are flaunting money."
- Ormode
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Jonathan’s Parting Thoughts: No. 9

Jonathan Clements  |  Jul 3, 2026

"May you rest in Peace Jonathan. Right on with that advice, pretty much what Buffett says also. And for me, I am 85% Index Stocks, and 15% cash, no bonds needed."
- William Dorner
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Buying a car in retirement

Julie C  |  Jul 11, 2026

"Julie, what happened was this: I was actually shopping for an SUV and was at the dealership test driving yet another one when my husband suggested I test drive the Camry. I relented and liked it. The next day after research, the salesperson wrote up the numbers and I signed and talked to Finance and was good to go. When I got home, I did an online search to send a link to a family member and lo and behold, the online price was $3000 less. I called and they (amazingly) apologized and rewrote the agreement - claiming an error was made by the internet team. If I had searched on line while I was originally sitting in front of the salesperson, I would've have found it. I was just lucky I wanted to share my purchase with my sister!"
- joanm114
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Manifesto

Jul 26, 2026

NO. 22: IF WE’RE saving enough each month for retirement and other goals, it doesn’t much matter how we spend our remaining money—and there’s likely no need to budget.

Truths

Jul 26, 2026

NO. 68: OUR HUMAN capital—our income-earning ability—should drive our asset allocation. Early in our adult life, with decades of paychecks ahead of us, we can risk investing heavily in stocks. But as we approach retirement and the need to replace our paycheck with portfolio withdrawals, we might shift half our nest egg into bonds and other conservative investments.

humans

Jul 25, 2026

NO. 42: WE'RE OVERLY influenced by information that’s easy to recall. Think about Warren Buffett, or Amazon, or Apple. Even casual observers of the financial world know about the huge gains associated with each. The danger: We become captivated by such winners and assume it’s easy to get rich by investing with top money managers or betting on select stocks.

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Jul 25, 2026

ACCESS FINANCIAL accounts from a dedicated device. Online thieves could load malware onto your computer, which then captures usernames and passwords for your financial accounts. To protect yourself, buy a low-cost notebook computer or other device to check your financial accounts—and never use it to read emails or visit other websites.

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Manifesto

Jul 26, 2026

NO. 22: IF WE’RE saving enough each month for retirement and other goals, it doesn’t much matter how we spend our remaining money—and there’s likely no need to budget.

Spotlight: In Retirement

Another interesting article on Social Security claiming

Rick Connor   |  Jul 5, 2025

A recent article by Michael Finke in Think Advisor discusses some anecdotal evidence he has been hearing about recent trends in SS claiming. Worry about a reduction in benefits apparently is leading some retirees to claim their benefits earlier than might be expected given their wealth.  I have to admit that this year’s discussions around SS funding and administration have given me pause.
Two things about the article. It was published in a professional journal targeting financial  advisors.

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Slow on the Draw

Edmund Marsh   |  May 9, 2026

RETIREMENT IS LIFE’S most expensive purchase. During our working years, we deprive our present selves of immediate pleasure by refusing to spend money for nicer cars, a bigger house or a vacation to boast about. Instead, we squirrel away those saved dollars with an eye toward keeping the future us fed, clothed and living indoors. 
At age 64, after decades of choosing to save and invest a large chunk of each paycheck, rather than spend it,

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Not Qualified to Carry This Anymore

Dennis Friedman   |  Aug 13, 2025

I’m turning into my mother more and more every day. Back when I was taking care of her, she’d hand me her credit card whenever we went shopping. She’d say, “I’m not qualified to carry this anymore.” She was afraid she’d lose it.
Now I catch myself doing the same thing. When Rachel and I go out, I sometimes give her my wallet to toss in her purse. I’m scared I’ll lose it. Since I’ve retired,

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Going It Alone

Dennis Friedman   |  Jun 18, 2025

When Rachel and I got married, I was already in my 60s. After our wedding, my sister said to Rachel, “You take good care of my brother.” My cousin Barb told her husband, Kent, “I don’t know what would have happened to Dennis if he had never met Rachel.”
I got the impression they didn’t think I could take care of myself in retirement — that it would be too difficult to go it alone. I get it.

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Managing Concentration Risk

Adam M. Grossman   |  Oct 4, 2025

LARRY ELLISON, THE 81-YEAR-OLD cofounder of Oracle Corporation, recently became the world’s wealthiest person.
Oracle, a software company, isn’t nearly as large as its peers. So how did Ellison’s net worth manage to surpass that of Bill Gates, Jeff Bezos and the founders of other much larger companies?
The answer is simple: In the nearly 50 years since Oracle’s founding, Ellison has almost never sold a share of his company’s stock. According to an analysis by Smart Insider,

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My First Retirement Report Card

Mark Crothers   |  Jul 31, 2025

I’m three months retired today, my goodness the time has flown by!
When I managed my own business I always collated business figures into a quarterly report for better performance monitoring and to help give me a feel for how things were going. I guess the urge to do so is still ingrained within me, and I thought I’d do a similar but more holistic exercise with a first quarter retirement report for the quarter ending 07/31/25.

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Spotlight: Smith

New to building a CD or Bond Ladder?

Dan Smith   |  Feb 27, 2026

Finally, I’ve gotten around to building a ladder. I have procrastinated doing so because it seemed like a hassle; buy a one year, and a two, and a three, etc. Then after a year, roll the one year to a five, and on and on. If I knew how simple Fidelity made it, I would have acted sooner.  Looking for ultimate safety, We decided to use Brokered Certificates of Deposit (CD). As most everyone here knows, Brokered CDs are simply CDs purchased from a broker dealer, in our case, Fidelity. It’s not my purpose to go into detail about the differences between bank and brokered products. I’ll just say that the brokered CD can be a bit more flexible, though there are pros and cons. The size of our ladder should outlast a dreaded ‘lost decade’. For those who have not yet built a CD or Bond ladder, here is the process at Fidelity.  Click on “build a ladder” Select which account to fund the ladder Click on the desired duration, (in our case, five years) Input the ladders investment ($100K for example) Press next At this step Fidelity displayed the highest paying CDs for each duration (I believe this is updated every 15 minutes) Choose if you want maturing CDs to be deposited back into your account, or if you want to purchase a new CD at the maximum duration of your ladder (again, five years) Select “buy”, and you now own five $20K CDs.  The ladder is totally on autopilot. Easy Breezy.
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HumbleDollar’s HumbleDrivers

Dan Smith   |  May 13, 2026

During my days running union meetings, there was a thing called “for the good and welfare of the members”. Today's post is about the good and welfare of HumbleDrivers. In the past few weeks, two of my retired friends have complained that the ‘blind spot’ warning device on their new cars was useless. Both said that the yellow warning light on their side view mirror did not illuminate until a vehicle was approximately at their rear bumper. I'm going to tell you why I don’t agree with them, and why I think this ‘good and welfare’ post is relevant to HumbleDollar. The area between the rear bumper and a car's passenger door is the blind spot on every vehicle that I have ever driven. Therefore, if the warning light comes on when traffic is occupying that area, it is working as it should. A problem arises when the side view mirrors are not properly adjusted. The following was lifted directly from the internet, because I could not have written it better.. "The most effective way to adjust your side-view mirrors is a method often recommended by the Society of Automotive Engineers (SAE). Unlike the traditional method where you see the side of your own car, this setup pushes the mirrors outward to significantly reduce—and often eliminate—your blind spots. The Blind Spot Elimination (BSE) Method Adjust the Rearview Mirror first: Set your center rearview mirror as you normally would, so it frames the entire rear window. Adjust the Driver’s Side Mirror: Lean your head to the left until it almost touches the driver’s side window. From that position, adjust the mirror so you can just barely see the rear corner of your car. When you sit back up straight, you should no longer see the side of your car at all.…
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Around the Obstacles

Dan Smith   |  Apr 25, 2026

I WAS 48 years old when the judgement was final and the papers were signed. My former wife and I split our net worth 50/50. There were no arguments over household items like furniture; I didn’t care about that stuff. Pam gladly accepted my proposal that she keep the house, and all its equity, in exchange for me keeping an offsetting amount of the IRAs and my 401(k), a very good move for my future self. By giving up the house, I also escaped the mortgage, which was the only loan obligation I had. Had there been consumer debt (there was none), I would have eliminated that as quickly as possible, beginning with the highest interest loans. I was ordered to pay spousal support to age 65, or my retirement if I worked beyond 65. I would be lying if I told you that I liked paying alimony. Still, it wasn’t unfair considering our age at divorce, Pam’s depression, and the fact that she mostly stayed at home to raise our kids.  Long before the divorce was ever final, I knew I’d have to make up for lost time if I ever wanted to retire in the manner to which I wanted to had become accustomed. The divorce wasn’t going to be the only obstacle I would have to overcome. Thirty years of delivering beverages resulted in osteoarthritis and plantar fasciitis; my days on the beer truck were rapidly coming to an end.  I needed a plan. Where Was I?  I had to understand exactly where I was, and what my options were.  My continued employment as a delivery driver would likely have left me on Social Security Disability (SSDI) by age 55. I was very interested in personal finance, and knew many people in that field who would help…
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My Favorite Rx

Dan Smith   |  Mar 19, 2026

It’s not your typical prescription, it’s not even the creation of a biotech company. My favorite med is a product of those crazy Generation Xers. No, not medicinal gummies, I’m talking about the chill pill, as in, “take a chill pill”, “chill out”, "chill dude” and etc. The chill pill helps control my blood pressure, and probably contributes to good health in other ways as well.  I’m not perfect, but I try. Earlier today, at Krogers, my phone wouldn’t let me scan a digital coupon. Oh the humanity. I began to punish my not-so-smart phone, but had to cease and desist after a crowd, with videos rolling, began to form a circle. Maybe I’ll become a YouTube celebrity.  I never “lose” it with Chrissy, as she would deal with my tantrum in a most decisive and unpleasant manner. And I’m pretty chill behind the wheel of my car. My philosophy is that if I wouldn’t swear at you face to face, I shouldn’t cuss you out from the safety of my car. That, and the fact that you may be armed and dangerous.  A chill pill helps me when someone says something I don’t agree with. I mean, while everyone is entitled to my opinion, I know that the constitution gives them the right to disagree with me, as long they don’t mind being wrong.  The chill pill also helps me deal with stock market volatility. I learned my lesson years ago, on Black Monday, and have chilled out ever since. The moral of my story is that with the recent volatility in the market, a chill pill might help you keep your sanity.
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The Choice to do Nothing

Dan Smith   |  Oct 14, 2024

The year was 1988 and I was sitting across the table from my employer and his attorney, I was not a happy camper when they proposed to freeze the defined benefit (DB) pension. Instead, they would divert their contribution into a new 401k plan. I had been a pension trustee representing the union’s interest and had some awareness of some funding issues looming. Most employers are desperate to freeze those DB plans in order to escape the financial liability that can plague their bottom line. At the end of the day the company got their way, but not before agreeing to a matching contribution (in addition to the fixed amount initially proposed) up to $2k per year. The new 401k did a couple things. First it transferred all the risk onto the employees, and second it created the potential to provide those workers with retirement income that far exceeded that of the old pension…. Or not. It all depended on choice. 36 years later I’m able to see the results and can report that they are mixed. The guys that chose to take advantage of the match are now enjoying comfortable retirements. The guys who didn’t plan and save adequately are either struggling or still working. At the time the old pension was frozen, the maximum benefit was only $690 per month. I only had 10 vested credits, and had to split them with my x-wife, leaving me with a whopping $84 monthly check. Fortunately for Chris and me, we choose to live within our means and took full advantage of every saving tool out there. Now fully retired we are more comfortable than we ever imagined possible. In a recent forum topic some commented that not having a lucrative DB pension was detrimental to automating ones finances. I contend…
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A Can of Worms

Dan Smith   |  Jul 17, 2026

I’m not making this up. I once overheard a conversation in a bar by a couple guys who were planning something nefarious. They were discussing what was essentially the same kind of risk/reward conversation we think about when making allocation decisions; the major difference was that they were weighing time in prison should they be caught.  I don’t know how things worked out for the pair, but at least they were considering the can-of-worms they were about to open.  Another fella, Dennis, also a customer at one of the bars I used to service, was clean cut and friendly. At some point, I didn’t see him around for quite a while, and I assumed he moved away. A few years went by, and I finally ran into him having lunch at the neighborhood diner. I asked where he’d been, and he explained that he was arrested after he robbed the bank just down the street.  Dennis explained that he was at his wits end and desperate; not an unusual predicament for folks in that neighborhood. Dennis did not give much thought, or did not care about his can-of-worms. His record had been clean, no weapon was used in the great bank holdup, and he was remorseful. He got off pretty darned easy.  Our shelves are lined with cans of worms to be opened when we don’t consider the consequences.  Bad eating habits and not considering poor health down the road. Buying a sports car, or any car for that matter, without first considering the insurance premium, reliability, resale, or gas mileage.  Leaving a job without realizing that the loan from your 401k just became an early distribution with tax consequences, until a 1099R shows up in your mailbox in January. Not saving and not considering how you will retire some…
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