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A fatter bank account won’t necessarily make us happier—but an empty one will likely make us miserable.

The Taxman Cometh

FOR A FEW YEARS early in my career, I was an internal revenue agent for the IRS. I audited the tax returns of small businessmen, drug dealers, doctors, lawyers, a professional basketball player and everybody in between.
That was 43 years ago, when the IRS was much bigger relative to the population. One result: A larger percentage of the population were subjected to audits.
I saw and heard a lot. Some people would put dogs,

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Inns and Outs

MOST READERS HAVE likely graduated from the vacations of their youth, where they saved a few dollars by sleeping on a friend’s hand-me-down couch. Still, some of my fondest travel memories were shaped by such frugal accommodation.
I once traveled cross-country on a summer camp trip with 48 other teens, touring the greater U.S. in a converted Greyhound bus. It was an eye-opener, visiting such heralded landmarks as the Statue of Liberty and the St.

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Recent Writing

Smaller Than It Looks

I RECENTLY STUMBLED on a retirement planning blog listing the top 10 regrets of retirees. Planning for health care costs was among the things that people wish they’d handled differently.
The site had this suggestion: “Before you retire, you should get a reasonable estimate of your health care costs and make sure you can afford them. Medicare does not cover everything and most people spend hundreds of thousands of dollars in out-of-pocket health care expenses in retirement—not even including funding a long-term-care need.”
This statement is scary—and very misleading.

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Keeping It Simple

“I NEVER MEMORIZE anything I can look up.” Albert Einstein, it seems, said this or something similar. I first heard the quote in my freshman physics class. The teacher asked a student to recite a formula. The student’s response: “I never memorize anything I can look up.”
I’ve adopted the same philosophy. My wife loves to point out that I don’t remember the names of streets in our neighborhood. But I don’t need to know them.

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Every Bit Helps

IN NEW ORLEANS, a lagniappe refers to a small gift or bonus—like receiving 13 items for the price of 12, or a so-called baker’s dozen. Today, credit card points are a popular form of lagniappe, delivering a modest bonus every time you spend. But many other lagniappes are also readily available:
Banking. If you’ve ever paid a fee to use an ATM, Charles Schwab Bank’s checking account is worth a look. You can use any bank’s ATMs and,

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What Lies Beneath

MONEY IS A TOOL. But a tool for what? We might imagine it’s simply a way to purchase the goods and services we need or want. But in truth, there are all kinds of things that money can do for us—some worthy, some not so much.
Want to use your wealth more wisely? I think all of us should spend time pondering what money represents to us, how we use it and why we like to have it.

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Home Call to Action

Details Matter

FOR THE PAST FOUR years, I’ve been dealing with both a revocable and irrevocable trust that my parents created decades ago. In 2020, I knew little about trusts, and my elderly parents weren’t willing or able to share much information with me. In retrospect, I don’t think they fully understood the details of either trust, instead relying on attorneys and financial advisors.
Since then, I’ve learned a lot about trusts. I’ve come to feel they’re unnecessarily complicated and allow unscrupulous advisors to take advantage of well-intentioned,

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Money Matters

DURING THE PANDEMIC, I started devoting more time to retirement planning. But I had more questions than answers. I called a friend who was a financial planner.
“Retirement planning is confusing,” I told him. “I have a lot of questions.”
He laughed and said, “The answer is money. What’s the question?”
While his answer was humorous, it reflected what most retirees already know: Money is crucial for a good retirement. While it isn’t the only thing you need for a happy retirement,

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Give Early and Often

KEY PROVISIONS IN 2017’s Tax Cuts and Jobs Act (TCJA) will expire in 2026 unless Congress steps in. That means folks have a two-year window to prepare.
What’s at stake? Income-tax rates will increase for many taxpayers. This creates an incentive to boost income over the next few years by, say, undertaking Roth conversions to shrink traditional retirement accounts and thereby lowering future required minimum distributions.
The sunsetting of key TCJA provisions would also cut the threshold for federal estate taxes in half,

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Losers Weepers

MY SON AND I WALK the streets of our town, so my son can pick up trash and recyclables. He’s obsessive-compulsive about trash. He impulsively picks it up even if he isn’t wearing gloves or doesn’t have his grabber available. To reduce this behavior, he and I go out daily looking for trash, so he feels there’s less trash out there.
We do find trash, but we also find things that I wouldn’t classify as trash.

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Get Educated

Truths

NO. 8: DILIGENT savers need smaller nest eggs. Let’s say you save 10% of income. To retire in comfort, you might need portfolio withdrawals, Social Security and any pension income to replace 80% of your salary. But if you’ve been saving 25%, you’re used to spending far less—and you might be comfortable retiring with just 65% of your preretirement income.

Act

UPGRADE YOUR credit cards. If you use one that doesn’t offer cash back or other rewards, swap it for one that does. Paying an annual fee? That might be worth it for the first year if it’s a travel rewards card that offers a large initial bonus. But if you can’t get a retention bonus or the fee waived for the second year, consider canceling and getting a new credit card.

Think

NEUROECONOMICS. To understand why we often make poor decisions, neuroeconomics studies how the brain reacts to financial situations. The research has confirmed insights first uncovered by behavioral finance, such as our strong aversion to losses, our fondness for long-shot investments and our preference for small rewards now over larger rewards later.

Money Guide

Changing Jobs

IF YOU CHANGE JOBS, it’s likely for a more enjoyable or more senior position—and it may mean more money. But don’t focus just on the size of your new paycheck. Also give some thought to your new job’s health, life and disability insurance, as well as the retirement benefits. Health insurance. If it will take a few months before you are eligible for health care coverage at your new job, you might be able to continue your old employer’s health benefits by taking advantage of so-called COBRA coverage. Life and disability insurance. You’ll want to consider what sort of disability and life insurance coverage your new employer provides, and whether you should supplement this with individual policies. You can read more about life, disability and health insurance in the safety net chapter. Your old employer’s retirement plan. If your current employer has a vesting schedule for its retirement plan contributions, see if delaying your job change by a few weeks will garner you additional retirement money. Also, be sure to pay back any 401(k) loans—or you could find yourself facing income taxes and tax penalties. Consolidate retirement accounts. Got money in your old employer’s retirement plan? You could transfer these savings to an IRA, which will simplify your finances, give you more investment choice and may lower your investment costs. If you move your 401(k) to an IRA, be sure to do a trustee-to-trustee transfer or you could end up with a nasty tax conundrum. Before moving the money, give some thought to how this will affect future Roth conversions, what it means for creditor protection, what’s the best strategy if you have your old employer’s stock in the plan—and whether your old 401(k)'s investment choices are so good and so inexpensive that you shouldn’t move the money. All of this is covered in detail in the tax chapter. Your new employer’s retirement plan. Your new employer may automatically enroll you in its retirement plan. But if you sign up yourself, you may get into the plan more quickly and at a higher contribution rate. If your new employer’s plan is top-notch, you might even transfer your 401(k) balance from your old employer to the new plan. Next: Losing Your Job Previous: Jonathan's Divorce Articles: Shifting GearsWait, There's More and Perking Up
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Manifesto

NO. 45: PAYING down debt may not be our best investment, but it’s almost never a bad idea. It reduces our life’s financial risk—and earns us a rate of return equal to the debt’s interest rate.

Voices

When were you happiest—and what role did money play?

"I think college was the happiest time for a few reasons. I didn't have a lot of money and wasn't taking vacations (I worked during the summer) but since I went to a large public U everyone around me seemed to be in the same boat. And I think that is significant; seeing others much better off can make people unhappy so I'm glad I didn't go to a more prestigious private college where wealth disparities would have been obvious. Second, I went to school in a smaller town so the people around me (in what can best be called a student slum) were college students. We were all single and away from home so open to making new friends in a way that people in their working years living in a less compact community and raising their own families are not. Third, the future seemed to stretch endlessly ahead. College was a time when so many paths forward seemed open, life felt like it was beckoning. Fourth, I had a feeling of accomplishment that was fed every few weeks. I worked hard to do well, but midterms and finals provided objective proof that I was succeeding. Out in the "real world" where work projects are either forever ongoing or years-long and you only get feedback in annual reviews it can be harder to know how you're really doing."
- MarkT29
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Is term life insurance always better than cash value?

"Absolutes are rare, so I agree, term is not always better. But uses for cash value, as as Adam points out, are few and specific. I decided in the early 1980s to buy term and build assets toward retirement with term coverage of $1,000,000. That was beyond adequate for the time and allowed some growth of needs to cover. The term coverage was supplemented with term from my employer as my family grew. Assets are either consumed, (like a car or a house,) or set aside to grow, (like 401ks, taxable accounts, and cash value life insurance.) But with costs of 3% or more higher than other assets, I cannot justify the cost. With no cash value needs, the high costs of whole life, UL, and variable life insurance policies were not appealing as asset for either investment or protection. I invested more into taxable accounts and 401k investments. At about age 45, I began to reduce the amount of coverage as the needs to cover also reduced. At retirement, I had no life insurance because there is no risk to cover. Retirement and funerals are funded, the house is paid off, and my kids are college graduates with no student debt."
- Mark Eckman
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Second Look

Retirement

Senior Assumptions

THERE ARE ADVANTAGES to being old. We seniors can leverage the widespread perception that we’re all poor, incapable of decision-making and inept at using technology.
I have fun with this.
We recently went car shopping. As we left the house, my wife turned and said, “You’re going dressed like that?”
“What’s wrong with the way I look?” I’m in my well-worn jeans, flannel shirt, suspenders and battered baseball cap.
“You look like a pauper.”
Ah,

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Family Finance

Give and Receive

MANY OF MY CLIENTS volunteer to perform chores for religious institutions and other charitable organizations. I remind them that volunteers qualify for tax breaks. Their itemized deductions include what they spend to cover unreimbursed out-of-pocket outlays—though there are limits to the IRS’s generosity.
I caution clients not to count on deductions for the value of the unpaid time that they devote to charitable chores. Let’s say the prevailing rate for the kind of services they render is $100 per hour and they spend 100 hours to render those services during the year in question.

Read more »

Investing

Don’t Mess Around

THERE ARE CERTAIN things I did right during my financial journey, notably saving like crazy, tilting heavily toward stocks and favoring index funds. But if only all my doing had stopped there.
Looking back over almost four decades of investing, what I see is far too much tinkering. At various times, I’ve owned funds devoted to precious metals, global real estate, commodities, emerging market bonds and more. I know this tinkering devoured precious time—and I strongly suspect it hurt my investment results.

Read more »

Lists

Get Rich Slow

THE FINANCIAL WORLD generates a lot of noise. As a financial planner, I see that every day. Being in my 20s, it’s fun to learn about new alternative investments or imagine getting rich quick thanks to one stock or following the advice of one social media post.
But I know that’s all it is—fun. Instead of imagining my way to wealth, I take control of my finances by creating rules to live by. Rules are driven by values.

Read more »
Home Call to Action

Mindset

Make It Important

A HAPPY LIFE CAN’T be built solely on relaxing, having fun and doing exciting things. To be sure, there’s pleasure to be found in all of these. But I have come to believe that, to lead a life that’s full and satisfying, there is an ingredient that is even more crucial: We need to devote our days to activities that we think are important.
Or, to frame it slightly differently, we want our life to count for something.

Read more »

Free Newsletter

Get Educated

Manifesto

NO. 45: PAYING down debt may not be our best investment, but it’s almost never a bad idea. It reduces our life’s financial risk—and earns us a rate of return equal to the debt’s interest rate.

Act

UPGRADE YOUR credit cards. If you use one that doesn’t offer cash back or other rewards, swap it for one that does. Paying an annual fee? That might be worth it for the first year if it’s a travel rewards card that offers a large initial bonus. But if you can’t get a retention bonus or the fee waived for the second year, consider canceling and getting a new credit card.

Truths

NO. 8: DILIGENT savers need smaller nest eggs. Let’s say you save 10% of income. To retire in comfort, you might need portfolio withdrawals, Social Security and any pension income to replace 80% of your salary. But if you’ve been saving 25%, you’re used to spending far less—and you might be comfortable retiring with just 65% of your preretirement income.

Think

NEUROECONOMICS. To understand why we often make poor decisions, neuroeconomics studies how the brain reacts to financial situations. The research has confirmed insights first uncovered by behavioral finance, such as our strong aversion to losses, our fondness for long-shot investments and our preference for small rewards now over larger rewards later.

Money Guide

Begin Here

Changing Jobs

IF YOU CHANGE JOBS, it’s likely for a more enjoyable or more senior position—and it may mean more money. But don’t focus just on the size of your new paycheck. Also give some thought to your new job’s health, life and disability insurance, as well as the retirement benefits. Health insurance. If it will take a few months before you are eligible for health care coverage at your new job, you might be able to continue your old employer’s health benefits by taking advantage of so-called COBRA coverage. Life and disability insurance. You’ll want to consider what sort of disability and life insurance coverage your new employer provides, and whether you should supplement this with individual policies. You can read more about life, disability and health insurance in the safety net chapter. Your old employer’s retirement plan. If your current employer has a vesting schedule for its retirement plan contributions, see if delaying your job change by a few weeks will garner you additional retirement money. Also, be sure to pay back any 401(k) loans—or you could find yourself facing income taxes and tax penalties. Consolidate retirement accounts. Got money in your old employer’s retirement plan? You could transfer these savings to an IRA, which will simplify your finances, give you more investment choice and may lower your investment costs. If you move your 401(k) to an IRA, be sure to do a trustee-to-trustee transfer or you could end up with a nasty tax conundrum. Before moving the money, give some thought to how this will affect future Roth conversions, what it means for creditor protection, what’s the best strategy if you have your old employer’s stock in the plan—and whether your old 401(k)'s investment choices are so good and so inexpensive that you shouldn’t move the money. All of this is covered in detail in the tax chapter. Your new employer’s retirement plan. Your new employer may automatically enroll you in its retirement plan. But if you sign up yourself, you may get into the plan more quickly and at a higher contribution rate. If your new employer’s plan is top-notch, you might even transfer your 401(k) balance from your old employer to the new plan. Next: Losing Your Job Previous: Jonathan's Divorce Articles: Shifting GearsWait, There's More and Perking Up
Read more »

Voices

When does leasing a car make financial sense?

"For the owner? Never."
- Bruce Keller
Read more »

What costs are you most loath to pay?

"As full time travellers, I’ve got to say our cell phone bill. I know that many are constantly switching out sim cards, etc but the reliability of the service we has, along with its grandfathered-in free international roaming, keeps me paying $200 a month!"
- haliday11
Read more »

How much of a stock portfolio should be invested abroad?

"I have been working on this question for the past 5 months since my sudden (read that as let go after 20 years) retirement. I have settled on an allocation of 70/30 with the equity portion 60% SPY and 10% VEU. The remaining 30% is 25% Bonds and 5% Cash (drawing 4.73% currently). Will see how that looks in 6 months and then adjust if needed. Really am trying not to overthink this."
- Richard Layfield
Read more »

Second Look

Retirement

Senior Assumptions

THERE ARE ADVANTAGES to being old. We seniors can leverage the widespread perception that we’re all poor, incapable of decision-making and inept at using technology.
I have fun with this.
We recently went car shopping. As we left the house, my wife turned and said, “You’re going dressed like that?”
“What’s wrong with the way I look?” I’m in my well-worn jeans, flannel shirt, suspenders and battered baseball cap.
“You look like a pauper.”
Ah,

Read more »

Family Finance

Give and Receive

MANY OF MY CLIENTS volunteer to perform chores for religious institutions and other charitable organizations. I remind them that volunteers qualify for tax breaks. Their itemized deductions include what they spend to cover unreimbursed out-of-pocket outlays—though there are limits to the IRS’s generosity.
I caution clients not to count on deductions for the value of the unpaid time that they devote to charitable chores. Let’s say the prevailing rate for the kind of services they render is $100 per hour and they spend 100 hours to render those services during the year in question.

Read more »

Investing

Don’t Mess Around

THERE ARE CERTAIN things I did right during my financial journey, notably saving like crazy, tilting heavily toward stocks and favoring index funds. But if only all my doing had stopped there.
Looking back over almost four decades of investing, what I see is far too much tinkering. At various times, I’ve owned funds devoted to precious metals, global real estate, commodities, emerging market bonds and more. I know this tinkering devoured precious time—and I strongly suspect it hurt my investment results.

Read more »
Home Call to Action

Lists

Get Rich Slow

THE FINANCIAL WORLD generates a lot of noise. As a financial planner, I see that every day. Being in my 20s, it’s fun to learn about new alternative investments or imagine getting rich quick thanks to one stock or following the advice of one social media post.
But I know that’s all it is—fun. Instead of imagining my way to wealth, I take control of my finances by creating rules to live by. Rules are driven by values.

Read more »

Mindset

Make It Important

A HAPPY LIFE CAN’T be built solely on relaxing, having fun and doing exciting things. To be sure, there’s pleasure to be found in all of these. But I have come to believe that, to lead a life that’s full and satisfying, there is an ingredient that is even more crucial: We need to devote our days to activities that we think are important.
Or, to frame it slightly differently, we want our life to count for something.

Read more »