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If you waste money, you can make more. If you waste time, life gets old really fast.

Writing My Retirement

I WROTE MY FIRST article for HumbleDollar in 2017. I’d been retired for nine years and I had plenty of material. I’d made a lot of mistakes with my money over the years.
I was truly a humble writer then, and I still am. My early articles weren’t my best. It was a learning experience. I wrote them using the notes app on my old iPhone 5—an app that was designed for jotting down quick thoughts,

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The Waiting Game

I’M IN EXCELLENT health. I avoid overindulging on sugar and carbohydrates. I exercise every day. I hope to live well into my 90s, if not longer.
What if I don’t live nearly that long? From a financial perspective, it makes little difference if I pass away before I tap my retirement funds. The value of most of my accounts wouldn’t be affected by my premature demise. My husband would simply inherit my 403(b) and Roth IRA accounts.

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Recent Writing

Grandpa’s Scholarship

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.

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Better Than Buffett?

IN AN EFFORT TO identify the simplest, most resilient lifetime investment portfolio, author and investment analyst Chris Pedersen concluded that a minimum of two funds is required. His recent book, 2 Funds for Life, summarizes his back-testing study to find a simple yet effective portfolio. The book is available free at PaulMerriman.com.
Pedersen found that a 90% allocation to a Vanguard Group target-date fund coupled with a 10% allocation to a small-cap value fund provides meaningful diversification across stocks and bonds,

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Covering the Basics

I TURNED AGE 62 LAST summer and, as with most birthdays at this stage of life, I had a pretty good, but non-spectacular day. On my birthdays, I tend to focus on enjoying the day itself as it stands before me and, for that one day, I don’t worry too much about the future, or all the adult stuff I have to do, or problems I might have to solve tomorrow, or the problems I think up in my head that would probably go away if I just stopped thinking about them.

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Going for Broke

WHEN SOME FOLKS MAKE the all-important Social Security claiming decision, one worry outweighs all others. Their big fear: The program’s funding will “run out” in a few years and therefore they “can’t depend on Social Security being around,” so the smart strategy is to claim benefits at 62, the youngest possible age.
This is not a big worry of mine—largely because Social Security won’t “go broke.” What’s happening to the program’s funding is that,

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Home Call to Action

I’ll Take It From Here

I RETIRED FROM MY other job in 2022, so I could return to our family farm. Upon leaving, one of the first decisions I had to make was whether to take my pension as a lump sum or as monthly annuity payments.
The pension plan based the lump sum on length of service, salary and age, plus the interest rate as of the prior December. The lower the interest rate at the time of retirement,

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Unhealthy Claims

WHEN I STARTED winding down my psychology practice two years ago, I anticipated freeing up oodles of time for reflection and for hobbies long cast aside, such as collecting oldies albums and the coveted rookie cards of sports legends. But my patient hours were merely replaced by my own spiraling doctor visits.
I was disappointed and concerned about my declining medical status. Still, I was reassured by the reputation of my health insurance company and the comprehensiveness of my policy.

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Reinventing Myself

WHEN I WAS FORCED out of my banking job of 36 years, I was age 59 and had enough money to retire comfortably. But I still felt the need to work—because that’s how I’m wired. Working gives me a sense of purpose and makes me happy, but it has to be the right kind of work.
I need work that’s fulfilling and which allows me to help others. I knew myself well enough to realize that,

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Pipe Dreams

AS A TEENAGER, I wanted to be an architect. I took six years of mechanical drawing during junior and senior high school, and I was good at it, earning nearly all As.

At another time, in my 30s, I thought about becoming a lawyer. People told me I’d make a good one. A lawyer’s opinion seemed to carry more weight, even when the subject was unrelated to legal matters.

I also wanted to play a musical instrument.

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Get Educated

Truths

NO. 110: ITEMIZED deductions only save you taxes to the degree they exceed your standard deduction. For 2023’s tax year, if you’re married filing jointly, your standard deduction is $27,700. If your mortgage interest and other itemized deductions total $28,000, they’ll trim your taxable income by $300—a tiny tax savings in return for huge dollars spent.

Act

CHECK YOUR portfolio percentages. Over the past year, both stocks and bonds have lost money. Moreover, among stocks, there’s been widely varying returns. After struggling for a decade, value easily outperformed growth in 2022 and foreign stocks outpaced U.S. This might have pushed your portfolio away from your targets—and you may need to rebalance.

Think

NET WORTH. To calculate our wealth, we need to add up our assets and then subtract all debts. What counts as an asset? Include financial accounts and any homes you own. Ignore cars, furniture and other household possessions, because these depreciate over time—and they typically can’t be sold, because you can’t reasonably live without them.

Money Guide

Five Reasons to Rent

HOMEOWNERSHIP OFFERS many advantages, as we detailed in the previous section. But there’s no guarantee you'll make money, especially if you own a house for just a few years. Thinking of purchasing a home? Here are five caveats—which may prompt you to continue renting. First, given the risk of declining property prices, you shouldn’t buy unless you can see staying put for at least five years and preferably seven years or longer. While it’s hard to imagine we'll suffer another decline like that of 2006-12 any time soon, a smaller drop is entirely possible. Second, homes are horribly expensive to buy and especially sell, which is another reason you need a long time horizon. There’s the mortgage-application fee, home inspection, title insurance and legal fees when you buy—and the 5% or 6% real estate brokerage commission and local transfer taxes when you sell. Suppose your home’s price rises a few percentage points a year, but you end up selling after just five or six years. Once you figure in all the costs of buying and selling, you may not make money. Third, owning a home involves greater hassle, with more bills to pay, maintenance to deal with and repairmen to call. If you're renting, many of these problems fall on the landlord's shoulders. Fourth, homeownership involves hefty ongoing costs. On top of the mortgage payments, you’ll have property taxes, homeowner’s insurance and regular maintenance. Because a home involves high ongoing costs and are so expensive to sell, those who need financial flexibility should probably rent. You might use that flexibility to slash your living costs by trading down to a lower-rent place, should your finances take a turn for the worse. That brings us to the final drawback: If you can’t make the regular mortgage payments on your home, your financial life could unravel fast. That’s why, before you buy, it's important to have a strong sense that your job is secure and a backup plan in case you’re wrong. That plan might include not only a healthy emergency fund, but also a list of expenses you’ll eliminate if your income suddenly drops. Next: Housing Myths Previous: Five Reasons to Buy Articles: Money Pit and To Buy or Not
Read more »

Manifesto

NO. 51: RENTAL real estate can be a great investment. But it’s also a big, leveraged, undiversified bet and a lot of hassle. A diversified stock portfolio is less work—and arguably less risky.

Voices

Should children be paid for doing chores?

"My family’s guideline was that routine household chores are part of family life, so no pay for making beds, dusting, doing laundry, or washing dishes. One of our routine chores as children was to pick up sticks, while Dad pushed the lawnmower on our 3/4 acre property. As my brother and I neared our teens and were physically capable of doing the heavier yard work, Dad made us an offer. We could take turns on the lawn mowing, and Dad would drive the family 30 miles to for a hamburger and movie weekly during the summer. Or, Dad could hire someone to mow the lawn, relieving all three of us of that chore, but also using the money that could have been spent on a weekly outing. Fast food and movies were a rare treat for us, so we leaped at the chance to do the yard work ourselves. Years later, while arranging to share the costs of a yard service for our parents, my brother brought up that annual offer from Dad. Looking at his own young children, my brother was trying to figure out how he could teach them about working for what you want as effectively as Dad taught us. My brother could easily afford European vacations for his family, so he had to adapt Dad’s strategy, but his three seem to have learned the lesson."
- Ginger Williams
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Is a home a good investment?

"A home (in a state with real estate taxes) used to be a good investment, but not any more. Significant appreciation into the future is unlikely because homes will become unaffordable. Taxes keep rising, and can easily exceed $1,000/month. Repairs, improvements, maintenance and other costs also keep rising. But there is nothing like having your own place, especially if you have a bit of a buffer where you have some privacy and can get some peace and quiet. How to save money on a home? Find the sweet spot where you get community value without a huge tax bite. Buy a home in very good condition in a stable neighborhood. Have a lot where you can easily cut the lawn and trim the shrubs yourself in an afternoon, and if you want more space, have the rest be undeveloped. Do your own lawn treatments for crabgrass, clover, grubs and the like. Get your house fully treated for termites the month you move in, just as if it has never had any treatment before. Have a mortgage as low as you can manage. Be willing to spend money on maintaining the core systems, because that will save you money in the long run. And always look out for water - water is the enemy in a house, from the roof, to an internal leak, to seepage and basement backups, and lots more!"
- Martin McCue
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What’s the best strategy for generating retirement income?

"Depreciation-protected rents cover 75% of expenses and individual dividend growth stocks the rest."
- TechnoPeasantx
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Second Look

Retirement

What Is Retirement?

AT A DINNER THAT I attended recently, someone pointed out that a high percentage of us were newly retired. That included me, as well as a couple who were just reaching age 60. After the dinner, the wife of the couple told me she was offended by being called retired. She’s writing fiction every day and her husband does some consulting work.
The work they’re doing pays, but it’s not by itself enough for them to live their comfortable,

Read more »

Family Finance

Two Numbers

WHAT’S THE STATE of your financial health? Forget your credit score, the past year’s handsome increase in your home’s value or how your salary compares to your brother-in-law’s. In the end, financial fitness comes down to two key numbers.
First, there’s your net worth, which is the value of your assets minus your debts. There’s some debate about what should be included. The easy answer: Don’t delude yourself by counting the value of your car,

Read more »

Investing

Not Worthless

THE INTERNAL REVENUE Code doesn’t authorize much relief for investors when they suffer capital losses that exceed their gains. It allows taxpayers each year to offset the excess against as much as $3,000 of their ordinary income from sources like salaries, pensions and withdrawals from IRAs.
What about the unused losses? The law lets investors carry forward such losses and claim them in an identical way on their tax returns in subsequent years, until they’re used up.

Read more »

Lists

Seems So Easy

MANAGING MONEY is ridiculously simple—and unbelievably hard.
Figuring out what we should do with our dollars is typically straightforward: We should save regularly, diversify broadly, rebalance occasionally and so on. Instead, the tough part is getting ourselves to do what we intellectually know is right.
Take the notion of buying low and selling high. Every investor knows that’s the goal—and yet, when the S&P 500 slumped 34% earlier this year, many folks just couldn’t bring themselves to buy stocks.

Read more »
Home Call to Action

Mindset

Made to Measure

“TO MEASURE IS TO improve.” Businesses, investors, athletes and others embrace this notion, and it undoubtedly has value. Still, earlier this year, when my bicycle’s decade-old computer—which measured speed, distance and cadence—finally quit on me, I didn’t replace it.
These days, when I go out for my morning 20-mile bike ride, I like to think I’m going reasonably fast and I’m not happy if another cyclist passes me. But I also know that, when I occasionally use the Strava app on my phone to clock my average speed,

Read more »

Free Newsletter

Get Educated

Manifesto

NO. 51: RENTAL real estate can be a great investment. But it’s also a big, leveraged, undiversified bet and a lot of hassle. A diversified stock portfolio is less work—and arguably less risky.

Act

CHECK YOUR portfolio percentages. Over the past year, both stocks and bonds have lost money. Moreover, among stocks, there’s been widely varying returns. After struggling for a decade, value easily outperformed growth in 2022 and foreign stocks outpaced U.S. This might have pushed your portfolio away from your targets—and you may need to rebalance.

Truths

NO. 110: ITEMIZED deductions only save you taxes to the degree they exceed your standard deduction. For 2023’s tax year, if you’re married filing jointly, your standard deduction is $27,700. If your mortgage interest and other itemized deductions total $28,000, they’ll trim your taxable income by $300—a tiny tax savings in return for huge dollars spent.

Think

NET WORTH. To calculate our wealth, we need to add up our assets and then subtract all debts. What counts as an asset? Include financial accounts and any homes you own. Ignore cars, furniture and other household possessions, because these depreciate over time—and they typically can’t be sold, because you can’t reasonably live without them.

Money Guide

Start Here

Five Reasons to Rent

HOMEOWNERSHIP OFFERS many advantages, as we detailed in the previous section. But there’s no guarantee you'll make money, especially if you own a house for just a few years. Thinking of purchasing a home? Here are five caveats—which may prompt you to continue renting. First, given the risk of declining property prices, you shouldn’t buy unless you can see staying put for at least five years and preferably seven years or longer. While it’s hard to imagine we'll suffer another decline like that of 2006-12 any time soon, a smaller drop is entirely possible. Second, homes are horribly expensive to buy and especially sell, which is another reason you need a long time horizon. There’s the mortgage-application fee, home inspection, title insurance and legal fees when you buy—and the 5% or 6% real estate brokerage commission and local transfer taxes when you sell. Suppose your home’s price rises a few percentage points a year, but you end up selling after just five or six years. Once you figure in all the costs of buying and selling, you may not make money. Third, owning a home involves greater hassle, with more bills to pay, maintenance to deal with and repairmen to call. If you're renting, many of these problems fall on the landlord's shoulders. Fourth, homeownership involves hefty ongoing costs. On top of the mortgage payments, you’ll have property taxes, homeowner’s insurance and regular maintenance. Because a home involves high ongoing costs and are so expensive to sell, those who need financial flexibility should probably rent. You might use that flexibility to slash your living costs by trading down to a lower-rent place, should your finances take a turn for the worse. That brings us to the final drawback: If you can’t make the regular mortgage payments on your home, your financial life could unravel fast. That’s why, before you buy, it's important to have a strong sense that your job is secure and a backup plan in case you’re wrong. That plan might include not only a healthy emergency fund, but also a list of expenses you’ll eliminate if your income suddenly drops. Next: Housing Myths Previous: Five Reasons to Buy Articles: Money Pit and To Buy or Not
Read more »

Voices

Should our values guide our investment choices?

"We should make investment decisions to maximize return within the bounds of reasonable risk, not to promote social beliefs. The proper response is to donate a portion of your investment gains to support causes you believe in. It may be noble to shun investments in companies whose products or services we feel run contrary to our values. But as long as there are customers for these products or services, someone will provide them."
- Philip Stein
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Can the market be beaten?

"Of course not. Buffett doubled it over a long span. Are there any others over 40yrs. If so you would have heard of them. Bill Miller and Lynch did well over 15yr periods and then Miller's fund imploded and Lynch retired and you don't hear Magellan Fund ever mentioned"
- Kenneth Tobin
Read more »

What should you look for when buying a home?

"My most important lesson related to house purchase occurred while my husband was in the Army. He had been in ROTC and went on active duty during the Vietnam War. Fortunately, he was stationed at the US Military Academy at West Point. We were both in graduate school at the time and lacked a car; my father drove us around so we could find housing in ONE day-- Tom was too low ranking to qualify for on post housing. We had the minimal amount for a down payment on a modest house, and looked at a couple that we could have afforded and which would have been fine. We decided not to risk a buy and instead found a rental. We stayed at West Point for 3 years; during that time, we saw career army people buy and sell their houses. They rarely planned to stay put for more than 3 years. Nevertheless, they rapidly found houses they thought would "work" for them and bought them. Every junior officer we knew followed this plan, and sold at a profit when their tour was finished. After the army stint, my husband took a job at the University of WI -- Madison. We were not mid-westerners and did not plan to stay (we actually have for almost 50 years!) BUT this time we followed the "army way." We drove to Wisconsin with one week to find a house that would work for us and our two young children The inventory available was very limited, but we found a 3 bedroom ranch that met our needs but was NOT our dream house. We stayed in that house for 5 years. During our initial week looking for housing in Madison, we did identify the small neighborhood in which we wanted to live, but it took us five years to find a house there that we could afford. We were constantly outbid until we came upon a true fixer upper. We were the first people to tour the house and we offered the full asking price. Our offer had no contingencies -- we did not have it inspected (it would never have passed!), we gambled we could sell the ranch house before the closing, and we just held our breath. We sold the ranch for about 25% more than we paid, and closed on both houses the same day! Forty-four years later, my husband and I still live in the fixer uppers. The house over the years has required a lot of work -- both do- it- yourself and bigger projects that were done by professional contractors. But the house in which we raised 3 kids still works well for us as empty nesters. Realtors often claim "location, location, location" are the 3 most important factors in real estate. I totally agree -- today, my neighborhood is as hot as it was 44 years when we moved into it. But I would tell any first time home buyer to determine his/her non-negotiable-- it might not be location for them-- and then proceed from there. No house is going to be "perfect," and it's important not to be overwhelmed by a housing purchase. The lesson from West Point was that what you buy, you can also sell! That approach definitely does work!"
- Marilyn Lavin
Read more »

Second Look

Retirement

What Is Retirement?

AT A DINNER THAT I attended recently, someone pointed out that a high percentage of us were newly retired. That included me, as well as a couple who were just reaching age 60. After the dinner, the wife of the couple told me she was offended by being called retired. She’s writing fiction every day and her husband does some consulting work.
The work they’re doing pays, but it’s not by itself enough for them to live their comfortable,

Read more »

Family Finance

Two Numbers

WHAT’S THE STATE of your financial health? Forget your credit score, the past year’s handsome increase in your home’s value or how your salary compares to your brother-in-law’s. In the end, financial fitness comes down to two key numbers.
First, there’s your net worth, which is the value of your assets minus your debts. There’s some debate about what should be included. The easy answer: Don’t delude yourself by counting the value of your car,

Read more »

Investing

Not Worthless

THE INTERNAL REVENUE Code doesn’t authorize much relief for investors when they suffer capital losses that exceed their gains. It allows taxpayers each year to offset the excess against as much as $3,000 of their ordinary income from sources like salaries, pensions and withdrawals from IRAs.
What about the unused losses? The law lets investors carry forward such losses and claim them in an identical way on their tax returns in subsequent years, until they’re used up.

Read more »
Home Call to Action

Lists

Seems So Easy

MANAGING MONEY is ridiculously simple—and unbelievably hard.
Figuring out what we should do with our dollars is typically straightforward: We should save regularly, diversify broadly, rebalance occasionally and so on. Instead, the tough part is getting ourselves to do what we intellectually know is right.
Take the notion of buying low and selling high. Every investor knows that’s the goal—and yet, when the S&P 500 slumped 34% earlier this year, many folks just couldn’t bring themselves to buy stocks.

Read more »

Mindset

Made to Measure

“TO MEASURE IS TO improve.” Businesses, investors, athletes and others embrace this notion, and it undoubtedly has value. Still, earlier this year, when my bicycle’s decade-old computer—which measured speed, distance and cadence—finally quit on me, I didn’t replace it.
These days, when I go out for my morning 20-mile bike ride, I like to think I’m going reasonably fast and I’m not happy if another cyclist passes me. But I also know that, when I occasionally use the Strava app on my phone to clock my average speed,

Read more »