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You could bravely confront temptation—or you could make things easy by automating your monthly savings and leaving the credit cards at home.

Rates Up Lumps Down

WE HAVE ALL BEEN affected by rising interest rates in 2022, from skyrocketing mortgage rates to plunging bond prices. A less-publicized casualty: Higher interest rates are having a big effect on those approaching retirement who are eligible for a pension.
How so? Many pension plans offer a choice between a lifetime stream of monthly income and a onetime lump sum payment. Rising rates could reduce the lump sum payment that many employees would receive next year by 25% or 30%.

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Guessing Game

ALL THIS MARKET turmoil has me thinking about my portfolio—and the things I’m a little hazy about.

One of my stock mutual funds just paid me a capital gains distribution of more than $5,000. I sure wasn’t expecting that. In fact, I wasn’t expecting any capital gains this year. It seems the net gain on the sale of individual stocks within a mutual fund are distributed to shareholders, no matter how the overall fund has performed.

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Recent Writing

What Do You Want?

AT A VULNERABLE time in my life, I went to a “quantum healer” who said my deceased mother was trying to ask me, “What do you want?”
I kept saying “I don’t know” to the healer and she kept repeating the question, until the answer popped out unexpectedly, “I just want to be alone right now.” The healer said my mother was clapping. That was exactly what I needed to hear to help me clarify my thinking.

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Just Say Noël

MY FAMILY IS FRUGAL all year long, even during the Christmas season. We’re modest with our gifts and sparing with our decorations. Each year, our sprucing up consists of one cut-your-own Christmas tree trimmed with the same ornaments we used the year before. I can’t say the same for our neighbors. They pull out all the stops to create a seasonal spectacle.
There’s no need to take a long, cold sleigh ride to the North Pole to scope out Santa and his companions frolicking in snowy splendor.

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Never Simple

WHEN ROSS PEROT RAN for president in 1992, a pillar of his campaign was tax reform. Federal tax rules, he pointed out, had grown to more than 80,000 pages. His proposal: Start over and replace everything with a simple flat tax.

Perot’s campaign for tax reform didn’t make much progress, but many can sympathize with his frustration. Because of the complexity of tax rules, financial planning often ends up feeling like the children’s game Operation—with penalties for even the slightest misstep and confusion around every corner.

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New Rules for Success

FOUR DECADES OF falling inflation and declining interest rates have come to an abrupt halt—and that’s changed the calculus on a fistful of financial decisions.
Want to make smarter money choices in the months and years ahead? Here are seven new rules for financial success:
1. Carrying debt is less foolish—in some cases. Thanks to inflation, families can now repay the money they’ve borrowed with depreciated dollars. That won’t help you with credit card debt,

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Home Call to Action

On My Own—But Not

WHEN I ANNOUNCED I’d be retiring at age 55, the most frequent question I received from friends was about how I’d pay for health insurance. They knew I wouldn’t be eligible to receive Medicare for a decade. They also knew paying for 10 years of premiums would likely leave a large crack in my nest egg.
Fortunately, I was able to take advantage of a health insurance benefit provided by my former employer. As an early retiree,

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America the Drivable

I’M BASICALLY A BORING kind of guy. I’ve been known to fall asleep during a raging house party. But when it comes to travel, you’ll find me wide awake. It’s one of my favorite things to do.

Given the hassle of international travel right now, Connie and I decided to see more of the U.S., rambling from state to state, planning no more than a day or so in advance.

We’ve just finished our third cross-country road trip since 2014.

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How About a Tutu?

AS ANYONE WHO HAS spent time around kids can attest, emotions often run high when things don’t go according to plan. Recently, my three-year-old daughter, Carter Rose, refused to brush her teeth, wear clothes or go to school.
Rather than going head-to-head with an emotional toddler, I took the approach of listening, compassion and empathy to get things back on track. What was wrong—and what could make things better?
We could all use a little more empathy these days.

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Go Ahead, Spend It

PERSONAL FINANCE gurus and bloggers will tell you that lifestyle creep—the tendency for spending to rise along with income—is one of the greatest barriers to building wealth. While that’s sometimes true, I believe it can also be a source of joy and reward.
After all, while we might work hard to get a pay raise or earn a big year-end bonus, what a lot of people are really striving for is the ability to increase their spending.

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Get Educated

Truths

NO. 85: DELAYING Social Security to get a larger benefit could be your best retirement investment. Benefits are government guaranteed, inflation-linked, at least partially tax-free, you get them for life and your benefit may outlive you—as a survivor benefit for your spouse. Indeed, delaying is especially smart if you were the family’s main breadwinner.

Act

RETHINK CASH investments. What’s the best place to stash money you’ll spend in the next year or you may need for surprise expenses? There’s a host of options, including Treasury bills, money market mutual funds, short-term certificates of deposit and online savings accounts. Check yields regularly on these various options—and be prepared to move your money.

Think

BUYING HAPPINESS. Research suggests we get more happiness from experiences than possessions. Why? While possessions offer lasting value, that’s also a drawback: We have to care for them and watch them deteriorate. By contrast, experiences are over and done, leaving only fond memories, plus they’re often enjoyed with others. That adds to the pleasure.

Money Guide

Today's Giving

ESTATE PLANNING ISN'T the cheeriest of topics, but it’s one where a little care can help your family immensely—and some carelessness could cost them dearly. Here’s a look at some of the latest developments:
  • The federal estate tax exclusion is $12.06 million in 2022 and $12.92 million in 2023. In 2020, just 1,275 estate tax returns were filed that included the payment of federal taxes. That year, there were 3.4 million deaths in the U.S.
  • As of 2022, 17 states and the District of Columbia have either a state inheritance tax or a state estate tax, and one has both. You can find a list at sites such as McGuireWoods.comNolo.com and TaxFoundation.org.
  • In 2019, Congress eliminated the "stretch IRA," which had allowed beneficiaries to draw down inherited retirement accounts over their lifetime. Instead, if an account is bequeathed by someone who dies after 2019, the beneficiaries must typically empty the account within 10 years.
  • The gift-tax exclusion is $16,000 in 2022 and $17,000 in 2023.
  • According to a 2022 survey for Caring.com, just 33% of U.S. adults have a will or living trust.
  • In recent years, fewer households have received a tax break for their charitable contributions, because their itemized deductions were less than the new, higher standard deduction introduced by 2017's tax law. What to do? Consider bunching two or three years of charitable contributions into a single year, perhaps putting the money in a donor advised fund.
  • Individuals account for 67% of all charitable gifts, followed by foundations (19%), bequests (9%) and corporations (4%), according to The Giving Institute.
  • Are you in your 70s or older and interested in making charitable gifts? Qualified charitable distributions from an IRA were made a permanent part of the tax code at year-end 2015—and have become more attractive, thanks to the 2017 tax law, which boosted the standard deduction while curtailing itemized deductions.
Next: Now or Later? Previous: Giving Article: Giving: 10 Questions
Read more »

Manifesto

NO. 44: WE SHOULD view our debts as negative bonds. Instead of earning interest, we’re paying it. Tempted to buy bonds? First, we should see if we can earn more by paying down debt.

Voices

Is buying a used car always the smarter financial choice?

"I've done both. If I have the resources, and expect to hold onto the car at least 15 years, I like to buy new. I can get exactly what I want, with the latest safety features, ensure timely maintenance, and I can baby the car. We've done this twice: 20 years and 301K miles, 17 years and 276K miles. If not, a used car can be a great option. I like used Toyotas with 100K miles on them. There are usually some expenses with used cars beyond the purchase price, so I try to include a couple grand of repairs in my budget. It's especially great when you have kids. A fender bender is no big deal. I've also leased a car, when I wasn't sure I wanted to own it forever, but did want to try it out. It was a Kia Sportage, which we loved. We returned it, but we are looking into it's big brother, the Sorento PHEV, and have one reserved."
- Roboticus Aquarius
Read more »

What's the best place to stash money you'll spend soon?

"A year or even six months ago, a reasonable answer might have been a 2-Year Treasury Fund or ETF at one of the bigs. But even those delivered a respectable gut-punch in lost value this year. Of course the flip side is that given the stunning rate spike in that maturity, the loss will be mostly recovered in reasonably short order. Unless rates keep spiking, but even then - and notwithstanding the recent hit even to two-years - they still just can't hurt you that badly. My bond portfolio is in a short-term treasury fund, aka two-years. I have trust issues. ;-) I have money for a summer home improvement project in an online savings account getting half-a-percent. :-( I hope yield suppression ends."
- Jack McHugh
Read more »

What’s the best strategy for getting a good deal on a car?

"Low mileage, one owner 2 to 3 year old used cars. I check Consumer Reports for the most reliable vehicle in my category (SUV) and start there."
- Mike Wyant
Read more »

Second Look

Retirement

Kick the Can

MANY EYEBROWS were raised during a recent city budget meeting in Portsmouth, New Hampshire. According to the Portsmouth Herald, the city manager told city councilors that Portsmouth’s mandated contribution to the state retirement system would balloon from $290,000 to a whopping $1.9 million per year. Councilors called the development, which would cause a sizable increase in the city’s 2022 budget, “ugly” and “a kick in the shins.” Had anyone been paying attention,

Read more »

Family Finance

An Ode to Owing

A MEDIA-SAVVY IRS often announces that one of its top priorities is combatting criminals who steal tax-related information. The good news: Reports of tax identity theft have declined markedly in recent years. The bad news: Resourceful identity thieves remain active and constantly introduce new schemes.
One consistently remunerative ploy is to use stolen Social Security numbers and other information to file fraudulent tax returns that claim hefty refunds—claims that generally are submitted at the start of the filing season.

Read more »

Investing

Where’s the Value?

IT’S INTUITIVE THAT, the cheaper a stock is when you buy it, the greater the expected risk-adjusted return. Indeed, academic research has shown this to be true. Eugene Fama and Kenneth French demonstrated in a 1992 academic paper how, over the long term, so-called value stocks have delivered significantly higher returns than growth stocks.
Fama and French defined value stocks as those companies with a book value—the accounting difference between corporate assets and liabilities—that was high relative to their stock market value.

Read more »

Lists

Say What?

A FEW WEEKS BACK, I mentioned Robert Shiller’s book Narrative Economics. His contention: Stories—to a surprising degree—often drive markets.
Similarly, the investment world is driven by a good number of sayings and aphorisms. Many of these are entertaining. Some are even useful. But they can also be tricky. Any time advice is delivered in a pithy phrase, it seems to carry extra credibility—as if it were a truth handed down from above.

Read more »
Home Call to Action

Mindset

Be Like Neil Young

ONE OF MY FAVORITE musicians is singer and songwriter Neil Young, who has sold millions of records since the 1960s. Young was rated No. 17 by Rolling Stone on its list of 100 greatest guitarists. He was inducted into the Rock and Roll Hall of Fame twice: once as a solo artist in 1995 and as a member of Buffalo Springfield in 1997.
When I was in college in the early 1970s, I would often hear students strumming their guitars to his songs as I walked across campus.

Read more »

Free Newsletter

Get Educated

Manifesto

NO. 44: WE SHOULD view our debts as negative bonds. Instead of earning interest, we’re paying it. Tempted to buy bonds? First, we should see if we can earn more by paying down debt.

Act

RETHINK CASH investments. What’s the best place to stash money you’ll spend in the next year or you may need for surprise expenses? There’s a host of options, including Treasury bills, money market mutual funds, short-term certificates of deposit and online savings accounts. Check yields regularly on these various options—and be prepared to move your money.

Truths

NO. 85: DELAYING Social Security to get a larger benefit could be your best retirement investment. Benefits are government guaranteed, inflation-linked, at least partially tax-free, you get them for life and your benefit may outlive you—as a survivor benefit for your spouse. Indeed, delaying is especially smart if you were the family’s main breadwinner.

Think

BUYING HAPPINESS. Research suggests we get more happiness from experiences than possessions. Why? While possessions offer lasting value, that’s also a drawback: We have to care for them and watch them deteriorate. By contrast, experiences are over and done, leaving only fond memories, plus they’re often enjoyed with others. That adds to the pleasure.

Money Guide

Start Here

Today's Giving

ESTATE PLANNING ISN'T the cheeriest of topics, but it’s one where a little care can help your family immensely—and some carelessness could cost them dearly. Here’s a look at some of the latest developments:
  • The federal estate tax exclusion is $12.06 million in 2022 and $12.92 million in 2023. In 2020, just 1,275 estate tax returns were filed that included the payment of federal taxes. That year, there were 3.4 million deaths in the U.S.
  • As of 2022, 17 states and the District of Columbia have either a state inheritance tax or a state estate tax, and one has both. You can find a list at sites such as McGuireWoods.comNolo.com and TaxFoundation.org.
  • In 2019, Congress eliminated the "stretch IRA," which had allowed beneficiaries to draw down inherited retirement accounts over their lifetime. Instead, if an account is bequeathed by someone who dies after 2019, the beneficiaries must typically empty the account within 10 years.
  • The gift-tax exclusion is $16,000 in 2022 and $17,000 in 2023.
  • According to a 2022 survey for Caring.com, just 33% of U.S. adults have a will or living trust.
  • In recent years, fewer households have received a tax break for their charitable contributions, because their itemized deductions were less than the new, higher standard deduction introduced by 2017's tax law. What to do? Consider bunching two or three years of charitable contributions into a single year, perhaps putting the money in a donor advised fund.
  • Individuals account for 67% of all charitable gifts, followed by foundations (19%), bequests (9%) and corporations (4%), according to The Giving Institute.
  • Are you in your 70s or older and interested in making charitable gifts? Qualified charitable distributions from an IRA were made a permanent part of the tax code at year-end 2015—and have become more attractive, thanks to the 2017 tax law, which boosted the standard deduction while curtailing itemized deductions.
Next: Now or Later? Previous: Giving Article: Giving: 10 Questions
Read more »

Voices

Should you take pension payments or a lump sum?

"This just came out: https://ofdollarsanddata.com/why-you-might-want-to-retire-soon-if-you-have-a-pension/"
- Rob Thompson
Read more »

What criteria should you use to pick a retirement location?

"Ability to visit family/friends easily, healthcare, local transportation options for when I’m no longer able/willing to drive, affordable housing, and inexpensive entertainment. For me, that means a small city in the Carolinas or northern Georgia, one with a good public library and maybe a college with a theatre program. I have friends looking for places with good public golf courses, small towns with large lots for gardening, or near major airports for easy travel."
- Ginger Williams
Read more »

Should you prepay a mortgage?

"Agree with most of what's already been said - if you have a low interest rate relative to the returns on your portfolio, then carrying a mortgage and not trying to pay it off quickly makes sense. With the market tumbling, and interest rates climbing, I'm feeling pangs of regret in not taking out a home equity loan back in November or December 2021. We retired a couple weeks ago and now have to rely on our portfolio for income at a time when withdrawing from it will be painful. Fortunately we have a cash buffer for a year or two. Otoh, with inflation raging and our home value reaching dizzying pandemic heights, I'm feeling pretty good about a 2% fixed mortgage. It's really the only offset to the rest of our net worth portfolio, which has definitely taken a hit. I'm starting to understand why wealthy people carry a lot of debt. It's because they can; and it lets them keep their invested money invested where it will work harder for them than paying the interest on loans (at least loans that were taken out up until lately)."
- tshort
Read more »

Second Look

Retirement

Kick the Can

MANY EYEBROWS were raised during a recent city budget meeting in Portsmouth, New Hampshire. According to the Portsmouth Herald, the city manager told city councilors that Portsmouth’s mandated contribution to the state retirement system would balloon from $290,000 to a whopping $1.9 million per year. Councilors called the development, which would cause a sizable increase in the city’s 2022 budget, “ugly” and “a kick in the shins.” Had anyone been paying attention,

Read more »

Family Finance

An Ode to Owing

A MEDIA-SAVVY IRS often announces that one of its top priorities is combatting criminals who steal tax-related information. The good news: Reports of tax identity theft have declined markedly in recent years. The bad news: Resourceful identity thieves remain active and constantly introduce new schemes.
One consistently remunerative ploy is to use stolen Social Security numbers and other information to file fraudulent tax returns that claim hefty refunds—claims that generally are submitted at the start of the filing season.

Read more »

Investing

Where’s the Value?

IT’S INTUITIVE THAT, the cheaper a stock is when you buy it, the greater the expected risk-adjusted return. Indeed, academic research has shown this to be true. Eugene Fama and Kenneth French demonstrated in a 1992 academic paper how, over the long term, so-called value stocks have delivered significantly higher returns than growth stocks.
Fama and French defined value stocks as those companies with a book value—the accounting difference between corporate assets and liabilities—that was high relative to their stock market value.

Read more »
Home Call to Action

Lists

Say What?

A FEW WEEKS BACK, I mentioned Robert Shiller’s book Narrative Economics. His contention: Stories—to a surprising degree—often drive markets.
Similarly, the investment world is driven by a good number of sayings and aphorisms. Many of these are entertaining. Some are even useful. But they can also be tricky. Any time advice is delivered in a pithy phrase, it seems to carry extra credibility—as if it were a truth handed down from above.

Read more »

Mindset

Be Like Neil Young

ONE OF MY FAVORITE musicians is singer and songwriter Neil Young, who has sold millions of records since the 1960s. Young was rated No. 17 by Rolling Stone on its list of 100 greatest guitarists. He was inducted into the Rock and Roll Hall of Fame twice: once as a solo artist in 1995 and as a member of Buffalo Springfield in 1997.
When I was in college in the early 1970s, I would often hear students strumming their guitars to his songs as I walked across campus.

Read more »