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Going Against the Grain

"In so far as my parents communicated expectations, it was that I would get a job when I left school. Since I did well in school, instead I became one of the first in my extended family to go to university. My original plan - and it was my own plan - was to teach history. A lot of English school children don't know how lucky they are that I was diverted and wound up a techie. There is one "road not taken" that I think about occasionally: I was offered a job designing databases for the BBC, but instead I stayed with my existing employer and accepted an assignment to the US."
- mytimetotravel
Read more »

Buying an Annuity from the SSA

"Exactly. I wanted not only the 8% increases, but the largest possible base for future COLAs. I was helped by a spousal benefit after FRA - good thing the divorce didn't go through a couple of months earlier!"
- mytimetotravel
Read more »

Bogle has saved us a Trillion Dollars through Vanguard’s 50th Anniversary

"I wish I knew 40 years ago what I know today, as I'm sure I'd have made a lot more money. The money that Bogle has saved investors is truly mind boggling."
- Dan Smith
Read more »

Tasting Retirement

I'M TRYING MY HAND at retirement. It isn’t going so well. As a teenager and when I was in my early 20s, I would take to the couch and happily spend the day consuming a novel. Could I do that at age 62? It seems not. At some point over the past four decades, I lost the ability to do things solely for my own enjoyment. It seems the endless demands of work, family and household chores have crushed my inner self-absorbed teenager. Am I missing out? I’m not sure. Sleeping in. This is relative. Before my diagnosis, I’d regularly get up at 5 a.m. Today, I’ll often stay in bed past 6. This is partly a conscious attempt to sleep more and partly because my body needs more sleep. My cancer, coupled with my treatment, can leave me feeling pretty fatigued. Still, after decades of getting seven hours of sleep a night and often less, it feels like a great luxury to linger longer in bed. This is one part of my “retirement” that I’ve successfully embraced. Travel. Since my diagnosis 11 months ago, Elaine and I have visited Ireland (twice), London and Paris, gone on a cruise, taken the kids and their families for a long weekend at a luxury resort, and made a number of shorter trips to places nearby. Many dollars have been spent. Has it been worth it? Some of the trips have been great. Others have been more of a struggle. Since late October, my mobility has been all over the map, a result of the cancer spreading to my spine. At its worst, I could barely walk a city block. After radiation treatment, I can almost feel like my old self, and have no problem walking. Even then, fatigue is an issue, and it’s especially bad when coupled with the changing time zones that accompany transatlantic trips. Before my diagnosis, Elaine and I had a wish list of places we wanted to visit, perhaps staying for weeks at a time. But those travel dreams have been largely nixed. It’s been tough for me to leave town for more than a week or so, given my endless medical appointments. All this is a reminder of what I’ve often read from HumbleDollar commenters, which is that retirees should travel while they can, because you never know when deteriorating health might steal that from you. Television. I’m ambivalent about TV, inclined to view it as a passive activity that usually isn’t worth the time invested. Still, in recent months, I’ve started to watch sports on TV every so often, something I stopped doing more than 25 years ago. Elaine and I also occasionally watch an episode of our latest TV series during the middle of the day, which feels like the height of decadence. I may even pay to stream July’s Tour de France, though I’m not sure I want to commit the necessary hours to take full advantage. Family. With my diagnosis, my family—my two kids, my mother, my three siblings—have rallied around me. We speak more often on the phone and see each other more frequently. If there’s an upside to my illness, this is it. Still, I’m not sure all of the above amounts to much of a retirement. Don’t I have any hobbies, you might wonder? I did—bicycling—and I imagined retirement would give me the chance to explore the Pennsylvania countryside on two wheels. But because I've had balance issues, the doctors ordered me to stop riding outside when I got my diagnosis, so the only cycling I do these days is in the basement. Any other hobbies? The problem, and I’m not sure it is one, is that my hobby is my work. I no longer spend my days editing articles for HumbleDollar. Those edited articles have been replaced by the pieces that the site’s readers post directly to the Forum. But while I’m no longer editing, I still devote part of each day to various writing projects and to monitoring activity on HumbleDollar. I enjoy it, and I think it’s a worthy use of my time. But I’m not sure others would consider what I do each day to be anything akin to retirement. Is there a lesson here? Perhaps. While HumbleDollar might be a community united by a desire to discuss financial issues in a civil and intelligent manner, the debates within the Forum highlight readers’ many differences. Among them: the virtues of budgeting, the wisdom of investing abroad, when to claim Social Security, whether to favor individual bonds over bond funds, how much to travel, the desirability of continuing care retirement communities, whether to buy income annuities, and much more. Similarly, there’s no one definition of retirement, and what makes others happy likely won’t work for you and me. Don’t like the way others are spending their retirement? That’s an easy one: Don’t do what they’re doing. Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier posts. [xyz-ihs snippet="Donate"]
Read more »

Kind Hearts are More than Coronets

"Marjorie, I once made the observation to another cancer patient that the disease was a lonely one. I hadn't thought about that until you mentioned this attribute. Much of what I experienced I did not share, and even my children who live a considerable distance away and don't see me very often were unaware of my situation until I shared it after I reached "stability". I did develop different methods to cope with that "loneliness." I am an advocate for the practice of small and frequent kindnesses."
- Norman Retzke
Read more »

A False Sense of Security

"Dan, I would also agree that I'm in the camp that Soc Sec will get fixed eventually. One last point that made me consider an SPIA was death of a spouse and it's impact on the surviving spouse's RMD depletion of IRA withdrawals. I was the executor of my parents' will and assisted in managing their investments. When my father died in 2016, he had the largest IRA balance which my mother inherited. However, the scenario of moving from a joint RMD schedule to a Single RMD schedule quickly accelerated the withdrawals that she had to take from my father's IRA. This forced her to liquidate the IRA quicker than she needed, caused higher tax bills because she had more income(than needed) and her tax filing status changed from married to single, and also created more emotional angst that she would run out of money. Having witnessed this, I decided to use my part of my IRA as the funding source for the SPIA. Why 1. To remove the emotional angst of outliving your money 2.Spread the tax hit over a potentially longer timeframe 3.Created a "paycheck lifestyle" that made my wife feel more comfortable assuming I checked out earlier then her Food for thought that should also be considered in purchasing an SPIA or not."
- Ray Holland
Read more »

Any Crypto Investors?

"Three or four years ago I bought $10 worth of bitcoins just for fun. It dropped to $6.00 and now it’s worth $23.00. No idea what it actually is."
- R Quinn
Read more »

You’ve Come a Long Way, Baby by Marjorie Kondrack

"Interesting thoughts, Kevin. I think most people recognize propaganda when they see it. This era was the dawning of women being brought to prominence in business. Companies were combing their human capital for women candidates they could promote to management positions. The ad embraced ” Sell the sizzle, not the steak.” The message to women was— You’ve arrived. Women wanted that recognition. Not the cigarette."
- Marjorie Kondrack
Read more »

RDQ Sorry folks, I still see annuities, including deferred annuities, as a viable option for creating steady retirement income.

"FED Data from 2022: Wealth (Total of all assets less liabilities) All Households 192,084 (Median or 50th%tile) Average this cohort 1,059,470 (82.5%tile) Households 65-69 years 393,480 (Median or 50th%tile) Average this cohort 1,836,884 (82%tile) Average all households 1,059,470 (73%tile) Households 70-74 years 438,700 (Median or 50th%tile) Average this cohort 1,714,085 (82%tile) Average all households 1,059,470 (71%tile) In plain English, for all US households, 50% have less than 192,084; and while the "average" household wealth is over a million, 82.5% have less than that. Not surprisingly, wealth is greater for older folks, and the numbers reflect that. Nevertheless, the skewing of wealth towards the top means that over 70% of those higher worth households are still below the US "average" wealth level. These numbers include all assets but exclude the value of pensions and social security benefits. Nevertheless, it illustrates the vital importance social security plays in the security of our nations's citizens."
- Jack Hannam
Read more »

You versus Social Security – Quinn is betting against you.

"Which is what it has to do now as the bonds are gradually being redeemed to pay benefits. I assume that cash is coming from new bonds sold elsewhere-debt for debt."
- R Quinn
Read more »

Deducting Medical Expenses of a Decedent

"Thank you, Bill, that was so kind of you. C"
- baldscreen
Read more »

No Exception

FRENCH HISTORIAN Alexis de Tocqueville toured the U.S. in the 1830s and chronicled his observations in a book titled Democracy in America. What mainly impressed him was Americans’ focus on trade and commerce. They have a “purely practical” mindset, he wrote, and concluded that “the position of the American is quite exceptional.” In the years since, others have picked up on this concept of “American exceptionalism.” Despite recent political and economic crosscurrents, the gap between the U.S. economy and its peers has only widened, especially over the past dozen years. Between 1990 and 2012, according to an analysis by author Larry Swedroe, corporate earnings in the U.S. grew no faster than in other countries. But since 2012, American companies’ profits have multiplied while—in aggregate—international companies’ earnings have stagnated. As a result, markets in the U.S. have far outpaced their international peers. This has made investing outside the U.S. feel like a losing proposition for quite some time. On the surface, this seems easy to explain. In the U.S., entrepreneurship is key to our DNA, and our regulatory regime makes it easy to get a business started. Hewlett and Packard got their start in Packard’s garage. Gates and Zuckerberg founded trillion-dollar companies in their dorm rooms. Jensen Huang launched Nvidia from a booth at Denny’s. By contrast, on the other side of the Atlantic, regulations make it harder to build a business. There aren’t any companies in Europe comparable to the “Magnificent Seven” technology firms in the U.S., and there are just a handful elsewhere in the world. In the European Union, working hours are strictly limited. In 2023, when the French government tried to raise the official retirement age from 62 to 64, more than a million people took to the streets to protest. Through this lens, the U.S. economy's outperformance seems to make sense. But this story may be oversimplified. Indeed, since the beginning of this year, markets in the U.S. have begun to falter. Domestic stocks are mostly in negative territory, while stocks outside the U.S. have delivered solid positive performance. This has people taking a second look at the question of American exceptionalism. Specifically, the question investors are asking is: To what degree should a portfolio be diversified internationally? This isn’t such an easy question. Ask the Vanguard Group to construct a portfolio, and it’ll be split roughly 60-40 between domestic and international stocks. Vanguard’s view is that there’s no reason to favor any one country or region of the world over another, and thus investors’ portfolios should simply reflect the relative weightings of world markets. But Vanguard's founder, the late Jack Bogle, took an entirely different view. He didn’t hesitate to tell people that his personal portfolio was 100% domestic. U.S. stocks, he felt, were entirely sufficient. There is, in short, no consensus on this question. Still, to gain clarity, we can consult the data. In a 2023 paper titled “Still Not Crazy After All These Years,” hedge fund manager Cliff Asness examined the outperformance of domestic stocks, performing what’s known as attribution analysis to uncover the sources of that performance. His conclusion: The lion’s share of domestic stocks’ impressive gains over the prior 15 years wasn’t due to earnings growth. It wasn’t, in other words, due to the exceptionalism of American companies. Instead, those companies’ stocks had, for the most part, just become more expensive. Even though U.S. stocks have given up some of their lead this year, that valuation gap is still very significant. Using the price-to-earnings (P/E) ratio as a measure, domestic stocks today are still 40% more expensive than their peers in developed markets outside the U.S. Boosters of a domestic-only approach are quick to reply that American stocks deserve higher valuations. There is no "Magnificent Seven” anywhere outside the U.S., they argue, and these companies’ scale and impressive growth warrant higher valuations. But that argument quickly falls apart. As Asness points out, domestic and international stocks traded at comparable valuations as recently as 2007. The valuation gap is a new phenomenon. According to the Swedroe analysis referenced above, another factor has contributed to domestic stocks’ outperformance: Between 2008 and 2024, the U.S. dollar appreciated nearly 20% against international currencies. This depressed the value of international stocks for U.S. investors, thus further boosting the relative performance of domestic stocks. There is, however, no guarantee that this trend will continue—and, indeed, it could reverse. To be sure, there are unique aspects to the U.S. economy, and de Tocqueville’s observations have validity. But a quantitative analysis suggests that the extreme U.S. outperformance we’ve seen over the past dozen years may not continue indefinitely. Despite some erosion this year, domestic stocks still carry elevated valuations compared to international markets, and the U.S. dollar is still expensive. This is worth paying attention to, because ultimately valuations do matter. Investments that are expensive usually don’t offer the same prospective returns. That’s certainly what history suggests. While it may be hard to remember, there have been multi-year periods when international stocks have outperformed the U.S. market. In fact, a chart of domestic vs. international stocks looks a little like a sine wave, with performance alternating over time. For that reason, I continue to recommend an allocation to international stocks. How much? I suggest something in the neighborhood of 20%. According to the data, that’s enough to deliver a diversification benefit, but not so much that it introduces significant currency risk. A final note: You might notice that I haven’t mentioned the proximate cause of the valuation shifts we’ve seen this year—the new administration’s tariff policies. I’m not focusing on this specifically because I see it as just one example of how markets can shift unexpectedly. In choosing an international allocation—or any other aspect of your portfolio—I recommend taking the long view. My advice: Choose a structure that you think will make sense regardless of who is in the White House or where the economy happens to stand at any given time. 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. [xyz-ihs snippet="Donate"]
Read more »

Going Against the Grain

"In so far as my parents communicated expectations, it was that I would get a job when I left school. Since I did well in school, instead I became one of the first in my extended family to go to university. My original plan - and it was my own plan - was to teach history. A lot of English school children don't know how lucky they are that I was diverted and wound up a techie. There is one "road not taken" that I think about occasionally: I was offered a job designing databases for the BBC, but instead I stayed with my existing employer and accepted an assignment to the US."
- mytimetotravel
Read more »

Buying an Annuity from the SSA

"Exactly. I wanted not only the 8% increases, but the largest possible base for future COLAs. I was helped by a spousal benefit after FRA - good thing the divorce didn't go through a couple of months earlier!"
- mytimetotravel
Read more »

Bogle has saved us a Trillion Dollars through Vanguard’s 50th Anniversary

"I wish I knew 40 years ago what I know today, as I'm sure I'd have made a lot more money. The money that Bogle has saved investors is truly mind boggling."
- Dan Smith
Read more »

Tasting Retirement

I'M TRYING MY HAND at retirement. It isn’t going so well. As a teenager and when I was in my early 20s, I would take to the couch and happily spend the day consuming a novel. Could I do that at age 62? It seems not. At some point over the past four decades, I lost the ability to do things solely for my own enjoyment. It seems the endless demands of work, family and household chores have crushed my inner self-absorbed teenager. Am I missing out? I’m not sure. Sleeping in. This is relative. Before my diagnosis, I’d regularly get up at 5 a.m. Today, I’ll often stay in bed past 6. This is partly a conscious attempt to sleep more and partly because my body needs more sleep. My cancer, coupled with my treatment, can leave me feeling pretty fatigued. Still, after decades of getting seven hours of sleep a night and often less, it feels like a great luxury to linger longer in bed. This is one part of my “retirement” that I’ve successfully embraced. Travel. Since my diagnosis 11 months ago, Elaine and I have visited Ireland (twice), London and Paris, gone on a cruise, taken the kids and their families for a long weekend at a luxury resort, and made a number of shorter trips to places nearby. Many dollars have been spent. Has it been worth it? Some of the trips have been great. Others have been more of a struggle. Since late October, my mobility has been all over the map, a result of the cancer spreading to my spine. At its worst, I could barely walk a city block. After radiation treatment, I can almost feel like my old self, and have no problem walking. Even then, fatigue is an issue, and it’s especially bad when coupled with the changing time zones that accompany transatlantic trips. Before my diagnosis, Elaine and I had a wish list of places we wanted to visit, perhaps staying for weeks at a time. But those travel dreams have been largely nixed. It’s been tough for me to leave town for more than a week or so, given my endless medical appointments. All this is a reminder of what I’ve often read from HumbleDollar commenters, which is that retirees should travel while they can, because you never know when deteriorating health might steal that from you. Television. I’m ambivalent about TV, inclined to view it as a passive activity that usually isn’t worth the time invested. Still, in recent months, I’ve started to watch sports on TV every so often, something I stopped doing more than 25 years ago. Elaine and I also occasionally watch an episode of our latest TV series during the middle of the day, which feels like the height of decadence. I may even pay to stream July’s Tour de France, though I’m not sure I want to commit the necessary hours to take full advantage. Family. With my diagnosis, my family—my two kids, my mother, my three siblings—have rallied around me. We speak more often on the phone and see each other more frequently. If there’s an upside to my illness, this is it. Still, I’m not sure all of the above amounts to much of a retirement. Don’t I have any hobbies, you might wonder? I did—bicycling—and I imagined retirement would give me the chance to explore the Pennsylvania countryside on two wheels. But because I've had balance issues, the doctors ordered me to stop riding outside when I got my diagnosis, so the only cycling I do these days is in the basement. Any other hobbies? The problem, and I’m not sure it is one, is that my hobby is my work. I no longer spend my days editing articles for HumbleDollar. Those edited articles have been replaced by the pieces that the site’s readers post directly to the Forum. But while I’m no longer editing, I still devote part of each day to various writing projects and to monitoring activity on HumbleDollar. I enjoy it, and I think it’s a worthy use of my time. But I’m not sure others would consider what I do each day to be anything akin to retirement. Is there a lesson here? Perhaps. While HumbleDollar might be a community united by a desire to discuss financial issues in a civil and intelligent manner, the debates within the Forum highlight readers’ many differences. Among them: the virtues of budgeting, the wisdom of investing abroad, when to claim Social Security, whether to favor individual bonds over bond funds, how much to travel, the desirability of continuing care retirement communities, whether to buy income annuities, and much more. Similarly, there’s no one definition of retirement, and what makes others happy likely won’t work for you and me. Don’t like the way others are spending their retirement? That’s an easy one: Don’t do what they’re doing. Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier posts. [xyz-ihs snippet="Donate"]
Read more »

Kind Hearts are More than Coronets

"Marjorie, I once made the observation to another cancer patient that the disease was a lonely one. I hadn't thought about that until you mentioned this attribute. Much of what I experienced I did not share, and even my children who live a considerable distance away and don't see me very often were unaware of my situation until I shared it after I reached "stability". I did develop different methods to cope with that "loneliness." I am an advocate for the practice of small and frequent kindnesses."
- Norman Retzke
Read more »

A False Sense of Security

"Dan, I would also agree that I'm in the camp that Soc Sec will get fixed eventually. One last point that made me consider an SPIA was death of a spouse and it's impact on the surviving spouse's RMD depletion of IRA withdrawals. I was the executor of my parents' will and assisted in managing their investments. When my father died in 2016, he had the largest IRA balance which my mother inherited. However, the scenario of moving from a joint RMD schedule to a Single RMD schedule quickly accelerated the withdrawals that she had to take from my father's IRA. This forced her to liquidate the IRA quicker than she needed, caused higher tax bills because she had more income(than needed) and her tax filing status changed from married to single, and also created more emotional angst that she would run out of money. Having witnessed this, I decided to use my part of my IRA as the funding source for the SPIA. Why 1. To remove the emotional angst of outliving your money 2.Spread the tax hit over a potentially longer timeframe 3.Created a "paycheck lifestyle" that made my wife feel more comfortable assuming I checked out earlier then her Food for thought that should also be considered in purchasing an SPIA or not."
- Ray Holland
Read more »

Any Crypto Investors?

"Three or four years ago I bought $10 worth of bitcoins just for fun. It dropped to $6.00 and now it’s worth $23.00. No idea what it actually is."
- R Quinn
Read more »

You’ve Come a Long Way, Baby by Marjorie Kondrack

"Interesting thoughts, Kevin. I think most people recognize propaganda when they see it. This era was the dawning of women being brought to prominence in business. Companies were combing their human capital for women candidates they could promote to management positions. The ad embraced ” Sell the sizzle, not the steak.” The message to women was— You’ve arrived. Women wanted that recognition. Not the cigarette."
- Marjorie Kondrack
Read more »

No Exception

FRENCH HISTORIAN Alexis de Tocqueville toured the U.S. in the 1830s and chronicled his observations in a book titled Democracy in America. What mainly impressed him was Americans’ focus on trade and commerce. They have a “purely practical” mindset, he wrote, and concluded that “the position of the American is quite exceptional.” In the years since, others have picked up on this concept of “American exceptionalism.” Despite recent political and economic crosscurrents, the gap between the U.S. economy and its peers has only widened, especially over the past dozen years. Between 1990 and 2012, according to an analysis by author Larry Swedroe, corporate earnings in the U.S. grew no faster than in other countries. But since 2012, American companies’ profits have multiplied while—in aggregate—international companies’ earnings have stagnated. As a result, markets in the U.S. have far outpaced their international peers. This has made investing outside the U.S. feel like a losing proposition for quite some time. On the surface, this seems easy to explain. In the U.S., entrepreneurship is key to our DNA, and our regulatory regime makes it easy to get a business started. Hewlett and Packard got their start in Packard’s garage. Gates and Zuckerberg founded trillion-dollar companies in their dorm rooms. Jensen Huang launched Nvidia from a booth at Denny’s. By contrast, on the other side of the Atlantic, regulations make it harder to build a business. There aren’t any companies in Europe comparable to the “Magnificent Seven” technology firms in the U.S., and there are just a handful elsewhere in the world. In the European Union, working hours are strictly limited. In 2023, when the French government tried to raise the official retirement age from 62 to 64, more than a million people took to the streets to protest. Through this lens, the U.S. economy's outperformance seems to make sense. But this story may be oversimplified. Indeed, since the beginning of this year, markets in the U.S. have begun to falter. Domestic stocks are mostly in negative territory, while stocks outside the U.S. have delivered solid positive performance. This has people taking a second look at the question of American exceptionalism. Specifically, the question investors are asking is: To what degree should a portfolio be diversified internationally? This isn’t such an easy question. Ask the Vanguard Group to construct a portfolio, and it’ll be split roughly 60-40 between domestic and international stocks. Vanguard’s view is that there’s no reason to favor any one country or region of the world over another, and thus investors’ portfolios should simply reflect the relative weightings of world markets. But Vanguard's founder, the late Jack Bogle, took an entirely different view. He didn’t hesitate to tell people that his personal portfolio was 100% domestic. U.S. stocks, he felt, were entirely sufficient. There is, in short, no consensus on this question. Still, to gain clarity, we can consult the data. In a 2023 paper titled “Still Not Crazy After All These Years,” hedge fund manager Cliff Asness examined the outperformance of domestic stocks, performing what’s known as attribution analysis to uncover the sources of that performance. His conclusion: The lion’s share of domestic stocks’ impressive gains over the prior 15 years wasn’t due to earnings growth. It wasn’t, in other words, due to the exceptionalism of American companies. Instead, those companies’ stocks had, for the most part, just become more expensive. Even though U.S. stocks have given up some of their lead this year, that valuation gap is still very significant. Using the price-to-earnings (P/E) ratio as a measure, domestic stocks today are still 40% more expensive than their peers in developed markets outside the U.S. Boosters of a domestic-only approach are quick to reply that American stocks deserve higher valuations. There is no "Magnificent Seven” anywhere outside the U.S., they argue, and these companies’ scale and impressive growth warrant higher valuations. But that argument quickly falls apart. As Asness points out, domestic and international stocks traded at comparable valuations as recently as 2007. The valuation gap is a new phenomenon. According to the Swedroe analysis referenced above, another factor has contributed to domestic stocks’ outperformance: Between 2008 and 2024, the U.S. dollar appreciated nearly 20% against international currencies. This depressed the value of international stocks for U.S. investors, thus further boosting the relative performance of domestic stocks. There is, however, no guarantee that this trend will continue—and, indeed, it could reverse. To be sure, there are unique aspects to the U.S. economy, and de Tocqueville’s observations have validity. But a quantitative analysis suggests that the extreme U.S. outperformance we’ve seen over the past dozen years may not continue indefinitely. Despite some erosion this year, domestic stocks still carry elevated valuations compared to international markets, and the U.S. dollar is still expensive. This is worth paying attention to, because ultimately valuations do matter. Investments that are expensive usually don’t offer the same prospective returns. That’s certainly what history suggests. While it may be hard to remember, there have been multi-year periods when international stocks have outperformed the U.S. market. In fact, a chart of domestic vs. international stocks looks a little like a sine wave, with performance alternating over time. For that reason, I continue to recommend an allocation to international stocks. How much? I suggest something in the neighborhood of 20%. According to the data, that’s enough to deliver a diversification benefit, but not so much that it introduces significant currency risk. A final note: You might notice that I haven’t mentioned the proximate cause of the valuation shifts we’ve seen this year—the new administration’s tariff policies. I’m not focusing on this specifically because I see it as just one example of how markets can shift unexpectedly. In choosing an international allocation—or any other aspect of your portfolio—I recommend taking the long view. My advice: Choose a structure that you think will make sense regardless of who is in the White House or where the economy happens to stand at any given time. 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. [xyz-ihs snippet="Donate"]
Read more »

Free Newsletter

Get Educated

Manifesto

NO. 2: WE GET one shot at making the financial journey from here to retirement—and failure is not an option, so we should save like crazy, avoid big investment bets and insure against major risks.

humans

NO. 2: WE FOCUS on today—and shortchange tomorrow. Our nomadic ancestors didn’t worry about the long term. Instead, they focused on surviving today, which meant consuming as much as they could whenever they could. Those instincts live on within us, driving our spending, saving and investing behavior—and causing long-term financial damage.

act

CHECK YOUR retirement readiness. Try the simple calculators from AARP and Vanguard Group. Neither requires you to create an account. Each will give you a somewhat different assessment—a reminder that such projections are a rough-and-ready business. Still, you should get a sense for whether you're on track for a comfortable retirement or off the rails.

Truths

NO. 104: SHIFTS IN investor sentiment—as reflected in the stock market’s rising and falling price-earnings ratio—become less important as our time horizon lengthens. Instead, for investors who hold diversified stock portfolios for decades, what matters is the stock market's starting dividend yield and subsequent growth in earnings per share.

Money Guide

Assessing the Market

PUNDITS OFTEN TALK about the state of the national housing market. But that's not terribly helpful if you're looking to buy a home. Why not? The housing market varies so much from one part of the country to another. How can you get a handle on the local property market? Ask a local real estate agent for details on recent sales, including how long it’s taking properties to sell and how final selling prices compare to list prices. Visit real estate sites such as Realtor.com, Redfin.com, Trulia.com and Zillow.com. Go to open houses in your neighborhood—even if you’re looking to sell, not buy. That way, you can get a reality check on whether you are pricing your home properly. If you are looking both to sell and buy within the same local market, you shouldn’t be too bothered if the market is buoyant or depressed. Even if you’re suffering on one side of the transaction, by receiving too little or paying too much, you presumably are benefiting on the other side. Buying in a market that’s overly exuberant? Think twice before getting into a bidding war. You could end up suffering from the so-called winner’s curse. What’s that? Winners of bidding wars often discover they paid too much, while those with cooler heads had a better handle on the home’s value. Before you blithely boost your bid by $20,000, think about how many months you would have to work to save that sort of money. Next: Remodeling Previous: Real Estate Agents
Read more »

Manifesto

NO. 2: WE GET one shot at making the financial journey from here to retirement—and failure is not an option, so we should save like crazy, avoid big investment bets and insure against major risks.

Spotlight: In Retirement

Early Decision

DELAYING SOCIAL Security until age 70 will get you the largest possible monthly benefit, and that’s the right strategy for many retirees. But what’s right for many folks won’t necessarily be right for you—and you may want to file at 62, the youngest possible age, so you maximize your total lifetime benefit.
If you’re single with no dependents, you should probably file at age 62 if you’re in poor health or your family doesn’t have great genes,

Read more »

Who’s a Senior?

I SEE THIS LABEL used a lot. But it hit me that I really didn’t know what “senior” means. I know it’s used to describe old people. But truthfully, I don’t know what “old” means, either.
We’ve been manipulated into believing that, when we turn 65, we automatically turn old—which isn’t true. It’s a mistake to label people based on their age, because biological age can vary considerably from chronological age. A person’s age is a meaningless number unless we’re dealing with hard-and-fast rules,

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Quinn doesn’t think like a average retiree, I bet you don’t either. Beware the experts

How much should we rely on studies, surveys, academically-generated tools and guides? I’m not sure, but they are used by policy makers so I guess we should pay attention. 
However, that doesn’t mean they are meaningful in personal retirement planning- that is unless you are average or typical. I’m guessing HD readers know that, but just I case. 
Consider the Elder Index from the University of Massachusetts. According to their website:
“The Elder Index can be a powerful tool for state and local advocates and aging service providers to educate policymakers,

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Risk Doesn’t Retire

I’LL ACKNOWLEDGE THAT today’s topic isn’t the most upbeat. I want to talk about risk—and, specifically, some of the underappreciated risks related to retirement.

In thinking about risk, the hardest part—in my view—is that it defies a single definition. Because of that, there’s no uniform yardstick for measuring it and thus no single strategy for managing it. As Howard Marks states in his book The Most Important Thing, “Much of risk is subjective,

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Fire the 4% Rule

I DID ACHIEVE financial independence and retire early—if you count age 64 as early. My friend Jose, a true believer in FIRE, or financial independence-retire early, celebrated his retirement at 44. That took a steely nerve that I lacked, plus I had big college bills to pay before retiring.
One big challenge of FIRE, of course, is that your savings might need to last 40 or even 50 years. Vanguard Group recently published a research paper to help FIRE followers go the distance.

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Quinn ponders – Are you better off than you were four years ago?

It’s not a political question, but a practical one, especially for us retirees. Let’s see.
We survived a pandemic.
My wife and I have both had expensive health issues in the last four years for which we received excellent care and that were paid in full by Medicare and our Medigap insurance.
Inflation has been up and now going down – but at its highest a lot less troubling than in the 70s and 80s. Social Security was adjusted upward accordingly.

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Spotlight: Wasserman

Not So Fast

THE GENDER PAY GAP is quantifiable. But there are also other, subtler forms of workplace discrimination that are harder to quantify, but which women face every day. When I was part of a five-person analyst team, my manager invited everyone on the team to a poker night at his house—except me, the only female. When I asked why I was left out, he said the absence of women would make the guys feel freer to relax. Another manager threatened to fire me when I asked to take a longer lunch break to attend my son’s sixth birthday party at his daycare center. While the manager approved my request unwillingly, his exact words were, “Next time, you will have to choose between being a mom and working here.” My experience in the workplace is hardly unique. Women are more likely to be subjected to demeaning comments, have to provide more evidence of their competence, have their work contributions ignored and be seen as the “different” employee who makes others uncomfortable, while also getting less access to senior leaders. Critics say the pay gap is due, in part, to women not asking for money as aggressively as men do. But even when women do, it’s often seen as arrogant, unfeminine and even “bitchy.” It’s also difficult for women to determine how much they are underpaid, as there’s little salary transparency in corporate America. When I requested the salary range for my pay level, so I could know where I fell, both my manager and my manager’s manager informed me they didn’t have that information. My question was escalated to a human resources employee, who informed me I wasn’t privy to this information. Over my career in financial services—where women typically earn 61% to 66% of what men do—I would occasionally ask for greater compensation or promotions after excellent performance reviews and after fulfilling the duties of a higher-level job. Some of the responses: One of my male managers advised me to look for another job in another department, despite my top performance rating. Another manager said that, despite excellent reviews, I’d have to continue proving to him and the rest of management that I could do the higher-level job for “a few more years” before they would give me the actual promotion. When I asked for the promotion later, I was told that, although my manager totally agreed I’d been working hard, doing vice president-level work and deserved a promotion to that level, it would be better if I applied for the promotion by myself—rather than him promoting me—or, alternatively, apply for such a position at another company. According to a 2018 survey of more than 64,000 workers by McKinsey & Co., performance perception bias helps explain early gaps in hiring and promotions, which then compound over a career. Research shows that we tend to overestimate men’s performance and underestimate women’s. Result: Men are often hired and promoted based on their potential, while women are often hired and promoted based on their track record. During my career, I went through several corporate reorganizations, where I ended up training a new male manager, who often had no knowledge in the area to which he’d been promoted. For instance, when I worked as a strategy analyst, which requires a thorough understanding and familiarity with statistical analysis, the company promoted a male manager who knew nothing about strategy and struggled with statistical concepts. I had to tutor him. His exact words to me were “please dumb down your presentation,” so he could present it as his own in executive meetings. He was made manager of a complex analysis group at a top-three U.S. bank based solely on his “potential.” Of course, a large banking institution, like the one I worked for, must be seen publicly as doing what it can to promote women and minorities. I was among a group of high-performance employees identified to join a special one-year leadership pipeline program designed to help the careers of minority employees. Yet one of the main messages echoed throughout the program was not that the bank would promote upward more fairly and without regard to gender or race, but that we should be happy to move laterally. Jiab Wasserman recently retired at age 53 from her job as a financial analyst at a large bank. She and her husband, a retired high school teacher, currently live in Granada, Spain, and blog about financial and other aspects of retirement—as well as about relocating to another country—at YourThirdLife.com. This is the second article in a three-part series about the obstacles women face in the workplace. The first part was Mind the Gap. [xyz-ihs snippet="Donate"]
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Trust Betrayed

BEFORE I RETIRED, I was a credit risk manager. I had to take compliance courses annually. One course focused on financial abuse, especially of the elderly. I learned that the most common perpetrators are not strangers, but family members, friends and caregivers who take advantage of too-trusting seniors. But it’s one thing to know this theoretically—and quite another to find out it’s happening in your own family. I previously wrote about now both my late father and his close friend were victims of financial abuse. After we discovered what was happening, I thought my three siblings and I had straightened out the family finances. My youngest brother and I live in the U.S., while my parents were in Thailand. We all agreed that my two middle brothers, who live in Bangkok, should be co-guardians of my parents and their finances. My father was dying of Parkinson’s and my mother was deteriorating mentally and physically, so it made sense to let my brothers have complete control. We split my parents’ money, enough to last the rest of their lives, between my two brothers in 2019. We had regular Zoom calls to discuss my parents’ physical condition and financial situation. One of my brothers sent us an accounting every quarter, while the other didn’t. When, in early 2020, we finally confronted the brother who hadn’t provided any sort of accounting, he admitted that the money he oversaw was gone. We consulted an attorney and were advised that we could go to the police to have him arrested. In the end, we decided against it for my mom’s sake. It would have devastated her. My other brother still has the other half of my parents’ money in his care, which should be enough for my mom, now that my father has passed. Losing my father was hard. I still miss him every day. But we knew it was coming and mentally we could prepare. Losing trust in my brother was in some ways harder. While we can’t recover the money, we have the comfort of knowing that Mom is still okay financially. Many seniors aren’t so fortunate.
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When You’re No. 2

WE ALL KNOW financial literacy is important. But it’s especially important if you’re a woman. According to the Gates Foundation, “No matter where you are born, your life will be harder if you are born a girl.” Today is Equal Pay Day—the day when U.S. women finally earn enough to “catch up” with men’s earnings from the previous year. Women in the U.S. earn 82% of what men do for equivalent work and, as a result, suffer a 33% wealth gap. Women also have less access to borrowed money than their male counterparts. All this leaves women with less control over their daily life. Think about a female applicant who is rejected for a new job because of her weak credit report. Or a woman who’s stuck in a relationship because her husband controls the family’s money. More than 50 years ago, Avis ran an advertising campaign that said, “When you’re not the biggest in rent a cars, you have to try harder. We do. We’re only No. 2.” I'm not advocating that women accept today's unfairness. But gender inequality isn’t going away any time soon. In the meantime, women will have to work harder and know more to propel themselves ahead—and financial literacy is one way to compete better on an unequal playing field. Marcus Aurelius, the famous stoic Roman emperor, wrote in his Meditations that “if you submit to the frustration with a good grace, and are sensible enough to accept what offers itself instead, you can substitute some alternative course.” Here are five workarounds that I’ve found have provided “alternative courses” for me: Be a smart consumer and self-advocate. Because of the pink tax, women get hit twice—first with less pay and again when they pay more for products. What to do? Think unconventionally. For instance, there’s no difference between men’s and women’s tennis shoes, so I often buy men’s—because they’re cheaper. Don’t be intimidated. Ask questions and negotiate for a better deal, especially on a big-ticket item like a mortgage. Advocate for yourself in your career by asking for a raise or promotion, or by negotiating for better benefits. Understand the importance of credit scores. Sellers want to give the best deal to their best customers. An excellent credit score will put a woman in an elite group of customers, giving her more power to obtain the best rate on a mortgage or a credit card, and lower premiums on homeowner’s and car insurance. That higher credit score can also get you quicker approval from utilities and cellphone companies. More employers are using credit histories when conducting background checks for both new and existing employees. This can impact the hiring and advancement for women. Understand the power of compounding. Combined with time, compounding can turn regular savings into a large nest egg. It’s crucial to save as much as you can and as early in your adult life as you can. But compounding can also work against you: Cumulative interest on loans can turn a molehill of debt into a mountain. Avoid credit card debt. Keep other borrowing to a minimum. Similar to compounding, small positive steps can produce extraordinary long-term results. Take good care of yourself physically and mentally. Eat healthily, stay physically active and get enough sleep. These small positive habits will help reduce medical costs, both now and in the future. More important, they’ll help you to feel good, reduce stress and have the confidence to face life’s challenges. If you aren’t used to making financial decisions, start small, but start somewhere. Overwhelmed by the idea of buying another car? Try purchasing new tires for the car you already have. Don’t have a checking or savings account in your own name? Find a bank that has no required account minimum, so you can start saving sooner rather than later. Do research ahead of time, so you go into these transactions with confidence—and come out with what you want. In 2017, Jiab Wasserman left her job as a financial analyst at a large bank and is now semi-retired. Her previous articles include Grab the Wheel, In Withdrawal and Time Well Spent. Jiab and her husband Jim, who also writes for HumbleDollar, currently live in Granada, Spain. They blog about downshifting, personal finance and other aspects of retirement—as well as about their experience relocating to another country—at YourThirdLife.com. [xyz-ihs snippet="Donate"]
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Enforcing the Rule

THE MOST POPULAR retirement income strategy is built around the so-called 4% rule. Three-quarters of financial advisors say they use some variation on this approach. But is it safe? The 4% rule specifies that you withdraw 4% of your nest egg’s value in the first year of retirement. Thereafter, you increase the dollar amount withdrawn each year at the inflation rate. Based on historical U.S. stock and bond returns, that strategy should carry you safely through a 30-year retirement. But there’s concern the strategy won’t work in today’s world, especially with bond yields so low. A 2013 paper by Wade Pfau and two other researchers even suggested the strategy might suffer a 57% failure rate over a 30-year retirement. In other words, there’s a good chance that retirees will run out of money. What to do? In another study, Pfau proposed a different way to think about retirement income. He looked at a hypothetical 65-year-old couple whose lifestyle required a 4% inflation-adjusted withdrawal rate. He plotted how 1,001 different product combinations might perform if the couple were trying to meet two objectives: generating spending money and preserving financial assets. Pfau found that the best way to meet those two goals was with a mix of stocks and single premium immediate annuities, or SPIAs. SPIAs shouldn’t be confused with other types of annuity, like equity-indexed annuities and variable annuities, which are far more costly and typically a bad deal for investors. Meanwhile, Pfau found that relying on a traditional portfolio of stocks and bonds produced some of the worst outcomes. For instance, at 50% stocks and 50% SPIA, there was a 94% chance to meet lifetime spending needs, while leaving the couple with about 60% of their assets at death. But with 50% stocks and 50% bonds, there was an 88% chance of meeting spending needs, but with only 38% of assets left upon death. In other words, immediate annuities can help retirees meet their retirement spending goals, while still preserving more of their assets. Many retirees will find that latter notion counterintuitive, because buying an immediate fixed annuity means turning over a big chunk of their assets to an insurance company. Why are immediate annuities so helpful to a retirement income strategy? Longevity risk—the risk of running out of money before you run out of time—is retirement’s greatest financial risk. If you live well into your 80s and beyond, there’s a grave danger you could suffer financially because of persistent inflation, a stretch of lousy investment returns or high health care expenses, including the cost of long-term care. Immediate fixed annuities can help protect against these financial perils. Along with Social Security and any pension you’re entitled to, they ensure you’ll have monthly income, no matter how long you live. Annuities also have the virtue of simplicity. That’s an important advantage. As retirees grow older, they often struggle to make good financial decisions. On top of that, income annuities and other predictable income streams can improve retiree happiness, and may even provide the incentive to keep going and live a longer life. As Jane Austen wrote in Sense and Sensibility two centuries ago, “If you observe, people always live forever when there is an annuity to be paid to them.” Despite all these benefits, immediate fixed annuities remain one of the financial world’s least popular products. Even insurance agents don’t make much effort to sell them, because the commissions they earn on immediate fixed annuities are small. But if your goal is a more comfortable, less anxious retirement, you might want to ignore the naysayers—and stash a slice of your nest egg in immediate fixed annuities. In 2017, Jiab Wasserman left her job as a financial analyst at a large bank and is now semi-retired. Her previous articles include When You're No. 2, Grab the Wheel and In Withdrawal. Jiab and her husband Jim, who also writes for HumbleDollar, currently live in Granada, Spain. They blog about downshifting, personal finance and other aspects of retirement—as well as about their experience relocating to another country—at YourThirdLife.com. [xyz-ihs snippet="Donate"]
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Portfolio builder

Takes Skill

I WAS SELECTED IN 2015 for the “leadership pipeline program” at the major bank where I worked. It was a 10-month-long program for minority employees just below executive level. We were selected to learn all about corporate culture and what it took to advance to the next level. I felt honored to be among such talented and promising employees. Participants were from various departments from across the U.S.—technology, risk management, operations, compliance, human resources, retail banking, commercial lending and investments. The program opened with a one-week in-person training session at the bank’s corporate headquarters in Charlotte, North Carolina, followed by monthly meetings via video conferencing and online courses. Each participant was assigned a mentor from the executive level. The people I met in the program were diverse in terms of experience, education and age. We were all united, however, in wanting to learn the skills necessary to move up the corporate ladder. Rather than particular job skills, however, a major emphasis of the program was networking. “It’s not what you know but who you know.” Over and over, making the right connections was emphasized. The bank encouraged us to join multiple affinity groups (Asian, veteran, Latino, Native American, women, LGBT, African American and so on), to socialize and connect across divisions and departments, and to reach out to executives. In other words, we needed to promote ourselves if we wanted to move up to the next level. The emphasis on self-promotion as a career strategy never quite sat right with me. Partly, it’s because I’m an introvert. But mostly, I saw a problem with focusing so much on building a network. I always thought that the time and energy spent maintaining these relationships and joining the many affinity groups would, instead, be better spent learning new skills. And there’s a big reason I felt that way: In 2007, I saw my then-employer, Countrywide, collapse. It was a turbulent and stressful time for the mortgage industry—and the financial reverberations would soon be felt across the globe. As my old company dissolved and we were integrated into a new one, I saw plenty of managers, colleagues and executives let go. All the people retained by the company had one thing in common: They were knowledgeable, hardworking and competent at their jobs. It was the employees who had valuable skills in coding and manipulating large data sets. It was the employees who knew the operating systems so well that they could fix any problem in their sleep. I had one of these unglamorous positions—and it’s why I kept my job. By contrast, the people let go were mostly middle and upper level managers—the people who oversaw others, but didn’t do the work themselves. I had seen so many of these managers focus heavily on networking. I witnessed them claiming the work of the people below them as their own, believing that’s what they needed to do to get ahead. They believed their web of executive contacts would support them, only to find themselves abandoned by those same tenuous connections. In lean times, everything and everyone is under scrutiny. What an institution needs is people who can keep the company going, not keep themselves connected. The Great Recession taught me an important lesson: You need to put skills, knowledge and competency first, ahead of self-promotion and networking. The order can’t be reversed. Jiab Wasserman recently left from her job as a financial analyst at a large bank at age 53. She's now semi-retired. Her previous articles include Living Small, This Old House and The Gift of Life. Jiab and her husband, who also writes for HumbleDollar, currently live in Granada, Spain. They blog about downshifting, personal finance and other aspects of retirement—as well as about their experience relocating to another country—at YourThirdLife.com. [xyz-ihs snippet="Donate"]
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