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This would be a great posting on a web site with the name “HaughtyDollar.”

R Quinn  |  Aug 28, 2026

"Dick, you acknowledged in your post that not all credit card debt is the result of not being responsible, so the only thing you and I don’t agree on is the percentage of people being irresponsible. I submit that the reasons for bad behavior are often not visible. For example, a symptom of depression is often poor spending habits; until I began selling life insurance, I never realized how many people took medications for that ofttimes invisible malady. My first wife and my best friend both suffered from depression and poor spending habits, so I definitely believe the research about the disease. "
- DAN SMITH
Read more »

Finding A Balance

Andrew Clements  |  Sep 2, 2026

"Thanks, Jeff. I think you’ve captured it well. Rarely is it one big decision that takes us off course, but rather a series of small choices that seem perfectly reasonable at the time. Hindsight gives us a perspective we simply didn’t have while living through it. We can’t change those earlier choices, but hopefully we can learn from them and make better ones going forward."
- Andrew Clements
Read more »

Traditional or Roth

ArticleRichard Connor  |  Aug 29, 2026

THE CHOICE BETWEEN a traditional retirement account or a Roth is a frequent topic on HumbleDollar. The choice is generally framed as a choice between paying taxes up front (a Roth), or deferring taxes until withdrawal (traditional). I thought it would be interesting to evaluate a real-life example of how this choice might work out. In December of 2016 my wife and I had an opportunity to each open a Roth IRA. My wife took a partial sabbatical that year, and that, combined with maxing out our 401k accounts, gave us a chance to each open a $4,500 Roth IRA. The maximum allowable contribution that year was $6,500 for those 50 and over. Up until then we had assumed that our marginal tax bracket would likely be lower in retirement, and focused on contributing to our employer’s traditional 401k plans. Despite that, we decided to move forward with opening a Roth IRA. I thought it would give us some tax diversity, and the opportunity to do Roth conversions when, and if, it made sense in the future.  In December of 2016 we opened Roth IRAs at Vanguard and invested the $4,500 in their S&P 500 Index Fund. Those initial funds have been invested for almost 10 years. Over that decade we have added some additional funds, and have done a few conversions. I recently did a quick analysis to see how my Roth experience would have compared to investing in a traditional IRA.   In 2016, our marginal tax bracket was 28%.  To contribute the $4,500 required $6,250 of pre-tax income. Due to some financial engineering over the last year, including selling our second home in late 2025, I expect our 2026 marginal tax bracket to stay within the 12% bracket. I’ve been looking at this closely because I’m considering doing a Roth conversion later this year. The table below shows the comparison between the Roth performance, and what a traditional IRA would have produced. The annual rate of return was determined using Nick Maggiulli’s S&P 500 Historical Return Calculator. Roth vs Traditional The table shows that the Traditional IRA would have been the better choice, producing about $3,500 more in available funds, or about 22% more. This demonstrates that the primary driver in choosing between a Roth and a traditional qualified account is a consideration of the tax rates at the time of contribution and at the time of distribution. There have been a number of changes to the tax code in the last decade that have contributed to the result, but I certainly didn’t predict any of them.  If you guess wrong, you pay the price in a higher tax bill. In the example above, the extra $1,750 invested in the traditional account produced an additional $6,143.31 in earnings. The lower tax rate at the distribution of the traditional IRA results in the $3,500 in extra funds. Even though the Roth IRA had tax free earnings growth, the initial larger tax rate overcame that advantage, when compared to the traditional IRA.   Because of my pension and my wife’s social security benefit, 85% of her social security benefit is taxable income, so that is not a consideration in our tax calculation. I used Dinkytown’s 1040 Calculator to run a series of estimates of our 2026 tax return to assess if we want to execute a Roth Conversion this year. We are still 4 years from taking RMDs, and I will start my Social Security in a year when I turn 70. My current thinking is a conversion of about $40,000 will keep us in the 12% bracket. There would also be a small NJ state tax impact. My simple analysis reinforces what I’ve been taught. Roth contributions make the most sense when you think your current tax bracket is lower than when you expect to withdrawal the funds. There are secondary considerations, like no tax diversification, no RMDs, and uncertainty about future tax rates. If you intend to pass the funds to heirs, it might make sense to perform Roth conversions today at the 22% tax bracket if you intend to pass these accounts to heirs who may be in their peak earnings years. Not sure? I believe I recall several HumbleDollar contributors write something about splitting the difference?   Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.
Read more »

The Value of Scratch Cooking in Retirement

Mark Crothers  |  Jul 11, 2025

"It's so much better and easy to make your own lobster rolls at home . If you don't want to pay the price of shelled meat, grocery stores steam lobsters for free. Shell them at home, buy brioche rolls at the store. I now prefer Connecticut style lobster rolls ( sautee the lobster in butter) rather than cold lobster. Even if you bought the shelled meat at $60 pound, you could make 3-4 rolls , cheaper than paying $35 each plus tip.Make the Black and Tan at home too. I"ve also made lobster mac and cheese for a party (with a lot more lobster than a restaurant would) by getting steamed lobsters . It was a big hit."
- Julie C
Read more »

Make the Attic Great Again

Dan Smith  |  Sep 1, 2026

"August, I have a couple tiny transistor radios from the 60s, one is brand new and still in the box. I'm sure it will pay for a grand-kid's college education some day!"
- DAN SMITH
Read more »

What’s your Domicile?

William Perry  |  Sep 1, 2026

"Bill, thanks for an interesting post. The Panko article was fascinating, especially the Minnesota case. One of my wife's nursing school roommates has become an RV nomad. She and her husband sold their home in PA, and have been traveling in an RV for 5 or 6 years. They spend most of their time in Florida, but travel frequently to see their 3 daughters spread around the country. I'll have to ask them how they are addressing the domicile question when I next see them. I had an interesting AARP TaxAide client a few years ago in Brigantine, NJ. She and her husband had a primary home in NJ, and a condo in FL. They spent a number of months each winter in FL. Their condo was in the same town where their son lived full time. Several years before my interaction, the husband had a serious health event while they were in FL. After several months in the hospital, he moved in with their son. He had spent the past several years living with the son rehabbing, while the wife when back and forth. We determined they were still NJ residents."
- Rick Connor
Read more »

Blood Money

Michael Flack  |  Mar 28, 2026

"If a future NUA has limited value to you then if you are concerned about the concentration from owning a high percentage of XOM I would hope you have the option to diversify within your 401(k). Before retirement I previously had some 1040 tax clients whose 401(k) plans/funds had lower expense ratios than what is available at Vanguard so leaving their funds in their 401(k) made more sense than rolling to a 401(k)."
- William Perry
Read more »

Americans and their credit cards

R Quinn  |  Aug 24, 2026

"53% of Americans is greater than 46% of cardholders since all Americans don’t have credit cards so both those numbers can’t be correct."
- R Quinn
Read more »

Percentage that “age in place”

Keith Pleas  |  May 24, 2026

"Lots of important insights here. We’re still committed to aging in place, but being 83 have seen what our friends are encountering. I totally agree about the importance of having family nearby. That seems to be critical. Also, I think you’re right about memory care facilities. I really wonder about those with many residents in independent living and a handful in memory care. I know of one non profit CCRC where the independent living folks had the manager fired because he was spending on Memory Care and shortchanging their amenities. The prices you mention are very typical of those where I live."
- Marilyn Lavin
Read more »

Long Term Care

Joe D'Alessandro  |  Jun 22, 2024

"Hi Jen. As someone who has been on the operations side of CCAH programs for over a decade I wanted to pop in here to make you aware that there are about 6 programs across the commonwealth of PA. So, depending on where you live you have options! (yay) The website Home - My House. My Home. will give you great guidance as to where they are offered in PA and actually across the nation."
- Jen Egizi
Read more »

How do you prepare for the long term care cost as retiree?

achnk53  |  Jun 21, 2026

"Any way we slice it care needs are expensive. Whether you go the traditional route and move into a CCRC, join a CCAH program or self-fund. The care is expensive. I think it comes down to where do you want to be as you age?"
- Jen Egizi
Read more »

Bad Maths, Good Fire.

Mark Crothers  |  Aug 28, 2026

"David, I'm with you on the peat fire. I still burn peat now and then in winter — messy fuel, but that smell is hard to beat. These days it's surprisingly hard to come by in Ireland, thanks to legislation protecting the peat bogs."
- Mark Crothers
Read more »

This would be a great posting on a web site with the name “HaughtyDollar.”

R Quinn  |  Aug 28, 2026

"Dick, you acknowledged in your post that not all credit card debt is the result of not being responsible, so the only thing you and I don’t agree on is the percentage of people being irresponsible. I submit that the reasons for bad behavior are often not visible. For example, a symptom of depression is often poor spending habits; until I began selling life insurance, I never realized how many people took medications for that ofttimes invisible malady. My first wife and my best friend both suffered from depression and poor spending habits, so I definitely believe the research about the disease. "
- DAN SMITH
Read more »

Finding A Balance

Andrew Clements  |  Sep 2, 2026

"Thanks, Jeff. I think you’ve captured it well. Rarely is it one big decision that takes us off course, but rather a series of small choices that seem perfectly reasonable at the time. Hindsight gives us a perspective we simply didn’t have while living through it. We can’t change those earlier choices, but hopefully we can learn from them and make better ones going forward."
- Andrew Clements
Read more »

Traditional or Roth

ArticleRichard Connor  |  Aug 29, 2026

THE CHOICE BETWEEN a traditional retirement account or a Roth is a frequent topic on HumbleDollar. The choice is generally framed as a choice between paying taxes up front (a Roth), or deferring taxes until withdrawal (traditional). I thought it would be interesting to evaluate a real-life example of how this choice might work out. In December of 2016 my wife and I had an opportunity to each open a Roth IRA. My wife took a partial sabbatical that year, and that, combined with maxing out our 401k accounts, gave us a chance to each open a $4,500 Roth IRA. The maximum allowable contribution that year was $6,500 for those 50 and over. Up until then we had assumed that our marginal tax bracket would likely be lower in retirement, and focused on contributing to our employer’s traditional 401k plans. Despite that, we decided to move forward with opening a Roth IRA. I thought it would give us some tax diversity, and the opportunity to do Roth conversions when, and if, it made sense in the future.  In December of 2016 we opened Roth IRAs at Vanguard and invested the $4,500 in their S&P 500 Index Fund. Those initial funds have been invested for almost 10 years. Over that decade we have added some additional funds, and have done a few conversions. I recently did a quick analysis to see how my Roth experience would have compared to investing in a traditional IRA.   In 2016, our marginal tax bracket was 28%.  To contribute the $4,500 required $6,250 of pre-tax income. Due to some financial engineering over the last year, including selling our second home in late 2025, I expect our 2026 marginal tax bracket to stay within the 12% bracket. I’ve been looking at this closely because I’m considering doing a Roth conversion later this year. The table below shows the comparison between the Roth performance, and what a traditional IRA would have produced. The annual rate of return was determined using Nick Maggiulli’s S&P 500 Historical Return Calculator. Roth vs Traditional The table shows that the Traditional IRA would have been the better choice, producing about $3,500 more in available funds, or about 22% more. This demonstrates that the primary driver in choosing between a Roth and a traditional qualified account is a consideration of the tax rates at the time of contribution and at the time of distribution. There have been a number of changes to the tax code in the last decade that have contributed to the result, but I certainly didn’t predict any of them.  If you guess wrong, you pay the price in a higher tax bill. In the example above, the extra $1,750 invested in the traditional account produced an additional $6,143.31 in earnings. The lower tax rate at the distribution of the traditional IRA results in the $3,500 in extra funds. Even though the Roth IRA had tax free earnings growth, the initial larger tax rate overcame that advantage, when compared to the traditional IRA.   Because of my pension and my wife’s social security benefit, 85% of her social security benefit is taxable income, so that is not a consideration in our tax calculation. I used Dinkytown’s 1040 Calculator to run a series of estimates of our 2026 tax return to assess if we want to execute a Roth Conversion this year. We are still 4 years from taking RMDs, and I will start my Social Security in a year when I turn 70. My current thinking is a conversion of about $40,000 will keep us in the 12% bracket. There would also be a small NJ state tax impact. My simple analysis reinforces what I’ve been taught. Roth contributions make the most sense when you think your current tax bracket is lower than when you expect to withdrawal the funds. There are secondary considerations, like no tax diversification, no RMDs, and uncertainty about future tax rates. If you intend to pass the funds to heirs, it might make sense to perform Roth conversions today at the 22% tax bracket if you intend to pass these accounts to heirs who may be in their peak earnings years. Not sure? I believe I recall several HumbleDollar contributors write something about splitting the difference?   Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.
Read more »

The Value of Scratch Cooking in Retirement

Mark Crothers  |  Jul 11, 2025

"It's so much better and easy to make your own lobster rolls at home . If you don't want to pay the price of shelled meat, grocery stores steam lobsters for free. Shell them at home, buy brioche rolls at the store. I now prefer Connecticut style lobster rolls ( sautee the lobster in butter) rather than cold lobster. Even if you bought the shelled meat at $60 pound, you could make 3-4 rolls , cheaper than paying $35 each plus tip.Make the Black and Tan at home too. I"ve also made lobster mac and cheese for a party (with a lot more lobster than a restaurant would) by getting steamed lobsters . It was a big hit."
- Julie C
Read more »

Make the Attic Great Again

Dan Smith  |  Sep 1, 2026

"August, I have a couple tiny transistor radios from the 60s, one is brand new and still in the box. I'm sure it will pay for a grand-kid's college education some day!"
- DAN SMITH
Read more »

What’s your Domicile?

William Perry  |  Sep 1, 2026

"Bill, thanks for an interesting post. The Panko article was fascinating, especially the Minnesota case. One of my wife's nursing school roommates has become an RV nomad. She and her husband sold their home in PA, and have been traveling in an RV for 5 or 6 years. They spend most of their time in Florida, but travel frequently to see their 3 daughters spread around the country. I'll have to ask them how they are addressing the domicile question when I next see them. I had an interesting AARP TaxAide client a few years ago in Brigantine, NJ. She and her husband had a primary home in NJ, and a condo in FL. They spent a number of months each winter in FL. Their condo was in the same town where their son lived full time. Several years before my interaction, the husband had a serious health event while they were in FL. After several months in the hospital, he moved in with their son. He had spent the past several years living with the son rehabbing, while the wife when back and forth. We determined they were still NJ residents."
- Rick Connor
Read more »

Blood Money

Michael Flack  |  Mar 28, 2026

"If a future NUA has limited value to you then if you are concerned about the concentration from owning a high percentage of XOM I would hope you have the option to diversify within your 401(k). Before retirement I previously had some 1040 tax clients whose 401(k) plans/funds had lower expense ratios than what is available at Vanguard so leaving their funds in their 401(k) made more sense than rolling to a 401(k)."
- William Perry
Read more »

Americans and their credit cards

R Quinn  |  Aug 24, 2026

"53% of Americans is greater than 46% of cardholders since all Americans don’t have credit cards so both those numbers can’t be correct."
- R Quinn
Read more »

Percentage that “age in place”

Keith Pleas  |  May 24, 2026

"Lots of important insights here. We’re still committed to aging in place, but being 83 have seen what our friends are encountering. I totally agree about the importance of having family nearby. That seems to be critical. Also, I think you’re right about memory care facilities. I really wonder about those with many residents in independent living and a handful in memory care. I know of one non profit CCRC where the independent living folks had the manager fired because he was spending on Memory Care and shortchanging their amenities. The prices you mention are very typical of those where I live."
- Marilyn Lavin
Read more »

Free Newsletter

Get Educated

Manifesto

Sep 2, 2026

NO. 35: OUR ODDS of beating the market averages over a lifetime of investing are so small they’re hardly worth considering. Overconfident investors insist on trying. Rational investors index.

Truths

Sep 1, 2026

NO. 75: IF YOU BUY and hold individual stocks or stock index funds in a regular taxable account, you can defer taxes, just like you can in a retirement account. Any capital-gains tax bill is postponed until you sell. But for this tax deferral to be truly valuable, you need super-low portfolio turnover, holding investments for 10 or preferably 20 years.

humans

Aug 31, 2026

NO. 26: WE TEND to be overconfident—which isn’t a bad thing. Self-confident individuals tend to be happier, have a wider circle of friends and enjoy greater career success. Problem is, if we’re too confident in our financial abilities, there’s a risk we’ll rack up hefty investment costs and make big undiversified bets, both of which could come back to haunt us.

think

Aug 31, 2026

PASCAL’S WAGER. Belief in God is rational, argued Blaise Pascal. If you believe and God doesn’t exist, the price is modest: a less immoral life. But if you don’t believe and God does exist, the price is far higher: an eternity in hell. The lesson? When managing money, we should focus less on the odds of something happening and more on the consequences.

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Manifesto

Sep 2, 2026

NO. 35: OUR ODDS of beating the market averages over a lifetime of investing are so small they’re hardly worth considering. Overconfident investors insist on trying. Rational investors index.

Spotlight: Houses

Not My Thing

David Gartland   |  Jul 23, 2024

IN RICH DAD POOR DAD, author Robert Kiyosaki touts the virtues of owning real estate as a way to reach financial independence. He explains the difference between how his father handled money and invested in his education, versus his friend’s dad, who gained his wealth by investing in businesses.
There’s controversy over whether this is a true tale or just a literary device to explain how to invest in real estate.

Read more »

Selling Your House and Reaping Tax Free Capital Gains May be in Jeopardy

David Lancaster   |  Jul 24, 2025

The National Association of Realtors forecasts that by 2035, close to 70% of homeowners might have gains exceeding $250,000 and 38% of them will have more than $500,000.
Per AI
I just read an article in which it was reported that in comments to the press on Tuesday the President suggested he is considering eliminating capital gains taxes on the sale of homes.
The article reviews the rules to claim this benefit which is definitely in the near(er) future for Humble Dollar readers
If you have lived in it as your primary residence for at least 24 months (consecutively or not) in the previous five years before you sell it,

Read more »

Stay or Go, and How Do We Know?

DrLefty   |  May 2, 2025

Last year I wrote a couple of HD articles called “When and Where?” about my upcoming retirement decisions. The “when” is settled: I’m retiring on July 1 (checks countdown app: 1 month & 28 days!). The “where,” I thought was also settled: We’d stay in the college town (Davis, CA) where we’ve lived for over 30 years, raised our kids, and built a life.
We’re now rethinking the “where,” but in two different ways: (1) Do we stay in Davis,

Read more »

Would You Rebuild?

stelea99   |  Jan 11, 2025

This is a thought exercise.
Suppose that you owned a home in Pacific Palisades, or Altadena that was destroyed by one of the wildfires. You have been through a very tough time. The fires are out, and after reporting your loss, you are waiting to hear from the company adjuster. You have a big decision to make……Will you rebuild?
Our little housing area here in the PNW has about 2000 single family homes. The first ones were built in 1976,

Read more »

Wherever You Live, Your Home is (Probably) Under-Insured

stelea99   |  Apr 10, 2025

A couple of days ago I chanced on this following very detailed and very lengthy article from the SF Chronicle:
https://www.sfchronicle.com/california/article/underinsured-home-what-to-do-20250824.php
This is behind a paywall, but if you haven’t been to the newspaper website recently you can probably read it. I am going to try to summarize some of the content.
Let me begin by putting a personal spin on this topic. I spent 30 years in the property and casualty insurance world. But, like you I have to insure my own home.

Read more »

Reverse 1031 Exchange

Chris Marsh   |  Jun 18, 2025

Hi,
I was encouraged to post here by my cousin, and HumbleDollar columnist, Ed Marsh so here goes – I’m considering a reverse 1031 exchange.  I’d have preferred it be a straight 1031 exchange but timing hasn’t worked in my favor in that my wife and I found the replacement property unexpectedly and had not intended on selling the relinquished property so quickly.  My question is twofold.  First – can the QI take title to the relinquished property instead of the replacement property ahead of the sale of said property so that I don’t have title to both properties?

Read more »

Spotlight: Saha

The Poor Millionaire

Sanjib Saha   |  Feb 18, 2023

HOW WE SPEND DEPENDS on how we feel about money. To be sure, we’re supposed to spend according to our financial situation and needs. But life experiences can so badly distort our attitude toward money that our financial decisions end up being ruled by fear and insecurity rather than questions of affordability. Such is the case with an acquaintance—let’s call her Satee—whose money habits are at odds with her financial standing. Satee grew up in a typical Indian family of four. Her working dad was the family’s primary breadwinner and financial decision-maker. Her homemaker mom put most of her energy into raising their two kids and taking care of the house. In their family, the financial and nonfinancial responsibilities were clearly divided between husband and wife. When Satee got married, she envisioned becoming a homemaker instead of a moneymaker. She wanted to be a supportive wife, a loving mother and a responsible daughter. Handling money was neither appealing to her nor on her list of responsibilities. Satee’s husband was professionally successful and financially savvy. They moved to the U.S. and had two children. They bought a house, saved for retirement and set aside money for the kids’ education. Everything was falling into place, just as Satee had hoped, except for one problem: Relationship and trust issues soured their marriage. Long story short, Satee went through a messy and conflict-ridden divorce that dragged on for months and turned her world upside down. A property settlement was eventually reached, but the bitter memories and fear of uncertainty remained. Satee took a while to accept her new role as head of a household with two school-age children. To get through the rough patch, she turned to the local community for emotional support. She met my wife through a mutual friend and quickly formed…
Read more »

Twenty-five years ago today….

Sanjib Saha   |  Mar 25, 2025

The S&P 500 Index peaked on this day after years of dot-com euphoria. Over the next two and a half years, it lost about half its value, and it took nearly five more years to recover. But the relief was what the Fed Chair might call “transitory” —just a couple of years later, the 2008 financial crisis hit, causing an even deeper crash. Ignoring dividends, it took over a decade from the year 2000 for the S&P 500 Index to shake off the bears and take off. While the result so far is impressive - the Index nearly quadrupled in these 25 years, I can’t help but wonder how this lost decade affected retirees or those who invested heavily during the dot-com boom. The decade-long wait to recover compared to a risk-free investment, including the unprecedented financial crisis that threatened a complete meltdown of capital markets, must have been painful and devastating. I can’t imagine how I’d feel if I had to endure such a market in my early retirement years. I didn’t know about the significance of March 24, 2000, until I saw today’s Barron’s “Review and Preview” email mentioning the anniversary. It made me reflect—what was I doing at that time? In 2000, I was new to this country and clueless about most things, including stock investments. (I'm still clueless about most things, except that I know a little bit about investments). The term “S&P 500 Index” would have sounded like a sci-fi gadget to me at that time. All I knew was that the company stock options (a mysterious term that I didn't understand until much later) that I received upon joining my new work—and in the years that followed—became worthless instead of making me a millionaire. I wasn’t particularly upset. Honestly, I couldn’t even grasp how…
Read more »

Risky Option

Sanjib Saha   |  Jan 7, 2020

AS A KID, MY MOST revered manmade invention was not a train or a record player, but rather the Swiss Army pocketknife. When I saw it for the first time at a friend’s home, I was fascinated that it could cut paper, open bottles, file nails and more. I marveled at the engineering beauty and wished I had one of my own. Years later, I was in Switzerland for a short business trip and had some free time for souvenir shopping. I saw a Wenger Swiss Army knife and fondly remembered my childhood wish. Without a second thought, I bought one that had a dozen or so attachments. After returning home, I was eager to show off my new toy to my wife and daughter. I used it wherever I could. My daughter was amused to discover the child in her dad. My wife teased me about my sudden interest in kitchen chores. Sadly, a minor mishap soon ended my excitement. My wife was trying to open a jar that was stubbornly jammed. I offered to help and took out my pocketknife to showcase its versatility. The first few attempts failed, and yet I didn’t want to give up on my favorite tool. I opened more blades and applied pressure. The knife slipped and I badly cut my hand. I recalled this incident a few years ago, when I was learning about financial derivatives, and specifically stock and index options. I was intrigued by Warren Buffett’s view of derivatives as “financial weapons of mass destruction.” I researched online, attended webinars and even studied a 1,000-page book. It struck me that options were the Swiss Army knife of investment tools. They’re elegant, versatile and nifty, but also deceptively dangerous even for experienced investors. Their elegance lies in the simplicity of the basic…
Read more »

Seven Habits

Sanjib Saha   |  Jan 25, 2021

BEING A BOOKWORM, I’ve read countless tomes on investing and personal finance. Many were helpful, but my favorite isn’t even about finance. Instead, my vote goes to Stephen Covey’s masterpiece, The Seven Habits of Highly Effective People. Surprised? What does a self-improvement book about character development have to do with finance? The connection between the two didn’t occur to me until I recently listened to a podcast on personal finance books. Several picks were about the psychology of money and sound financial habits. That’s when it dawned on me how much Covey’s book has helped me with my finances. It’s been years since I first read the book, but I still skim through it every now and then. As I practiced the lessons over the years, I got better at my work and personal commitments. Unknowingly, these seven habits also crept into my financial decisions. Habit No. 1: Be proactive. Financial success won’t happen automatically. We each need to take the initiative and take responsibility. Proactive people realize that procrastination and success seldom go together. They do whatever it takes to get on a wealth-building path. That begins with figuring out the steps toward financial independence. Proactive folks use all available resources to learn. They ask for help from mentors, family members, coworkers, friends and professionals, until they get a handle on financial matters. Instead of leaving things to chance, proactive people focus on things they can control. They don’t complain about unfair pay, because they’re busy finding ways to increase their income and reduce their spending. Result? Missing the employer’s match on a 401(k) or paying sales loads for underperforming mutual funds don’t exist in their playbook. Habit No. 2: Begin with the end in mind. How many of us have gone through a phase of mindless spending or…
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Working the Plans

Sanjib Saha   |  Mar 10, 2020

I’VE DEVELOPED a series of what I call “Geico talks,” named after the ubiquitous insurance company commercials. They’re 15-minute talks that, I joke, are aimed at boosting financial knowledge by 15% or more. The talks are for friends and acquaintances who work at the same company as me or at companies with similar employee benefits. These firms typically have great retirement plans and many employees own company stock. I figured the topics I’d researched for my own finances would help these folks. I also suspected that some friends were making the same mistakes I’d made. With that in mind, I came up with three Geico talks: 1. After-tax 401(k) contributions. Only a minority of 401(k) plans allow so-called mega-backdoor Roth conversions, but it’s worth checking to see whether your plan does. What’s involved? It starts with making after-tax contributions to your employer’s 401(k). These contributions are over and above the usual tax-deductible or Roth 401(k) contribution limit, which in 2020 is $19,500 for those under age 50. The after-tax contributions can sometimes be immediately converted to the company’s Roth 401(k), where the money grows tax-free thereafter. Alternatively, the after-tax dollars can be transferred to a Roth IRA, either while you’re still employed or when you leave the company. If the money ends up in a Roth IRA, either immediately or when you leave your employer, it also escapes the rules for required minimum distributions that apply starting at age 72. My employer’s 401(k) plan allows both after-tax contributions and the ability to convert that money over to the Roth 401(k) option. Ditto for the employers of some friends. Be warned: If you convert to a Roth and the after-tax dollars have enjoyed some investment gains, the conversion will trigger a tax bill, though it’ll typically be modest. 2. Company stock. Many…
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Summer Relief

Sanjib Saha   |  Aug 2, 2021

LIVING IN THE PACIFIC Northwest, my favorite time of year is summer. I love the extra daylight and relief from the nagging rain. In recent years, there’s been an additional reason to look forward to summer: I get to see my paycheck again. Some background: A few years ago, in an online investment forum, another participant—I’ll call him Dave—gave me a tip for early retirement. He suggested that I practice living off my investment portfolio even while working. Many early retirees, in Dave’s opinion, spend too little in the initial years because they struggle with depleting their savings. I decided to give it a try. As a first step, I maxed out my payroll 401(k) contribution. The leftover money in each paycheck went to the employee stock purchase plan and additional tax withholding. These various payroll deductions exhausted my entire part-time pay. That meant I had to cover all my expenses with my investment accounts. As Dave suspected, I’ve had a hard time spending from my brokerage account, especially if it involved selling investments. I figured that a monthly cash distribution would work better psychologically. This prompted me to look for more income-generating investments, such as closed-end bond, utility and real estate funds. Their monthly distributions cover my groceries and utilities. For most of my other funds, the first-quarter distributions arrive in April, just in time to take care of the property tax payments. I tend to defer big-ticket expenses until later months when I start seeing my paycheck again. Recently, extra cash showed up in my bank account on payday. It’s a sign that that my total 401(k) contribution—pretax, catchup and after-tax investments—reached the maximum annual limit. The paycheck drought is over for another year.
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