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If the pay wasn’t so lousy, everybody would retire.

Count the Cash

WHEN WE THINK about portfolio building, we tend to think first about stocks. They’re our engine of investment growth—and the source of endless anxiety. Indeed, to make stock market investing palatable, we take all kinds of precautionary measures, including diversifying broadly, adding bonds, throwing in cash, purchasing gold and goodness knows what else.
But maybe we have this all wrong. Perhaps, instead, we should start with cash: how much we currently have in safe,

Read more »

You’re on Your Own

A WRITER RECENTLY asked my opinion of gig economy jobs and how they could benefit retirees looking for extra income. I looked up the term to be sure my understanding was correct. It was—except we used to call the jobs “temporaries,” “part-time,” “project work” or “consulting.” As I told the writer, a gig economy job sounds pretty good for us retirees who want to keep active or supplement our income, especially if it doesn’t involve being a crossing guard.

Read more »

Measuring Up

IT BAFFLES ME that people often favor stock-picking over index funds—and yet they fail to measure their portfolio’s performance against a proper benchmark. I’m not talking about those who buy a few individual stocks for entertainment or education. For them, it’s a worthwhile pastime and the stakes are low.
But there are others who ignore the evidence and arguments against active management, and devote serious money to picking stocks and timing the market in hopes they’ll earn market-beating returns.

Read more »

Into a Cloud

MY GREAT-UNCLE, Jerry Kelly, was an American pilot in the Second World War. On Oct. 20, 1944, he was flying a close-support mission over Germany when his P-47 Thunderbolt was hit by anti-aircraft fire. After he radioed that he had smoke in the cockpit, his plane began losing altitude and was last seen disappearing into a cloud. Jerry was 20 years old.
More than 71 years later, a UPS carrier delivered a blue box to my home.

Read more »

Peace of Mind

I HAVEN’T BEEN feeling myself lately. Until now, I didn’t understand what had brought this on. You see, I have this different attitude toward money—and it’s changed the way I behave.
Before, it seemed like money was always on my mind. I used to love to read Barron’s every week. Now, I just pick it up in front of my house and toss it in the garage, where it joins 20 other unread copies. 

Read more »

Late Fee

I’M JUST A FEW years from age 65—and being eligible for Medicare. One of my concerns: making a mistake that could trigger penalties.
If you file for Social Security before age 65, you’ll be automatically enrolled in Medicare Part A and B. What if you’re still working at 65? Ask your human resources department for advice. Your coverage at work will dictate whether you should file for Medicare.
If you aren’t covered by an employer’s health insurance plan and you aren’t yet collecting Social Security benefits,

Read more »

Money Guide

Marginal vs. Average

IMAGINE YOU'RE single, you claim the standard deduction and you have income of $53,000 in 2020. You would be in the 22% federal income tax bracket, but that isn’t how much of your income you lose to taxes. On the first $12,400 of income, you wouldn’t owe any federal income taxes, thanks to your standard deduction. The next $9,875 would be taxed at 10% and the subsequent $30,250 would be taxed at 12%. That gets you up to $52,525 in total income. It’s only at that point that your income starts getting taxed at 22%. In other words, while you’re in the 22% marginal federal income tax bracket, just $475 of your $53,000 income would be taxed at that rate. Your total federal income tax bill would be $4,722, putting your average tax rate at 8.9% for your $53,000 in gross income and 11.6% for your $40,600 in taxable income. Your marginal tax rate is crucial for figuring out whether you should buy taxable or tax-free bonds, how much all that mortgage interest is costing you, and whether it makes sense to convert your traditional IRA to a Roth IRA. But your marginal rate isn’t a good indicator of what your total bill will be for the year. For that, you’d want to know your average rate. Next: Standard vs. Itemized Previous: Payroll Taxes
Read more »

Archive

Saving Time

WE HUMANS CAN be a bit irrational. We’ll struggle to the bitter end over potential losses of property, whether it’s fretting over investment losers, trying to recover money we’ve lent or wrangling over our parents’ estate. But strangely, when it comes to what may be our most valuable resource—time—we collectively shrug off losses as a mere nothing. That “mere nothing” can often have significant financial implications for future monies earned or lost. Time has specific properties. It is fixed in amount, but the “expiration date” is unknown. It is highly perishable. Once used, it cannot be reused. Over the years, our time resource will become less and less, while being cherished more and more. Sadly, we cannot go back and reuse the time we misused previously. We all have some time waste forced upon us. I’ve been kept waiting by individuals who value their time but not my time. Others, unwittingly, are just bad judges of time. Many time losses result from inefficient institutional practices, such as legal systems, government bureaucracy, medical care facilities and utility company dealings. Some time loss is part of everyday life. Examples include traffic jams and airline delays. There are also things that just happen, like plumbing problems, storm damage, medical emergencies and school closings. Want to make better use of your time? Consider four strategies: 1. Think carefully about time priorities. Try to avoid giving up truly unique opportunities for the more ordinary. To that end, think about which non-selected options would cause greatest remorse in the long run. 2. Develop a plan to maximize the best use of time. Develop new interests and new expertise. Discover new careers or part-time diversions. Use time to generate new sources of additional income or new ways to reduce expenses. Improve physical fitness and favor a healthier lifestyle, which will translate to potential savings in future medical expenses, including hospital bills, physician treatments, and time in assisted living facilities and nursing homes. Consider reading both fiction and nonfiction, taking college courses, developing hobbies, joining social and service organizations, and try to get in some truly memorable travel. Favor more novel, inspiring, educational or just plain relaxing activities. 3. Consider what time is worth to you. Pay for tasks that rob you of valuable time by hiring help in such areas as lawnmowing, housecleaning, household repairs, painting, car washing, leaf raking, tax preparation and so on. I have adopted a contra-Ben Franklin philosophy of “don’t do today what you can postpone until tomorrow.” I’m generally inclined to give preference to something I really wish to do today, rather than use time for some mundane activity that could easily be postponed. With luck, I may even die before I have to do the darn task. 4. Minimize total time wasters. I refuse to stand in line for pretty much anything. I avoid lines for drive-through banks and fast food. I find that just parking the car and walking in can often save time and add a bit of exercise. I also build in a bit of self-defense for possible wait times: I try to bring along a book or magazine, as well as a legal pad for writing down ideas. I also have a specific plan for those habitually late: I build in a lateness cushion. An example: I’ll set a 4:45 pm appointment time when I want a 5 pm face-to-face meeting. Do I ever make bad use of time? Absolutely. When I look back through my life, I still cringe at those occasions when I used my time on something unimportant, when instead I could have seized the unique opportunity to see Count Basie, Duke Ellington or Jimmy Buffett in concert. I don’t remember what I thought my “better time option” was, but I sure remember what I missed. But there was one instance when the reverse was true. I made the “wise” decision to attend the lecture of world-famous inventor-thinker-futurist R. Buckminster Fuller. Bad decision. Yes, he was a genius, but also a terrible lecturer. Finally, I thought of a better use for my time. I walked out of the lecture and joined dozens of other early-departing scholars in going out for a couple of beers. Dennis E. Quillen is a retired economic geographer and university professor. In addition to blackjack, he loves long-term investing. His previous blogs include Food for ThoughtCutting the Bonds and Bouncing Back.
Read more »

Numbers

JUST 12% of actively managed U.S. stock funds outperformed the broad U.S. stock market over the 15 years through June 2019, according to S&P Dow Jones Indices. Index funds, anyone?

Home Call to Action

Manifesto

NO. 5: WE CAN’T stop misfortune from befalling us—but we can limit the fallout by keeping emergency money, living below our means, taking on debt cautiously and buying the right insurance.

Truths

NO. 56: NO INVESTMENT is risk-free. While the standard measure of risk is volatility, it isn’t the only risk. We also need to consider threats such as inflation, trailing the market averages and failing to amass enough to meet our goals. Indeed, for long-term investors, stocks may be the least risky choice, while safe investments like Treasury bills can be a disaster.

Act

WRITE YOUR own obituary, and list which newspapers and other publications you’d like it sent to. Your family will appreciate having details about your life’s milestones. It will also give you a chance to ponder the achievements you’re most proud of—and it may spur you to consider the work that’s unfinished. What else would you like to accomplish in the years ahead?

Think

DILUTION. As a company sells additional shares or compensates employees with stock, existing shareholders see their stake diluted. Dilution also occurs at the macroeconomic level. As new companies spring up, existing corporations see their claim on the economy’s profits diluted. This dilution has been estimated at two percentage points a year.

Count the Cash

WHEN WE THINK about portfolio building, we tend to think first about stocks. They’re our engine of investment growth—and the source of endless anxiety. Indeed, to make stock market investing palatable, we take all kinds of precautionary measures, including diversifying broadly, adding bonds, throwing in cash, purchasing gold and goodness knows what else.
But maybe we have this all wrong. Perhaps, instead, we should start with cash: how much we currently have in safe,

Read more »

You’re on Your Own

A WRITER RECENTLY asked my opinion of gig economy jobs and how they could benefit retirees looking for extra income. I looked up the term to be sure my understanding was correct. It was—except we used to call the jobs “temporaries,” “part-time,” “project work” or “consulting.” As I told the writer, a gig economy job sounds pretty good for us retirees who want to keep active or supplement our income, especially if it doesn’t involve being a crossing guard.

Read more »

Measuring Up

IT BAFFLES ME that people often favor stock-picking over index funds—and yet they fail to measure their portfolio’s performance against a proper benchmark. I’m not talking about those who buy a few individual stocks for entertainment or education. For them, it’s a worthwhile pastime and the stakes are low.
But there are others who ignore the evidence and arguments against active management, and devote serious money to picking stocks and timing the market in hopes they’ll earn market-beating returns.

Read more »

Into a Cloud

MY GREAT-UNCLE, Jerry Kelly, was an American pilot in the Second World War. On Oct. 20, 1944, he was flying a close-support mission over Germany when his P-47 Thunderbolt was hit by anti-aircraft fire. After he radioed that he had smoke in the cockpit, his plane began losing altitude and was last seen disappearing into a cloud. Jerry was 20 years old.
More than 71 years later, a UPS carrier delivered a blue box to my home.

Read more »

Peace of Mind

I HAVEN’T BEEN feeling myself lately. Until now, I didn’t understand what had brought this on. You see, I have this different attitude toward money—and it’s changed the way I behave.
Before, it seemed like money was always on my mind. I used to love to read Barron’s every week. Now, I just pick it up in front of my house and toss it in the garage, where it joins 20 other unread copies. 

Read more »

Late Fee

I’M JUST A FEW years from age 65—and being eligible for Medicare. One of my concerns: making a mistake that could trigger penalties.
If you file for Social Security before age 65, you’ll be automatically enrolled in Medicare Part A and B. What if you’re still working at 65? Ask your human resources department for advice. Your coverage at work will dictate whether you should file for Medicare.
If you aren’t covered by an employer’s health insurance plan and you aren’t yet collecting Social Security benefits,

Read more »

Free Newsletter

Numbers

JUST 12% of actively managed U.S. stock funds outperformed the broad U.S. stock market over the 15 years through June 2019, according to S&P Dow Jones Indices. Index funds, anyone?

Manifesto

NO. 5: WE CAN’T stop misfortune from befalling us—but we can limit the fallout by keeping emergency money, living below our means, taking on debt cautiously and buying the right insurance.

Home Call to Action

Act

WRITE YOUR own obituary, and list which newspapers and other publications you’d like it sent to. Your family will appreciate having details about your life’s milestones. It will also give you a chance to ponder the achievements you’re most proud of—and it may spur you to consider the work that’s unfinished. What else would you like to accomplish in the years ahead?

Truths

NO. 56: NO INVESTMENT is risk-free. While the standard measure of risk is volatility, it isn’t the only risk. We also need to consider threats such as inflation, trailing the market averages and failing to amass enough to meet our goals. Indeed, for long-term investors, stocks may be the least risky choice, while safe investments like Treasury bills can be a disaster.

Think

DILUTION. As a company sells additional shares or compensates employees with stock, existing shareholders see their stake diluted. Dilution also occurs at the macroeconomic level. As new companies spring up, existing corporations see their claim on the economy’s profits diluted. This dilution has been estimated at two percentage points a year.

Money Guide

Start Here

Marginal vs. Average

IMAGINE YOU'RE single, you claim the standard deduction and you have income of $53,000 in 2020. You would be in the 22% federal income tax bracket, but that isn’t how much of your income you lose to taxes. On the first $12,400 of income, you wouldn’t owe any federal income taxes, thanks to your standard deduction. The next $9,875 would be taxed at 10% and the subsequent $30,250 would be taxed at 12%. That gets you up to $52,525 in total income. It’s only at that point that your income starts getting taxed at 22%. In other words, while you’re in the 22% marginal federal income tax bracket, just $475 of your $53,000 income would be taxed at that rate. Your total federal income tax bill would be $4,722, putting your average tax rate at 8.9% for your $53,000 in gross income and 11.6% for your $40,600 in taxable income. Your marginal tax rate is crucial for figuring out whether you should buy taxable or tax-free bonds, how much all that mortgage interest is costing you, and whether it makes sense to convert your traditional IRA to a Roth IRA. But your marginal rate isn’t a good indicator of what your total bill will be for the year. For that, you’d want to know your average rate. Next: Standard vs. Itemized Previous: Payroll Taxes
Read more »

Archive

Saving Time

WE HUMANS CAN be a bit irrational. We’ll struggle to the bitter end over potential losses of property, whether it’s fretting over investment losers, trying to recover money we’ve lent or wrangling over our parents’ estate. But strangely, when it comes to what may be our most valuable resource—time—we collectively shrug off losses as a mere nothing. That “mere nothing” can often have significant financial implications for future monies earned or lost. Time has specific properties. It is fixed in amount, but the “expiration date” is unknown. It is highly perishable. Once used, it cannot be reused. Over the years, our time resource will become less and less, while being cherished more and more. Sadly, we cannot go back and reuse the time we misused previously. We all have some time waste forced upon us. I’ve been kept waiting by individuals who value their time but not my time. Others, unwittingly, are just bad judges of time. Many time losses result from inefficient institutional practices, such as legal systems, government bureaucracy, medical care facilities and utility company dealings. Some time loss is part of everyday life. Examples include traffic jams and airline delays. There are also things that just happen, like plumbing problems, storm damage, medical emergencies and school closings. Want to make better use of your time? Consider four strategies: 1. Think carefully about time priorities. Try to avoid giving up truly unique opportunities for the more ordinary. To that end, think about which non-selected options would cause greatest remorse in the long run. 2. Develop a plan to maximize the best use of time. Develop new interests and new expertise. Discover new careers or part-time diversions. Use time to generate new sources of additional income or new ways to reduce expenses. Improve physical fitness and favor a healthier lifestyle, which will translate to potential savings in future medical expenses, including hospital bills, physician treatments, and time in assisted living facilities and nursing homes. Consider reading both fiction and nonfiction, taking college courses, developing hobbies, joining social and service organizations, and try to get in some truly memorable travel. Favor more novel, inspiring, educational or just plain relaxing activities. 3. Consider what time is worth to you. Pay for tasks that rob you of valuable time by hiring help in such areas as lawnmowing, housecleaning, household repairs, painting, car washing, leaf raking, tax preparation and so on. I have adopted a contra-Ben Franklin philosophy of “don’t do today what you can postpone until tomorrow.” I’m generally inclined to give preference to something I really wish to do today, rather than use time for some mundane activity that could easily be postponed. With luck, I may even die before I have to do the darn task. 4. Minimize total time wasters. I refuse to stand in line for pretty much anything. I avoid lines for drive-through banks and fast food. I find that just parking the car and walking in can often save time and add a bit of exercise. I also build in a bit of self-defense for possible wait times: I try to bring along a book or magazine, as well as a legal pad for writing down ideas. I also have a specific plan for those habitually late: I build in a lateness cushion. An example: I’ll set a 4:45 pm appointment time when I want a 5 pm face-to-face meeting. Do I ever make bad use of time? Absolutely. When I look back through my life, I still cringe at those occasions when I used my time on something unimportant, when instead I could have seized the unique opportunity to see Count Basie, Duke Ellington or Jimmy Buffett in concert. I don’t remember what I thought my “better time option” was, but I sure remember what I missed. But there was one instance when the reverse was true. I made the “wise” decision to attend the lecture of world-famous inventor-thinker-futurist R. Buckminster Fuller. Bad decision. Yes, he was a genius, but also a terrible lecturer. Finally, I thought of a better use for my time. I walked out of the lecture and joined dozens of other early-departing scholars in going out for a couple of beers. Dennis E. Quillen is a retired economic geographer and university professor. In addition to blackjack, he loves long-term investing. His previous blogs include Food for ThoughtCutting the Bonds and Bouncing Back.
Read more »