Most of us will love many people during our life, but very few possessions.
I HAVE NO IDEA HOW stocks will perform this year or next. But I have full confidence that a globally diversified stock portfolio will fare just fine over the decades ahead.
My optimism, it seems, isn’t shared by many HumbleDollar readers, who fear we’re facing some rough years for the economy and the stock market. How do I justify my optimism about the long term? Here are five reasons.
1. Heads I win,
EVER SINCE I RETIRED, mornings are the best part of my day. I always go for a long, quiet walk before sunrise. The only person I usually see is Mark, walking his dog. It’s a great way to start my day. By the time I get home, my wife is up and we have breakfast together.
Last week, I had coffee with Eric, Rob and Craig. We met at a Starbucks in the neighborhood where I used to live.
THE LONGER I SPEND in retirement, the more convinced I am of the benefit of reliable income. One of retirement’s most pronounced psychological shocks is the loss of a regular paycheck. After four decades of working, you get used to one coming in every two weeks. The occasional consulting paycheck, even a small one, makes me inordinately happy.
I’m fortunate to have a traditional defined-benefit pension. It built up over 31 years of working with a large aerospace engineering firm.
ONE OF MY FAVORITE books is The Paradox of Choice by Barry Schwartz. Its subtitle is Why More Is Less: How the Culture of Abundance Robs Us of Satisfaction. The principles that the book discusses have important implications for how we manage our money.
Schwartz distinguishes between “maximizers” and “satisficers.” A maximizer is someone who needs to be assured that he or she is making the best decision possible.
SOME PEOPLE CAN LOOK at a blank page and imagine a new creation—perhaps a new business or a new house. I can’t.
What I seem to be pretty good at is taking something that’s broken and coming up with creative solutions for fixing it. It’s like a game or a puzzle. The goal: Bring this broken object back to life as cheaply as possible.
When, say, a washing machine or a dishwasher breaks, the repair person will look up the manufacturer and order the necessary replacement part.
HOW CAN WE GET greater satisfaction from our life—and what role does money play? Below is an edited excerpt from A Wealth of Well-Being, published this month by Wiley.
I often note that the biggest risks in life aren’t found in the stock market. If you want real risk, I say, get married. And if you want more risk, have children.
People laugh. The point is obvious.
I KEEP SEEING THEM—overly complicated, overly expensive investment portfolios. The most recent belonged to a widow in her 70s, with modest earned income, Social Security benefits and about $5,000 in taxable fund distributions for 2023. She was someone I helped during the recent tax-filing season, when I was volunteering at an AARP TaxAide site in Monmouth County, New Jersey.
Her portfolio held about a dozen mutual funds, most of which I’d never heard of.
IN MY EARLY 50s, when retirement began looking like a viable option, I started thinking seriously about what my life might look like after I stopped working as an engineer at a nearby nuclear power plant. Earlier in my career, I’d imagined living off my pension and not working at all. But by my 50s, I wasn’t so sure. I felt retirement could be a time to explore other work opportunities.
My favorite hardware store is less than a mile from my house.
I’VE FOUND RETIREMENT to be a conundrum. We finally have the time to pursue any activity we want in a leisurely manner—spend time with family and friends, exercise, sleep, travel, read, binge watch TV, knock items off our bucket list. On the other hand, I now hear the constant ticking of life’s clock.
Tick tock, tick tock.
For the decades before retiring, life for my wife and me was pedal-to-the-metal with work, children, commuting and chores,
I WAS A PART-TIME instructor in public speaking for Dale Carnegie & Associates during the 1980s and early 1990s. I taught a course at the Downtown Athletic Club in lower Manhattan.
At the time, my wife and I were living in northwestern New Jersey, and we each took the bus into Manhattan to our respective jobs. The course was given after work, so I had to take a late bus home. This meant my wife needed to drive to the bus depot to pick me up.
NO. 87: A LONG LIFE is a big risk. On average, 65-year-olds live until their mid-80s. But that’s the average—and half of all 65-year-olds will live longer. How can you cope with this longevity risk, especially given the threat from inflation? Your financial arsenal might include stocks, delayed Social Security benefits, and immediate and deferred income annuities.
GET A FREE CREDIT score. You can learn your score at websites such as Bankrate, Credit Karma, Credit Sesame, NerdWallet and WalletHub. Credit scores are also available from firms like Capital One and Chase, even if you aren’t currently one of their customers. Not all these sites will tell you your FICO score—the most widely used scoring system.
HUMAN CAPITAL. If we’re early in our career, our most valuable asset is usually our human capital—our ability to pull in a paycheck. That paycheck allows us to service debt, provides the savings needed for retirement and frees us up to invest in stocks. But as retirement approaches, we should aim to pay off all debt and shift maybe half our portfolio into bonds.
NO. 26: WE SHOULD strive to spend our days as we wish—by using our dollars to escape today’s chores that we dislike, while also saving for the ultimate prize: full financial freedom.
SEQUENCE-OF-RETURN risk has long been a major concern among retirees—and it’s a real danger right now for those who just quit the workforce or soon will. Also known simply as sequence risk, it refers to the chance that the market declines sharply, forcing retirees to sell investments at depressed prices to generate income.
Wade Pfau, a leading retirement researcher, published a paper highlighting the danger involved. As he makes clear, a few years of market losses coupled with portfolio withdrawals can decimate savings,
WE HAVE A PROBLEM: We may have saved too much for our daughter’s college education.
My wife and I started contributing aggressively to our daughter’s 529 college savings account as soon as she was born. For the first two years, we invested the full amount of the annual gift-tax exclusion, which was then $14,000. Now, the exclusion is at $16,000, but lately we haven’t been saving as much as we used to. The reason: Our early aggressive saving,
LAST FRIDAY AT 7:16 A.M., I sent an email to HumbleDollar’s editor. We were discussing what this blog post should be about. This was before I got the news alert that S&P 500 futures were up bigtime, following the historic selloff the day before.
I concluded my email to Jonathan this way: “The market never gives you the big fat target you want. I’ve got great plans if the market behaves today like it did yesterday,
WHAT SHOULD BE THE first rule of personal finance? My vote: Always look for ways to stay in the center lane—that is, to take a balanced approach. As 2024 gets underway, here are 10 ways you could apply this principle.
1. Housekeeping. Over time, many of us accumulate a grab bag of investments—some good, some not-so-good. Those in the not-so-good category can pose a challenge. Suppose you own an expensive mutual fund.
WE LIKE TO THINK we’re rational, especially when it comes to spending and investing. But in truth, all of us are susceptible to impulsive decision-making and unconscious persuasion. Result? We often end up wasting our hard-earned money.
According to traditional economics—which depicts humans as conscious, rational decision-makers—this shouldn’t happen. But this traditional view has been under attack since the late 1800s, when Thorstein Veblen explored conscious irrational decisions, such as buying items simply to impress others.
NO. 26: WE SHOULD strive to spend our days as we wish—by using our dollars to escape today’s chores that we dislike, while also saving for the ultimate prize: full financial freedom.
GET A FREE CREDIT score. You can learn your score at websites such as Bankrate, Credit Karma, Credit Sesame, NerdWallet and WalletHub. Credit scores are also available from firms like Capital One and Chase, even if you aren’t currently one of their customers. Not all these sites will tell you your FICO score—the most widely used scoring system.
NO. 87: A LONG LIFE is a big risk. On average, 65-year-olds live until their mid-80s. But that’s the average—and half of all 65-year-olds will live longer. How can you cope with this longevity risk, especially given the threat from inflation? Your financial arsenal might include stocks, delayed Social Security benefits, and immediate and deferred income annuities.
HUMAN CAPITAL. If we’re early in our career, our most valuable asset is usually our human capital—our ability to pull in a paycheck. That paycheck allows us to service debt, provides the savings needed for retirement and frees us up to invest in stocks. But as retirement approaches, we should aim to pay off all debt and shift maybe half our portfolio into bonds.
SEQUENCE-OF-RETURN risk has long been a major concern among retirees—and it’s a real danger right now for those who just quit the workforce or soon will. Also known simply as sequence risk, it refers to the chance that the market declines sharply, forcing retirees to sell investments at depressed prices to generate income.
Wade Pfau, a leading retirement researcher, published a paper highlighting the danger involved. As he makes clear, a few years of market losses coupled with portfolio withdrawals can decimate savings,
WE HAVE A PROBLEM: We may have saved too much for our daughter’s college education.
My wife and I started contributing aggressively to our daughter’s 529 college savings account as soon as she was born. For the first two years, we invested the full amount of the annual gift-tax exclusion, which was then $14,000. Now, the exclusion is at $16,000, but lately we haven’t been saving as much as we used to. The reason: Our early aggressive saving,
LAST FRIDAY AT 7:16 A.M., I sent an email to HumbleDollar’s editor. We were discussing what this blog post should be about. This was before I got the news alert that S&P 500 futures were up bigtime, following the historic selloff the day before.
I concluded my email to Jonathan this way: “The market never gives you the big fat target you want. I’ve got great plans if the market behaves today like it did yesterday,
WHAT SHOULD BE THE first rule of personal finance? My vote: Always look for ways to stay in the center lane—that is, to take a balanced approach. As 2024 gets underway, here are 10 ways you could apply this principle.
1. Housekeeping. Over time, many of us accumulate a grab bag of investments—some good, some not-so-good. Those in the not-so-good category can pose a challenge. Suppose you own an expensive mutual fund.
WE LIKE TO THINK we’re rational, especially when it comes to spending and investing. But in truth, all of us are susceptible to impulsive decision-making and unconscious persuasion. Result? We often end up wasting our hard-earned money.
According to traditional economics—which depicts humans as conscious, rational decision-makers—this shouldn’t happen. But this traditional view has been under attack since the late 1800s, when Thorstein Veblen explored conscious irrational decisions, such as buying items simply to impress others.
What's your favorite tax-savings strategy?
Traditional Medicare or Medicare Advantage?
What money advice do you recall hearing from your parents?