Stocks are often held in retirement because they are expected to beat inflation over long periods of time. While they generally do, there have also been periods of rising inflation in which stocks suffered poor returns in the face of rising living costs. This is the worst-case scenario for retirees. The period from 1968 to 1982 was particularly bad. Even taking just 4% initial distributions, an investor with $1,000,000 in the S&P 500 ended the period with roughly $288,000 in

People often talk about charitable giving as though it were mostly a question of generosity. But I think charitable giving is also a skill. And like most skills, it tends to become more enjoyable as you get better at it. Think about cooking. If you don't know how to cook, making dinner feels like a chore. Every part of it is stressful, from picking out a recipe, to tracking down each item in the store, to guessing blindly at substitutions when the store doesn't have exactly w

Even if estate taxes aren’t the driving consideration for your parents’ estate structure, there may still be some good opportunities for tax planning. Particularly around minimizing taxes on capital gains. Assets held in a taxable account, as opposed to a retirement account, generally receive a step-up in cost basis at death. The basis “resets” to whatever the asset was worth when the owner passed away. This means the heirs can generally liquidate and diversify those assets i

For people born in 1960 or later, Required Minimum Distributions start at age 75. For everyone else it's 73. At 73, the required withdrawal is only about 3.8% of the account. But the percentage rises with age. At 80, it is closer to 5%. For someone with a $2 million traditional IRA, assuming for simplicity that the balance somehow stayed at exactly $2 million, the required distributions would look roughly like this: Age Distribution Requirement Approximate RMD on $2 Million 7

For decades, retirement investing has followed the same conventional wisdom. When you are young, you can afford to take risk, so you own more stocks. As retirement approaches, you gradually move money into bonds. Once you retire, preserving what you have becomes more important than growing it. There is a lot of common sense behind that approach. If the stock market falls 40% while you are still working, you may have years to recover, and you'll may even emerge better-than-eve

I enjoyed this interview on The Long View with Ryan Frederick https://www.morningstar.com/podcasts/the-long-view/ryan-frederick-why-your-home-may-matter-more-than-your-portfolio-later-life, and have included a summary below: Frederick argues that where someone lives may be one of the most important retirement-planning decisions, because housing affects not only finances, but also physical health, social connection, independence, and quality of life. He calls this “place plann

This is a common risk in blended-family estate planning, especially when a parent remarries later in life. What you don’t want: A parent dies and leaves everything outright to their spouse, assuming the surviving spouse will eventually leave a fair share to the children from the first marriage. This assumption fails so regularly that it has become a plot worthy of Hamlet. A parent dies, the surviving spouse remarries, and the child watches the family legacy pass into someone

Rough Waters, Calm Mind: Navigating the Market's Rapids Would you go whitewater rafting on a river you had never seen before, without a guide? Maybe you would. Some of you are apparently much braver than I am. Sure, you could prepare. You could study maps, read blogs, watch YouTube videos, buy the right equipment, and analyze the river from a dozen different angles. But you would still have to put your raft in the water. The Difference Between Knowledge and Experience There's

During your working years, deferring taxes is often a good strategy for building your net worth. But the purpose of saving money is not to defer taxes forever. Eventually, you'll want to use the money. And that means paying some of the taxes that you've deferred up until now. Deferred taxes function a lot like debt. Part of the balance in a traditional retirement account belongs to the government. You may not know exactly when the bill will come due or what the final tax rat

An Employee Stock Ownership Plan, or ESOP, is a retirement plan that invests primarily in the stock of the company you work for. In plain English, it is a way for employees to build ownership in the business over time, usually without writing a check themselves. That can be a very good thing. It can also create a strange financial situation: the same company that pays your salary may also become one of the largest investments in your retirement plan. That is the basic tradeof

I read Benjamin Franklin’s Autobiography several years ago, and I still think about it. Franklin retired from his printing press business at 42. By then, he had built a successful company, saved enough to become financially independent, and gained control over his time. Upon making the decision to retire he wrote, “I would rather have it said, ‘He lived usefully,’ than, ‘He died rich.’” Indeed, many of the accomplishments for which he is best remembered came after he no longe

One of the hardest retirement questions is also one of the most basic: How much does your life actually cost? That number affects nearly every part of a retirement plan. It helps determine how much income you will need from your portfolio, how much cash you should keep available, whether you can retire now or should work another year, and how much flexibility you will have if markets perform poorly. Yet many people reach retirement without a clear answer. They know their mort

I recently looked at my grocery budget and realized something strange. Compared with eating more meals at restaurants (or even grabbing a quick meal at Chipotle), I have a functionally unlimited grocery budget. I can keep my fridge stocked with everything that makes cooking easier and more enjoyable, and still spend far less than I would eating out more often. So the problem got reframed from, “I need to spend less money eating out,” to “I need to keep more veggies in my frid

I’ve had a handful of parents and grandparents ask me about the new “Trump Accounts” (aka 530A accounts). Many are excited about the idea of giving their kids a head start financially, particularly the benefit of 60 years or more of compound interest. While the retirement math is pretty compelling, if the intent is for funds to be used in early adulthood, I think there are better tools available. If the funds are left alone until retirement age, compound interest works mirac

I met a man who had spent the last four years living out of a camper perched atop an old F-250. He does own a home, no mortgage, but it sits largely unused. He has significant assets from the sale of his business. Since retiring, he has spent nearly all his time traveling the US, Canada, and South America. He is 63 years old. For the sake of his privacy, let's call him Marco. In the winters, Marco skis four days a week (Monday-Thursday), then spends his weekends restocking hi

When clients talk to me about long-term care late in life, many express a similar worry. It’s usually framed financially at first: not wanting to become a burden to their kids, not wanting to spend down everything they’ve built, not wanting to end up stuck in an expensive facility for years. But I sometimes think there’s a deeper concern underneath that. Not just the fear of poor health, but the possibility of feeling disconnected from the people and routines that make life g

Most people give in a reactive way. A friend asks for a donation. A letter comes in the mail. It’s the end of the year and you realize you haven’t given much, so you write a few checks. There are a few problems with this approach. First, and maybe this is just me, but it feels like an obligation. There’s a little bit of guilt involved. “I forgot to do this. Am I letting them down if I don’t give? What’s the least I need to do to avoid feeling bad about this?” It’s uncomfort

I am convinced that money’s highest use is to support a good life. And one of the best ways to have a better life is to be of service to others. Two of the most vital needs for humans are our need for connection, and our need for purpose. Sadly, I think these are some of the most commonly unmet needs in our society today. But when you get out of your own head, away from your own needs and fears, and instead focus on what you can do to be of service to others, everything els

I’ve been thinking about how I’d like to be when I’m older. It’s a worthwhile question for anyone. Even if you’ve just made it to retirement, you likely have many years ahead to shape your future life. Life is a creative act. Our future comes from how we spend our time today. The choices we make, the habits we form, the attitudes we cultivate. When I find people I admire, or just specific qualities, I try to reverse engineer that back to the present. What would I have to be

I came across a talk from Arthur Brooks on leisure and found it thought-provoking. The biggest shift for me was the distinction between passive and active leisure. Here's the link to that, notes below: https://youtu.be/n0apNHGLBMo Passive leisure looks like watching TV, scrolling, or reading the news. Active leisure is more engaging. It involves creating, participating, or connecting with something in a more meaningful way. And it turns out, it contributes far more to happin