WE HAVE A SLEW of economic problems in the U.S. But many of them can be traced, at least in part, to a single cause: We increasingly have too few workers and too many retirees. HumbleDollar’s latest newsletter looks at the issue—and what it means for both public policy and our portfolios.
June’s newsletter also touches on my struggle to understand the financial behavior and beliefs of my fellow Americans, and it includes the usual list of the seven most popular blogs from the prior month.
MY MATERNAL grandmother recently celebrated her 97th birthday. Until three years ago, she lived in her own home. Now, she lives in a senior apartment community, where she remains active and independent.
Part of my grandmother’s decision to move out of her home was prompted by her desire to be closer to family members who could assist in her care. According to a 2015 study, over the previous 12 months, more than 34 million Americans had provided some type of unpaid care to an adult age 50 or older.
IS WHAT YOU’RE paid what you’re really paid? Probably not. The compensation that you don’t see each payday has a tremendous impact on your financial security and your future standard of living—and should affect how much you save and how you invest.
Defined benefit pension plans can be the most valuable form of noncash compensation. Health benefits for active and retired employees are a close second—especially so because they’re tax-free compensation (and hence a huge revenue loss for the federal government).
ANNUITIES ARE OFTEN dismissed as costly, complicated contraptions that are more lucrative for Wall Street than investors. And I’m half-inclined to stick with that blanket condemnation, rather than muddy the waters by offering a more nuanced view. I hate the idea that somebody might read this blog and then buy the wrong type of annuity—and end up making a horribly expensive mistake.
Still, I believe there are four types of annuity that can make sense for investors.
PERHAPS YOU’VE HEARD the story of Ronald Read. A lifelong resident of Brattleboro, Vermont, Read was a quiet man. He preferred flannel shirts and spent much of his career as an attendant at a local gas station. Yet, when he died in 2014, even his closest friends were surprised to learn that Read had accumulated a fortune of more than $8 million.
Stories like this appear with some regularity. In 2010, Grace Groner,
WHEN I WAS a child, I remember my parents putting great store by antique furniture, silver cutlery, bone china, cut glass and fine rugs. My maternal grandparents had rare books and old prints. My paternal grandfather had built an extensive stamp collection.
When Clem—as we all called him—died in 1988, he left me his stamp collection. I rarely look at it these days, but I’ve been dutifully carting it around for 30 years, through six changes of residence.
DO THIS YEAR’S meandering markets make you more excited about your portfolio’s prospects—or less so? My contention: How we react to 2018’s lackluster stock market and sliding bond prices says a lot about how we think about investing. Check out my latest article for Creative Planning, where I sit on the investment committee.
I CONTRACTED part-time for nine months last year. As April 17 approached this year, reality lead to realization: 2017’s self-care phase had been well-executed, my tax planning not so much.
Where to find the thousands I owed? As I firmly believe savings need to stay there, I offer nine near-term ways to cut costs and make more money for those in similar ruh-roh situations. Some of these solutions I’ve used, others not:
Excise (some) splurges.
I OFTEN RECEIVE letters and emails from retired individuals in need of financial advice. Many of their queries mention that they attended one of those ubiquitous free lunch seminars offered by investment advisors and estate planners.
While I could ask what enticed them to attend, I’ve already heard the answer lots of times. They fell for the seminar promoters’ promises of free gourmet meals, along with tips on how to earn excellent returns on their investments,
IN LATE MARCH, I set out into the backcountry of central Oregon with eight other women, all on snowshoes or cross-country skis. We traversed more than 22 miles in the heart of the Oregon Cascades, breaking trail and staying in huts. The terrain was steep, the visibility was poor, the snow was deep and there was a stiff wind.
What does this have to do with investing? The trek was reminiscent in three ways:
THE FEDERAL GOVERNMENT recently issued its monthly inflation report. The resulting headlines could have put you to sleep: “Consumer Price Index Rises 0.2% in April.” It would have been easy to skip over this seemingly insignificant story for two reasons: First, the way the government reports inflation data, focusing on the monthly increase, isn’t terribly meaningful. Second, even if you looked at the annual rate, which is 2.5%, inflation just doesn’t seem like much of a concern.
IT RARELY HAPPENS these days, because I’ve been kicking around so long, but occasionally I’m taken aback by some completely nutty financial idea. This happened a few weeks ago, when I heard folks opine that you should always lease cars, not buy them—because cars are depreciating assets.
To be fair, there’s a related idea, which is indeed sound: You want more of your wealth in assets that appreciate in value and less in those that depreciate.
BY ALL ACCOUNTS, I’ve won the game. I know the income my family needs to live our desired lifestyle. I have an inflation-adjusted Navy pension in my future. I have two children and two GI Bills, one for each child. My house is paid off and I’m debt-free. Combine all of this with the 4% rule, and it seems I have enough to produce our desired income for the rest of my life. I have “won the game.”
DESPITE RHETORIC to the contrary, Social Security isn’t going anywhere. Today’s workers will eventually collect benefits. Today’s seniors will continue to receive the benefits they’re entitled to.
But that doesn’t alter the fact that the program faces fiscal problems, is misunderstood, and is used as a political tool to mislead and scare people, especially seniors who depend heavily on Social Security benefits. I regularly scan social media to better understand how everyday Americans view Social Security.
IT’S PROBABLY NO surprise I gravitated toward a career in the sciences: I love compiling data. My master’s thesis was 150 pages of charts, graphs and tables that summarized two years’ worth of research.
When it comes to my finances, I’m equally compelled to gather data. I do so, in part, to create a set of documents that are more tangible than the pixels that make up the account balances on my computer screen.