Name That Bias
Greg Spears | Jan 6, 2022
THE FOUNDERS OF economics were prodigious thinkers. They tended to believe that others shared their brainpower and so would do as they did—wrinkle their brow, think deeply and make the best choices with their scarce resources. Problem is, this isn’t how most of us operate. Instead, we take mental shortcuts. This is understandable: We’d never rise from the breakfast table to begin our day if we rigorously analyzed the health effects of eggs, orange juice and coffee. Evolution has also favored those who thought in shortcuts. If our ancestors pondered whether an object in the jungle was a stick or a snake, they might have been bitten. It was better to react to the uncertainty by jumping away. The mental shortcuts that humans take aren’t random, but show persistent “leans” or biases. That’s good news. It means many can be identified and countered if we slow down and think a bit harder. To help in this endeavor, here are 17 common financial biases that researchers have identified. Anchoring. It’s hard to objectively value an asset, so many people rely on shortcuts. As the fair market value, they fix on the price they paid or some peak price the asset reached. Someone who won’t sell for less is said to be “anchored” on a particular price. But assets, alas, have no memory and aren’t obliged to return to that price again. Availability bias. People overestimate the value of the information that’s most accessible in their memory. If they have a roommate who day-trades meme stocks, it might seem like a more reasonable investment than cold logic would suggest. If everyone in our circle is buzzing about nonfungible tokens, goldmining shares or taxi medallions, their intrinsic worth may seem more certain to us. Blindspot bias. We’re all subject to biases, but we recognize…
Read more » Think of the Children
Greg Spears | Aug 24, 2022
WE PUT OUR TWO KIDS through college using 529 plans—and I estimate the accounts easily added 10% to the value of our college savings, compared to what we would have accumulated if we’d invested through a regular taxable account. Yet only 37% of families use 529s to help pay for college, according to a 2021 survey by Sallie Mae. Like an IRA, a 529 plan gives you a tax break for saving for a specific goal—but, in this case, college rather than retirement. Money in a 529 grows tax-deferred and, if used to pay for qualifying education expenses, can be withdrawn tax-free. You don’t get a federal tax deduction for funding a 529, like you can with a traditional IRA or 401(k). Several states, however, do give a state income-tax deduction, including Pennsylvania, where we live. Pennsylvania’s state income-tax rate is 3.07%. Each year, Pennsylvania allows residents to deduct up to the gift-tax exclusion—$16,000 in 2022—for contributions to any 529 plan in the country. Other states provide a deduction for in-state plans only, which limits your choice. At the end of this article, I’ll offer some suggestions for finding a good plan. We used Utah’s 529 plan because it had rock-bottom fees, offered low-cost index funds and didn’t charge a sales commission. We invested in lifecycle funds that started stock-heavy when the kids were young, then switched to a majority bond allocation as college neared. When we took withdrawals, we owed no federal or state taxes because all the money was spent on qualifying education expenses. If you’re keeping score, this means 529 plans potentially offer a rare tax triple play: tax-deductible contributions at the state level, tax-deferred growth and tax-free withdrawals. This tax trifecta is shared with only one other investment account that I know of—health savings accounts. HSAs…
Read more » Reacting to the Tariffs
Greg Spears | Aug 7, 2025
A NEW TARIFF REGIME takes effect today. If the costs are passed along to buyers, the price of cars, orange juice, clothing and Swiss chocolates could increase, possibly dramatically. I dealt with price shocks earlier this year. It gives me some insight into how we might behave if prices rise suddenly. Although I could have afforded the higher prices, the strong emotional impact made me highly adaptive. The price shock mobilized me to take action, even though it was only over a dollar or two. In February, Patricia and I flew to the remote Hawaiian island of Molokai, which is about the size of Manhattan but with only 7,000 residents. We flew on an eight-seat plane that resembled a giant grasshopper. Before taking off, a couple of other passengers shoved big tubs of groceries into the plane’s cargo hold. A trip to the island’s grocery store explained why. Prices there weren’t just high—they seemed absurd. I kept taking items off the shelf and then putting them back after I saw the price, such as $12 for a small jar of mayonnaise. Pineapples cost $8, more than double what we paid at home in Pennsylvania. Eggs were $12 a dozen. A local acquaintance explained that Molokai was at the tail end of the global supply chain. Everything costs more at the grocery store because it has either been flown in or shipped over the rough seas from other Hawaiian Islands. I had a startling reaction. Prices seemed so out of line that it became a game to stock our kitchen with less costly foods. We pursued several methods that shoppers might adopt if the tariffs start to pinch. Here are some hacks we developed over our two-week stay: Buy local. A man sold local fruit from a card table set up…
Read more » Rising Tide
Greg Spears | Jul 28, 2021
YOU CAN ADD ANOTHER item to the list of things in short supply: Up here in Maine, used boats are hard to find. “You can’t buy a house, a car or a boat this summer,” said Sean, manager of the local lobster dock in Bremen, Maine. Luckily, you can still buy lobsters from Sean, though they’re mighty pricey. Every afternoon, scuffed-up boats with names like Chomper and Sandollar glide up to the dock to winch their catch up to Sean’s lobster tanks. On a recent July day, hard-shell lobsters fetched $10.95 a pound and soft-shells, which have less meat inside, $9.95. The same lobsters cost $6 and $5 last summer. Back then, China wasn’t buying, and neither were restaurants. Now everyone wants Maine lobsters, Sean said, including Canadian canning houses that let their inventories run down. To an economist, it looks like too many dollars chasing too few goods—the classic recipe for inflation. At a conference organized by University of Pennsylvania’s Wharton School in April, Prof. Jeremy Siegel noted that M2 money supply—ready money, including cash and deposits in checking accounts, savings accounts, certificates of deposit and money market funds—jumped 25% in less than a year. It has never expanded by that much before, Siegel said, not even during the difficult days of the Second World War. Siegel predicted a burst of inflation for the next three or four years. “When will it start?” someone asked. Right away, Siegel answered. After the conference, I bought shares in an inflation-protected Treasury bond fund. Who knows what will happen, but I hope to ride inflation like a surfer on the crest of a wave. Too bad I didn’t think of the really smart inflation play—to buy a used boat in Maine last summer.
Read more » Backstage at Antiques Roadshow
Greg Spears | May 5, 2025
While I was in Savannah last week, PBS was filming an episode of Antiques Roadshow, a show I’ve always enjoyed. On a lark, my girlfriend Patricia and I walked over and took a backstage tour with a woman who worked for Georgia Public Broadcasting. This is what we saw: Hundreds of people who had won free tickets in an online lottery lined up at the entrance to the Georgia Railroad Museum. Most carried small items in tote bags. One woman pulled a grandfather clock in a little wagon. Another wheeled a wooden chest with a sailing ship painted on its lid. Once they showed their printed tickets to security, visitors were directed to the triage tent. There, nattily dressed experts in bow ties and pocket squares gave their items the once-over. If one was worthy of further evaluation, their admissions leaflet was stamped with one of 23 specialist areas, such as Chinese art, ceramics, dolls, sports memorabilia, games and toys. At the specialist booths, guests would queue up again, some under the hot Georgia sun and others beneath the shade of a towering locomotive in the museum’s roundhouse. They might wait 10 or 20 minutes to be seen at a busy booth, such as furniture or paintings. Everyone seemed cheerful and relaxed, wondering if they had a prize. The show’s experts evaluated some 1,300 objects in one day at the railroad museum. Of these, about 10% are selected for a filmed appraisal with well-known experts like Leigh Keno or Lark Mason. And of these 130 filmed scenes, approximately 30 will make it into the final broadcast. No doubt we’ll see many wonderful and valuable objects when the Savannah show is broadcast in 2026. Yet the odds of making it into that broadcast are 30 out of 1,300, or roughly 2%.…
Read more » Raising Dough
Greg Spears | Jul 25, 2025
The best financial advice I know is “live on less than you earn and save the difference.” But what if there’s no daylight between what you earn and what you spend? Many of us confront this problem because of four scary expenses: housing, healthcare, student loans and child care. Take housing alone. By my calculations, it would take a six-figure income to buy a $435,300 home, which is the median cost of a U.S. home today according to the National Association of Realtors.* The median U.S. household comes up well short of this, with $78,171 in 2025. With challenges like these, it’s time to add a new chapter to the financial planning textbook—how to make more money. What would you include in a “make money” playbook? I’ll pitch my ideas, but it honestly feels like I’m stating the obvious. You may have better ideas from your life. Please add them in comments—I look forward to reading them. Here are my thoughts: If you’re still in school, know what your college major pays before you—or your child—graduates. You can look up the average first-year earnings of many majors at specific colleges here. It’s a goldmine of nuggets like this: At Purdue, graduates in biology earn $33,500 a year, on average, versus $69,200 for mechanical engineers. If you’re already in the workforce, continue your education by earning a professional designation or advanced degree. This makes you a trusted authority with your employer. Extra credit: Many employers, like mine, will pay the freight on a job-related degree. Job hop for a big pay bump. I wrote about this once during the pandemic, when job seekers had the upper hand in salary negotiations. That may not be true now, except in specialty fields like AI. Back then, one commenter said that changing employers seemed…
Read more »
John Yeigh is an author, coach and youth sports advocate. His book “Win the Youth Sports Game” was published in 2021. John retired in 2017 from the oil industry, where he negotiated financial details for multi-billion-dollar international projects. Check out his earlier articles. 
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- Tax-free growth when used for qualified education expenses
- High gift-tax contribution limits: $19K per contributor per year (indexed)
- New ability to convert up to $35K into a Roth IRA for the beneficiary
Cons- Relatively complex with penalties and taxes on non-qualified withdrawals
- Limited, state-approved investment options
- Risk of underutilization if the child does not pursue qualifying education
Caveats- Technology and AI could significantly reduce education’s cost structure in the future
- Roth conversions are capped at $35K lifetime
- The 529 must be open 15 years, and contributions must age 5 years before conversion
- Conversions require the beneficiary to have earned income (i.e. they could Roth anyway)
- Annual Roth contribution limits still apply (e.g., $7.5K in 2026), so completing the full $35K conversion would take five years
UGM Custodial Accounts Pros- Brokerage account where up to $2.7K of unearned income can be tax-free each year
- High gift-tax contribution limits: $19K per contributor per year (indexed)
- Broad investment flexibility — stocks, bonds, funds, etc.
- Few restrictions on how funds may be used for the child’s benefit
- Potential for low taxes on capital gains, but subject to marginal “kiddie tax” at parent’s rates until tax-independency or age 24
Cons- Higher income or capital gains could trigger the kiddie tax at the parents’ marginal rate
- Assets count as the child’s for financial-aid purposes
Caveats- Custodians have some ability to spend down the account for legitimate child expenses if the child is a wild-child in the later teen years
Coverdell Accounts Pros- Tax-free growth for qualified education expenses
- More flexible investment choices than most 529 plans
Cons- Low contribution limit: $2K per year plus income limits restrict who can contribute
- Essentially irrelevant today given the expanded options within 529 plans
Trump Accounts Pros- $1K government seed deposit for children born 2025–2028
- Contribution limit of $5K per year in 2026, indexed to inflation
- Parent employers may contribute up to $2.5K per year (also indexed)
- Tax-deferred growth with Roth-conversion opportunities beginning at age 18
- No earned-income requirement for Roth conversions
- Roth conversions are ideal in low-income years starting after age 18 once the child has transitioned to tax-independency of parents or at age 24 when “kiddie taxation” ends. Early tax independence could even be a combined Roth plus student financial-aid strategy
- Potential to convert large account values over several years at relatively low tax rates (potentially marginal 10-12% tax-rates, but averaging less due to the standard deduction).
Cons- Investment options limited to low-cost indexed stock funds (not necessarily a drawback)
- Penalty-free withdrawals must wait until age 59½, but the accounts could be advantageous even including penalties
- Limited custodian control and intervention possibilities if the teen is a wild-child
Caveats- If Roth conversions are not undertaken during the child’s low-income years, a UGMA invested to capture long-term capital gains tax-rates may outperform a Trump Account taxed at ordinary income tax-rates
- Watch this space as future adjustments or eligibility changes are possible
In effect, the 529 is a two-decade college savings program having some complexity and withdrawal limitations; the UGM is a reasonably flexible, 18-30-year college or house downpayment savings program; and the Trump account is a somewhat inflexible, sixty-year retirement accelerator. Resulting Playbook Here is our family’s intended playbook for tax-advantaged accounts in the grandchild's name:- Parents’ retirement account fundings remain their top priority - 401K’s at a minimum up to the match, HSAs with their triple tax advantages, and Roths as long as eligible within income limits.
- A Trump account has already been initiated to secure the free $1K government seed contribution – grows to potentially $2.6K at age 18 after penalties and taxes.
- Limited 529 funding has also been initiated to start the 15-year clock for potential later Roth conversions.
- The family’s next priority is to fund the Trump account which starts at $5K later this year. Maximizing the Roth conversion opportunity will require ~$116K of contributions (at 3% inflation) over 18 years which we grandparents intend to help fund. I estimate the Roth converted Trump account could grow to ~$2 million of tax-free money at age 60 (6% growth) assuming early-age Roth conversions, and the Wall Street Journal projects as much as $3 million (link likely paywalled).
- The subsequent priorities are to start UGM taxable account and 529 account contributions in parallel to perhaps initial levels of about $35K each. This may take our family some years depending upon available resources for contributions.
For the UGM account, a balance of $35K should capture a sizeable chunk of the annual $2.7K tax-free income limit by investing in high-yield income alternatives. For the 529 account, $35K aligns with the Roth conversion limit. On a personal note, we had extremely positive UGM outcomes with our children. We saved taxes for two decades, and each child used the ~$60K balance as down payments on their first house shortly after college. Due to the 529’s withdrawal rigidities and potential technology impacts, we are unlikely to fund the 529 to the max.- We will skip Coverdells as the alternatives offer ample savings opportunity in the child’s name ($200K+).
- Depending upon spare resources available for gifting, we can always reassess future contributions.
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