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State Farm Dividend

Bogdan Sheremeta  |  Sep 2, 2026

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A bleak picture for retirement in the future?

R Quinn  |  Sep 2, 2026

"I would think so, but it didn’t stop them from publishing it. I bet some people take it very seriously, statistically valid or not. Of course, that seems quite popular these days."
- R Quinn
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This would be a great posting on a web site with the name “HaughtyDollar.”

R Quinn  |  Aug 28, 2026

"Learning takes many forms and people learn in different ways, sometimes from reading others experiences, sometimes from debate on different points of view. That's why I wrote a section for My Money Journey I would suggest that there is a learning experience available from the comments and criticisms made on this post. I would be pleased if one person was motivated to think about their behavior with CC debt."
- R Quinn
Read more »

What’s your Domicile?

William Perry  |  Sep 1, 2026

"I got this newsletter from Andy and it made my head hurt. Chris"
- baldscreen
Read more »

Make the Attic Great Again

Dan Smith  |  Sep 1, 2026

"David, I'm surely not an engineer, my math skills are seriously lacking, I just like to throw in an occasional reference to spreadsheets to poke the Quinn bear every once in a while. I'm happy that my daughters have a few things from my folks."
- DAN SMITH
Read more »

Finding A Balance

Andrew Clements  |  Sep 2, 2026

"Thanks, Mike. I really appreciate this perspective. And to answer your test question: Yes, I’m very happy with my life today. You’re right that changing one decision from the past might have changed everything that followed, including many of the things and people I cherish today. I’ve made my share of mistakes, but I’ve also learned from them. Perhaps that’s the best we can ask of ourselves, to accept the past, carry forward what it taught us, and appreciate where the journey ultimately brought us."
- Andrew Clements
Read more »

The Value of Scratch Cooking in Retirement

Mark Crothers  |  Jul 11, 2025

"Dan, Suzie would nod along in agreement. We're extremely compatible in most areas, but the kitchen isn't one of them. The woman can turn a bowl of cereal and a cup of coffee into a full dishwasher load. Wisely, we've agreed that I will do the cooking. It's also best not to bicker within reach of sharp, pointy implements. And Suzie is very happy to let me wait on her hand and foot in the dining arena! I'm also guilty of reracking the dishwasher after Suzie's loaded it 😂"
- Mark Crothers
Read more »

How do you prepare for the long term care cost as retiree?

achnk53  |  Jun 21, 2026

"My wife and I are both 60 and fully retired, and are blessed to be fully capable of self funding. Back when we were in our mid-40s we didn't know how things would turn out and we purchased long term care insurance. Our annual premium is fixed at ~$2,500 per year each and it pays out ~$10,000 per month. We continue to pay the premiums and pray we will never need this, and fortunately the premiums are a small expense in the big picture. Generally I lean to the side of self-insurance, but I have seen first-hand how long term memory care can burn through cash reserves. My mother in law spent 5 years in memory care and the fact my father in law had purchased LTC insurance for her years before enabled her to not have to sell a farm or two to pay for her extended care. I had a close friend who had a father get Alzheimers at around 60 and he spent greater than 10 years in memory and skilled nursing care. They burned through well over a million dollars in that time. Self funded. Unforturnately virtually all of us will be faced with situations like this -- for a parent, sibling, spouse or self. There is no one-sized answer that fits all of our situations or needs, and it is something every person needs to build a plan to address."
- glenntp
Read more »

Traditional or Roth

ArticleRichard Connor  |  Aug 29, 2026

THE CHOICE BETWEEN a traditional retirement account or a Roth is a frequent topic on HumbleDollar. The choice is generally framed as a choice between paying taxes up front (a Roth), or deferring taxes until withdrawal (traditional). I thought it would be interesting to evaluate a real-life example of how this choice might work out. In December of 2016 my wife and I had an opportunity to each open a Roth IRA. My wife took a partial sabbatical that year, and that, combined with maxing out our 401k accounts, gave us a chance to each open a $4,500 Roth IRA. The maximum allowable contribution that year was $6,500 for those 50 and over. Up until then we had assumed that our marginal tax bracket would likely be lower in retirement, and focused on contributing to our employer’s traditional 401k plans. Despite that, we decided to move forward with opening a Roth IRA. I thought it would give us some tax diversity, and the opportunity to do Roth conversions when, and if, it made sense in the future.  In December of 2016 we opened Roth IRAs at Vanguard and invested the $4,500 in their S&P 500 Index Fund. Those initial funds have been invested for almost 10 years. Over that decade we have added some additional funds, and have done a few conversions. I recently did a quick analysis to see how my Roth experience would have compared to investing in a traditional IRA.   In 2016, our marginal tax bracket was 28%.  To contribute the $4,500 required $6,250 of pre-tax income. Due to some financial engineering over the last year, including selling our second home in late 2025, I expect our 2026 marginal tax bracket to stay within the 12% bracket. I’ve been looking at this closely because I’m considering doing a Roth conversion later this year. The table below shows the comparison between the Roth performance, and what a traditional IRA would have produced. The annual rate of return was determined using Nick Maggiulli’s S&P 500 Historical Return Calculator. Roth vs Traditional The table shows that the Traditional IRA would have been the better choice, producing about $3,500 more in available funds, or about 22% more. This demonstrates that the primary driver in choosing between a Roth and a traditional qualified account is a consideration of the tax rates at the time of contribution and at the time of distribution. There have been a number of changes to the tax code in the last decade that have contributed to the result, but I certainly didn’t predict any of them.  If you guess wrong, you pay the price in a higher tax bill. In the example above, the extra $1,750 invested in the traditional account produced an additional $6,143.31 in earnings. The lower tax rate at the distribution of the traditional IRA results in the $3,500 in extra funds. Even though the Roth IRA had tax free earnings growth, the initial larger tax rate overcame that advantage, when compared to the traditional IRA.   Because of my pension and my wife’s social security benefit, 85% of her social security benefit is taxable income, so that is not a consideration in our tax calculation. I used Dinkytown’s 1040 Calculator to run a series of estimates of our 2026 tax return to assess if we want to execute a Roth Conversion this year. We are still 4 years from taking RMDs, and I will start my Social Security in a year when I turn 70. My current thinking is a conversion of about $40,000 will keep us in the 12% bracket. There would also be a small NJ state tax impact. My simple analysis reinforces what I’ve been taught. Roth contributions make the most sense when you think your current tax bracket is lower than when you expect to withdrawal the funds. There are secondary considerations, like no tax diversification, no RMDs, and uncertainty about future tax rates. If you intend to pass the funds to heirs, it might make sense to perform Roth conversions today at the 22% tax bracket if you intend to pass these accounts to heirs who may be in their peak earnings years. Not sure? I believe I recall several HumbleDollar contributors write something about splitting the difference?   Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.
Read more »

Blood Money

Michael Flack  |  Mar 28, 2026

"If a future NUA has limited value to you then if you are concerned about the concentration from owning a high percentage of XOM I would hope you have the option to diversify within your 401(k). Before retirement I previously had some 1040 tax clients whose 401(k) plans/funds had lower expense ratios than what is available at Vanguard so leaving their funds in their 401(k) made more sense than rolling to a 401(k)."
- William Perry
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Americans and their credit cards

R Quinn  |  Aug 24, 2026

"53% of Americans is greater than 46% of cardholders since all Americans don’t have credit cards so both those numbers can’t be correct."
- R Quinn
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Percentage that “age in place”

Keith Pleas  |  May 24, 2026

"Lots of important insights here. We’re still committed to aging in place, but being 83 have seen what our friends are encountering. I totally agree about the importance of having family nearby. That seems to be critical. Also, I think you’re right about memory care facilities. I really wonder about those with many residents in independent living and a handful in memory care. I know of one non profit CCRC where the independent living folks had the manager fired because he was spending on Memory Care and shortchanging their amenities. The prices you mention are very typical of those where I live."
- Marilyn Lavin
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State Farm Dividend

Bogdan Sheremeta  |  Sep 2, 2026

Be the first to comment.
Read more »

A bleak picture for retirement in the future?

R Quinn  |  Sep 2, 2026

"I would think so, but it didn’t stop them from publishing it. I bet some people take it very seriously, statistically valid or not. Of course, that seems quite popular these days."
- R Quinn
Read more »

This would be a great posting on a web site with the name “HaughtyDollar.”

R Quinn  |  Aug 28, 2026

"Learning takes many forms and people learn in different ways, sometimes from reading others experiences, sometimes from debate on different points of view. That's why I wrote a section for My Money Journey I would suggest that there is a learning experience available from the comments and criticisms made on this post. I would be pleased if one person was motivated to think about their behavior with CC debt."
- R Quinn
Read more »

What’s your Domicile?

William Perry  |  Sep 1, 2026

"I got this newsletter from Andy and it made my head hurt. Chris"
- baldscreen
Read more »

Make the Attic Great Again

Dan Smith  |  Sep 1, 2026

"David, I'm surely not an engineer, my math skills are seriously lacking, I just like to throw in an occasional reference to spreadsheets to poke the Quinn bear every once in a while. I'm happy that my daughters have a few things from my folks."
- DAN SMITH
Read more »

Finding A Balance

Andrew Clements  |  Sep 2, 2026

"Thanks, Mike. I really appreciate this perspective. And to answer your test question: Yes, I’m very happy with my life today. You’re right that changing one decision from the past might have changed everything that followed, including many of the things and people I cherish today. I’ve made my share of mistakes, but I’ve also learned from them. Perhaps that’s the best we can ask of ourselves, to accept the past, carry forward what it taught us, and appreciate where the journey ultimately brought us."
- Andrew Clements
Read more »

The Value of Scratch Cooking in Retirement

Mark Crothers  |  Jul 11, 2025

"Dan, Suzie would nod along in agreement. We're extremely compatible in most areas, but the kitchen isn't one of them. The woman can turn a bowl of cereal and a cup of coffee into a full dishwasher load. Wisely, we've agreed that I will do the cooking. It's also best not to bicker within reach of sharp, pointy implements. And Suzie is very happy to let me wait on her hand and foot in the dining arena! I'm also guilty of reracking the dishwasher after Suzie's loaded it 😂"
- Mark Crothers
Read more »

How do you prepare for the long term care cost as retiree?

achnk53  |  Jun 21, 2026

"My wife and I are both 60 and fully retired, and are blessed to be fully capable of self funding. Back when we were in our mid-40s we didn't know how things would turn out and we purchased long term care insurance. Our annual premium is fixed at ~$2,500 per year each and it pays out ~$10,000 per month. We continue to pay the premiums and pray we will never need this, and fortunately the premiums are a small expense in the big picture. Generally I lean to the side of self-insurance, but I have seen first-hand how long term memory care can burn through cash reserves. My mother in law spent 5 years in memory care and the fact my father in law had purchased LTC insurance for her years before enabled her to not have to sell a farm or two to pay for her extended care. I had a close friend who had a father get Alzheimers at around 60 and he spent greater than 10 years in memory and skilled nursing care. They burned through well over a million dollars in that time. Self funded. Unforturnately virtually all of us will be faced with situations like this -- for a parent, sibling, spouse or self. There is no one-sized answer that fits all of our situations or needs, and it is something every person needs to build a plan to address."
- glenntp
Read more »

Traditional or Roth

ArticleRichard Connor  |  Aug 29, 2026

THE CHOICE BETWEEN a traditional retirement account or a Roth is a frequent topic on HumbleDollar. The choice is generally framed as a choice between paying taxes up front (a Roth), or deferring taxes until withdrawal (traditional). I thought it would be interesting to evaluate a real-life example of how this choice might work out. In December of 2016 my wife and I had an opportunity to each open a Roth IRA. My wife took a partial sabbatical that year, and that, combined with maxing out our 401k accounts, gave us a chance to each open a $4,500 Roth IRA. The maximum allowable contribution that year was $6,500 for those 50 and over. Up until then we had assumed that our marginal tax bracket would likely be lower in retirement, and focused on contributing to our employer’s traditional 401k plans. Despite that, we decided to move forward with opening a Roth IRA. I thought it would give us some tax diversity, and the opportunity to do Roth conversions when, and if, it made sense in the future.  In December of 2016 we opened Roth IRAs at Vanguard and invested the $4,500 in their S&P 500 Index Fund. Those initial funds have been invested for almost 10 years. Over that decade we have added some additional funds, and have done a few conversions. I recently did a quick analysis to see how my Roth experience would have compared to investing in a traditional IRA.   In 2016, our marginal tax bracket was 28%.  To contribute the $4,500 required $6,250 of pre-tax income. Due to some financial engineering over the last year, including selling our second home in late 2025, I expect our 2026 marginal tax bracket to stay within the 12% bracket. I’ve been looking at this closely because I’m considering doing a Roth conversion later this year. The table below shows the comparison between the Roth performance, and what a traditional IRA would have produced. The annual rate of return was determined using Nick Maggiulli’s S&P 500 Historical Return Calculator. Roth vs Traditional The table shows that the Traditional IRA would have been the better choice, producing about $3,500 more in available funds, or about 22% more. This demonstrates that the primary driver in choosing between a Roth and a traditional qualified account is a consideration of the tax rates at the time of contribution and at the time of distribution. There have been a number of changes to the tax code in the last decade that have contributed to the result, but I certainly didn’t predict any of them.  If you guess wrong, you pay the price in a higher tax bill. In the example above, the extra $1,750 invested in the traditional account produced an additional $6,143.31 in earnings. The lower tax rate at the distribution of the traditional IRA results in the $3,500 in extra funds. Even though the Roth IRA had tax free earnings growth, the initial larger tax rate overcame that advantage, when compared to the traditional IRA.   Because of my pension and my wife’s social security benefit, 85% of her social security benefit is taxable income, so that is not a consideration in our tax calculation. I used Dinkytown’s 1040 Calculator to run a series of estimates of our 2026 tax return to assess if we want to execute a Roth Conversion this year. We are still 4 years from taking RMDs, and I will start my Social Security in a year when I turn 70. My current thinking is a conversion of about $40,000 will keep us in the 12% bracket. There would also be a small NJ state tax impact. My simple analysis reinforces what I’ve been taught. Roth contributions make the most sense when you think your current tax bracket is lower than when you expect to withdrawal the funds. There are secondary considerations, like no tax diversification, no RMDs, and uncertainty about future tax rates. If you intend to pass the funds to heirs, it might make sense to perform Roth conversions today at the 22% tax bracket if you intend to pass these accounts to heirs who may be in their peak earnings years. Not sure? I believe I recall several HumbleDollar contributors write something about splitting the difference?   Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.
Read more »

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Get Educated

Manifesto

Sep 2, 2026

NO. 35: OUR ODDS of beating the market averages over a lifetime of investing are so small they’re hardly worth considering. Overconfident investors insist on trying. Rational investors index.

Truths

Sep 1, 2026

NO. 75: IF YOU BUY and hold individual stocks or stock index funds in a regular taxable account, you can defer taxes, just like you can in a retirement account. Any capital-gains tax bill is postponed until you sell. But for this tax deferral to be truly valuable, you need super-low portfolio turnover, holding investments for 10 or preferably 20 years.

humans

Aug 31, 2026

NO. 26: WE TEND to be overconfident—which isn’t a bad thing. Self-confident individuals tend to be happier, have a wider circle of friends and enjoy greater career success. Problem is, if we’re too confident in our financial abilities, there’s a risk we’ll rack up hefty investment costs and make big undiversified bets, both of which could come back to haunt us.

think

Aug 31, 2026

PASCAL’S WAGER. Belief in God is rational, argued Blaise Pascal. If you believe and God doesn’t exist, the price is modest: a less immoral life. But if you don’t believe and God does exist, the price is far higher: an eternity in hell. The lesson? When managing money, we should focus less on the odds of something happening and more on the consequences.

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Manifesto

Sep 2, 2026

NO. 35: OUR ODDS of beating the market averages over a lifetime of investing are so small they’re hardly worth considering. Overconfident investors insist on trying. Rational investors index.

Spotlight: Careers

Missing you….Or not?

Mark Crothers   |  Jun 19, 2025

It’s a question many of us ponder as we transition into retirement: Beyond the financial aspects, what truly sticks with us from our working lives, and what do we find ourselves missing?
For me, like many others, it’s the daily banter and camaraderie with customers and colleagues. There’s a unique energy in those professional interactions—the quick jokes, shared challenges, and the general buzz of a workplace. It’s a specific kind of social connection that’s surprisingly hard to replicate.

Read more »

Will Work For Food, Starting My Diet Soon

DAN SMITH   |  Mar 31, 2025

Part 1
I sold my tax business 3 seasons ago, the year I turned 70, or as I often refer to it, the 30th anniversary of my 40th birthday. Besides the volunteer tax prep I do with AARP, I still prepare a dozen or so returns for friends and family. I don’t want to take money for my efforts, I will work for food. So far this season I have been compensated with burgers, steaks, chicken,

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Long Remembered: A Fine Recollection

Ken Cutler   |  Jun 29, 2024

Note: This is the second Forum piece from my ‘shelved articles’ archive. It was written months ago but never submitted to Jonathan.
These days, people often debate the value of a college education, but what about the value of a good high school education? I was fortunate to attend high school in Moorestown, New Jersey, a community that has always valued having an excellent school system.
With the perspective shaped by over 40 years of life post-graduation,

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Going Against the Grain

smr1082   |  Apr 25, 2025

From an early age, we are influenced by our parents, friends, relatives and society in general to get us on the treadmill of achieving success. By the time we are in college, career choice and what we want to do with our life have been heavily influenced by everyone around us.  After several decades of pursuing someone else’s dream, it is hard to switch and focus on what we really want to do. It is too late and most just carry on.

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Quinns visit to Mar-a-Lago

R Quinn   |  Feb 14, 2025

Yesterday we drove by Mar-a-Lago.  The flag was flying, but nobody was home. I had been there before. Actually, several years ago I had dinner there. The owner wasn’t home then either. 
The houses in the neighborhood made me think. How poor am I? Wealth is quite relative for sure. I doubt I could afford the gardening bill let alone the property taxes on those homes.
Never fear, if you can’t afford one of the homes listed for $22,000,000,

Read more »

Selling our business – contemplating what’s next

greg_j_tomamichel   |  Jul 4, 2025

So, we have signed the contracts. We have advised all our staff. We are talking to our customers every day about the sale, about the new owners and how it will be “business as usual”, how they can expect the same service that they have been used to.
We have already received lots of really positive and quite humbling feedback from our customers. Even those that could be challenging at times have been really generous in their praise and thanks.

Read more »

Spotlight: Zaccardi

Price of Ignorance

Mike Zaccardi   |  Sep 9, 2021

PETER LYNCH, the famed Fidelity Investments’ mutual fund manager, used to advise investors to “buy what you know.” But many of today’s investors have other ideas. Obscure cryptocurrencies and nonfungible tokens have taken the financial social media by storm. Most investors have heard of bitcoin, ethereum and dogecoin. But a new set of coins have emerged—cardano and solana are the hot trades. Meanwhile, JPEG and GIF image files are changing hands for ridiculous amounts of money. I’m reminded of another investing adage, this one from Warren Buffett: “Price is what you pay. Value is what you get.” I wonder what the Oracle of Omaha thinks about all this. In February, market-watchers marveled at NBA Top Shot. It’s a platform where individuals can own GIF images of superstars as if they were digital trading cards. Sales surged as it went viral across social media. Individual “moments” sold for more than $100,000. At the peak of the frenzy, the combined value of all NBA Top Shot moments had a market cap above the value of some NBA teams. One-upping those prices is the latest round of insanity. EtherRock 27 (yes, that’s a thing) recently sold for some $3 million. It’s a picture of a fake rock. What’s the appeal? Perhaps it’s the chance to impress acquaintances at a dinner party by saying you have so much money you can just throw it at the most useless thing imaginable. I believe financial markets often know more than what my small brain can fathom. No, I don’t own any GIFs or cryptocurrencies. But I do believe the assets of the future could look different from what seasoned investors are used to purchasing today. Keep an open mind—but don’t go all-in buying things you don’t truly understand.
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Give It Time

Mike Zaccardi   |  Sep 19, 2022

WHILE THE S&P 500’s price-earnings (P/E) ratio has little predictive power if you look at returns over the next 12 months, it’s more important if you stretch out your time horizon to five years and beyond. What you pay has a significant impact on your likely long-run return—and that should be comforting for today’s buyers. Recently, WisdomTree Global Chief Investment Officer Jeremy Schwartz shared a compelling graphic showing P/E ratios for dozens of U.S. and foreign stock market sectors. Whether you look at broad market segments or only at value stocks, it’s hard to find a hugely expensive part of the global market. For instance, WisdomTree shows a P/E based on forecasted earnings of just 13.8 for the Russell 3000 Value Index, a broad gauge of the U.S. stock market that excludes growth companies. Morningstar concurs that markets look cheap. As of Aug. 31, the research firm boldly declared that all nine of the Morningstar “style boxes” were in undervalued territory. Its fair value estimate is based on a composite of some 700 individual stocks. This is far different from the P/E picture at year-end 2020. Back then, according to FactSet, the S&P 500’s P/E ratio based on trailing 12-month earnings seemed stretched at around 31 times corporate profits. But as of this past Friday, large-cap U.S. stocks were trading below 20 times earnings—and below both their five- and 10-year averages. It’s reasonable to conclude that stocks are a good value today based on both trailing and forecasted earnings. The bottom line: Rising corporate profits, increasing dividends and share buybacks, and the simple passage of time will eventually heal all stock market wounds. The longer the market trades sideways to down, the more compelling the valuation picture becomes—and the higher future returns will likely be.
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Quitting Retirement

Mike Zaccardi   |  Dec 1, 2021

DRIVING PART of the nation’s labor shortage is a wave of early retirements dubbed the “Great Resignation.” A red-hot housing market and booming stock market have made it financially easier for many to quit traditional nine-to-five employment, as has employers’ embrace of part-time, work-from-home positions. Add to that virus concerns and parents’ difficulty finding child care, and you’ve had a perfect storm for the labor market. According to a recent article in The Wall Street Journal, those exiting the labor market weren’t your typical job-quitters and job-switchers. The article notes that the Federal Reserve Banks of Kansas City and Dallas concluded there are 1.5 million more retirees as of April 2021 than would have been expected, assuming pre-pandemic retirement rates had simply continued. These early retirees face a problem, however: inflation. The Consumer Price Index (CPI) currently runs at a spicy 6.2%. Analysts see inflation averaging near that rate through much of 2022's first half. CPI is not only remarkably high, but its increase has also outpaced most economists’ forecasts for 2021. I wonder if higher-than-expected inflation might nudge some early retirees back into the workforce next year. Sustained higher living costs, coupled with a longing for the camaraderie of the office social scene, could prompt some folks to call it quits... from calling it quits. Early retirees, those younger than 62, can’t count on Social Security—which is indexed to inflation—to help protect their purchasing power. Owning inflation-sensitive assets like stocks, inflation-indexed Treasury bonds, real estate and commodities can soften the blow. But all those asset classes can drop in unison, too—as they did in late 2008 and early 2020. I’m one of those workers currently on the sidelines, ready to jump back into the game. I’ve been successfully running my own business this year after leaving the corporate world…
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Where’s My Refund?

Mike Zaccardi   |  Mar 19, 2020

WE LOVE TO procrastinate. Have you done your taxes yet? IRS data show that nearly a quarter of Americans wait until the last two weeks of tax season to file. It often feels like that nagging task that grows more arduous each year, though the result for many is a juicy refund. The average federal tax refund is more than $2,800, so it can pay to get your taxes done sooner rather than later. To be sure, instead of making an interest-free loan to Uncle Sam, it would be more rational to reduce the amount of federal income tax withheld during the year by giving our employers a revised Form W-4. We could then take the extra money in our paycheck and stash it in, say, a high-yield savings account, where we could earn interest, albeit at a paltry 1½% or so—and that rate is likely to shrink in the months ahead. But most of us don’t operate that way. We like the forced savings that comes with having too much tax withheld. We like getting that large refund each spring. Chalk it up to mental accounting. How are we using our tax refunds? Among those surveyed by GOBankingRates, 27% say they’ll use their refund to pay down debt. That makes sense. The Federal Reserve Bank of New York reports that Americans with a credit report are, on average, in debt to the tune of almost $52,000. While my official title at work is market research analyst, I also conduct retirement and savings workshops for my colleagues, where I talk about a priority pyramid. First, contribute to the 401(k) up to the company match. After that, contribute to our company’s health savings account (HSA) up to the match. Next, pay off high interest rate debt. Getting that free money from the employer…
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Simpler and Cheaper

Mike Zaccardi   |  Sep 28, 2021

VANGUARD GROUP today announced significant price cuts for its fleet of target-date retirement funds. Currently, investors can own a Vanguard target fund for the seemingly low cost of 0.12% to 0.15% a year, equal to $12 to $15 for every $10,000 invested. The new price tag will be just 0.08%, effective February 2022. It might not seem like much, but the price cuts announced today will deliver an aggregate savings of $190 million to investors in 2022, says Vanguard. Price competition continues to be fierce in the investment management business. In a world of zero-dollar trading commissions and zero-cost index funds, financial firms are under intense pressure to lower expenses for investors. Vanguard’s target funds are globally diversified portfolios built using index funds, effectively offering investors one-stop investment shopping. With the price cuts, its target-fund expenses will be on par with Charles Schwab’s target-index funds and below those of archrival Fidelity Investments. By lowering costs, Vanguard also addresses a longstanding complaint among its cost-conscious investors. Currently, Vanguard investors can save a few “basis points” by purchasing a target fund’s component index funds, thereby creating their own target fund. With the fee reduction, building your own target-date fund using the component parts won’t make much cost difference. The upshot: Vanguard investors will have the option to make their financial life simpler—by swapping over to a single target-date fund. This morning, Vanguard also announced that more 401(k) plans will have access to its institutional target funds, which have even lower costs. The new plan minimum will be $100 million, down from $250 million. In addition, Vanguard said it was introducing a new mutual fund, the Vanguard Target Retirement Income and Growth Trust, which is geared to retirees. The new fund will have a 50% stock allocation, higher than the 30% allocation used…
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Falling Like a Brick

Mike Zaccardi   |  Jul 11, 2022

IF YOU THINK STOCKS have fallen fast this year, check out the collapse in the National Association of Realtors’ housing affordability index. The index tracks how financially easy it is for the typical family to buy a house with a conventional 30-year mortgage. May’s reading of 102.5 is down sharply from the 154.4 recorded in December 2021 and it’s just a whisker away from the lowest levels seen in the past four decades. For those of us in the southern U.S., we have to go back to the mid-1980s to find worse purchasing conditions. It’s a sobering reality for first-time homebuyers, who must contend with higher interest rates and still-soaring property values. Today’s environment is a far cry from the generous buying conditions seen in early 2021, when the index was above 170. Back then, the average 30-year fixed-rate mortgage was roughly 3%, while home prices were nearly 20% lower. Survey data from the end of last week show the current 30-year mortgage rate at a whopping 5.84%. You have to wonder: Are falling home prices just around the corner? Goldman Sachs puts out its own version of the housing affordability index. The investment bank’s gauge likewise illustrates a stunningly expensive turn in the domestic housing market—the worst since it started tracking affordability in 1996. But there are bright spots. First, families are making more now than in early 2021. But the 4.5% rise in median household income has, alas, been less than the rise in home prices and inflation more generally. Second, families are well positioned today to meet the challenges of high real estate prices and steep borrowing costs. Household financial obligations, as a percent of disposable personal income, remain incredibly low by historical standards. This figure compares debt payments, lease payments, property taxes and rents to after-tax income. It…
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