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COBRA insurance: No need to fear the bite

Heidi - SunnyMoneyDIY  |  Aug 11, 2026

"Heidi, your premium for medical coverage through COBRA is about the same that I paid in 2020, so given inflation, your cost seems to be very reasonable."
- Mark Bergman
Read more »

Medicare Advantage Part C — Not too soon to start planning for 2027

R Quinn  |  Aug 11, 2026

"As to your last sentence Dick, even though we are generally health we chose traditional with a G supplement. Even though it costs more we can “budget” the supplement and Federal part B and move on."
- DavidHLancaster
Read more »

Can a Value fund also be a Growth fund?

Harold Tynes  |  Aug 11, 2026

"Harold, You have all the biggies in investing covered, except I would recommend Ed Slot who is the preeminent source for taxes in retirement."
- DavidHLancaster
Read more »

My Sister – A Reflection One Year Later

Andrew Clements  |  Aug 12, 2026

"Thank you, Jack. Over the past year, I’ve realized that I can’t change the sadness of losing Tory, but I can choose how I remember her. Focusing on the laughter, love, and wonderful memories she left behind has helped make the grief a little easier to carry. I appreciate your kind words."
- Andrew Clements
Read more »

Roth Conversions and Taxes

ArticleJohn Urban  |  Aug 8, 2026

EVERY ARTICLE ABOUT Roth conversions says the same thing: pay the tax from taxable money, not from the IRA. That is good advice if you have taxable money. Plenty of retirees do not. Their savings sit almost entirely in a traditional IRA, built from years of 401(k) contributions and a rollover at retirement, with little brokerage money and no cash reserve worth naming. For them, “pay from outside money” is not advice. It is a condition they do not meet. Their real choice is a self-funded conversion or no conversion at all. The familiar warning is that self-funding requires a gross-up. You withdraw money to pay the conversion tax, that withdrawal is itself taxable, so you have to withdraw a little more. Less discussed is what else that withdrawal sets off. It makes more of your Social Security taxable, it raises your Medicare premiums two years later, and in a high-tax state it enlarges the amount that has to leave the IRA. Here is what those three cost, on one household. A cautious conversion Meet Dianne, a composite rather than a real person. She is 66, single, retired to Florida, with $1 million in a traditional IRA and nothing outside it. Social Security pays her $28,000 a year. She is past 59 and a half and already on Medicare. Florida keeps state income tax out of the arithmetic for now. She converts $40,000. Careful, modest, the size people choose when they are trying not to do anything dramatic. The tax on that conversion, paid from a checking account she does not have, would be $4,234. Funding it from the IRA instead, the withdrawal that covers it is $5,125, and her tax rises to match. That extra $891 is 17.4% of the $5,125 she withdrew. Her ordinary-income bracket is 12%. Twelve of those points are the tax on the withdrawal itself, which is the gross-up everybody expects. The other 5.4 points come from $2,300 of her Social Security being pulled into taxable income by that same withdrawal. Paying from cash, $21,500 of her benefit would be taxable. Self-funding, $23,800 is. The difference is caused by how she paid, not by what she converted, and nothing on her return will label it. Not a smaller version of a large one The effect is not linear. Run the same woman at $150,000 and 85% of her benefit, the statutory maximum, is already taxable before she funds the tax. The funding withdrawal drags in nothing further, and this particular cost is zero. That is not an argument for converting more. It is an argument against assuming a small conversion is simply a smaller version of a large one. The one that looks cautious can carry the higher marginal rate. What self-funding actually costs Give Dianne the $150,000 conversion, still with no outside cash, and add the state question. Still in Florida, $195,469 has to leave the traditional IRA to put $150,000 into the Roth. Move her to California, changing nothing else, and it is $219,751. That is $1.30 of IRA spent for every dollar reaching the Roth, against $1.47, and the gap is California income tax compounded through the gross-up. If a move across state lines is anywhere in your plan, the order of operations may matter more than the size of the conversion. But $1.47 invites a conclusion it does not support, and I would rather correct that myself than let it travel. A conversion is taxable whichever pocket pays. Of the $69,751 Dianne withdraws in California, roughly $44,639 replaces cash she would have spent anyway. The incremental cost of self-funding, in wealth given up, is $25,111. About 17% of the conversion, not 47. The bill that arrives in 2028 At that $150,000 conversion, self-funding also costs Dianne $1,735 in higher Medicare premiums, a surcharge of $6,355 rather than $4,620, charged on top of the standard premium, for one year, and hers alone as a single filer. The bill arrives two years late. Medicare sets her 2028 premiums from her 2026 income, so the cost is invisible at the moment she is deciding how to pay the 2026 tax. When it can still make sense Doing nothing is not free either. Money left in a traditional IRA comes out eventually, under required distributions, at whatever rates apply then, possibly to a survivor filing single, possibly to heirs facing a 10-year deadline. Where self-funding still holds up, a few things tend to be true. The rate gap is durable rather than a one-year accident. Whether it repays a cost this size depends on time, future tax rates and investment returns. A temporary dip in income is a thin foundation. A structural window, after retirement and before Social Security or required distributions begin, is more compelling. There is runway, because shrinking the portfolio to change its tax character needs years of tax-free growth to earn back. Age 59 and a half is cleanly behind you. The converted amount is not subject to the 10% additional tax on early distributions. A separate distribution taken to pay the tax generally is, unless an exception applies. And enough is left afterward. Check the balance after the funding withdrawal, not after the conversion. Dianne’s California IRA drops to $780,249, and whether that funds the next 30 years matters more than whether the conversion was tax-efficient. A practical warning about withholding Withholding from the conversion is not a cheaper way to pay the tax. It reduces what reaches the Roth. Elect 24% on Dianne’s $40,000 conversion, as this illustration does rather than as any custodian requires, and $9,600 goes to the IRS while $30,400 lands in the Roth, against $4,234 actually owed. The cash comes back next spring as a refund. The Roth room does not come back at all. Restating the rule Pay the conversion tax from outside cash if you have it. That remains the best answer. It is not an answer for the retiree whose savings are almost entirely in a traditional IRA. For that person, “never pay from the IRA” skips the actual decision, which is whether a self-funded conversion, with its full marginal cost, beats leaving the money where it is. Before deciding, count the gross-up, the Social Security effect, state tax and the Medicare bill two years later. Sometimes that arithmetic still says no. It beats applying a rule written for somebody with a different balance sheet. ________________________________________________________________________________ John Urban is the founder of RetireSmartIRA, a retirement tax-planning app. Earlier, he founded GT Nexus, a supply-chain software company acquired by Infor in 2015. He lives in Northern California with his wife, Kathy, and enjoys time with family, travel, reading, Bay Area sports, and the occasional deep dive into the fine print of the tax code.
Read more »

What is the right percentage?

R Quinn  |  Aug 9, 2026

"I log on to my investments everyday, just out of habit. My bank sends automatic updates on account balances. I make sure I stick with my theory, but there is no budget. I see no difference between my method at any income level. It’s a forced way to live within one’s means, you can’t spend more than you have. Of course, your example is an exception. There are always exceptions. In the example, it probably means a lower lifestyle, lower budget, lower everything regardless."
- R Quinn
Read more »

Don’t Let a Roth Conversion Trigger a Penalty

John Urban  |  Jul 8, 2026

"Hi Grant, and thanks for the article (John Urban) and this comment. Sorry to be a few months late commenting but I think your approach is very intriguing and I have questions for you if you have time to help me understand your process. Firstly, my situation is retired, no W2 income and RMDs to be satisfied from conventional IRA before the end of the year. Also, not yet concerned over IRMAA impact at this time.  Q1. The 1, 2, 3 process says one can do a rollover contribution to the Roth account with money from a regular brokerage or other non-IRA account within 60 days. Is this correct? I thought that a rollover should be IRA to IRA (Roth and/or conventional). Q2. About the 1, 2, 3, process. Why not make the conversion and pay the taxes directly from the converting IRA at the same time. Brokerage will withhold the amount specified to make it a single operation on my part. THEN I take money from the non IRA account and rollover the amount withheld in taxes into the target Roth account. I realize this violates the guidance that taxes shouldn't be withheld from a conversion, however, since the taxable amount is being deposited almost immediately back into the Roth account then it would seem to be a wash. What are your thoughts? Am I missing something? Thanks, Derek"
- Derek Shuttleworth
Read more »

For most retirees, the greatest fear is not death—it is running out of money before they die.

Matt Halperin  |  Aug 6, 2026

"I understand, thanks, Dunn"
- DAN SMITH
Read more »

Risk and Taxes

ArticleAdam M. Grossman  |  Aug 8, 2026

AFTER YEARS OF heady gains in the stock market, many investors are facing the same question: To manage risk, they’d like to cut back on one or more of their holdings. But because of the potentially costly tax bill that might result, they aren’t sure exactly how to do that. How can you square this circle? One easy option would be to donate appreciated assets to charity. But that would make sense only if it aligns with your charitable goals and, of course, if you don’t need those funds for other uses. How else could you strike a balance between managing risk and limiting taxes? Here’s how I would answer this question. Step 1. I’d start by estimating the potential risk level among your holdings. While there’s no single litmus test, you could ask the following questions. First, how large a portion of your assets does any single holding represent? As a rule of thumb, I’d focus first on individual stocks that top 5%. Why 5%? My operating assumption is that any individual stock could experience a 50% decline during a crisis. So if a holding is limited to 5%, then a 50% drop would result in an overall portfolio impact of just 2.5%. I see that as very manageable. To be sure, stocks can certainly decline by more than 50%, but I view this as a reasonable figure for risk management. While I worry most about the risk posed by single stocks, it’s also important to examine the overall composition of your portfolio. That’s because, counterintuitively, a portfolio of 30 stocks could end up being riskier than a group of just 10. Harry Markowitz, the father of Modern Portfolio Theory, explained why. In his initial work back in the 1950s, Markowitz used railroad company stocks to explain the concept of diversification. There’s nothing inherently wrong with railroad stocks, Markowitz explained. But if a portfolio consists of only railroad stocks, then that would be a problem—because companies in the same industry are often impacted by the same economic factors. In other words, a portfolio consisting of a large number of holdings might only appear diversified, so it’s important to look under the hood. Another risk factor to consider: Do you work for a public company and own the company’s stock? If so, that would be a reason to consider diversifying more quickly (within the permitted time windows). What if you own only mutual funds or ETFs? Diversified funds tend to be less risky than individual stocks, but that’s not always the case. The fund industry launches as many as 1,000 new funds each year, including many with very aggressive strategies. So it’s important to check each fund’s holdings. You can find that information on the fund company’s website or on a site like Morningstar (Here, for example, are the top holdings in Vanguard’s S&P 500 index fund). Step 2. Next, you’d want to estimate how much a loss might impact you. As with most questions in personal finance, there are two answers to consider: how it might affect you in dollar terms, and the degree to which a loss would simply be upsetting. Both are important. Step 3. If you determine the holding in question does represent a material risk, then you’d want to estimate the potential tax impact. Here are questions you might ask: What would the tax be if you exited the entire position? Would it push your income into the next capital gains bracket? Are there tax lots with less appreciation you could take advantage of? Do you have losses you could use to offset some of the gains? Do you expect to be in a higher or lower tax bracket next year? Step 4. If you conclude that the tax bill might be significant, what steps could you take to reduce a holding tax-efficiently? Here are strategies to consider: For starters, I suggest deciding on a target percentage for the holding. While ideally I prefer bringing any individual stock down to a 5% weighting, that figure isn’t a rule. All things being equal, the larger a portfolio, the more risk you can afford. After deciding on a target percentage, the simplest approach would be to set up a long-term sale plan—like dollar cost averaging but in reverse. Suppose you’d like to sell 1,200 shares of a given stock. You could sell 100 shares each month for twelve months. You’d do that regardless of whether the stock happens to be up or down that month. That 12-month schedule isn’t a rule. If your holding is very significant, you might opt for a longer timeframe. On the other hand, if you feel the stock has a particularly highflying valuation, you might choose a quicker pace. The key, in my view, is just to get started. As the writer Carveth Read wrote, “it’s better to be roughly right than precisely wrong.” Selling a stock down over time is the simplest way to reduce risk, but it’s hardly the most tax efficient. Another approach that’s been gaining in popularity is known as a 351 exchange fund. With a 351, the idea is that a group of investors, each with their own portfolios of appreciated securities, come together and collaborate to diversify their respective holdings. To provide a simplified illustration, imagine two investors, each with a concentrated holding, one in Microsoft and the other in Apple. Each would benefit by diversifying, and that’s what a 351 exchange fund allows. Each would contribute their respective shares into a common pool that would then hold some Apple and some Microsoft. This new investment would be structured as an ETF, and each investor would be issued shares proportional to the size of their contribution. Importantly, the initial creation of a 351 fund doesn’t entail any tax. Taxes are due only when an investor later sells shares of that ETF. This is a simplified example. In reality, a 351 exchange fund would hold many more than just two holdings. They’re actually required to meet various diversification requirements. As a result, investors in 351 funds may end up feeling sufficiently diversified and thus comfortable holding their fund shares for the long term. That would make this strategy potentially the most tax-efficient way to manage portfolio concentration risk. This is just an overview, though. If you’re interested in 351 strategies, I suggest further research. In July, The Wall Street Journal discussed these funds in some detail. In addition, a firm called Alpha Architect, the largest player in this area, has a number of helpful explanatory videos on its site.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
Read more »

“Gerontocracy” in America

Chris Rush  |  Aug 6, 2026

"I’ll not render an opinion of a book that I have not read, but several age impaired presidents and numerous lawmakers are a fine argument for age limits. Otherwise, like Mark and David write below, it’s no surprise that based on wealth and numbers, we boomers remain a powerful voting bloc."
- DAN SMITH
Read more »

Looking Back On My Hard Luck Days

DAN SMITH  |  Aug 7, 2026

"Dick, your 3rd point is so powerful that it overshadows the first two. Connie is going through so much at this time, and she is lucky to have you in her corner. While you strive to take good care of Connie, don’t forget to take care of yourself as well. "
- DAN SMITH
Read more »

FIFA Financials

R Quinn  |  Jul 19, 2026

"Me, too. Prices not outlandish."
- Jeff Bond
Read more »

COBRA insurance: No need to fear the bite

Heidi - SunnyMoneyDIY  |  Aug 11, 2026

"Heidi, your premium for medical coverage through COBRA is about the same that I paid in 2020, so given inflation, your cost seems to be very reasonable."
- Mark Bergman
Read more »

Medicare Advantage Part C — Not too soon to start planning for 2027

R Quinn  |  Aug 11, 2026

"As to your last sentence Dick, even though we are generally health we chose traditional with a G supplement. Even though it costs more we can “budget” the supplement and Federal part B and move on."
- DavidHLancaster
Read more »

Can a Value fund also be a Growth fund?

Harold Tynes  |  Aug 11, 2026

"Harold, You have all the biggies in investing covered, except I would recommend Ed Slot who is the preeminent source for taxes in retirement."
- DavidHLancaster
Read more »

My Sister – A Reflection One Year Later

Andrew Clements  |  Aug 12, 2026

"Thank you, Jack. Over the past year, I’ve realized that I can’t change the sadness of losing Tory, but I can choose how I remember her. Focusing on the laughter, love, and wonderful memories she left behind has helped make the grief a little easier to carry. I appreciate your kind words."
- Andrew Clements
Read more »

Roth Conversions and Taxes

ArticleJohn Urban  |  Aug 8, 2026

EVERY ARTICLE ABOUT Roth conversions says the same thing: pay the tax from taxable money, not from the IRA. That is good advice if you have taxable money. Plenty of retirees do not. Their savings sit almost entirely in a traditional IRA, built from years of 401(k) contributions and a rollover at retirement, with little brokerage money and no cash reserve worth naming. For them, “pay from outside money” is not advice. It is a condition they do not meet. Their real choice is a self-funded conversion or no conversion at all. The familiar warning is that self-funding requires a gross-up. You withdraw money to pay the conversion tax, that withdrawal is itself taxable, so you have to withdraw a little more. Less discussed is what else that withdrawal sets off. It makes more of your Social Security taxable, it raises your Medicare premiums two years later, and in a high-tax state it enlarges the amount that has to leave the IRA. Here is what those three cost, on one household. A cautious conversion Meet Dianne, a composite rather than a real person. She is 66, single, retired to Florida, with $1 million in a traditional IRA and nothing outside it. Social Security pays her $28,000 a year. She is past 59 and a half and already on Medicare. Florida keeps state income tax out of the arithmetic for now. She converts $40,000. Careful, modest, the size people choose when they are trying not to do anything dramatic. The tax on that conversion, paid from a checking account she does not have, would be $4,234. Funding it from the IRA instead, the withdrawal that covers it is $5,125, and her tax rises to match. That extra $891 is 17.4% of the $5,125 she withdrew. Her ordinary-income bracket is 12%. Twelve of those points are the tax on the withdrawal itself, which is the gross-up everybody expects. The other 5.4 points come from $2,300 of her Social Security being pulled into taxable income by that same withdrawal. Paying from cash, $21,500 of her benefit would be taxable. Self-funding, $23,800 is. The difference is caused by how she paid, not by what she converted, and nothing on her return will label it. Not a smaller version of a large one The effect is not linear. Run the same woman at $150,000 and 85% of her benefit, the statutory maximum, is already taxable before she funds the tax. The funding withdrawal drags in nothing further, and this particular cost is zero. That is not an argument for converting more. It is an argument against assuming a small conversion is simply a smaller version of a large one. The one that looks cautious can carry the higher marginal rate. What self-funding actually costs Give Dianne the $150,000 conversion, still with no outside cash, and add the state question. Still in Florida, $195,469 has to leave the traditional IRA to put $150,000 into the Roth. Move her to California, changing nothing else, and it is $219,751. That is $1.30 of IRA spent for every dollar reaching the Roth, against $1.47, and the gap is California income tax compounded through the gross-up. If a move across state lines is anywhere in your plan, the order of operations may matter more than the size of the conversion. But $1.47 invites a conclusion it does not support, and I would rather correct that myself than let it travel. A conversion is taxable whichever pocket pays. Of the $69,751 Dianne withdraws in California, roughly $44,639 replaces cash she would have spent anyway. The incremental cost of self-funding, in wealth given up, is $25,111. About 17% of the conversion, not 47. The bill that arrives in 2028 At that $150,000 conversion, self-funding also costs Dianne $1,735 in higher Medicare premiums, a surcharge of $6,355 rather than $4,620, charged on top of the standard premium, for one year, and hers alone as a single filer. The bill arrives two years late. Medicare sets her 2028 premiums from her 2026 income, so the cost is invisible at the moment she is deciding how to pay the 2026 tax. When it can still make sense Doing nothing is not free either. Money left in a traditional IRA comes out eventually, under required distributions, at whatever rates apply then, possibly to a survivor filing single, possibly to heirs facing a 10-year deadline. Where self-funding still holds up, a few things tend to be true. The rate gap is durable rather than a one-year accident. Whether it repays a cost this size depends on time, future tax rates and investment returns. A temporary dip in income is a thin foundation. A structural window, after retirement and before Social Security or required distributions begin, is more compelling. There is runway, because shrinking the portfolio to change its tax character needs years of tax-free growth to earn back. Age 59 and a half is cleanly behind you. The converted amount is not subject to the 10% additional tax on early distributions. A separate distribution taken to pay the tax generally is, unless an exception applies. And enough is left afterward. Check the balance after the funding withdrawal, not after the conversion. Dianne’s California IRA drops to $780,249, and whether that funds the next 30 years matters more than whether the conversion was tax-efficient. A practical warning about withholding Withholding from the conversion is not a cheaper way to pay the tax. It reduces what reaches the Roth. Elect 24% on Dianne’s $40,000 conversion, as this illustration does rather than as any custodian requires, and $9,600 goes to the IRS while $30,400 lands in the Roth, against $4,234 actually owed. The cash comes back next spring as a refund. The Roth room does not come back at all. Restating the rule Pay the conversion tax from outside cash if you have it. That remains the best answer. It is not an answer for the retiree whose savings are almost entirely in a traditional IRA. For that person, “never pay from the IRA” skips the actual decision, which is whether a self-funded conversion, with its full marginal cost, beats leaving the money where it is. Before deciding, count the gross-up, the Social Security effect, state tax and the Medicare bill two years later. Sometimes that arithmetic still says no. It beats applying a rule written for somebody with a different balance sheet. ________________________________________________________________________________ John Urban is the founder of RetireSmartIRA, a retirement tax-planning app. Earlier, he founded GT Nexus, a supply-chain software company acquired by Infor in 2015. He lives in Northern California with his wife, Kathy, and enjoys time with family, travel, reading, Bay Area sports, and the occasional deep dive into the fine print of the tax code.
Read more »

What is the right percentage?

R Quinn  |  Aug 9, 2026

"I log on to my investments everyday, just out of habit. My bank sends automatic updates on account balances. I make sure I stick with my theory, but there is no budget. I see no difference between my method at any income level. It’s a forced way to live within one’s means, you can’t spend more than you have. Of course, your example is an exception. There are always exceptions. In the example, it probably means a lower lifestyle, lower budget, lower everything regardless."
- R Quinn
Read more »

Don’t Let a Roth Conversion Trigger a Penalty

John Urban  |  Jul 8, 2026

"Hi Grant, and thanks for the article (John Urban) and this comment. Sorry to be a few months late commenting but I think your approach is very intriguing and I have questions for you if you have time to help me understand your process. Firstly, my situation is retired, no W2 income and RMDs to be satisfied from conventional IRA before the end of the year. Also, not yet concerned over IRMAA impact at this time.  Q1. The 1, 2, 3 process says one can do a rollover contribution to the Roth account with money from a regular brokerage or other non-IRA account within 60 days. Is this correct? I thought that a rollover should be IRA to IRA (Roth and/or conventional). Q2. About the 1, 2, 3, process. Why not make the conversion and pay the taxes directly from the converting IRA at the same time. Brokerage will withhold the amount specified to make it a single operation on my part. THEN I take money from the non IRA account and rollover the amount withheld in taxes into the target Roth account. I realize this violates the guidance that taxes shouldn't be withheld from a conversion, however, since the taxable amount is being deposited almost immediately back into the Roth account then it would seem to be a wash. What are your thoughts? Am I missing something? Thanks, Derek"
- Derek Shuttleworth
Read more »

For most retirees, the greatest fear is not death—it is running out of money before they die.

Matt Halperin  |  Aug 6, 2026

"I understand, thanks, Dunn"
- DAN SMITH
Read more »

Risk and Taxes

ArticleAdam M. Grossman  |  Aug 8, 2026

AFTER YEARS OF heady gains in the stock market, many investors are facing the same question: To manage risk, they’d like to cut back on one or more of their holdings. But because of the potentially costly tax bill that might result, they aren’t sure exactly how to do that. How can you square this circle? One easy option would be to donate appreciated assets to charity. But that would make sense only if it aligns with your charitable goals and, of course, if you don’t need those funds for other uses. How else could you strike a balance between managing risk and limiting taxes? Here’s how I would answer this question. Step 1. I’d start by estimating the potential risk level among your holdings. While there’s no single litmus test, you could ask the following questions. First, how large a portion of your assets does any single holding represent? As a rule of thumb, I’d focus first on individual stocks that top 5%. Why 5%? My operating assumption is that any individual stock could experience a 50% decline during a crisis. So if a holding is limited to 5%, then a 50% drop would result in an overall portfolio impact of just 2.5%. I see that as very manageable. To be sure, stocks can certainly decline by more than 50%, but I view this as a reasonable figure for risk management. While I worry most about the risk posed by single stocks, it’s also important to examine the overall composition of your portfolio. That’s because, counterintuitively, a portfolio of 30 stocks could end up being riskier than a group of just 10. Harry Markowitz, the father of Modern Portfolio Theory, explained why. In his initial work back in the 1950s, Markowitz used railroad company stocks to explain the concept of diversification. There’s nothing inherently wrong with railroad stocks, Markowitz explained. But if a portfolio consists of only railroad stocks, then that would be a problem—because companies in the same industry are often impacted by the same economic factors. In other words, a portfolio consisting of a large number of holdings might only appear diversified, so it’s important to look under the hood. Another risk factor to consider: Do you work for a public company and own the company’s stock? If so, that would be a reason to consider diversifying more quickly (within the permitted time windows). What if you own only mutual funds or ETFs? Diversified funds tend to be less risky than individual stocks, but that’s not always the case. The fund industry launches as many as 1,000 new funds each year, including many with very aggressive strategies. So it’s important to check each fund’s holdings. You can find that information on the fund company’s website or on a site like Morningstar (Here, for example, are the top holdings in Vanguard’s S&P 500 index fund). Step 2. Next, you’d want to estimate how much a loss might impact you. As with most questions in personal finance, there are two answers to consider: how it might affect you in dollar terms, and the degree to which a loss would simply be upsetting. Both are important. Step 3. If you determine the holding in question does represent a material risk, then you’d want to estimate the potential tax impact. Here are questions you might ask: What would the tax be if you exited the entire position? Would it push your income into the next capital gains bracket? Are there tax lots with less appreciation you could take advantage of? Do you have losses you could use to offset some of the gains? Do you expect to be in a higher or lower tax bracket next year? Step 4. If you conclude that the tax bill might be significant, what steps could you take to reduce a holding tax-efficiently? Here are strategies to consider: For starters, I suggest deciding on a target percentage for the holding. While ideally I prefer bringing any individual stock down to a 5% weighting, that figure isn’t a rule. All things being equal, the larger a portfolio, the more risk you can afford. After deciding on a target percentage, the simplest approach would be to set up a long-term sale plan—like dollar cost averaging but in reverse. Suppose you’d like to sell 1,200 shares of a given stock. You could sell 100 shares each month for twelve months. You’d do that regardless of whether the stock happens to be up or down that month. That 12-month schedule isn’t a rule. If your holding is very significant, you might opt for a longer timeframe. On the other hand, if you feel the stock has a particularly highflying valuation, you might choose a quicker pace. The key, in my view, is just to get started. As the writer Carveth Read wrote, “it’s better to be roughly right than precisely wrong.” Selling a stock down over time is the simplest way to reduce risk, but it’s hardly the most tax efficient. Another approach that’s been gaining in popularity is known as a 351 exchange fund. With a 351, the idea is that a group of investors, each with their own portfolios of appreciated securities, come together and collaborate to diversify their respective holdings. To provide a simplified illustration, imagine two investors, each with a concentrated holding, one in Microsoft and the other in Apple. Each would benefit by diversifying, and that’s what a 351 exchange fund allows. Each would contribute their respective shares into a common pool that would then hold some Apple and some Microsoft. This new investment would be structured as an ETF, and each investor would be issued shares proportional to the size of their contribution. Importantly, the initial creation of a 351 fund doesn’t entail any tax. Taxes are due only when an investor later sells shares of that ETF. This is a simplified example. In reality, a 351 exchange fund would hold many more than just two holdings. They’re actually required to meet various diversification requirements. As a result, investors in 351 funds may end up feeling sufficiently diversified and thus comfortable holding their fund shares for the long term. That would make this strategy potentially the most tax-efficient way to manage portfolio concentration risk. This is just an overview, though. If you’re interested in 351 strategies, I suggest further research. In July, The Wall Street Journal discussed these funds in some detail. In addition, a firm called Alpha Architect, the largest player in this area, has a number of helpful explanatory videos on its site.   Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X @AdamMGrossman and check out his earlier articles.
Read more »

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Manifesto

Aug 14, 2026

NO. 56: WE SHOULD hold down our fixed monthly costs, especially car payments and mortgage or rent. If these are too high, we’ll struggle to save, no matter how determined we are.

Truths

Aug 14, 2026

NO. 78: INVESTORS often boost their annual tax bill—by gleefully selling their taxable account’s winners, while refusing to unload losers. But to trim taxes, you should do the opposite: Sell losers, so you have realized capital losses to offset your capital gains and even your ordinary income. Meanwhile, hang onto winners, thus deferring the capital-gains tax bill.

think

Aug 13, 2026

DIVERSIFICATION. While diversifying is important with bonds, it’s crucial with stocks—and involves investing in hundreds and perhaps thousands of companies from a host of market sectors and countries. If we don’t diversify, and instead buy a handful of stocks or a single sector, there’s a danger we’ll take the risk of stock investing—without getting the reward.

act

Aug 12, 2026

GET YOUR CHILDREN age 18 and older to draw up a health care power of attorney, specifying that you can make decisions on their behalf if they become incapacitated. If they have an accident—and you have no power of attorney—you may be unable to make medical decisions for them or even learn basic information about the state of their health.

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Manifesto

Aug 14, 2026

NO. 56: WE SHOULD hold down our fixed monthly costs, especially car payments and mortgage or rent. If these are too high, we’ll struggle to save, no matter how determined we are.

Spotlight: Spending

Morning Delight

Mark Crothers   |  Jun 21, 2025

My wife, Suzie, is currently visiting her dad in Spain. This means I’m fending for myself, and I’ve found myself venturing into the local supermarket for essential supplies – like fruit and nut chocolate, my little indulgence! While wandering the aisles, I made an observation that got me thinking….. again!
Morning shopping, I’ve discovered, is a real delight. There are no crowds, just a quiet hum, and I even had time to chat with the checkout operator,

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Top Five Expense Categories and Inflation Factor

Cheryl Low   |  Apr 23, 2025

Dan’s post ‘Insomnia and the Back of an Envelope’ motivated me to review our expenses.  Our top five categories are property taxes, home/car insurance, utilities, groceries, and healthcare premiums/deductibles.

Our home property taxes increased 23% from 2023 to 2025 while our home value increase 17%. The value of our ten-acre plot went down 1.6% from 2023 to 2024, but then increased 23.5% from 2024 to 2025 and property taxes increased by 30%.
Home insurance went up 46% from 2023 to 2025,

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A Quick Question about Retirement Vacations

Mark Crothers   |  Jul 9, 2025

I’ve been at my holiday home for 10 days now, feeling relaxed and enjoying myself. It’s the first ‘holiday’ since retirement. What piqued my interest, though, is a subtle but distinct difference: this break feels less intense, is probably the word, than vacations I took while still working. It’s not the same kind of escape. Has anyone else noticed this after retirement?

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When to spend money

Ross Young   |  Mar 8, 2025

One of the biggest financial questions I wrestle with is when to spend. Saving has never been an issue for me—my thrifty habits make that easy. What I struggle with is knowing when (if ever) to splurge.
For example, I love rock climbing with my kids. It’s a weekly ritual, and I have no hesitation spending money on those experiences because I know I’m investing in memories before they grow up and move on.

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Quinn’s super frugal experiment. Are you up for a challenge?

R Quinn   |  Apr 4, 2025

Five years ago I wrote a HD article titled Food for Thought. It was about all the food we waste and, of course the money as a result.
Yesterday I mentioned to Connie that we have things in our pantry and fridge we don’t even know we have. She was sure that was not the case. Today I pulled out a bag of candy and other goodies we had forgotten from Christmas. I’m assuming it’s from last Christmas but that is not a certainty. 

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Our $1000’s Of Dollars Mistake: A Lesson Learned

Mark Crothers   |  Jul 1, 2025

My wife, Suzie, and I have just uncovered the biggest financial oversight mistake we’ve probably made in a very long time.
Since entering retirement, we have been reorganizing our everyday finances, including consolidating our two separate current accounts (a checking a/c without a checkbook) into one for the majority of our recurring bills. During this process, we realized we were paying for three mobile phone plans, two coming from my wife’s account. It turns out Suzie had always assumed my plan was taken from her account.

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Spotlight: Saha

Inflation Bites

Sanjib Saha   |  Dec 4, 2021

FINANCIAL PLANNERS often ask new clients about their first money memory. Mine was about an early encounter with inflation. It involved a favorite childhood snack named fuchka, a popular street food in Kolkata, where I grew up. The snack is a ball-shaped flatbread, filled with spicy potato mash and topped with tamarind water. As you crunch its crispy shell, the magical flavors burst in your mouth and take your tastebuds on a rollercoaster ride. As a child, this occasional savory treat was my main motivation for earning pocket money. In my elementary school days, our neighborhood street-food vendor used to sell three pieces for 10 paisa—roughly one cent at that time. I rarely had more than five paisa, for which the vendor gave me just one piece. I challenged his math and demanded fairness. Pestered by this argumentative little boy, he agreed to give me an extra piece with every other purchase. I felt proud of my negotiation skills. My joy didn’t last long. Out of nowhere, the vendor raised the price to two pieces for 10 paisa. No more extra pieces for me. This came as a surprise. My little mind couldn’t comprehend how and why prices could increase overnight. Angry and frustrated, I ran home to my mother and drew her attention to this injustice. To my disappointment, my mother seemed more sympathetic toward the vendor than her own son. She told me that prices go up over time but couldn’t explain why. Her advice: Sign up for more chores to boost my pocket money. My childhood snack is 100 times pricier these days, compared with a threefold rise in U.S. hot dog prices over the same period, reflecting India’s far higher inflation rate in recent decades. Today, inflation doesn’t surprise me. What does is the realization that my…
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A Matter of Timing

Sanjib Saha   |  Mar 4, 2022

I RECENTLY WROTE about missing the chance to harvest tax losses. A reader decried this as market timing, which I found surprising. But on second thought, I can see where the reader was coming from. Suppose we define market timing as any buy or sell decision that’s taken only when the time is right. Using this definition, I’m guilty as charged. But if that’s the case, is all market timing bad? I’d argue it depends on the intent behind the action. Take the example of Tim, a fictitious investor with a 50% stocks-50% cash portfolio. Consider three scenarios. Scenario 1: Tim wants to put more money into stocks, but he’s waiting for the market to drop. As the market drops a bit, he buys stocks with half of his cash. When the market dips further, he goes all-in. Scenario 2: During his annual portfolio checkup, Tim notices that the recent bull market has inflated his stock allocation. He rebalances his portfolio, selling some stocks and thereby bringing his portfolio allocation back to 50-50. Scenario 3: Tim notices during a down market that the stocks in his taxable account are trading below their original purchase price. To realize the tax loss, Tim sells the losing stocks and immediately buys others that give him similar market exposure. One could argue that all three scenarios are market timing. The first scenario is an investment strategy that doesn’t work so reliably. The second scenario is a risk-management strategy to keep Tim’s portfolio aligned with his risk tolerance. The jury is still out on whether rebalancing also improves portfolio performance. The third scenario is neither an investment strategy nor a risk-control strategy. There’s no material change in Tim’s market exposure, and hence no change in expected return or risk. It’s merely a tax-cutting strategy. The…
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Simply Works

Sanjib Saha   |  Oct 25, 2021

I THANK MURTHY, a friend at college, for teaching me guitar. Instead of theories, he taught me five easy chords. I could soon play a few songs and that fueled my motivation to learn more. The same strategy can help beginner investors. Novices often find the stock market intimidating and mysterious. Result? Inaction and opportunity cost. Solution? Simple steps. A former coworker comes to my mind. He was uninterested in stocks, including the company shares he received as part of his pay. He sold the shares immediately—often the smart thing to do—but he didn’t know what to do with the cash. For people like him, a simple solution is a fund like Vanguard Total World Stock ETF (symbol: VT). No need to research individual stocks. All my friend had to do was sell his company shares as he received them and then buy this fund. Over time, his interest in investing grew, and he’s no longer ignorant about the stock market. Another example: A friend’s daughter needed help with investing. She learned fast and decided to invest equal amounts in four commission-free index funds. She adopted a shortcut for rebalancing. Whenever she had money to invest, she’d buy the fund with the lowest balance. Was this the best strategy? Maybe not. But it works for her. My last example: A recent acquaintance had a large sum sitting in her bank account for years. She was too afraid to invest and too embarrassed to ask. After we chatted a few times, she realized that—while she was avoiding risk—she was also avoiding return. She decided to start investing in small installments, but invest less if stock prices were high. To keep things simple, she transfers just enough from her bank each month so her investment account reaches a fixed dollar target. If…
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A Narrow Escape

Sanjib Saha   |  Aug 12, 2022

I ENVY THOSE WHO can remain patient and calm in almost any situation. Thanks to my neurotic personality, I find it hard to wait for an outcome over which I have little control. This year, I narrowly escaped that sort of agonizing experience. What happened? We found ourselves selling our home during 2022’s suddenly cooling real estate market. I was surprised last year when the red-hot property market pushed our modest home past the $1 million mark. With prices so high, we decided to sell our paid-off house and move to one that offered more space and privacy. The place we settled on as our next home was a 50-year-old house in dire need of repairs and a facelift. We wanted to remodel it before moving in—and before selling the house we currently lived in. The remodeling started last summer at a sluggish pace. It was great not to live in a house that’s being remodeled, but it also made it harder for us to monitor progress and deal with contractors. The work dragged on, thanks to supply issues, contractor delays and COVID. I pretended to stay patient. My anxiety started rising as whispers about a possible cooling of the housing market grew louder. After all, we had to sell the old house after we moved into the new one. If it didn’t sell within a reasonable time and at a reasonable price, it would mess up our financial plans. I neither fancied being a landlord nor wanted to leave a large chunk of our assets locked up in real estate. As mortgage rates ticked higher, we revised our plan. Instead of waiting for the remodeling to be wrapped up, we decided to move in by early spring. We called up a moving company and set a date in March. We…
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Identity Crisis

Sanjib Saha   |  Jul 22, 2020

MAY 18, 2020, STARTED as an ordinary Monday. I was busy with office work. An email from our human resources department hit my inbox. It said something about fraudulent unemployment benefits. I couldn’t pay attention right away, so I saved it to read later. That evening, I found five letters from our state’s unemployment claims department in the mail. I’d never heard of such a department, but it reminded me about the email I got earlier. This time, I read the email more carefully. It turned out that someone had filed for unemployment benefits using my personal information. Many coworkers were also affected. They’d had little luck in contacting the state’s unemployment claims department directly. On behalf of the impacted workers, our employer was working with the department to flag these claims as illegitimate. Needless to say, I was surprised and worried. The letters from the state, dated between May 14 and 16, had bigger surprises. First, the department still seemed unaware that the claim filed on my account was fraudulent. Second, it appeared the department had started making payments without complete verification. The third surprise was most disturbing. Sensitive personal information about my employment and wages were included in the letters. I couldn’t tell whether that information was also sent electronically to the fraudulent claimant. That would surely make me a target for future, possibly more sophisticated, cyberattacks. I was curious about how this had happened, but first I needed to worry about my own vulnerability. My personal information had previously been exposed by a few of the well-known security breaches, including one involving my former mortgage lender. It had taken me months to sort out an identity-related tax fraud a few years ago. That experience was frustrating. The prospect of repeating that same drill was daunting. Sadly, I had no…
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Inflated Anxiety

Sanjib Saha   |  Jul 26, 2021

MY EMPLOYER’S 401(K) plan is great, with a generous matching contribution and lots of investment options. Those looking for even more choice can open a brokerage subaccount within the 401(k), allowing them to buy thousands of securities. I’ve stayed away from the brokerage option, in part because I feared the extra choice might affect my investment discipline. But my growing anxiety about inflation forced me to reconsider. I want a predictable cash reserve to cover my expenses for the next 10 years, independent of how the financial markets perform. That’s why a large portion of my 401(k) is invested in Vanguard Short-Term Bond Index Fund (symbol: VBIPX). Problem is, while the fund should hold its own in a broad market decline, it does little to preserve my money’s purchasing power. Everywhere I look, I’ve been noticing price creep. Initially, I took it as temporary phenomenon, the result of a post-lockdown spending surge. But the inflation spikes of recent months have spooked me. My anxiety kept rising despite the Federal Reserve’s insistence that this was only temporary. I’ve always felt that even the Fed—the expert of experts—has a hard time predicting and controlling inflation. To tame my anxiety, I opened a brokerage subaccount in my 401(k). The process was simple and quick. In a few days, I was able to raise cash by selling a large portion of my Vanguard Short-Term Bond Index Fund. I used the proceeds to invest in inflation-indexed Treasury bonds through another low-cost Vanguard fund (VTIP). Was it a good move? My rational self is half-convinced. But my emotional self couldn’t be happier. Sometimes it feels good to have a little insurance.
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