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Looking Back On My Hard Luck Days

DAN SMITH | Aug 7, 2026

"I am sorry for the loss of your wife. Bob"

- Mom & Dad Schneider

What is the right percentage?

R Quinn | Aug 9, 2026

"For us, it wasn't replacing any specific % of working income, it was when our income streams would more than cover our expenses (yes, calculated with a ... spreadsheet) and also allow us to continue to save each month. Our pensions have a COLA which has more than kept up with Medicare and other increased costs. My wife started receiving social security in February and all that goes into savings. So, we don't anticipate needing to tap into our T-IRA, Roth IRA's, or savings accounts in order to pay monthly bills. While I hope that our politicians do something positive to save social security with no benefits reduction, even if reduced benefits happen it won't interfere with our retirement lifestyle."

- Dave Melick

Short term and long term Social Security planning

William Perry | Aug 4, 2026

"Interesting question Robert that sent me down a rabbit hole. Using the CMS 271 page report with a transmittal letter of June 9, 2026 titled "THE 2026 ANNUAL REPORT OF THE BOARDS OF TRUSTEES OF THE FEDERAL HOSPITAL INSURANCE AND FEDERAL SUPPLEMENTARY MEDICAL INSURANCE (SMI) TRUST FUNDS" the best answer I can find appears to be that the IRMAA contributions are not broken out from the approximate 22% of total revenues that come from beneficiary premiums. Page 13 reads in part - For SMI, government contributions represent the largest source of income. These contributions covered about 75 percent of program costs in 2025. Also, beneficiaries pay monthly premiums for Parts B and D. Those premiums financed roughly 22 percent of the total cost in 2025... "

- William Perry

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.

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.

Taxing Social Security benefits

R Quinn | Aug 6, 2026

"I am going on a reading strike about Social Security. If the title says Social Security I do not read."

- Nick Politakis

Before Someone Else Decides

Kathleen Rehl | Aug 2, 2026

"Martin, you raise an important point. The financial implications of a later-life move can vary greatly by state and by family circumstances—and estate and inheritance taxes may outweigh the more immediate tax differences. Your comment is a good reminder that “Where should I live next?” is both a lifestyle decision and an estate-planning decision. I hope your next move gives you the setting you want and helps you preserve more of what you have built for your children."

- Kathleen Rehl

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

Matt Halperin | Aug 6, 2026

"This is very well framed. thanks"

- Rick Connor

FIFA Financials

R Quinn | Jul 19, 2026

"If you're a LedZep fan, try to catch one of Jason Bonham's "Led Zeppelin Experience" shows. Jason is, of course, John Bonham's son. Caught it at Wolftrap in Northern Virginia a couple years back. Fantastic show! Jason is currently touring too! Check www.jasonbonham.net I think."

- Mark Ukleja

“Gerontocracy” in America

Chris Rush | Aug 6, 2026

"Thanks for sharing this, Chris. I found Moyn’s notion that “age limits for political office are a must” ageist, and his book’s loaded, buzzword-laden title polarizing. His sprawling narrative seems to conflate a demographic anomaly (the baby boom) and long-lamented political challenges such as special interest money and the incumbency effect, among other factors. Given that, his prescribed remedies miss the root causes and aim for a more convenient target: the aged. At age 54, he might consider what his ideas mean for his own cohort: Generation X. As a considerably smaller generation, we already lack much influence. Under Moyn’s proposals, Generation X—and future generations—might have even less of a voice upon reaching our “golden years.”"

- D.J.

Jonathan’s Parting Thoughts: No. 8

Jonathan Clements | Aug 7, 2026

"Rob Berger had a YouTube video published 3 years ago titled "Avantis All Equity Market ETF (ticker: AVGE) Pros and Cons" where he discussed this fund which was new as it started in 2022 and he also made some comparisons with VT. I interpret Rod Berger's main concern about AVGE was the fact that as the fund was new that the newness alone was then disqualifying for him to include in his holdings. AVGE is also a fund of funds, is actively managed, tilts toward value, tilts towards US and uses a mathematical formula to look at past profitability to help fund management project which investments will be profitable in the future. That may parallel your investing thinking but I have gone with VT, for better or worse, which tracks the appropriate world equity index. A couple of key numbers and considerations - Expense ratios (net current) - AVGE 0.23%, VT 0.06% YTD gain per Morningstar 8/6/2025 to 8/7/2026 - AVGE +28.71%, VT +23.32% The VT fund at 6/30/2026 was about 80 times the size of AVGE The AVGE has a large Bid/Ask Spread which likely is caused because it is a "fund of funds" that trades underlying small-cap and value-tilted global equities and because of lower daily trading volume compared to a much larger fund like VT."

- William Perry

Inflation, prices, COLAs, retirement and the last 16 years

R Quinn | Jul 27, 2026

"I suspect the posts you read from seniors are those that do not really have adequate funds built up in IRAs (or other investment orientated savings) to act as the buffer on top of SS. The world has however changed and anyone who has retired in the past 10 years (or is coming up to retirement) should be aware of the utility in maintaining equity market exposure as a key part of managing inflation (and other life event) risks. As has been discussed before SWR is only a tool not the entire answer. If you're asking how much can I draw from $1m capital then 40k pa (rising with inflation) is a reasonable answer for a 30 year lifespan etc. That does nothing to tell you whether $40k will support your lifestyle and/or leave enough surplus for unexpected needs. Hence why you also need a budget or alternately the discipline to live within the income. I'd suggest it is wise to at least think about financial strategy in weathering unexpected needs. But it doesn't need to negate the overall drawdown strategy - for some it might be drawing at only 3.5%, for others maintaining a cash-like emergency fund or being prepared to sell a second home or whatever. My approach is to have a notional "when it's gone, it's gone" pot to cover lumpy one-off spend. Then I top it up from excess from my planned drawings or if it goes, replenish by paring back lifestyle spending a bit. Some people might need to see that as a physically separate fund/account. That's personal choice (possibly for those allergic to spreadsheets/budgeting ;) ) and largely just accounting presentation."

- bbbobbins

Looking Back On My Hard Luck Days

DAN SMITH | Aug 7, 2026

"I am sorry for the loss of your wife. Bob"

- Mom & Dad Schneider

What is the right percentage?

R Quinn | Aug 9, 2026

- Dave Melick

Short term and long term Social Security planning

William Perry | Aug 4, 2026

- William Perry

Roth Conversions and Taxes

ArticleJohn Urban | Aug 8, 2026

Risk and Taxes

ArticleAdam M. Grossman | Aug 8, 2026

Taxing Social Security benefits

R Quinn | Aug 6, 2026

"I am going on a reading strike about Social Security. If the title says Social Security I do not read."

- Nick Politakis

Before Someone Else Decides

Kathleen Rehl | Aug 2, 2026

- Kathleen Rehl

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

Matt Halperin | Aug 6, 2026

"This is very well framed. thanks"

- Rick Connor

FIFA Financials

R Quinn | Jul 19, 2026

- Mark Ukleja

Manifesto

Aug 9, 2026

NO. 71: WE SHOULD take a broad view of our bond holdings—and include our paycheck, Social Security and other bond-like income streams. Result? We may find we have too much in bonds.

act

Aug 10, 2026

KEEP ENOUGH in cash investments to give yourself a sense of security. It’s tempting to invest as much as possible for long-term growth. But research suggests putting perhaps $5,000 in a savings account or a money market fund can greatly improve our sense of financial wellbeing. If your emergency fund isn’t that large, consider stockpiling some cash.

think

Aug 10, 2026

ENDOWMENT EFFECT. We prize the items we own. We might believe our homes are worth more than they really are and our investments have performed better than they have, making us reluctant to sell. We might also hang on to investments we inherited from our parents, because we endow them with meaning beyond their actual value.

humans

Aug 9, 2026

NO. 41: OUR APPETITE for risk isn’t stable. As we settle on a stock-bond mix, we should ponder how much risk we can reasonably take and how much we can stomach. The first part is easy, but the second part—deciding how much risk we can truly tolerate—is tough. The reason: Our risk tolerance rises as stocks climb, but can evaporate when prices fall.

Money Guide

Manifesto

Aug 9, 2026

NO. 71: WE SHOULD take a broad view of our bond holdings—and include our paycheck, Social Security and other bond-like income streams. Result? We may find we have too much in bonds.

Spotlight: Behavior

And Another Thing….

Marjorie Kondrack | Mar 17, 2025

Henry James is one of my favorite authors. In the late 1880s He wrote a novel, Washington Square, which was adapted into a play and an award winning movie, “The Heiress”. Olivia dehavilland starred as Catherine Sloper, a shy, ordinary looking, socially awkward young woman, who stands to inherit a large fortune.
Montgomery Clift, was Morris Townsend, her handsome, charming but ne’er do well suitor—and a wonderful English actor, Ralph Richardson, as Dr. Austin Sloper, Catherine’s father.

Generational Perspective

Rand Spero | May 8, 2025

Many Humble Dollar readers, including myself, are on the older side – approaching retirement or already retired. Readership tends to be relatively affluent and educated. Our financial and social perspective may at times be influenced by a generational outlook. At the risk of overgeneralizing, here are some possible baby boomer versus Under 40 year old viewpoints:

Artificial Intelligence

Baby boomer: A new development with many unknowns and exciting possibilities. AI could play a dangerous role in future scams targeting them.

Money Grows Up

Jonathan Clements | Jan 18, 2025

I MOVED FROM LONDON to New York City in 1986, when I was age 23. That’s when my financial education truly began.
I’d previously studied economics for three years and spent a year writing about the international financial markets for Euromoney magazine. Still, I knew almost nothing about investing, insurance, homeownership and other topics crucial to managing a household’s finances.
I’ve learned a ton since, and the focus of that education keeps changing,

Regular HD writers, readers and commentators are just not normal- in a good way

R Quinn | Jul 30, 2025

Over the several years I have been writing and commenting on HD it has been made clear that the HD community includes many sophisticated investors and planners. People who use budgets, track expenses, do their best to investigate and then make financial decisions based on information they develop. They use various type of software programs and, of course, their own spreadsheets. They analyze risk and investment expenses. They like details. They think about the future. And,

Necessary Skills

kt2062 | Feb 2, 2025

As someone who is independent, I try to do as much around the house as I can. I don’t mean housework or laundry; I mean things like unclogging the toilet and putting up shelves. I try to stay as independent as possible to save money and so that I don’t have to be subjected to someone else’s time schedule.
But most of these require certain skills I’ve never learned. I haven’t used an electric snake, or a toilet auger.

Do You Worry About Money Every Day?

R Quinn | Jun 6, 2025

An article in Employee Benefits News paints a dim picture of retirement. One that may reflect the real world beyond the HumbleDollar community.
Here again we are relying on a survey so who knows how accurate, but I bet worrying and anxiety over money in retirement is not uncommon. Can you imagine retiring with no clue about the viability of your finances?
It says retirees are struggling to make their savings stretch.
According to Schroder’s 2025 U.S.

Whither Crypto?

Mike Zaccardi | Dec 26, 2021

NO DOUBT ABOUT IT, cryptocurrencies have had a raucous 2021. From bitcoin and ether’s fast start in January, to the rise of dogecoin in April and then the shiba-inu October shenanigans, folks owning seemingly any digital currency likely experienced big gains if they were owners since early 2021. What if folks got in later in the year? Despite being all over the financial press and having inked all sorts of sponsorship deals—including the naming rights to what was once the Staples Center in Los Angeles—total crypto market cap today is pretty much unchanged from the peaks reached in May and September, and down somewhat from the Nov. 11 all-time high. Still, total crypto market cap is up 211% year-to-date. Some investors keep a close eye on the two stalwarts in crypto land: bitcoin and ether. Those coins rallied sharply before the stock market close on Thursday. Santa came early for so-called HODLers, those holding on for dear life to their cryptocurrencies. Tech stocks also rose on the final trading day before Christmas. CNBC’s Brian Kelly noted that bitcoin’s 30-day correlation with the Nasdaq Composite index is 47%—the highest since September. Kelly contends bitcoin might be more correlated with the stock market in the coming years as institutions accept it as a traditional asset. If that thesis plays out, owning cryptocurrencies might lose some of its luster going forward. After all, if virtual currencies will simply move with share prices, then the diversification benefit diminishes. Next year will be yet another fascinating one for cryptos, especially given that massive gains have been made, but recent performance has been lukewarm. Next year will also be a period of tightening credit conditions if the Federal Reserve has its way. On top of that, there will almost certainly be less fiscal stimulus sloshing around.…

Ready for Rough Times

Mike Zaccardi | Oct 24, 2022

AS INFLATION continues to run hot, wage gains for the bottom quartile of income earners are almost keeping pace with consumer prices. Meanwhile, checking account balances for this group remain more than 50% above pre-pandemic levels. Is everything A-okay? Of course not. Still, I’d argue that many Americans have positioned themselves well to weather an economic downturn. Another sign: Average credit scores are much improved from, say, the mid-2000s, when families were loading up on debt and speculators were snatching up houses only to flip them months later. According to Bank of America’s third-quarter earnings report released last week, the average FICO score among the firm’s credit card customers was a solid 770. That’s a smidgen higher than was reported in the same quarter a year ago. Another bright spot for everyday Americans: Natural gas prices have plummeted. After surging to almost $10 per MMBtu during the summer, the spot price for U.S. Henry Hub natural gas is back under $5. That's the lowest level since March. Families might not face home heating bills this winter that are as steep as some forecasters had feared earlier this year. Meanwhile, utility bills across the pond should also be less severe now that European natural gas prices are down 67% from their 2022 peak. But there is, of course, also bad news. Mortgage rates have surged to their highest level in nearly 22 years, with new 30-year loans now above 7%. It’s hard to fathom how the housing market avoids a collapse in monthly transactions. Between steep lending rates and still sky-high real estate prices, prospective borrowers face huge costs, while homeowners who secured a low mortgage rate will likely sit tight for as long as possible. These are strange times for consumers. But with strong household balance sheets and the job…

Call of the Wild

Mike Zaccardi | Jan 16, 2022

CRYPTOCURRENCIES have come under selling pressure over the past few months. That might have some readers thinking about buying the dip in, say, bitcoin or ethereum. Those two cryptos, the largest by market capitalization, are off more than 30% from their all-time highs. I’ve been dabbling in digital assets, but not in the way you might imagine. I put about 3% of my portfolio into stablecoins. Stablecoins differ from the well-known cryptocurrencies we often hear about. How so? They're pegged to the value of, say, the U.S. dollar or gold, thus offering more price stability. Why am I doing this? I admit it, I’m thirsty for yield. Stablecoins offer interest rates of up to 9%, depending on the coin you pick, where you invest and the amount involved. Those high interest rates are made possible because the crypto exchanges involved are making even higher rates by lending out the money to, say, those who want to borrow against their cryptocurrency holdings. I bought USD Coin (symbol: USDC) through BlockFi. I consider this speculative money. Last year, I detailed other fringe investments I’ve purchased. Fear not: Most of my money is far more conventionally invested. I still have some 80% of my portfolio in your typical low-cost index funds. My thinking: Stablecoins complement my emergency cash position, which currently earns next to nothing in a bank account. I also have $20,000 in Series I savings bonds that will pay perhaps 3% to 4% a year over the next five years. Stablecoins should provide an even bigger yield. But there’s also a risk that I log in one day and see it all gone. I’m fine with that possibility, though I also see the risk as small. After reading about stablecoins and hearing from other investors, I think there’s something to the…

Parents Know Best

Mike Zaccardi | Sep 2, 2021

A DECADE AGO, I was sure I knew everything. I scrimped and saved as much as I could to fully fund my retirement accounts. My goal was to retire early. All that was fine for me. My error: casting my credos on others. I gave my parents grief for what I considered to be their excessive spending and insufficient regard for long-term planning. I was wrong. While it’s imperative for those in their 40s and 50s to have their retirement plan on track, it’s also imperative to make memories by leading an enjoyable life. I was—and likely still am—at one end of the spectrum. I focused on growing my net worth as much as possible. My parents, back in the day, leaned the opposite way. They aggressively invested in experiences for my siblings and me. Jump ahead to today. I love the idea that my folks want to upgrade their kitchen. Maybe it isn’t the most opportune time, given supply chain bottlenecks and raw material price spikes. But who cares? After a decade of stock, bond and real estate gains, they’re in good financial shape. Delaying their Social Security benefits to age 70 was another prudent choice. I say go ahead and put in those fancy new countertops, sleek cabinets and stylish appliances. Despite recent health scares, my mother still works. She uses the kitchen as her office. Why shouldn’t she have a great place to spend the day? I think back to what my 23-year-old self would think about that. I’m sure I would have made rude comments about how the money would be better invested in a low-cost, target-date fund instead of depreciating material items. Now I think spend-shaming is never the answer. It turns out my parents knew best.

A Stronger Bond

Mike Zaccardi | Sep 26, 2022

SERIES I SAVINGS bonds might be the best-performing investment in folks’ portfolios this year. With steep losses in both the stock and bond markets, I bond’s 9.62% current yield looks like a home run. But the playing field could be shifting. How so? Yields on the federal government’s other inflation-linked bond—Treasury Inflation-Protected Securities (TIPS)—are up sharply in 2022. Result: TIPS aren’t such a bad buy today and perhaps better than Series I savings bonds. According to Bloomberg, as of last Friday, TIPS yields across the maturity spectrum, from five to 30 years, were solidly in the black, generally in the 1.3% to 1.6% range. These are so-called real yields, meaning they’re yields over and above inflation. Simply put: We can now earn a positive inflation-adjusted rate of return on TIPS. Meanwhile, today’s buyers of Series I savings bonds will earn a yield that merely equals the inflation rate. Remember, that 9.62% yield is only good for the first six months. Thereafter, the annualized yield for each six-month stretch will bounce up and down with the inflation rate. Series I savings bonds may start looking much less attractive as early as May of next year, when rates on I bonds are reset. In fact, if you have a short time horizon and want safety, you might want to check out very short-term TIPS. The Wall Street Journal reports that real yields are above 2% on TIPS maturing within 18 months. Gone are the days of your cash losing out big time to inflation. Based on the difference in yield between TIPS and conventional Treasurys, investors expect inflation over the next year will be muted at a little more than 2%, while the expected 10-year average inflation rate is just 2.37%. Investors’ conviction that the economy will slow and inflation will cool…

Rough Over There

Mike Zaccardi | Jul 25, 2022

INFLATION IS TAKING its toll on Americans’ view of the economy. But things could be a lot worse. Exhibit A: Europe. Last week, the U.K. reported its inflation rate had surged to a four-decade high of 9.4%. June’s reading was a significant bump up from May’s 9.1%. Even higher inflation is expected as year-end approaches, with the Bank of England seeing annual inflation hitting 11%, according to The Wall Street Journal. In fact, consumer prices across Europe are rising rapidly amid surging energy costs. As much of the U.S. baked in the July heat, all-time record hot temperatures were notched in major population centers across the pond. Sky-high costs for summertime cooling are crimping consumers’ pocketbooks, with food and housing-related expenses also on the rise. To combat the energy crisis in Germany, streetlights are dimmer and people are taking shorter showers. Americans headed to Europe will no doubt notice that their travels are cheaper, thanks to a much weaker euro. The financial press pounced the instant the U.S. dollar and euro hit parity. The “Big Mac Index” is often used to illustrate how cheap or expensive other parts of the world are relative to the U.S. Right now, a strong dollar means relatively inexpensive McDonald’s burgers in Europe. Last Thursday, to combat rising inflation and a falling euro, the European Central Bank issued its first interest rate increase since 2011. Meanwhile, we’ll learn the U.S. Federal Reserve’s next move on Wednesday afternoon. The financial markets expect another 0.75 percentage point rate hike to cool off the 9.1% headline U.S. inflation rate. The big question: Will these rate increases break the back of inflation—or do further big increases lie ahead, which would likely mean more turmoil in the stock and bond markets?

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