Jonathan Clements's Blog, page 111

Letter to My Ex

HI CHRIS, IT'S BEEN 45 years since we broke up, we’re now both age 78, and I’m winding down. I wanted to touch base and catch you up, but mostly let you know that I often think back on our 11 years as husband and wife, and how much I value the time we spent together. Sometimes, that period of my life seems far in the past, but other times it’s right on my shoulder, as I suspect it may be for you.

I still recall the day I first saw you in a psychology statistics class. You were wearing a plaid blouse and penny loafers, and your earrings were flopping around. I felt easy and in charge on our first date. You didn’t challenge what I said and agreed with my itinerary for the evening, a pattern that eventually bred mutual resentment. At the time, I often felt dragged down by your melancholy. But I now realize we shared a despair that explains much of our attraction to each other and our instant bond.

I can still remember calling you in Chicago from New York, just before setting out for Colorado to take my shot at graduate school in psychology. When you said you would endeavor to join me in graduate school, I was elated. Only age 22, I was heading out to explore young adulthood and carve out a career whose end points were obscure.

I knew no one in Boulder and fall semester hadn’t yet started. Until I made a few friends and until you were able to join me, your visits from Northwestern were what sustained me and bailed out my loneliness. I wrote my papers on that makeshift desk, with an old door as a top and bricks as legs, listening to Simon and Garfunkel, and imagining what our weekend would be like.

Eventually, the abyss between our backgrounds proved too treacherous to cross and we fell into a desperate alienation. I became exasperated with your dependency and passivity, cultivated first by your family and then by me. But I’ve since come to understand how your simple quietude let me do my own thing, making room for my prolific professional writing and frantic career-building. You were so frugal and so generous, forfeiting fancy clothes and lavish entertainment to support my investing habit.

I was relieved we could talk openly about the “Jewish thing.” We were driving to Aspen, Colorado, in the Corvette with a cassette playing Summer in the City by the Lovin’ Spoonful. I got off at a Mobil station in Silverado, California, an all-but-abandoned mining town, and turned to face you. I warned you about how your life would be affected by marrying a Jew. You needed to know what you were getting into and how you would be stained by the centuries-old stereotypes of opportunism and greed. This was virtually guaranteed when people learned my family had money.

Still, our wedding on Long Island, New York, went on as planned, with two friends and no parents. We had spited them and they returned the favor. First love is a powerful deterrent to fears of disinheritance. Your common decency would ultimately win over my parents, but you sacrificed your whole family.

After you were admitted to the psychology program at Boulder, I was insistent that you finish your dissertation and get your PhD. Remember how my father, a.k.a. Wild Bill, pushed my mother around, even though the apartment buildings they owned were actually hers? I wanted to be better than that. But as it turned out, I was not much of an improvement on my father.

Right before we separated, we bought that English Tudor home you admired. It was obvious to me by then—as it must have been to you—that our marriage didn’t have long to go. And yet, like so many troubled couples, we took a big step—homeownership—hoping it would make things better. As part of the property settlement, I figured we would exchange your cash for my half of the home equity, so that you could own your own home. Who knew the value of houses in East Sacramento would take off before the ink had even dried on the transfer of title?

I’m still humbled that you trusted me to finalize the divorce. With neither kids nor lawyers, I filled in the dots in the Nolo Press paperback on how to do your own divorce. The court proceeding took 15 minutes—about as long as our wedding ceremony. When I got back to the psychiatry building, I walked into your office, and placed the divorce papers and title to the house in the middle of your desk. Hearing how we did the divorce, your shrink was amazed and said she’d sorely underestimated the depth of our relationship.

I saw that, for many years, you and Ron headed up the child development center at a university in the Midwest. I trust helping others proved enriching for you. I also trust your second marriage has proved better than your first. I know, at least, that you haven’t been alone.

Anyway, Chris, I hope your health has held up better than mine and you’re free of anything ominous. I am hosting a cancer and a heart condition, both reputedly under control, and am feeling well for the time being. You may have heard on the academic grapevine that my life has been a rollercoaster. That once blazing research career careened into a crippling depression that lasted almost 20 years. I know I made a mess of things at the end of our relationship, and I accept that you may feel my suffering was just desserts.

The last 15 years of semi-retirement have been good to me. I have a wonderful partner and terrific kid, and the three of us are close. I roam from sessions with my few remaining patients to lunches with some of the old crowd from the med school. And I am still smitten by the stock market and have been doing some writing about personal finance. For better or worse, I’m pretty much the same quirky character, but chastened by life’s lessons, less driven and more at peace.

No pressure to write. I just had some things I wanted to tell you. I know I hurt you—really, really hurt you—and I’m sorry it came crashing down that way. I met up with a tornado and she blew me away.

Take care,

Steve

Steve Abramowitz is a psychologist in Sacramento, California. Earlier in his career, Steve was a university professor, including serving as research director for the psychiatry department at the University of California, Davis. He also ran his own investment advisory firm. Check out Steve's earlier articles.

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Driving Us Batty

WHAT DRIVES THE PRICE of individual company stocks, and why do some soar while others sink? It comes down to five factors, I believe.

The first two factors are a company’s observable strengths and weaknesses. Consider Apple. Its strengths are easily quantifiable. In the U.S., it’s captured more than half the smartphone market. When you take into account the company’s premium prices, it collects a disproportionate share of the industry’s revenue. Last year, Apple’s profits hit nearly $100 billion, making it the most valuable American company. Because of this, it would be easy to be bullish on Apple’s future, and thus on its stock.

You could make a similar observation about a company like Tesla. It holds about 50% of the U.S. electric car market and saw revenue grow by 51% last year. It also has a cult-like following. Chip maker Nvidia is in a similar position. Artificial intelligence (AI) services like ChatGPT run on its chips. As a result, in its most recent quarter, Nvidia’s revenue tripled and its profits grew 1,200%.

Against those strengths, investors weigh a company’s observable weaknesses. That’s the second variable that drives stock prices.

Let’s look at Apple again. The company is clearly on a roll, but does it have weaknesses? A key concern is market saturation. At some point, everyone who needs an iPhone, Mac or iPad will have one. Because of Apple’s premium pricing, consumers can be slow to upgrade. That’s one reason Apple’s revenue fell in its most recent quarter. In valuing Apple shares, an investor would want to weigh its immense profitability against this sign of potential weakness.

Tesla, too, is not flawless. While it holds half the electric car market, its market share was even higher before competitors came along. And because Tesla has lowered prices at the same time that it’s lost share, its financial picture isn’t as strong as it was even a year ago.

What about Nvidia? After gaining more than 1,200% over the past five years, many are wondering if the stock is riding on a knife’s edge. While its valuation doesn’t look unreasonable, with a price-to-earnings ratio of 25, that’s predicated on continued demand from AI developers. Because the market is so new, that’s not guaranteed.

These two factors—how investors weigh a company’s observable strengths and its weaknesses—are two key drivers of stock prices. But stock-picking would be a whole lot easier if those were the only variables. The reality is that share values are also driven by another set of strengths and weaknesses.

To understand these two drivers—our third and fourth—let’s continue with the above examples. If you wanted to calculate a valuation for Apple’s stock, you’d certainly start with all of the information—both positive and negative—that is publicly available. That’s what we discussed above. The problem, though, is that this would fail to capture what’s below the surface. What, for example, is Apple cooking up in its labs right now?

Of course, there’s the next generation of the iPhone, but it may also have something—or many things—entirely new. Because no one knows about them, their revenue isn’t reflected in Wall Street analysts’ valuation models, and thus those potential future profits aren’t reflected in Apple’s share price today. The same is true of Tesla, Nvidia and every other company.

At the same time, there are negative factors below the surface that should also factor into a company’s share price. Given its size, Apple could easily become the subject of an antitrust inquiry. And because most of its manufacturing is in China, it could get caught up in political tensions between Washington and Beijing. So far, CEO Tim Cook has done a great job managing this delicate relationship.

But what if Cook were to retire? It wouldn’t be unreasonable. He’s 63, has a net worth in the billions and has been on the job for 12 years. If he did, would his successor do as good a job? This same set of concerns could easily apply to the other companies we’ve looked at. Tesla and Nvidia could find their market-leading positions subject to regulatory scrutiny. Both are highly dependent on their skilled and highly visible CEOs.

Those aren’t the only potential weaknesses that could hurt share prices. Another worry, especially for technology companies, is the “two guys in a garage” risk. Apple, Microsoft, Google and HP all started that way. Michael Dell and Mark Zuckerberg started in dorm rooms before they even had garages. This is proof that an upstart competitor—armed only with a good idea and a shoestring budget—could upend an incumbent at any time.

To appreciate this, think back to the days before the iPhone was unveiled. BlackBerry was dominant, and now it’s essentially gone. A new competitor is a fundamental risk to any company’s share price, and yet it’s completely invisible to the public and it’s impossible to know how to factor it in.

To accurately value a stock, then, we need to take into account all of a company’s observable strengths and weaknesses, as well as those that are unobservable. That might seem hard enough, but there’s a fifth driver to consider: how investors interpret the data they have.

Consider the electric vehicle (EV) market. Toyota has discussed a new battery technology that it believes could double its vehicles’ range, and at a lower cost. This information is publicly available, and it could be damaging to Tesla and every other EV maker. But right now, it doesn’t seem to be affecting share prices. At some point, though, that might shift. When? No one knows. That’s why this fifth and final driver of share prices is perhaps the most difficult. It’s fully in the realm of psychology rather than anything that can be captured in a spreadsheet.

These five factors reveal an irony of investing. On the one hand, stock-picking is frustratingly difficult because of the unpredictable ways in which these factors come together. That’s why both professional and individual investors have a hard time beating the market. But at the same time, thanks to these same factors, stock-picking can be a lot of fun, as I can attest.

Earlier in my career, when I worked as a research analyst, I studied everything from computer storage to paper towels. Among other topics, I learned how Boeing constructed its Dreamliner and how GE built wind turbines. I had an excuse to follow each new iPhone release. And then, together with colleagues, we’d spend hours debating what we’d learned. As an intellectual game, it was a lot of fun, so I understand why—despite the discouraging data—stock-picking still has an appeal.

With the benefit of hindsight, stock-picking sometimes looks downright easy. Ten years ago, it was no secret that iPhones were great, that people enjoyed watching movies on Netflix, that Google’s search engine was popular, or that Amazon was getting quicker and quicker with deliveries. Looking back, it seems like it would have been easy and obvious for anyone to buy those stocks. That, fundamentally, is the challenge. Stock-picking, when it’s successful, looks fun and profitable, while index fund investing can feel a bit like eating your vegetables—good for you, but not very entertaining.

What’s the solution? As I’ve noted in the past, investing requires us to channel, simultaneously, five sometimes conflicting ways of thinking. In making decisions, we want to be part optimist, part pessimist, part analyst, part economist and part psychologist. If you can strike that balance, then you can, I think, successfully navigate this question—and find the answer that makes sense for you.

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 Twitter @AdamMGrossman and check out his earlier articles.

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Retirement Roulette

IT'S HARD TO OVERSTATE how challenging it is to generate retirement income: We need our money to last at least as long as we do, and yet we don’t know how financial markets will perform, what the inflation rate will be, whether we’ll get hit with hefty long-term-care costs and how long we’ll live.

Moreover, the generic advice offered inevitably doesn’t work for many—and perhaps most—folks because we all start retirement with different attitudes, goals and financial resources. For proof, consider seven issues.

1. About the kids. If our retirement needs and wants were relatively modest, and hence we could cover all expenses with our monthly Social Security check, we’d be in great financial shape. After all, we’d have a government-backed inflation-indexed stream of income that’s paid until the day we die—and that, arguably, is as good as it gets.

Yes, even Social Security has drawbacks. First, Congress could cut benefits, though I can’t imagine that ever happening, given that politicians have a fondness for reelection. Second, the national standard of living rises not with inflation, but slightly faster, with per-capita GDP. That’s why many retirees feel financially pinched, especially later in retirement.

But there’s also a third key drawback: Even if Social Security could cover our entire retirement costs, there’d be nothing left for our children, nieces, nephews and charity—and bequeathing money is an important goal for many. Where we position ourselves on the spectrum from “strong bequest motive” to “die broke” can make a huge difference to how we manage our retirement finances.

2. How optimistic we are. If we knew our end date, managing our retirement finances would be a cinch. The reality: Unless we’ve lived a life of total debauchery or our current health is downright awful, it’s hard to know how long we’ll live. What about family longevity as an indicator of our own life expectancy? We might imagine our parents and grandparents are a great guide to our longevity, and yet genetics might explain just 25% of the variation in lifespans—and perhaps as little as 7%.

The bottom line: It’s awfully hard to know how long our retirement will last. Like saving too much for retirement, there’s no financial harm in assuming we’ll live to a ripe old age. By contrast, there’s great risk in assuming a short retirement. What if we do just that? Before we start spending merrily, we should at least have a backup plan in case we live longer than imagined. Did anybody say “reverse mortgage”?

3. Risks we hate. The biggest risk in retirement is running out of money before we run out of breath. But that’s hardly the only financial danger. Every key financial decision in retirement involves risk. The question is, which risks are we willing to take?

For instance, if we delay Social Security, buy income annuities and take any pension as a monthly payment, we run the risk of dying early in retirement and leaving big money on the table. Meanwhile, if we claim Social Security early and take our pension as a lump sum, we’ll have a fatter nest egg, at least in the initial retirement years. But there are also dueling risks—the risk of sharp short-term losses if we favor stocks and riskier bonds, and the risk we’ll lose ground to inflation if we’re too conservative.

4. Income we want. The popular 4% withdrawal rate is based on withdrawing 4% of our nest egg in the first year of retirement, and thereafter stepping up the sum withdrawn each year with inflation. Is 4% the right number? Those of us without a crystal ball have no idea.

More important, we should be skeptical of the notion that steadily growing lifetime income can be generated from volatile investments. And even if it’s doable, most retirees won’t do it. Instead, faced with a market crash and accelerating inflation, their instinct will be to spend less—and that’s a good instinct, I’d argue. My advice: Treat the 4% rule as a guideline and not a withdrawal strategy to be followed robotically.

But what if folks loathe the idea that their spending will need to fluctuate from one year to the next? That’s a vote in favor of predictable income, and hence a vote in favor of delaying Social Security and buying immediate-fixed annuities. Indeed, research suggests that retirees with predictable income tend to be happier.

5. Whether to work. I know that, for some, retirement means never working again and, indeed, earning any money somehow violates the very notion of retirement. For others, even if they wanted to work part-time, it’s hard to find a position they’d enjoy at a pay rate they’d consider acceptable.

Still, let me offer this contention: Working a handful of hours each week for money is perhaps the smartest strategy, financially and otherwise, for those in their initial retirement years. Think about it: That work could provide us with a sense of purpose, ensure we regularly engage with others, give us an identity beyond “I’m a retiree,” limit withdrawals from our portfolio, and allow us to delay both Social Security and any immediate annuity purchases. In short, a handful of years of part-time work could be the difference between a happy and financially successful retirement, and one that’s marked by money worries, loneliness and a lack of direction.

6. When to spend. Many retirees spend heavily in their first decade of retirement, figuring this is their chance to enjoy life before the slow-go and no-go years arrive. I wouldn’t discourage anybody from doing so—but I also fear that those in their 60s aren’t very good at anticipating the needs of their octogenarian selves. Are we sure we’ll be content to spend our 80s and beyond sitting at home, watching the TV? Do we really have enough savings and long-term-care insurance to cover long-term-care costs? If not, perhaps we should spend a little less freely in our 60s.

7. When we start to slip. Overseeing a portfolio of stocks and bonds, and calculating how much we can safely withdraw each year, might seem easy enough in our 60s. But will we be up to the task in our 80s?

This might again sound like a vote for annuitizing and delaying Social Security. But instead, it could be a reason to keep our finances as simple as possible, and perhaps also identify a family member or younger financial planner who could help us manage our money as we age.

Where do I stand on these various issues? I intend to work part-time for as long as it’s enjoyable, and I plan to do that work from all over the world, as I strive to make the most of my go-go retirement years. But I concede that I’m lucky: With a laptop and an internet connection, I can work from all manner of wonderful places.

What about the 4% rule? I might use it as a guideline to make sure I’m not overspending. But I’m going to be flexible about how much I spend each year, taking my cues from my portfolio’s performance. At the same time, as a cushion, I plan to keep five years’ worth of expected portfolio withdrawals in high-quality short-term bond funds, so there’s scant risk I’d ever need to sell stocks during a market downturn.

Meanwhile, I’m planning to delay Social Security until age 70 and I intend to use part of my nest egg to purchase immediate-fixed annuities from a variety of insurers. My goal: have enough predictable income to cover at least my fixed living costs. That’ll free me up to invest more of my remaining money in stocks and hence go for growth—because I’d like to leave a healthy sum to my kids, grandkids and charity. Indeed, I believe annuitizing and delaying Social Security are the key to greater wealth later in retirement. That predictable income stream should also make managing my finances later in retirement far less mentally taxing.

What if I’m wrong, and I don’t live long enough to break even on my delayed Social Security benefits and my annuity purchases? No doubt I’ll die with some regrets—but, when the end comes, I can’t imagine I’ll be fretting over my financial choices.

Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier articles.

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Parting Ways

IN 1980, MY FIRST WIFE and I spent the Labor Day weekend with friends on Cape Cod, Massachusetts. We went out for breakfast and I drank a lot of coffee. Our friends were planning a day at the beach. This is not a good idea for me because—being of Irish descent—I come in two colors, red and white. Either I look pale and sickly or I’m red as a beet. To avoid this latter state, I suggested they go ahead and I’d walk back to the house where we were staying. 

During this walk back, I came across a 1960s Porsche sitting in a repair shop’s parking lot. I stopped to admire it. I continued on my walk back to the house and began fantasizing about how cool it would be to own a Porsche.

At this point in our marriage, I’d begun my insurance career, while my wife was progressing in her career as a teacher for those with special needs. We were both finally making okay money. The caffeine was kicking in and my brain was racing. I began to think about how I could buy a Porsche. My thoughts led me to decide that, if we never had kids, our financial position would improve even faster, and that would lead to the car I now desperately wanted.

I kept the idea to myself on our ride back home to Brooklyn, as well as the next morning when we went to work. But on that Tuesday night, I decided to broach the subject with my wife to see her reaction. She went ballistic. The evening culminated with her walking out and never coming back.

My first wife was also my first girlfriend. We met in college when she was a freshman and I was a senior. We dated for the four years she was in school, and got married the September after she graduated. I was ready for “and they lived happily ever after.” But it was not to be.

At the time of our breakup, New York didn’t have a category of divorce which applied to us. My wife decided annulment was the way to go. I always thought if a marriage had been consummated, it couldn’t be annulled. She argued there was a defect in our relationship since I hadn’t told her before our marriage that I didn’t want kids. The truth is, I never thought about kids. I just wanted to be married to her.

She hired an attorney and filed the papers. It was an uncontested annulment since we had no children and few assets. Her lawyer asked if she wanted to sue me for legal and court fees. She said “no.” She was the one who wanted out, so she felt she should pay all the costs.

My wife also did this because she knew how important money was to me. My goal in life had been to get rich ever since my father died when I was age 15. I’d assumed that, because of his death, my mother and I were now poor. We weren’t, but the empty feeling stayed with me for years. Money was the answer.

My first wife was raised Catholic. She went to a Catholic grammar school and high school. I was raised Protestant, so a Catholic annulment meant nothing to me. But it was important to my wife, who I was still in love with. I didn’t want to prevent her from getting married in the Catholic church at some point in the future, so I cooperated with the priests and nuns who interviewed me prior to the annulment.

After the tape recorder was turned off, the priest asked me if I had any thoughts. To ensure my wife got the annulment she wanted, I proceeded to tell him my views on the Catholic church, which were not complimentary. I’m sure the papers were airmailed to the Vatican that day for approval. Mission accomplished.

My first wife went on to marry a Protestant (go figure) widow who already had kids, so she knew he’d be willing to have more kids. She eventually became principal of a public middle school in Massachusetts. She always demonstrated that a successful career was in her future, and I’m happy she got what she wanted.

I believe it’s important to pick and choose our fights. Financially, I made out better by not fighting my wife’s decision to divorce. Emotionally, it was a huge hit since it wasn't what I wanted. But as the expression goes, “what doesn’t kill us makes us stronger,” and it did. I’ve heard many stories from others about how expensive their divorce was and how ugly it got. Because ours was an uncontested annulment, it didn’t cost me anything and it didn’t cost my first wife much.

I never did get that Porsche. Still, as a reward for the divorce ordeal, I attended the Skip Barber Racing School in Lime Rock, Connecticut. Some kids dream of being a baseball or football player. I wanted to be the next Mario Andretti.

After completing the program, I realized that a racing career wasn’t in the cards. One of my fellow racers owned a Porsche. He was impressed at how I “took this one corner” and thought I was pretty good. He’d never let anyone drive his Porsche, but he said he’d let me drive it around the Lime Rock race course. I finally got my Porsche experience—and it didn’t cost me a dime.

David Gartland was born and raised on Long Island, New York, and has lived in central New Jersey since 1987. He earned a bachelor’s degree in math from the State University of New York at Cortland and holds various professional insurance designations. Dave’s property and casualty insurance career with different companies lasted 42 years. He’s been married 36 years, and has a son with special needs. Dave has identified three areas of interest that he focuses on to enjoy retirement: exploring, learning and accomplishing. Pursuing any one of these leads to contentment. Check out Dave's earlier articles.

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A Glass Act

MY WIFE RECENTLY GOT the chance to showcase her artistic talents at a cultural festival in Kansas City, Kansas. Lori's craft is stained glass, and this was the first time she’d displayed her creations in public.

She began working with glass five years ago, shortly after she retired. We’ve discussed the possibility of turning her hobby into a business. She’s dreamed of selling her artwork so she could at least cover the cost of her craft.

Dreams and reality are often at odds. I know many artists who have natural business acumen. My wife only partially falls into that category, with business logistics mostly taking a backseat to her much stronger artistic talents.

The offer to participate in the festival was the push she needed. Over a couple of margaritas, I suggested she take the leap and create her own business. I know I’m biased, but her art is truly stunning, as you can see from the accompanying photos. How hard could it be to establish a presence in a crowded artistic field?

Silly me. I offered to help. We’d be a team in this endeavor.

We started by opening a business checking account. Before that first step, she always referred to me as her sugar daddy, funding her mildly expensive hobby. But at the bank where we opened the account, she introduced me as her business manager. While the cost to support her efforts was the same as before, at least I now had a title.

The weeks before the trip were hectic. Lori was excited as she worked to complete her portfolio and prepare items for traveling. Meanwhile, I contemplated the business aspects of the trip.

My wife shared her vision for how the artwork might be displayed. She envisioned ornate cases with LED lights, shadow boxes and perhaps a cabinet to hang her art. As her new business manager, I was caught off guard by her vision’s complexity and cost. I felt a wave of frugal anxiety fast approaching. I took a few deep breaths and offered a compromise.

Since I’m quite handy with tools, perhaps she’d consider a couple of handcrafted wooden boxes painted white. She leapt at the idea, and suggested the addition of mirrors to reflect natural light. And being that this was her first show, she recommended we use black painted PVC hanging racks, which could easily be created with love by her husband’s thrifty hands.

She designed a banner and business cards, commenting on how easy it was to have these quickly printed. We even created a novel email address. We were beginning to look like a bona fide business.

The week prior to the show, it dawned on me that we knew practically nothing about accepting payments. Lori admitted she was so busy that she hadn’t given much thought to how sales would be processed. With a shrug, she said I was the business manager, and she had every confidence I’d come up with a plan.

I frantically established a Square account, and created a rudimentary sales system. My first challenge was to categorize inventory. My original concept was to place items under a common heading, such as “glass.” I soon realized everything related to stained glass fell into that category.

To make matters more complicated, my artistic companion had creative names for each piece that didn’t always match its form and function. Luckily, the app included an option to use picture tags to represent items. I was able to create receipts that could be sent via email or text to the purchaser. Overall, while not my best piece of software work, it was sufficient to accomplish our goal.

While setting up for the show, the festival’s coordinator dropped off paperwork to record sales taxes collected. It never crossed my mind that Uncle Sam would be a guest at the festival. Unfortunately, I’d programmed the Square app to use our home as our business address, which meant that taxes collected would be according to Houston rates. The Kansas City rate was slightly higher, and I never did figure out how to change the automatic tax calculation on the fly. Rather, I simply told customers they were receiving a 1% price reduction on taxes as a perk for first-time buyers.

The show itself was exhilarating as well as exhausting. We gained insights into the life of a professional artist, and appreciation for how hard it is for creative individuals to make money. I’m not sure the experience convinced us to become fulltime entrepreneurs, although we would consider showcasing my wife’s talents again if the right opportunity arose closer to home.

Lori’s stained glass was well received, which validated her later-in-life artistic endeavor. In addition, we sold enough pieces to more than cover the cost of the trip.

We also realized that we’d created a business on a whim, jumping into the fray without a business plan or an evaluation of our combined strengths and weaknesses. I’ve always wanted to know what it feels like to run a business. Luckily, we aren’t financially dependent on the success of this particular venture. For us, it’s a bonus if the business generates extra spending money, and it allows me to share in my wife’s love for her craft.

Now, if we could only figure out how to design a website.

Jeffrey K. Actor, PhD, was a professor at a major medical school in Houston for more than 25 years, serving as an academic researcher with interests in how immune responses function to fight pathogenic diseases. Jeff’s retirement goals are to write short science fiction stories, volunteer in the community and spend time in his garden. Check out his earlier articles.

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Room at the Table

MY UPBRINGING WAS difficult. The alcoholism and rage among adult family members were often at their worst during the year-end holidays, and Thanksgiving could be particularly bad. What made this even worse was that I thought the popular images and ideas about Thanksgiving were accurate descriptions of other people’s good times.




One familiar depiction of Thanksgiving is Norman Rockwell’s iconic painting, “Freedom from Want.” The picture has come to represent the central moment of our Thanksgiving celebration: the roasted turkey arriving at the table as the prelude to eating ourselves into a tryptophan coma.




Because I thought the painting showed what the occasion was like for others, and my experience didn’t measure up to what was shown, I concluded I was to blame. Cue feelings of anxiety and inferiority.




But I later discovered that Rockwell painted the picture for another purpose. He was illustrating the third of Franklin D. Roosevelt’s four freedoms, from a speech FDR gave to Congress in 1941. Completed in 1943, Rockwell’s painting was used to help sell war bonds during the Second World War.




Learning all this was not a trivial matter for me. I realized Rockwell’s painting was not portraying anyone’s life. Rather, his aim was to present an image of a better future for everyone—a time when the Great Depression was behind us and the war would be over, when rationing and long work hours were past, when the constant uncertainty and anxiety about loved ones were eased, and when war department telegrams conveying grief and loss were behind us.




Rockwell’s message was that we could create the outcome he pictured. He meant to inspire our efforts, not measure our present situation. He offered an image of a future yet to be realized, and that future need not be irrevocably compromised or irretrievably damaged by a hard and hurtful past. That was encouraging to me.




There are details of the painting that I hadn’t paid much attention to before, but which grabbed my attention now. For example, all the seats are filled—no one is missing. We don’t have to assume everyone at the table is from the same family or indeed know one another well. What’s really important is their delight in being together, and their faces show it, so much so that arrival of the turkey is almost secondary to the occasion. 




I see the fellow looking out at us from the lower right as extending the hospitality of the occasion to us. This is our outlook when we’re at our best. We have room for you if you have room for us.




The words and symbols of Thanksgiving can bind us together. Many of us came to the U.S. as immigrants or our families did. Many of us have ancestors who were transported here as slaves or other forced labor. Some of our ancestors were brought as condemned criminals, or fled as refugees and social outcasts from their homelands. And we must never overlook the remnants of the first nations, those whose ancestors were here before the European settlers. I know none of this is conveyed directly in Rockwell’s picture, but it is not excluded. I choose to add all of it in my mind’s eye.




As I see it now, a Thanksgiving celebration is a dynamic reality that supports me, and I can use the occasion to help others. So, I approach Thanksgiving three ways. The first part is simply to be grateful for all the blessings of this life—thanks-giving.




The core of thanks-giving for me is remembering important moments, happy and sad, especially from the past year. My intention is to be grateful, as specifically as I can be, for who and what I am, and for how I got where I am. Sometimes, I tell people about my thoughts, but not always.




The second part is thanks-giving. I give away money until I feel it. In addition to my regular donations throughout the year, this month I’ll distribute larger sums for charitable purposes. I view these donations as both a social obligation and a personal privilege. There aren’t many things better than giving away a portion of the money that I’m fortunate to have.




Sharing like this helps me avoid the age-old delusion that what I have comes from my solo efforts, or because I am uniquely wonderful or somehow have special status. Work hard I did, but my success was not entirely by my own efforts. Giving and sharing helps me keep my pride and greed in check.




My third action is what might be called thanks-living with and through others. I am a solitary soul. A loner. My idea of a great day includes neither seeing nor speaking to anyone. This “default mode” does not, in fact, serve me or anyone well. I must exert myself to be a better member of my family, and get engaged with the wider world beyond that small circle of people, and the result is I’m happier and healthier.




Being disciplined and purposeful about my money now that I have some, and open to ways of sharing who I am and what I have beyond my ordinary circle of people and concerns, makes my life better and richer, and it does so by leaving me with less money and less time. Yes, that’s one of life’s great paradoxes—and a more than fair exchange.

Tom Scott is a retired Episcopal priest. He and his wife live in Evanston, Illinois. They love retirement because they get to see more of their children and grandchildren, and they can spend more time at concerts, the opera and the Chicago Botanic Garden. Check out Tom's earlier articles.

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Who Will Care?

WHEN MY DAD HAD cancer, we’d take walks through the neighborhood. One day, on our stroll, we met a neighbor, Ted. My dad introduced me. “This is my son, Denny, he’s taking care of me.”

Ted gave me a smile and said, “I hope my son will take care of me if I need help.”

Not long after that conversation, my dad was in hospice care. My mother and I were standing over his bed. My dad looked up at me and asked, "Who’s going to take care of you when you need help?”

I was surprised by his question. I was single at the time, and don’t have children. All I could think to say was, “Don’t worry about me. I can take care of myself.”

Before I started looking after my parents, I’d never seriously thought about needing help in my later years. I’ve fended for myself most of my adult life. I had something of an independent streak and liked being on my own—until I met my wife.

One morning, when I was sitting with Rachel in our kitchen, I asked, “What would you do if something happened to me? Would you sell the house and move closer to Justin?”

“I’ll stay here until I can’t take care of myself anymore, " Rachel said. “Then I’ll probably move closer to him.” Justin, my son-in-law, lives on the East Coast.

Rachel didn’t need to ask me what I’d do if I was on my own. She knows I’d do everything possible to stay in our house.

I recently wrote an article about the top four things that make me happy. If I had to add a fifth item, it would be our house. I like where we live. The neighborhood is safe, and has good walking and biking trails. We’re close to everything, including our doctors. There are plenty of trees, as well as a lake a few blocks from our home. It doesn’t feel or look like a typical Southern California neighborhood. For me, there’s also a lot of history here. In 1978, my parents moved into the house where Rachel and I now live. I was just 27 years old when I first visited them here some 45 years ago.

My wife and I will take care of each other for as long as we can. Still, there’s a good chance Rachel will outlive me. I’m six years older. She’s in good health and doesn’t take any medication. More important, she takes good care of herself. The odds are that Rachel will be there for me in my time of need—and I won’t be there for her. That’s why I worry about her later years more than mine.

We both agree we want to stay in our house for as long as we can. A continuing care retirement community isn’t something we’re interested in. Meanwhile, at age 72, I’d probably have a difficult time qualifying for long-term-care (LTC) insurance because of some existing medical issues. It would have been best to purchase a policy before I turned 65, which is when various medical conditions first emerged. I still might qualify for a hybrid life-LTC insurance policy because the medical qualifications aren’t as stringent. But from what I’ve read, hybrid policies tend to be more expensive than purchasing a standalone LTC policy.

I thought about buying an LTC policy just for my wife, but she’s against the idea if we can’t get one together. We’ve both come to the same conclusion—as we have many times before—that we should have enough to self-fund our LTC needs, which we measured using AARP’s long-term-care cost calculator. Of course, there’s no way of really knowing how much in-home care we’d need and for how long. In addition, health care costs could outpace inflation, making the potential tab more daunting over time.

Still, we feel confident about our plan to self-fund our care. We have a few things working in our favor:

We could deduct care costs that exceed 7.5% of our adjusted gross income on our tax return, thereby reducing our net cost.
My Social Security benefits, which I took at age 70, should be enough to cover our other living expenses.
If necessary, we could do a reverse mortgage to help fund our long-term care.
We could even rent out one of our bedrooms to make extra money. We live close to a university, so finding a tenant shouldn’t be a problem.

There’s one thing I’m certain about: I don’t want anyone, including my son-in-law, taking care of me. I love Justin and we get along great, but I know how much work is involved in taking care of someone and how it can turn your life upside down. I don’t want that for him or anyone else.

I was physically and mentally drained by the time my mother passed away. I put my life on hold to take care of my parents. I wanted to marry Rachel, but we waited. How do you marry someone when you spend most of your time looking after a parent? That’s not an ideal way to start a marriage. I was also afraid that, if I got married, my mother might think I’d stop taking care of her. That was the last thing I wanted her to think.

It was also a difficult situation for my mother. She thought my spending so much time with her was driving Rachel and I apart. Occasionally, she’d ask if everything was okay between us. Sometimes, the only way I could convince her our relationship was solid was to have Rachel talk to her. She wouldn’t take my word for it.

I was lucky that Rachel was patient and understanding because her life was also affected. But she knew what I was going through. Her brother was taking care of her mother, who was about a year younger than my mother. Although Rachel and her sister helped, her brother did the heavy-lifting because he lived much closer and was retired.

I have no regrets about taking care of my parents. I would do it all over again. I would like to think it made me a better person. I have great respect for anyone who’s willing to make the sacrifices necessary to care for a loved one. Not everyone is able or willing to do that.

Most of all, I’m pleased that Rachel and I were good savers and lived below our means in our early years—because that means we won’t have to burden Justin with our long-term care needs in our later years.

Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor's degree in history and an MBA. A self-described "humble investor," he likes reading historical novels and about personal finance. Check out his earlier articles and follow him on Twitter @DMFrie.

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The Good and the Bad

LIKE EVERYBODY ELSE, I’ve made both bad and good decisions during my financial journey, and those have affected the financial well-being of my now-older self. Here’s what I consider my five worst financial decisions, followed by my five best:

1. Contributing too little to my 401(k) early on. I’ve confessed to this in a prior article. I missed out on a lot of potential growth by making only token contributions to my 401(k) during my 20s. If I’d saved an extra $2,000 in each of my first five years of 401(k) eligibility and invested that money in an S&P 500-index fund, my balance would have been more than $250,000 higher when I retired in September.

2. Playing it safe with my asset allocation. Throughout almost my entire investing life, stocks have appeared to be priced too high. Remember Greenspan’s "irrational exuberance" proclamation in 1996? My younger self took this kind of statement to heart, and I was far too conservative for decades. Stocks were rarely more than 50% of my portfolio, even in my 20s and 30s.

3. Timing the market. Here’s just one example: I was convinced that, regardless of whether Clinton or Trump won the 2016 election, stocks were headed lower in 2017. I sold some stock holdings in October 2016, and moved the money into cash investments and short-term bonds. Result: Less of my capital benefited from the subsequent high-growth years. After that humbling mistake, I adopted a practice of benign neglect with my 401(k), and that’s turned out far better.

4. Managing my Roth IRA poorly. I opened my Roth in 2004 and invested it aggressively from the outset. In 2008, my portfolio lost almost half its value. Rather than waiting out the decline, as I should have, I sold low and moved all my money into certificates of deposit and money market funds. It was several years before I got around to moving the money back to a brokerage account, where I could invest in stocks. Meanwhile, I again lost out on a lot of investment growth.

5. Keeping too much in low-interest bank accounts. I probably still have too much cash in bank accounts, but sometimes I get lazy about moving it out. Still, these days, I have a large percentage of my cash holdings in a higher-yielding brokerage cash account.

Meanwhile, what did I get right financially? Here’s my top five:

1. Purchasing inexpensive vehicles for almost 40 years. I talked about this at length in a previous article. I’ve always prioritized reliability and value when purchasing a car. Status, which doesn’t have a quantifiable financial benefit, has never been a consideration.

2. Staying put in an appropriately sized house. We’ve only owned two houses, so our lifetime losses to transfer taxes, realtor fees and the like are pretty low. We could have afforded—with the help of a mortgage—a much larger first home, but decided to buy only what we needed at the time. Our current home, where we’ve lived for 23 years, still feels perfect to us. By purchasing only what we needed, we’ve never had to take out a mortgage, which means we’ve not only avoided mortgage interest, but also we’ve never had to pay mortgage-application fees or mortgage insurance.

3. Getting serious about saving after age 30. Although I didn’t make funding my 401(k) a priority before I was married, I got aggressive about contributing thereafter. Not having a mortgage freed up cash flow, and that allowed us to shovel hefty sums into my 401(k). Even during the years when we were pulling from savings to fund our children’s college educations, we were able to save a significant percentage of my salary. We also maxed out our Roth IRAs in each of the past 12 years.

4. Working 38 years at a company with a pension plan. The name of my company and the terms of my pension changed several times over my career. Still, I continued to be covered by a pension throughout all 38 years. I never had one of the top-paying positions at the company, but I did stick around longer than most. The monthly pension payouts will be the cornerstone of our finances for the rest of our lives.

5. Marrying my wife. This was my best financial decision. It’s not because I married someone who was rich or was a high earner. Indeed, Lisa has been a homemaker for most of our married life. Rather, having a stable marriage is correlated with wealth accumulation. Marrying and having children increased my sense of purpose during my career. Compared to when I was single, I found I was more content at work. I suspect that led to improved job performance.

Lisa and I have a good friendship and a high level of trust in each other. Divorce is so far from being a possibility as to be laughable. I’ve never had any qualms about maintaining joint accounts or funding her Roth IRA from my income. Although we might disagree on spending priorities, we always manage to come up with a plan that works for both of us.

Have the outcomes of the good decisions sufficiently outweighed the effects of the bad ones? I think so. We aren’t particularly wealthy. But financially, our retirement should be just fine.

Ken Cutler lives in Lancaster, Pennsylvania, and has worked as an electrical engineer in the nuclear power industry for more than 38 years. There, he has become an informal financial advisor for many of his coworkers. Ken is involved in his church, enjoys traveling and hiking with his wife Lisa, is a shortwave radio hobbyist, and has a soft spot for cats and dogs. Check out Ken's earlier articles.

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Look All Ways

WHAT HAPPENS WHEN you’re hit by the proverbial beer truck? Will it be easy for others to pick up the pieces—the pieces of your financial life, that is?

To my knowledge, my wife isn’t checking the delivery schedule for the Anheuser-Busch brewery here in Columbus, Ohio. Still, she’s worried about the complexities of our finances. I’ve made a concerted effort since I retired to consolidate and close financial accounts, reduce our investments holdings, and streamline where it makes sense. Here are nine steps I’ve taken:

I had two 403(b) accounts that I rolled into a single rollover IRA at Fidelity Investments.
I combined two Roth IRAs into one.
I had three regular, taxable investment accounts that I’ve consolidated into one.
I’ve closed credit and charge card accounts that didn’t offer any notable advantages.
I drew up a letter of last instruction, including a checklist with key contacts.
Since I no longer have a paycheck to protect, I’ve allowed my disability and term life insurance to lapse.
I drained a small 457 deferred compensation account, realizing the taxable income prior to starting Social Security benefits. Social Security will boost my taxable income, and that meant my 457 would have been taxed at a steep rate if I’d waited to empty the account.
After I retired, I inherited a tax-deferred annuity. As with my 457 account, I opted to have the full balance paid out prior to starting Social Security.
I evaluated our mutual fund holdings to identify funds with overlapping objectives, and then consolidated money into the more promising fund. As part of this process, I reallocated significant sums from actively managed funds to broad market index funds.

Despite my focus on consolidation, I’ve allowed some new accounts to creep in:

My former employer offered to buy out my defined benefit pension. I agreed, and had the resulting lump sum rolled over into an IRA at Vanguard Group.
After I retired but before we became eligible for Medicare, I bought high-deductible health insurance plans for my wife and me. That allowed us to fund a health savings account.
To boost our interest earnings, I opened a high-yield online savings account, which is linked to our checking account at a local bank.
To give us another safe way to earn interest, I opened a TreasuryDirect account, which is linked to our online savings account.
I inherited a Roth IRA. If that occurred today, I’d have to withdraw the money within 10 years. But since it happened prior to the change in the tax law, I can stretch out the withdrawals over my life expectancy, which currently exceeds 20 years.

If I was focused solely on simplicity and consolidation, I wouldn’t have opened all these accounts. For now, I’m willing to manage them. But as I age, I envision taking further steps toward simplification:

Spend down and close the health savings account.
Consolidate my Vanguard rollover IRA with my rollover IRA at Fidelity, which is where our other investment accounts also reside.
Accelerate the draw down of the inherited Roth IRA by taking more than the annual required minimum distribution.
Further reduce our number of credit cards.
I’ve always done my own taxes. But I can see hiring an accountant and, in the process, allow the accountant to become familiar with us and our finances.
Similar to hiring an accountant, I can see hiring an investment manager to oversee our portfolio.
Move to a continuing care retirement community (CCRC). This will greatly reduce monthly bill paying. Most of the bills that come with homeownership are rolled into the CCRC monthly fee.

I find the beer truck scenario useful. It forces us to focus on how our life can end in an instant and what the financial fallout would be. Still, for most of us, the reality will be a slow decline. To counterbalance this decline in our interest and ability to manage our finances, we should strive for a commensurate simplification and consolidation of our financial accounts, while hopefully recognizing the wisdom of bringing in outside help, in the guise of an accountant and investment manager, at the right time.

But will we be able to identify that our cognitive function has declined to the point where we should back away? Rather than waiting until then, we might surrender control as our interest wanes. If tracking our investments and living expenses becomes a chore, maybe it’s time to get some help.

Not long ago, I mentioned the beer truck example to a group I was talking to. A woman asked, “Can’t it be a wine truck? I don’t like beer.” Yes, it can be a wine truck, or any other truck of sufficient size to do the job. Just be sure to look both ways when you cross the street—while also peering into the future.

Howard Rohleder, a former chief executive of a community hospital, retired early after more than 30 years in hospital administration. In retirement, he enjoys serving on several nonprofit boards, exploring walking paths with his wife Susan, and visiting their six grandchildren. A little-known fact: In May 1994, Howard was featured—along with five others—on the cover of Kiplinger’s Personal Finance for an article titled “Secrets of My Investment Success.” Check out his previous articles.

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Playing Possum

ZERO-WASTE LIVING. Kondo cleaning. FIRE, or financial independence-retire early. Whatever your feelings are about these three movements, frugality is at their core, with the focus on minimizing possessions and living simply.




To these, you might want to add another, “possum living,” which has been hailed as a manifesto for living cheaply.  Possum Living is the title of a book written in 1978 by a free-thinking, resourceful young woman who went by the pen name Dolly Freed. The book’s subtitle: How to Live Well Without a Job and (Almost) No Money.




Possum living is about dropping out of the rat race to live simply, growing food in your garden, living off the land and sometimes earning a little money from odd jobs. The author also offers a host of creative ideas for leading a laid-back lifestyle without a steady income. Freed talks about her love of growing tomatoes, her father’s love of fishing, and the chickens and rabbits they kept. Ultimately, the book is about living life on your own terms and saving money.




Decades later, there’s been renewed interest in the book and it’s been brought back into print. It was re-released in 2019, with an update from the author. I had always wondered what had happened to Freed, and was pleasantly surprised to learn that she went to college, became a NASA aerospace engineer, married, had two children and now has a big garden. And she doesn’t make moonshine anymore.




A frugal lifestyle can be fulfilling. In fact, it can make you happier than living large. Spending excessively has serious consequences. Today, the cost of carrying a credit-card balance is at its highest level in 40 years. Making $90,000 a year but spending $100,000? You may never be able to retire.




One of the richest people in America is a paragon of frugality. Warren Buffett still lives in the same relatively modest home in Omaha, Nebraska, that he bought in 1958—no millionaire’s mansion for him. He buys his breakfast at McDonald’s, which he then washes down with a Coke that he pours himself.




I’m not advocating for breakfast at McDonald’s—but here is a man who could have a sumptuous breakfast at the toniest restaurant in town, yet he prefers his humble breakfast at a fast-food chain. It’s said he enjoys eating at Dairy Queen, too.




Although Possum Living was an engaging, fun read, and may be doable for an 18-year-old, it’s a little too arduous for those of us in our senior years. Still, we should all strive for a simple lifestyle that we can afford and that’s sustainable over the long haul. Part possum, perhaps?

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