Jonathan Clements's Blog, page 145

The Mary Jean List

MY FATHER-IN-LAW Carson was a stereotypical engineer—organized and precise. All four of his children know the motto “measure twice, cut once.” Carson applied these traits to his finances, which he managed on behalf of himself and Mary Jean, his wife. Mary Jean depended on this.

As they aged, Carson maintained his mental acuity, but he was the first of the two to deteriorate physically. Mary Jean was strong physically but slowly surrendered to Alzheimer’s.

Before her diagnosis, Carson made a concerted effort to teach Mary Jean how to manage their finances in case, someday, she might have to do it on her own. They had an investment manager, so the actual investing was taken care of. Carson wanted her to be able to navigate the banking, bill paying and check book. With an engineer’s precision, he created a list instructions laying out who to contact and how to handle the monthly financial chores.

It became apparent that this wasn’t going to work. Possibly due to the early effects of as-yet undiagnosed Alzheimer’s, Mary Jean couldn’t grasp what needed to be done. That was when he turned to us. I wrote a HumbleDollar article based on what we learned from this experience.

Carson’s list, which my wife and I referred to as the “Mary Jean list,” guided us when he passed away. It was such a good idea that we adopted it ourselves. Enshrined in a manila folder in the front of our file cabinet is a three-page list of steps and instructions for my wife to follow, should I die first.

Just over a page is devoted to 15 steps. Each step refers to an individual contact: attorney, accountant, investment company, bank, insurance agent, pension, Social Security, health insurance… the list goes on. There’s a name, a phone number, questions to ask each person and which documents that person might need. A majority of these documents are in the same file drawer as the Mary Jean list.

With so much of our financial life documented electronically, many of the references also note where to find the appropriate Excel spreadsheet or how to access the online account.

There are suggestions for consolidating and simplifying our accounts. Right now, I have two rollover IRAs that could be consolidated. We have two checking accounts when one should be sufficient. I manage our investments now so the list anticipates the need to turn that over to an investment manager.

Another half-page is devoted to a summary of our bills. Everything but the local water bill comes by email. Some are paid automatically from a credit card, while others are deducted from a checking account. Some require initiating an electronic payment. There are suggestions about canceling certain subscriptions and credit cards.

The last page and a half is an index of where to find important documents. We have four file cabinets and a safe deposit box. With the ability to access accounts online, I’m reducing the amount of paper I receive each month. I’m also working to reduce the volume of paper I keep, which should cut back on the need for filing cabinets.

I have maintained this list for at least 10 years. What surprised me is how much maintenance it takes. Things change. As I moved into retirement, I consolidated accounts, which made some references obsolete. My mother died and I inherited new accounts. Our insurance agent retired. We moved and established new attorney and accountant relationships, and many of our monthly bills changed. I recommend reviewing the list annually, or when major changes occur, such as a move.

This list was developed with my wife in mind, but it could be used by my children if they’re the ones handling things. It includes details that my wife knows, but my children may not. Part of the review process is to have my wife read it over. Ensuring that it’s understandable to her will be the key to its usefulness someday.

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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Medicare for All

I CAN’T TAKE IT ANY more: I need to rant about health care.

There’s absolutely no reason to continue the current health-care payment system, none, not one. Where’s the rationale for having private insurance, Obamacare, Medicare, Medicaid, TRICARE and the Children's Health Insurance Program (CHIP)? Each was developed to deal with the same issue—paying for health care.

Some form of Medicare for all, or M4A as it’s sometimes known, is the only system that makes sense. Before I hear it one more time, I am not talking about socialized medicine or a care system like the U.K.’s National Health Service.

Instead, I’m talking about a universal payment system funded through employer and worker taxes, premiums and out-of-pocket cost sharing—all calibrated relative to the individual’s ability to pay. There’s no such thing as free health care, so let’s not even use the “f” word.

The popular arguments against a universal billing plan are largely false and misleading. Wait times, third-party involvement between patients and providers, denied care and health-care rationing are already part of our current systems in some form or another. Even for people with insurance, thousands of dollars in deductibles and coinsurance can be devastating to their budget.

And please don’t talk about instilling competition in providing health care—that’s nonsense. The system is nothing but incentives to provide more care—often unnecessarily—either for profit or to protect the medical provider from lawsuits. If you invest in a multi-million-dollar piece of equipment, the only way to make it pay is to use it. It’s well documented that a great deal of health care is unnecessary. If you think more care is always better care, think again.

For Americans who insist on private insurance, maintaining a form of Medicare Advantage is possible. Sixty-five million Americans are enrolled in Medicare. As of January 2023, another 93 million people were enrolled in Medicaid and CHIP, about 17 million more in Obamacare and 9.6 million in TRICARE, the health-care system for military personnel and their families.

Altogether, then, about 184 million Americans use some form of government-run health insurance system, often operated in coordination with private insurers and with care provided by the private sector. Yet, according to some, Medicare for all is not acceptable. That’s laughable.

I know all the arguments against M4A. I know there are consequences and I know the projected cost savings are imaginary. I know many health-care providers won’t be paid at their current rates, but they’ll have reduced administrative hassles as well. During the transition, there may be shortages.

Still, everyone will have health-care coverage, and there will be a fairer distribution of costs and tremendous opportunity for better coordination of care no matter where you are in the U.S. Isn’t it absurd that, in this era of technology, you can’t walk into any doctor’s office or health-care facility and have them instantly access all your medical records before they start tests or provide care? Don’t like that idea of health record coordination? Fine, you could opt out and end up having more tests.

Any transition will take years, resistance from self-interested parties will be tremendous and Twitter will be overwhelmed by raucous debates. But who has a better idea for how to achieve universal coverage that offers a fair distribution of costs and the opportunity for better coordination of health care for individuals?

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My Retirement Home

WE BEGAN IN 2019 to think seriously about what we wanted our retirement to look like. My husband had retired in 2018. I was aiming to leave my job in 2022. We were hoping to have a plan in place long before my final day of work.

Our first step was to decide where we wanted to live. We were both eager to escape the Pacific Northwest, so we zeroed in on a couple of potential destinations. We spent a few weeks during the summer of 2019 investigating our choices.

Our initial pick was St. George, Utah. We quickly discovered we weren’t alone in our love of the southern Utah climate. Over the past decade, St. George has consistently ranked as one of the fastest-growing metro areas in the U.S. Knowing our retirement budget would be modest, we realized we needed to find a location where housing was more affordable.

Sun City West, Arizona, an age-restricted community located just outside of Phoenix, was next. The desert climate appealed to us. The cost of homes was lower than in many other parts of the country. The question we had: Would we enjoy living in a retirement community?

Our doubts didn’t last long.

On our first trip to visit Sun City West in June 2019, my husband and I both commented on how easy it felt to be there. The community—which encompasses 12 square miles—consists of 17,000 single-story homes. Within the city boundaries are all the various amenities you’d expect to find in a small metropolis.

Sun City West is home to three grocery stores, a gas station, a full-service hospital and a variety of restaurants. There are also numerous banks and credit unions, three fire stations, two hardware stores and several churches.

The one thing conspicuously absent? Schools. With a median age of 75—and a minimum age of 55 to purchase a home—residents of Sun City West have no need for an educational system. As a result, property taxes are significantly lower than in surrounding areas.

Two days after we arrived for our initial visit, we began looking for a home to buy. With only a handful of houses for sale, and many eager buyers, we found ourselves in a market that favored sellers. We bid—and lost out—on two homes. A few days later, we flew back to Portland, Oregon, and continued our search online.

Two weeks after returning to Portland, we found a fully furnished home in our price range. We quickly made an offer and, within a month, we were absentee homeowners. Although we made a few extended visits to our new home in 2020 and 2021, we didn’t become fulltime residents until April 2022.

In the year since moving to Sun City West, we’ve become convinced an age-restricted community was the right choice for us. What have we learned over the past 12 months?

We made a good decision to buy when we did. The average price of a home in Sun City West was $272,000 in mid-2019. Three years later, they peaked at an average $408,000. If we’d waited to buy until I retired in 2022, we would have been priced out of the market.

Relocating has helped us financially. The cost of living in Phoenix is some 18% lower than Portland. Our Arizona property taxes, for a 2,000-square-foot home on a 10,000-square-foot lot, are $1,200 this year. That compares favorably to the nearly $4,000 property tax bill we had on our much smaller Portland home.

We aren’t as social as we thought we’d be. One of the draws of Sun City West is the ample opportunity for social interaction. With more than 100 chartered clubs, there’s something to do every waking hour. Prior to retiring, both my husband and I imagined joining at least a couple of the clubs to explore new interests. But since we’ve moved down, we find ourselves with little time for extracurricular activities. Training our dogs, working out, going for walks and riding our bikes keep us busy.

Our community is designed to help seniors age in place. The homes in Sun City West were built with an older population in mind. The open floor plans allow residents to negotiate their home using a variety of mobility aids. The gravel- and rock-filled yards are generally maintenance free. Most of the homes are single-family residences, but there are duplexes, townhouses, apartments and condominiums as well. Several assisted living facilities are located within the city’s boundaries.

The entire community is designed to allow residents to age in place and maintain their independence for as long as possible. Since moving down, we’ve learned about several nonprofit organizations that provide free or low-cost assistance to residents who need it. My husband and I appreciate knowing we can likely stay in our home for as long as we’re physically able.

We don’t miss commuting. One hesitation I had about moving to a suburb of Phoenix was dealing with the traffic. Having commuted to my job in Portland for several years, I wasn’t looking forward to dealing with all the cars in the fifth largest metropolitan area in the U.S.

But since moving, we’ve discovered there aren’t many times we need to leave our immediate area. Most of the services we require are located within—or just outside of—our community.

It’s apparent there’s a tradeoff when it comes to buying items locally. We may pay slightly more for purchases made at the stores within walking distance of our house. But we save the time and aggravation that comes with battling big city traffic. We also feel it’s important to support our local retailers as much as possible. Many of the local stores go out of their way to employ residents who want or need a job.

Kristine Hayes Nibler retired in 2022, and she and her husband now live in Arizona. She enjoys spending her time reading, writing and training their four dogs. Check out Kristine's earlier articles.

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How Far I’ve Come

I GREW UP IN A SMALL three-bedroom home, the youngest of 14 children. I was always sharing a bed with one older brother or another. My father drove a garbage truck for the county and my mom washed dishes in the school cafeteria.

Money was hard to come by and, when it was in hand, it needed to be spent wisely. My parents engrained in me the importance of education, although neither had a high school diploma. With their encouragement and support, I secured a four-year academic scholarship for college. At age 18, I received the last financial assistance I’d ever get from my parents. Having lived hand to mouth, the life lesson of squeezing the most out of every dollar would follow me for the rest of my life.

During college, I wrote an essay that secured a second scholarship worth $500 a semester, which I used to pay for books. My primary academic scholarship paid for tuition, the dorm room and three meals a day at the school cafeteria. That meant the college refunded to me—for overpayment of tuition—$1,500 a semester, which was the sum I received in Pell grant assistance. I used that money to pay for clothes, haircuts, health care, and occasional fast food when I wanted more variety than the cafeteria could offer.

I got my first credit card and, in a pinch, used it to pay for dental surgery. After receiving the first card statement and realizing how much interest I’d have to pay, I vowed that credit cards would always be a last resort, when I was faced with a financial emergency.

During the first summer in college, I got a job as a valet, parking cars at a casino in Tunica, Mississippi. I saved all the money from my paychecks and tips. That allowed me to buy a used car from my sister. The next two summers were spent at internships, one at the Rock Island Arsenal in Illinois and the other at NASA in Greenbelt, Maryland. The money I made helped to pay for car maintenance and gas. I could even enjoy the luxury of dating and ultimately found a girlfriend.

My girlfriend and I both graduated from college. She, too, had her education paid for by an academic scholarship. We were also both fortunate to get job offers during 2002’s recession. But while she received multiple offers, I got just one. It was a bit disheartening, but it turned out to be the only offer I needed—and it was at the same company, IBM, and on the same team as the offer that my girlfriend had accepted. We both contributed to the 401(k) up to the 6% match and watched our savings grow. I ended up working for IBM for 17 years.

During summer 2003, I proposed, and she made me the happiest man alive by saying “yes.” Wedding planning began. We had the dreaded financial conversation. I was surprised to learn that my fiancée had $10,000 in credit card debt from her time in college and from the two years following graduation.

At the time, I considered this a huge amount. With the sum she wanted to spend on the wedding, I was a bit concerned. It took some work, but ultimately we agreed on a $10,000 budget for the wedding. This was a significant amount for a frugal guy like me—but for my fiancée it felt like a modest sum.

We each had our own apartments at the time. I did the math and knew that we could both pay off her credit card debt and pay for the wedding in cash if we dipped into savings and also moved in together for the 12 months prior to the wedding. We both gave up our individual one-bedroom apartments and rented a two-bedroom place, allowing us to put more than $600 a month into our wedding fund. A year later, we were married, paying cash for the ceremony—and with her credit cards paid off.

That same year, our lack of debt allowed us to take out a mortgage to purchase our first home at age 24. We started a family three years later. Now, we’re the parents of an 11- and 15-year-old whom we’re attempting to teach about finance and the importance of sound decision-making.

Maybe there was some luck in our ability to win scholarships, meet the requirements to keep them, find employment, secure a home loan and start a family. But there was certainly a whole lot of hard work involved as well. I studied on the bus in high school, went to the library on Friday nights in college and didn’t buy a soda for years—because water was free.

Is the American dream still alive? That’s not a question I can easily answer, given today’s high housing prices and often modest wages. But I share my story in hopes that it might inspire others.

Chris Amos is a 42-year-old father of two. He and his wife have been married for 19 years. He works as a customer success manager at Betty Blocks, the provider of a no code-low code application development platform. Chris loves personal finance.

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Costs Worth Watching

AS I SURF THROUGH my streaming channels, I wonder if I’m paying too much for too much.

Do you feel overwhelmed by the choices on Netflix and similar services? Are your personal watch lists constantly expanding because a channel keeps suggesting shows you might like? Even in retirement, who has that much time to spend? Before you know it, some shows on your list have disappeared—and you’re wondering whether you’re getting your money’s worth

I still believe streaming is a bargain compared with the outrageous cable bills I once received. A year ago, I wrote about cutting the cord. Still, some of my channels are getting more expensive as they end introductory periods or simply hike their fees. Even in retirement, I don’t have enough time to finish “my lists” on Netflix, HBO Max and elsewhere before some movies end their run.

At the same time, it’s wonderful for a lifelong movie buff like me to readily access classics such as A Streetcar Named Desire without buying a DVD or borrowing one from the library. I’m also exposed to many new films and lots of new series.

I recently tallied my current monthly costs (before taxes) compared to a year ago:

$15.99 HBO Max—$4 more
$15.49 Netflix—unchanged
$15.13 Amazon Prime—unchanged
$14.99 Hulu—$8 more
$11.99 YouTube Premium—unchanged
$3.99 PBS Documentaries—unchanged
$10.99 Criterion Channel—dropped

HBO Max—which as of today is simply known as Max—increased because the introductory offer expired. Hulu jumped because I upgraded to remove commercials. I paused the Criterion Channel because I felt like I wasn’t watching its many classic and foreign offerings often enough.

I pay extra for YouTube so the music I listen to on my daily walks isn’t constantly interrupted by commercials. Well worth it.

As I review the total–$77.58 before taxes—it remains much cheaper than cable. Then I calculate the yearly cost: $930.96. It seems like a lot of money, but these channels remain my primary source of entertainment. I can’t recall the last film I saw in a theater. I’ve not seen a play or live performance since before the pandemic. For me, it’s money well-spent to follow the latest maneuvers on HBO’s Succession or the surprising plot twists on Netflix’s Beef. One joy of retirement is being able to binge a series and not worry about staying up late on a weekday.

If they cut the cable, retirees with a low fixed income could eliminate an average monthly cost of $217.42, according to one article, though part of that cost savings would no doubt get spent on various streaming services. I understand the switch might seem technically difficult or mysterious. But just ask a younger friend or your millennial child for help. They come in handy sometimes.

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A Game of Darts

IN GRADE SCHOOL, when my mother asked me what I wanted to be when I grew up, I recall saying “entrepreneur.” I’m sure she would rather I’d said “doctor” or “lawyer.” But the thrill of building something new and providing something of value to others has always appealed to me.

My first entrepreneurial memory was selling Entenmann’s donuts and coffee to captive motorists waiting on long gas lines during the energy crisis of the 1970s. I don’t remember if I turned a profit, but it didn’t matter—because simply trying was exhilarating. Maybe it was the idea of controlling my financial destiny that I found so appealing.

While in college, I worked at a local bagel shop. The excitement of the retail environment made the days pass quickly. I loved the action of a busy store, the people who came and went, and the independence that the extra money gave me. After college, I had a brief stint selling insurance. It bored me to tears. Cold calling friends, family and strangers was brutal. I was that guy that people hung up on when their dinner was interrupted by the ringing telephone—one that, at the time, was actually mounted on the wall.

The allure of independence and the siren of entrepreneurship kept calling me. In 1988, at age 23, I opened my first bagel store. Along with my business partner, we opened five stores over 25 years. All are still in operation today.

The business grew and grew. The excitement of sowing ideas here and there kept me awake at night and propelled me through the fast-paced days. The ideas weren’t all good, but the endless possibilities were my entrepreneurial fuel. Every idea was a potential dart to be thrown. The ideas would be first sketched out and then carefully analyzed, with the hope of controlling the aim and trajectory of each dart thrown. I just needed to be sure a wayward dart didn’t cause the kind of damage that would bring the game to an end. This is how the business ran day after day, year after year. The bagel business had become my identity.

I absolutely loved it. Until I hated it.

Approaching my 50s, I’d grown weary of the career path that had treated me so well over the prior three decades. I was mentally drained, bored and increasingly restless. To me, the business became transactional and mundane. Plain, poppy, sesame, I had built a life and a living one bagel at a time. I grew to resent the monotony of the well-oiled machine. The business was a friend in the beginning but an enemy by the end.

Something totally unexpected had happened: It became about the money. It became simply a job. Ask the entrepreneurs you meet, and they’ll tell you it’s never about the money. They’ll say that, when it becomes about the money, the passion escapes as painfully as a Goodyear tire’s slow leak on the darkest and loneliest of roads.

The jet-black hair of my youth showed wisps of gray. I was still relatively young. From the years of living a financially responsible life, I had the wherewithal to start anew. But did I have the fortitude to leave the stability of “the job”? I would constantly wrestle with the numbers, while crafting a new path, one that would require me to combine the business skills I’d acquired over the years with new skills yet to be learned. It was a path that would require total reinvention. It was terrifying.

One more idea, one more sketch and one last dart. I believed I could do it. Those closest to me believed in me as well.

In 2013, I left the bagel business to become a Certified Financial Planner. I melded my passion for helping people with my interest in personal finance to forge a new life path. After months of classwork and test-taking, I passed the required exams. I also learned that studying and fact retention gets a bit harder as we age. In true entrepreneurial spirit, I created a solo practice where I can operate how and where I choose.

My years of fiscally responsible living had given me options. And the greatest option was the chance to reinvent myself—and escape the feeling of being trapped.

Rob Solimano is a Certified Financial Planner and the founder of Angel Oak Financial , a fee-only financial planning and investment advisory firm. Rob loves teaching and learning about personal finance. Earlier in his career, he owned and operated a chain of bagel bakery and coffee roasting stores. He’s married with two grown children, and spends time between Montvale, New Jersey, and Kiawah Island, South Carolina. Despite his career change, he’s never lost his love for fresh coffee and bagels.

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Long Time Coming

IN THE NETHERLANDS in 1602, the Dutch East India Company conducted the world’s first initial public offering. Then, in 1610, the Netherlands saw the issuance of the first ever stock dividend. And in 1611, when the Amsterdam Exchange opened, the Netherlands became home to the world's first stock market. Throughout the 1600s, the Netherlands continued to see further financial growth and innovation.

During that period, the Dutch economy was among the world’s largest. But its dominance faded over time, and today the Netherlands ranks 17th in terms of GDP among world economies—behind Russia and Mexico.

This highlights an important aspect of economic cycles. Usually, when we think of cycles, what comes to mind are the regular ebbs and flows of the economy that last perhaps a few years. In the past 30 years, for example, the U.S. has experienced four recessions and recoveries. These are the sort of cycles we’re used to and, in financial planning, they’re the sort of cycles that get the most attention when thinking about risk.

But we can learn something important from the Netherlands: In addition to the regular economic cycles we’re used to, there’s another, entirely different type of cycle—one that can last decades or even centuries. These are trickier, for two reasons. First, they’re so long that they begin to create an illusion of permanence. To someone living in Amsterdam during the Dutch Golden Age, it would probably have seemed unthinkable that the country would one day fall to No. 17 among world economies.

The second reason these longer cycles are tricky: Because they don’t have a regular rhythm, it’s hard to know what to make of them. In mapping out a financial plan, how can you account for something that you might or might not even see in your lifetime?

Consider Japan’s Nikkei 225, the equivalent of our S&P 500. After a boom in the 1980s, the Nikkei hit a peak in December 1989. Today, more than 30 years later, the Nikkei remains about 20% below that 1989 peak. But its market has been showing signs of life recently. That’s great, but it’s also confusing. Does this mean that, in making plans, investors need to consider the possibility of—and be prepared for—stock market downturns that could last as long as 30 years?

Japan’s experience might seem like an outlier case. And perhaps it is. But closer to home, we’re currently witnessing some unusual financial cycles of our own. At least three economic trends are confounding investors.

1. Real estate. Real estate has always been very cyclical. But despite periodic downturns, historically it’s rebounded and come back stronger. Today, however, real estate investors have a more serious concern: Because the work-from-home trend doesn’t seem to be going away, many are wondering if commercial real estate is facing an existential threat.

Office vacancy rates have remained high. And while still anecdotal, there have been stories about office buildings being sold at steep losses. Many buildings have changed hands at prices 30% or more below where they stood before the pandemic. In San Francisco, a building that was valued at $300 million in 2019 recently sold for less than $70 million. The question investors are asking: Is commercial real estate permanently impaired, or will this turn out to be just part of a longer cycle and we’ll eventually see a recovery?

2. Inflation. Before inflation picked up last year, the U.S. had enjoyed inflation so low that consumers and investors barely gave it much thought. Inflation averaged 3% in the 1990s, 2.6% in the 2000s and 1.8% in the 2010s. Go back to the 1980s, however, and inflation was in the 5% range, and it breached 10% in the 1970s.

This has left investors wondering how to think about inflation. Is today’s inflation rate—most recently at 5%—an aberration, or was the aberration that earlier period, between 1990 and 2020, when inflation was so low for so long? This isn’t just an academic question. It has practical implications for anyone making a financial plan.

3. Interest rates. These are another issue confounding investors. After peaking in 1981, interest rates in the U.S. declined in more or less a straight line for four decades. From a peak above 15% in 1981, the 10-year Treasury note yield declined to near 0% in 2020.

So, how should investors think about today’s interest rates? The 10-year note now stands at roughly 3.7%. That’s demonstrably higher than it was two years ago but no higher than the rates we saw in the 2000s, prior to the financial crisis. Are today’s higher yields an aberration, or was the aberration that earlier period, when the Federal Reserve held rates so low for so long? This is an important question, especially for those in retirement. Can they expect to continue earning 3% or 4% on their bonds over the long term, or should they assume rates will drop back down?

These are the most obvious open questions. But in reality, there may be other cycles underway which are so slow moving that we don’t even realize they’re cycles. Consider stock market index funds. For years, according to the data, index funds have consistently outperformed their actively managed counterparts.

It seems like they’ll be the right choice for the foreseeable future. Still, index funds might one day go into decline. I’ve discussed, for example, a strategy known as direct indexing that’s been growing in popularity. Perhaps this will supplant traditional index funds. Or perhaps, as some have argued, index funds’ success will sow the seeds of their own demise.

How should investors respond to this kind of uncertainty? I have three recommendations. First, recognize that nothing lasts forever. You want to avoid becoming too attached to any single investment or way of investing. Periodically question whether the approach you’ve been using still makes sense.

Second, maintain a diversified portfolio. How diversified? Here’s the litmus test I use: You should always have some holdings in your portfolio that annoy you because they’ve been lagging for a while. If that’s the case, then you should be well positioned to benefit when the cycle turns for those particular investments.

Finally, in making a financial plan, think through a set of scenarios that seem just a little far-fetched. I’m not sure you need to worry right now about the U.S. falling to 17th place behind Russia and Mexico. But in making your plan, look for ways to build in just a little more margin for error than you think necessary.

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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Best Time of My Life

I WAS AT WORK WHEN my daughter called. "Grandpa was taken to the hospital in an ambulance, and you need to meet Mom and Grandma there as soon as you can."

I entered the hospital room 45 minutes later, and I saw my mom in tears standing next to my dad’s lifeless body. Dad’s hair and face were spotted with wood chips and dirt, and he was wearing a torn flannel shirt and old blue jeans. He had spent the day working in his backyard, something he loved to do.

As I looked at my parents, all I could think about were some of the last words that I remember my dad saying. It had been just five days earlier. The family was gathered in our living room after Thanksgiving dinner, and my daughter asked, "Grandpa, what was the best time of your life?"

My dad looked at Mom, his wife of 54 years, and smiled as he answered, "The best time of my life has been since I retired because I have been able to spend more time with my wife and best friend."

Although I didn’t know it at the time, my dad’s short answer to my daughter’s simple question would cause me to change my retirement plan. I was age 53, and I’d always envisioned retiring sometime between 65 and 70. But my dad’s death at age 74, the result of his second heart attack, would become the catalyst to reframe my future plans and accelerate my retirement timeline.

Like many engineers, I created my own spreadsheet and made my own retirement projections. Unfortunately, I never revisited that spreadsheet or the assumptions that went into it. Although I probably created my custom retirement spreadsheet more than 20 years ago, I never felt the need to go back to it because I loved my job and I was now in my best earning years.

When my dad died, I knew practically nothing about my parents’ finances. I had tried to talk to them about their financial situation on several occasions, just in case something happened, but they never wanted to talk about money. All I knew was that when Dad retired, he assumed responsibility for paying the bills, balancing the checkbook and handling their investments.

It had been 12 years since Mom had turned over the finances to Dad. And now, because of the sudden loss, she couldn’t concentrate, and had difficulty paying her bills and getting her finances organized. To make things worse, we couldn’t find the passwords for any of their accounts. Mom needed me to help her get smart about her financial situation quickly.

It wasn’t quick. Over the next three years, my mom and I had a financial baptism by fire as I slowly helped her uncover, unpack and clean up her financial situation. We interacted with lawyers, financial advisors, and insurance and annuity companies. We dealt with banks, health insurance companies, Dad’s former employers, Medicare and the Social Security Administration. We learned numerous financial lessons, and some of the harder lessons were taught to us through high fees and excessive taxes.

One thing that was particularly frustrating about my dad’s finances: He seemed to have money all over the place. Dad had stock certificates in shoe boxes, drawers and filing cabinets. He held some stocks in his name only, and others were in both of their names. And he had numerous investment accounts, checking accounts and certificates of deposit in different locations.

It took nearly two years to track down all the money. At least we assume it’s all the money. I could imagine my dad opening some of these accounts 40 years ago because of an offer of a free toaster or a digital clock radio and then just leaving the money there for decades. How else would something like this occur?

Then I thought about my wife and me, and we seemed to have money all over the place as well. We had accounts at Vanguard Group, Charles Schwab, TD Ameritrade, the federal government’s Thrift Savings Plan, TreasuryDirect and our local credit union. My wife might be in the same situation as my mom if something were to happen to me. I’m not sure how we got so many accounts, but I’m fairly sure I didn’t get a free toaster or digital clock radio for opening them.

We started to consolidate our accounts as much as possible. What I discovered was that having so many accounts obscured our net worth. I was not in the habit of checking all our investments regularly, and I practically never traded. I was pleasantly surprised to see our net worth when we looked at the balances and did the math on our accounts.

I had been on financial cruise control, with my retirement set for 65, but my dad’s last words about the best time of his life caused me to rethink my own retirement plans. I’d never considered retiring prior to 65, but after cleaning up and clarifying our financial situation, I ended up retiring at 56.

Dad was a loving and devoted husband. He loved his four kids, his 14 grandchildren and his church. But he didn’t love thinking about or talking about money. When the topic of money came up in a conversation, he often said to me, "Charlie, there’s a lot more to life than money."

Death is a sobering reminder of the frailty and fleeting nature of life. But death can also be an important opportunity to reevaluate your own priorities and values. It was for me. Today, I’m happy to say that I’m able to spend my time with my wife and best friend. Retirement has been the best time of my life.

I’m thankful to my dad for the financial lessons he taught me while he was alive and after he passed. I loved my dad, and still do.

Chuck Staley and his wife Gina have five children between ages seven and 30. He worked for 35 years as a Department of Defense engineer at Edwards Air Force Base before retiring in January 2022. Chuck now volunteers as a part-time pastor at a small church. He recently started a sole proprietorship, Walk Worthy Solutions, to train federal employees about retirement planning and leadership. Chuck enjoys walking daily with his wife, reading, home improvement projects, and traveling with his family.

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Exposing Themselves

RICHARD NIXON IS best known for the infamous Watergate scandal. But how many of us remember that, prior to Watergate, he got caught up in another scandal over a suspect tax deduction?

In 1969, Nixon donated more than 1,000 boxes of his official papers to his presidential library and attempted to claim a $576,000 charitable deduction. This caused an uproar, and served to start turning much of the nation against the president.

Congress got involved, created an investigative panel and eventually disallowed the deduction. Nixon felt his strategy was legal, and voluntarily provided three years of income-tax returns to Congress for the panel’s review. This set the precedent for presidents—and presidential candidates—to submit their tax returns for public scrutiny.

This anecdote, and many more, are contained in a fascinating new book entitled All the Presidents’ Taxes, written by Charles Renwick, a Chartered Financial Analyst and Certified Public Accountant. Renwick’s goal is to expose readers to some of the more interesting stories of presidents, and presidential candidates, and their tax challenges.

But the book isn’t just an exposé of suspect tax strategies. The author highlights legal tax-cutting strategies that are used by our highest leaders, but that are also available to everyday taxpayers.

Part One consists of four chapters. The first provides a concise and informative overview of the history and construction of our tax system. The second chapter asks the question, “How can we assess a president’s taxes?” The author proposes four questions:

Are they a cheater?
Is there a conflict of interest?
Are they paying their fair share?
Do they have any foreign business dealings?

Renwick then adds a fifth question to help readers with their own taxes: What can we learn and borrow from presidents and presidential candidates? The author uses this framework to look at President Jimmy Carter; Senators John Kerry, Ted Cruz and Mitt Romney; President Joseph R. Biden, Jr.; and President Donald Trump.

Chapter No. 3 provides an excellent overview of two of the key underlying concepts in the tax code, namely nuance and context. Our tax code is riddled with nuance, especially when it comes to a business. The facts and circumstances of the tax situation provide the context to interpret the law.

A good example, which may impact some retirees, is the difference between a business and a hobby. The IRS has rules addressing this, but they’re open to interpretation depending on the facts and circumstances of the case. Hobbies can’t take tax deductions; businesses can.

For example, the regulations state that if you make money in three out of five years, you have a business. The author cites an example of a travel business opened in 2018. It lost money in the first two years due to startup costs. It then lost money in 2020 and 2021 because of the pandemic. Despite those losses, it’s still considered a business and qualified to deduct expenses.

Chapter No. 4 discusses the critical difference between avoiding and evading taxes. Avoiding taxes—taking steps to pay less than might otherwise be owed—can be a sound and legal strategy. We’re all free to structure our financial lives to take advantage of the tax code and thereby trim our taxes. For the average salaried employee, things like contributing to a tax-deferred 401(k) or health savings account come to mind.

Tax evasion happens in small and large ways. Failing to report income is common, and cash transactions are one of the methods employed to evade the taxman. Many businesses want to avoid the complexity and fees associated with third-party credit card companies. But running a cash business can be a big temptation to fudge your income.

Part Two consists of chapters five through 10. These chapters provide an in-depth review and analysis of Biden’s and Trump’s tax returns. The final two chapters address two important tax topics: fringe benefits and estate tax.

The fifth chapter analyzes Biden’s taxes in 2017 and 2019. Subsequent to his term as vice president, and prior to being elected president, he and his wife used an S Corp to legally reduce their tax bill. An S Corp strategy avoids payroll taxes on pass through income, and is something accessible to citizens who have rental or partnership income.

Trump has the most complex financial situation of any modern president. Chapter Nos. 6, 7 and 8 delve into three specific aspects of President Trump’s tax strategy. These chapters examine the use of deductions for business expenses, using a business to pay family members, and using depreciation in a real estate business. The author makes the case that these are common strategies used by business owners, and explains how the reader might take advantage of them.

The final two chapters are a brief discussion of how to use fringe benefits to provide tax-free income, and strategies to use favorable asset valuations to reduce estate taxes. Both chapters provide interesting background information and an assessment of how these strategies can drift into legal gray areas.

The author ends with a call to arms of sorts—to make it a legal requirement to disclose the tax returns of presidents and presidential candidates.

The reader can enjoy this book on a number of levels. The historical context and tax code philosophy are interesting and informative. The analysis of president and presidential candidate tax returns provide insight into each person. It also offers a glimpse into the political calculations that candidates make in deciding how much personal information to provide.

More important, the book prompts readers to think more deeply about the role of the tax code in our country and our lives. What should be taxed and at what rates? What’s considered a fair share? When does tax avoidance slip into tax evasion? These are important questions that affect all of us.

Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.

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Think for Yourself

I DREAD THOSE RED down votes on my HumbleDollar comments. Perhaps at times I come across as less than empathetic, but that’s not really me. I have sincere empathy for anyone who honestly struggles to make life decisions, including financial decisions. I also realize that adhering to good financial practices is made hard by the problems that arise with the ups and downs of daily life.

I spent my working life, which spanned nearly 50 years, trying to educate workers about 401(k) plans, health plans, life insurance and more. Thirteen years after retiring as a corporate executive overseeing compensation and employee benefits, I still get messages from folks who retired from my old employer—and even from their spouses—asking for help. Whenever possible, I happily provide answers.

Yet the majority of people who get themselves into financial difficulty are what I call lazy thinkers. These are people who have the ability and resources to make good decisions but go through life unaware. They display a “don’t care” attitude, ignoring the possible consequences of their actions.

During my career, when I met with employees, I could usually tell if their need for help was sincere. Too often, they misrepresented the facts, left out important information or hadn’t made an effort to solve their problem. I’ve heard that at times I come across as a bit harsh. Perhaps my work experiences have tainted my perception, but I have little tolerance for lazy thinkers. They bring out the curmudgeon in me.

Consider the 55-year-old who says he can’t plan his retirement because he has no idea what his Social Security benefits will be. Hey fella, to get an estimate, try one of the Social Security Administration calculators. It’s easy.

I just read this question on Facebook: “I'm looking to start a Roth IRA with Fidelity. Is there a good ‘on-ramp’ when initially investing with Fidelity?” Yeah, go to Fidelity.com and click on “Open an Account.”

Which health plan is the best deal? There are four factors: premiums, deductibles, co-insurance and the out-of-pocket maximum. While predicting your exact medical spending for next year isn’t possible, your payment history—especially if you have a chronic condition—provides a reasonable guide.

Absent that research, folks can determine the maximum out-of-pocket amount they’re able to pay and compare policy premiums, and then decide accordingly. Ignoring annual open enrollment information, as too many Americans do, makes good decisions nearly impossible.

Should I contribute to my employer’s 401(k)? Is that really a hard decision, especially when there’s an employer match? I recall a group of workers who wouldn’t participate. They didn’t trust the company and didn’t want the employer to have their money. Some didn’t know there was an employer contribution. Not really thinkers at all.

Participating in the 401(k) should be a no-brainer. To help workers decide, my employer—and many others—provided extensive communications and online tools. We held seminars that we invited workers and spouses to attend. A tiny percentage of workers took advantage. Most weren’t willing to invest the time. Even the unions were frustrated with their members ignoring these opportunities.

I recently viewed an old video criticizing 401(k) plans, saying they’re too confusing, workers don’t understand mutual funds or their fees, and so on. Of course, the larger world of investing is complicated, too, but a minimal investment of time will provide the basic information needed to use a 401(k).

Similarly, ignoring your employer’s flexible spending account or health savings account is often a poor financial decision. The unrealistic fear of losing money was frequently the excuse, but simple planning can easily avoid that—if you think about it.

Two years ago, my former employer dropped Medicare-eligible retiree health coverage and replaced it with an annual lump-sum payment, which could be used to buy coverage through a designated administrator.

Communications went on for nearly a year. In addition to printed materials, there were videos to watch. COVID-19 prevented the planned in-person meetings. Still, reading the materials would have made the transition relatively easy for those affected, and a comparison with the old coverage showed the vast majority of retirees were getting a better deal. I saved $3,400 annually in out-of-pocket costs.

Nevertheless, mass confusion and misinformation reigned among retirees. Many made poor choices. Part of the problem was that retirees didn’t know what their old coverage was or what they paid for it.

One fellow absorbed all the misinformation—and ended up not enrolling his wife in the plan, but instead bought Medigap coverage on his own. That meant he lost $4,500 annually in employer contributions.

So, why this rant? I get frustrated when I read about the financial issues that many folks face and which are so often of their own making. In fact, after nearly 50 years of trying, my inability to get more employees to pay attention to their own financial lives was a factor in my retirement. My job was frustrating.

Yes, more financial education, starting in grade school, is important, at least as important as learning basic arithmetic. But you can lead a horse to water and all that.

My message? Pay attention to the information you receive, ask questions, investigate, use every resource available—and don’t believe every rumor you hear. Take the time and put in the effort needed to make good decisions. As my chapter in the just-published book My Money Journey concludes, “We can’t control what others do and we can’t stop misfortune from striking. But we can control our own actions.”

Richard Quinn blogs at QuinnsCommentary.net. Before retiring in 2010, Dick was a compensation and benefits executive. Follow him on Twitter @QuinnsComments and check out his earlier articles.

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