Jonathan Clements's Blog, page 163

What Is Retirement?

AT A DINNER THAT I attended recently, someone pointed out that a high percentage of us were newly retired. That included me, as well as a couple who were just reaching age 60. After the dinner, the wife of the couple told me she was offended by being called retired. She’s writing fiction every day and her husband does some consulting work.

The work they’re doing pays, but it’s not by itself enough for them to live their comfortable, low-key, middle-class lives. They both worked in professional careers, were diligent savers and invested those savings intelligently. Now, they’re mostly living off their investments, with their earned income streams providing a minority—but still important—part of their income. But to the wife, that didn’t mean they were retired.

I couldn’t figure out what she thought retirement was, or why it would be offensive to be thought of as retired. I can’t say she’s wrong, though. Retirement is one of the strangest words in finance, in part because it’s notably vague. It has a couple of unusual characteristics.

First, people who aren’t financial professionals talk about retirement around the dinner table. They don’t talk about single premium immediate annuities or cross-currency interest rate swaps around the dinner table. My point: Retirement is real and important to people in a way that many financial terms are not.

Second, I know what retirement means, you know what retirement means and the guy down there at the end of the bar knows what retirement means. We just all think it means different things.

For many people, retirement seems to mean a planned, permanent, more or less voluntary leaving of their jobs. One obvious problem with this definition is that quitting a job takes two weeks. Many people who retire think they’re going to live another 30 years. That leaves 29 years and 50 weeks undefined.

Furthermore, many people work in retirement, so the idea that retirement always means you no longer work doesn’t fit the reality of many retired people. Some people even work in the same field they retired from. On the other hand, some retirees don’t work at all, because for them that’s the point.

If all this is true, what the heck is retirement?

It’s personal. And on a personal level, I’ve noticed three things about my retirement.

First, I thought the pace of change in my life would slow but I was wrong. Change happens to the world, to my kids, to my parents, to the dead battery in my car and the sink faucet that decides to leak. And to myself, including—sadly—my teeth. Some change is good, some is not, but it happens without seeking our approval and it certainly doesn’t care whether we think we’re retired.

Second, I’m surprisingly busy, to the point of being one of those people who can’t believe they ever had time to go to work. There are all kinds of chores and projects to do. These aren’t heroic deeds and songs will not be sung of them. Yet I seldom finish my day’s to-do list.

The third thing is that my retirement is, in many respects, unusual. Some particulars—such as my nearly complete lack of interest in traveling to distant vacation spots, no matter how pleasant or educational such places might be—are so different from those of other people I admire that I can start to think I’m doing it wrong. But the truth is that everyone’s retirement is different. The fact that yours doesn’t look like everyone else’s is not a bug, it’s a feature.

There is no blueprint for this. We have to think for ourselves, and decide for ourselves what to do and how to do it. Then we have to think about whether what we are doing is as satisfying as we’d hoped it would be and make adjustments—yes, change—as needed to better our lives.

We strove to improve our lives before retirement, and that process doesn’t stop in retirement. Why would we want it to?

Darker elements are also possible, though. Your job, and likely long hours and dedication to it, gave you a function. Now that function is gone and perhaps a bit of your identity with it. If you start checking off your bucket list items and that doesn’t work out as wonderfully as you thought, retirement can start to look depressing.

This is the hardest thing about retirement: matching what gives you satisfaction with what you’re doing and who you are at your core.

Some people are disturbingly shallow and selfish in retirement. But I suspect most of us oversteer in the other direction. I think some of us, after decades of delayed gratification or outright sacrifice, have an odd sense of guilt about doing things just for ourselves.

I’ve had to learn to give myself permission to do things for myself at least part of the time. If those things harm no one else and don’t harm me, and they give me nontrivial pleasure, then they’re good to do.

Of course, you can help others as well. Some people do volunteer work in retirement. I was raised to think work was stuff you did to get paid. If you didn’t get paid, whatever it was you were doing wasn’t work.

And yet pay and value are different things. I learned this while volunteering at a summer camp for kids with cancer. I taught the kids how to fly fish. There was a bluegill pond at the camp and almost all the kids caught fish, in many cases their first fish.

Some of these kids, even as young as 10 years old, were in the midst of fighting terminal cancer. And they knew it.

In doing this volunteer work, I discovered how pretty damn unimportant my problems were—and also something else about work.

No work I ever did for a dollar was as important as the happiness those kids experienced learning a physical skill and catching real fish, their bodies briefly escaping the pain and ravishment of cancer to rise in movement, careful and precise, turning by their own hand and action one small moment into fierce grace and joy, their eyes and faces fired with an astonishment of pleasure in themselves.

There are many fuels fit for burning down despair. Find them.

David Johnson retired in 2021 from editing hunting and fishing magazines. He spends his time fishing, reading, cooking, gardening, freelancing and hanging out with his family in Oregon.

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January’s Hits

READERS LOVE LISTS. For proof, look no further than our (ahem) list of January's 10 most popular articles. Seven of those articles took the form of lists, and their readership helped propel HumbleDollar to its second-best month ever for pageviews.

"I suggest skipping the step of building up an emergency fund—in cash, that is," writes Chuck Wilson. "I’m willing to bet that only a small minority truly use it for emergencies only."
You need $1 million to retire. Social Security won't be there for me. My retirement expenses will decline as I get older. Dick Quinn tackles these and six other retirement myths.
Thanks to the new tax law, retirement account investors don't need to start tapping their accounts until age 73. But the result could be larger tax bills for both retirees and their heirs, says John Yeigh.
Want to make financial progress in the year ahead? Check out the 10 steps suggested by Adam Grossman. Step No. 3: Take advantage of today's higher yields.
Retired radiologist John G. Clement has four granddaughters. He lists the eight financial rules he wants them to know.
"Investing in dividend-paying stocks is lunacy for two reasons," argues Mike Flack. "The main reason is that there are zero studies that show this stratagem can beat the market."
Instead of trying to be precisely right with our financial decisions—an impossible goal—we should aim to be roughly right, says Adam Grossman. He offers nine ways to do just that.
In the first of a series of posts by HumbleDollar’s most prolific writers, Dennis Friedman lists his 10 favorite articles that he’s written for the site.
Last year was one of just five years since 1928 when the S&P 500 and 10-year Treasurys both lost money, notes Bill Kosar. The good news: History suggests returns from here should be robust.
"You and I often lend a helping hand to the FIRE folks," notes Dick Quinn. "In some cases, they keep their income so low that they receive taxpayer subsidies for health care and other services."

What about our twice weekly newsletters? The most popular were Juggling for Retirees, A Difficult Year and Retire Is a Verb.

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Saving Our Retirement

I ONLY WOKE UP TO the notion of financial independence at age 50. I’d been asleep at the financial wheel and almost crashed. It had been a 20-year Rip Van Winkle slumber. I realized suddenly that I had an irresponsible, unconscious and unintentional money mindset.

I could offer plenty of excuses, but they don’t make me feel better. Shame, grief and disbelief overcame me initially. At times, regret still haunts me. We had lost so much time without taking care of our future.

An acute financial depression ensued. I felt panicked and lost. Our financial realization arrived simultaneously with family health issues, transitional job stress, downsizing and a growing awareness that I had a conflicted relationship with money.

The weight of all this nearly led to a mental breakdown. Yet my tale is an optimistic story of recovery, thanks to a dramatic change in our financial attention and direction.

My wife and I are reasonably high-income physicians, in emergency medicine and psychiatry. We’re empty-nesters now, in our late 50s and living in Tennessee after a long chapter in Chicago.

As is often the case, our relationship with money was forged in childhood. I grew up in a middle-class patriarchal household. My mother was a nurse and then a stay-at-home mom. My father was a state-employed physician and sole breadwinner. Money was a taboo topic when I was growing up, yet also a source of perpetual argument. My parents divorced for many reasons—money among them. We had enough, yet were led to feel like we lived in constant scarcity.

Neither my wife nor I had any constructive money behaviors to model. There was also an utter lack of formal personal finance education. We learned to care for others without learning how to care for our financial selves. Somehow, it always seemed there would be time to take care of this “later on.”

We exited medical school in our early 30s. We had no idea how to allocate the money from our first real paychecks. I now know the recipe for financial independence: Start early. Insure your human capital. Increase your income. Spend less than you earn. Save the difference. Avoid consumer debt. Invest in a simple portfolio of low-cost index funds. Let compounding work for you.

It’s simple, but not easy—and we didn’t know any of it at the start. Immediately out of our residencies, we started a family. We were blessed and overwhelmed with fraternal twin boys. One of them had significant developmental challenges requiring years of intense focus. Happily, in the end, our concerted efforts paid off.

We bought a big doctor's house and new cars. We hired high-cost financial “advisors,” among them insurance salesmen. We established an inflationary lifestyle that led to a paycheck-to-paycheck existence. We spent first and saved the leftovers.

Who knew what dollar-cost averaging was? There was a never-ending litany of distractions from our money managers. It’s scary for me to think how common our story is, especially among late starters to the financial independence movement.

Our biggest mistakes happened during the Great Recession. We completely renovated our “forever” home in 2007. Housing money was cheap and plentiful then. By 2008, we were suddenly underwater on the mortgage and house-poor.

In addition to our paltry savings rate, we panicked and sold stocks. Committing a cardinal financial sin, we "de-risked" our portfolio at the worst possible time. We missed out on a significant portion of the subsequent bull market recovery. Our non-fiduciary advisor just let us do it. We had no idea what we were doing.

In the end, we emerged from a 20-year wind tunnel of spending with less than $1 million in savings. It was 2016, and we realized that our retirements loomed ahead. At age 50, ignorance was no longer bliss.

I went down the investment book, blogging and podcast rabbit hole. Analysis paralysis set in for a time. I wished someone had created a personal-finance education platform just for physicians. Then I discovered it’d been done. Driven by his passion for giving doctors and other high-income professionals a “fair shake on Wall Street,” Jim Dahle had already created The White Coat Investor.

With this knowledge now in hand, the race was on to take over our financial lives. We fired our financial advisor from the big private bank. We moved our investments from actively managed mutual funds to passive index funds at Fidelity Investments and Vanguard Group.

We left only our checking accounts at the bank. We opened a high-yield savings account at Ally for our emergency fund, and created various savings funds for the intentional needs and wants that we’d identified as still worthwhile.

Our gains were still punctuated by mistakes. Fortunately, we had exited a whole-life insurance policy and purchased term-life insurance. Unfortunately, we had used the proceeds of the whole-life policy to pay cost overruns on our home renovations. Fortunately, we moved from Chicago to lower-cost Tennessee. Unfortunately, we’d built our own house there.

Mistakes are best made when you’re young and have time on your side to recover. We certainly made mistakes, but now our time to recover was dwindling. We finally realized how leveraged our lives had become. To get out of debt and reverse the tide, we shoved our savings rate from the single digits to 35% to 40% of income. We saved as much as we could without eating rice and beans. Painfully, in 2019, we downsized from our costly custom home.

We kept shedding our materialistic weight, including selling our pleasure boat. Appropriately named YOLO—you only live once—it described our old way of living. Lifestyle inflation was insidious and easy. Lifestyle deflation is much, much harder. Yet, amazingly, our overall quality of life isn’t much different than before.

Today, we’re well on the way to financial independence. The goalposts still move a bit, but right now 63 to 65 is our target retirement age. Critical to achieving this goal are following our formal investment policy statement and an intentional life plan. Even with all our progress, our current phase of mindful living can still feel like the hardest part.

Why? The problem lies with our late start. It’s hard to stay on the straight and narrow when we’re surrounded by a community of early starters and early retirees. We have some ground to make up, while our peers can be more relaxed with money now.

Our net worth is up roughly 3.5 times since 2016. Our home’s value makes up 20% of this total. College for our twins is paid off. Thanks to a modest windfall, we paid off the last of our debt a few years ago—and treated ourselves to a hot tub.

A debt-free life has brought extraordinary peace of mind. The hot tub is good for our aching backs. Our nest egg still needs to grow quite a bit to meet our anticipated retirement spending. We are works in progress, but now it feels like we can get there in time.

Can you wake up too late to catch up? Sadly, I think the answer is yes. It’s never too late, however, to take control of your financial life. If the best time to plant a tree was 20 years ago, the next best time is now.

We just don’t let money slip away any longer on the mindless consumption promoted by our culture. Those dopamine hits are short-lived. The Joneses may appear rich, but they probably aren’t wealthy.

We’ve chosen to enjoy the present, but not sacrifice our future to it. I know that’s not assured, however. From my work in the ER, I know that planning on those future golden years can be an illusion.

What's next? Stay the course. Stick to the plan. Which is easier said than done. We have less time to recover from mistakes, and yet we still make them. The question I often ask is this: While late-starters like us are probably the predominant demographic in society, why do we make up such a small part of the voices in the financial independence community? We’re the silent majority and should speak out to help others that come after us. There’s no better time than now.

Bill Yount, age 57, is an emergency room physician in Tennessee. He wants to help others wake up and join him on the journey to escape the rat race, live a balanced life and enjoy generous time freedom. You can find him at Catching Up to FI and Financial Literacy Project .

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Introverted Me

NOW THAT I'M RETIRED—and living in a warm desert climate—walking has become one of my favorite activities. Most days, I log between six and eight miles trekking around our neighborhood. I usually listen to a podcast during my journey, but it just serves as background noise. My real focus is contemplating dog training strategies or the subject matter of my future HumbleDollar posts.

Some days, I play the “what if” game. I contemplate how my life’s trajectory would have been altered if I’d made different choices at certain junctures. I also often reflect on how my personality has shaped nearly every aspect of my life.

Ten years ago, I read the book Quiet. As I consumed each page, it became apparent I finally had a word—introvert—to describe my personality. Up until that point, I’d never fully understood why I enjoyed the activities I did.

As a child, I preferred spending time alone. Given the choice between going outside to play or staying indoors and reading a book, I’d always choose the latter. I spent hours writing stories and poems, with plots that almost always revolved around animals.

As a teenager, I spent more time with my livestock than I did with friends. I found animals easier to interact with than humans.

In college, I spent my time studying. I always signed up to earn more credits than I needed to be considered a fulltime student. Unsure of my career path, I used the time to take classes in a variety of subjects. The social aspects of college held no interest for me.

When I was in graduate school, I landed an unpaid internship at a clinical laboratory located within a large medical school. I quickly became a valued member of the lab and was offered a paid position a few weeks after I started.

Thinking back over my 30 years of employment, I now realize that my first job was the one I enjoyed the most. For eight hours a day, I would sit at a microscope and analyze human chromosomes. The work was tedious, and required an enormous amount of focus and attention to detail. I never felt more comfortable.

At the time, I couldn’t understand why I enjoyed the work as much as I did. But I thrived in the lab environment. It was solitary work so there was never any need to engage in small talk with my coworkers. The lights in the lab were often dimmed to prevent eye strain. Getting paid to sit in a quiet, softly lit room, with just my own thoughts to keep me company, felt like nirvana.

Now, in retirement, my introverted personality continues to affect the choices I make. I spend my days reading and writing, rather than traveling and socializing. My husband and I will always choose a quiet dinner and movie at home over going out to eat. As for walking around the neighborhood, with just my own thoughts to keep me company? That, too, feels like nirvana.

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Improve Yourself

I'LL TURN AGE 72 this year. Since I’ve retired, my wife and I have had some wonderful experiences. Our travel adventures are full of great memories that I’ll cherish for the rest of my life.

Still, as great as those adventures have been, they aren’t nearly as important to our happiness as living a healthy, pain-free life without physical or mental limitations. That’s something that’s hard to beat. It gives you a different outlook. Life seems more cheerful and brighter. Your problems don’t seem so big.

Over the years, I’ve learned how important your health is if you’re going to have a satisfying retirement. Staying fit not only allows you to do the things you want to do, but it can also help reduce one of your biggest expenses in retirement. The average 65-year-old couple who retired in 2022 will spend $315,000 on health care expenses in retirement, calculates Fidelity Investments.

Want to improve your health? Here are 10 simple steps that I try to follow:

1. Take a brisk walk. There are many health benefits that walking offers, including lower blood pressure, cholesterol and body fat. Another plus: It’s inexpensive. All you need is a good pair of walking shoes.

I like to walk after a meal. That not only helps you digest your food, but also it lowers your blood sugar level after eating. I usually take a long walk after breakfast, and then a shorter walk of 15 to 20 minutes after my next biggest meal.

2. Drink filtered coffee. Drinking unfiltered coffee, such as Espresso, Turkish and French press, can raise your cholesterol level 10% to 15%. Since these types of coffee don’t use a filter, they allow a cholesterol-raising chemical called diterpenes, found in coffee beans, to enter your body. We have an Espresso machine, but we only use it on special occasions.

3. Get a good night's sleep. I usually wake up before 4:30 a.m. I like to get an early start on my day. I still try to get at least the recommended seven hours of good-quality sleep that have been found to be important for brain health.

Two recent studies have found there’s a connection between poor-quality sleep and the increase in toxins, such as amyloid beta protein, that have been linked to Alzheimer’s disease. Another study found that when we sleep, our brain cells shrink, allowing more room for the brain to dispose of these harmful substances. The upshot: Getting seven to eight hours of sleep could reduce the risk of dementia by giving the brain time to flush out these toxins.

4. Learn a new skill. Sanjay Gupta—renowned neurosurgeon, medical reporter and writer—believes learning even a simple skill, such as eating with your non-dominant hand, can enhance your brain health. "The act of experiencing something new—or even doing something that's typical for you, but in a different way—can all generate these new brain cells," Gupta says. Doing something different builds cognitive reserve that we can then draw on as we age, allowing us to continue to function well. Want to keep your brain sharper? Try new, challenging experiences.

5. Floss your teeth. For the little money and time spent on flossing, you can keep your teeth and gums healthy, while saving thousands of dollars on dental work. Flossing helps prevent cavities, gum disease, and tooth and bone loss. It also reduces the chance of heart disease. Recent research revealed you have a 20% higher risk of having heart disease if you have gum disease.

One study recommends flossing before brushing. It found flossing first was more successful in removing plaque between the teeth. Flossing loosened up the plaque and other residue, which then allows brushing and rinsing with water to remove more particles.

6. Wear sunscreen. The most common form of cancer in the U.S. is skin cancer. More than 90% is caused by too much exposure to ultraviolet (UV) light. According to the Centers for Disease Control and Prevention (CDC), Americans lose more than $100 million in annual productivity due to skin cancer.

One of the easiest ways to protect yourself is to wear a broad-spectrum sunscreen that blocks both the UVB and UVA rays that cause skin cancer. I like to wear a broad-spectrum, mineral-based sunscreen that has a sun protection factor (SPF) of at least 30. But if I spend more time outdoors, I’ll wear one that has an SPF of 60 or above. When participating in outdoor activities, it’s also a good idea to wear a hat and UV sun-protection arm sleeves.

7. Include calcium and vitamin D in your diet. Having sufficient amounts of calcium and vitamin D is important in preventing osteoporosis. It’s a condition where the bones become weak and brittle. Calcium helps build and maintain your bones, while vitamin D helps your body absorb the calcium.

Osteoporosis is called the “silent thief” because you can have it and not know until you break a bone. It’s more common among the elderly, especially women. That’s why it’s recommended for women to get screened at age 65 and men at 70.

If you eat wisely, you can get the nutrition needed to improve your bone health and reduce the risk of developing osteoporosis. On our grocery list are foods rich in calcium, such as nonfat milk, yogurt, almonds, kale, broccoli, dried beans and oranges. We also buy eggs and salmon, which are rich in vitamin D.

8. Do weight-bearing exercises. One out of four older Americans falls each year. Falls are not only dangerous for the elderly, but also costly. According to the CDC, “Each year about $50 billion is spent on medical costs related to non-fatal fall injuries and $754 million is spent related to fatal falls.”

One way to prevent falls is to do weight-bearing exercises that can strengthen your bones and improve your balance. Walking, jogging, climbing stairs, playing tennis and pickleball, dancing and weight-training are some of the exercises that will help keep you upright.

9. Drink water. Staying hydrated is especially important as we age. Older adults often take medication that causes a loss in body fluid. In addition, we become less thirsty in our later years, putting us at greater risk of dehydration. Drinking water is crucial. It helps improve brain health, relieve joint pain, prevent kidney stones, control body temperature, remove body waste and prevent infections.

How much water should you drink? The common thought has been 64 ounces (eight cups) per day. But according to new research, that might not be true. That advice didn’t take into consideration all the fluids we get from the food we eat.

Two easy ways to determine if you're getting enough fluids: how dry your mouth is and the color of your urine. If your urine is a light straw yellow color, it’s a sign that you're well hydrated.

10. Don’t sit too much. Sitting too long can lead to health issues, such as diabetes, heart disease, dementia, cancer, high cholesterol and high blood pressure. How often should you move? Some studies recommend every 30 minutes.

Here are a few tips on how to sit less:

Divide your activities into smaller chunks. Instead of taking one long walk, take two or three shorter walks.
Stand while doing some activities. For instance, stand while talking on the phone, watching television, and on a train or bus.
Raise your laptop, so you can work standing up.
Get up and move after a meal. Don’t sit. We tend to get tired and sleepy after eating, which can lead us to sit for even longer.

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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Back From the Dead

JUST LIKE THAT, growth stocks are back in vogue. Vanguard Growth ETF (symbol: VUG) has outpaced Vanguard Value ETF (VTV) by more than nine percentage points over the past three weeks. That gap in favor of “risk-on,” meaning mainly technology shares, is the biggest since those two exchange-traded funds were created some 19 years ago.

What gives? Weren’t all the strategists proclaiming a new era of value investing? It still seems that way based on what you hear on financial TV and read in investment magazines. My hunch is that the growth comeback, perhaps driven by a 75% rally in Tesla (TSLA) shares from earlier this year, is a short-term trend.

Cast your mind back to the early 2000s bear market. Longtime investors might recall that rocky time. Making the downturn so grueling was not only its duration, but also its depth. The Nasdaq Composite peaked in March 2000, but it took until October 2002 to reach the market low, for a total decline of 78%. During those 31 months, there were several “bear market rallies.” Indeed, short-term snapbacks of 25% or more were common.

This month’s revenge of the tech titans shouldn’t be a big surprise. Many investment managers came into 2023 underweighted in once-sexy stocks like Apple, Amazon and Tesla. According to data from Strategas Research, 62% of active funds beat the S&P 500 in 2022—the highest rate since 2005 and after a dozen straight years of sub-50% readings—and that outperformance was made possible by underweighting big tech stocks.

Could 2023 be the year growth stocks find their footing again—and was 2022 an anomaly? We’ll have to wait to find out. But with the Nasdaq Composite stocks still trading at a pricey 26 times last year’s earnings, value shares appear cheap by contrast. That said, the winning investors so far in 2023 might be those who rebalanced their allocation at the end of last year—automatically trimming what worked (value) and buying what was lousy (growth).

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Grossman’s Favorites

ONE WINTER DAY IN 2016, I jotted down a few comments about the financial markets and emailed them to a group of clients. I received a few responses—some of them positive—so I did the same thing the following week, and I’ve continued that practice every week since.

For better or worse, when it comes to investment markets, there’s always something new to discuss. But it can also be helpful to pause and revisit key investment principles from time to time. To that end, below are the 10 articles I’ve written that readers have said they found most useful.

Free for All (March 2, 2018). Most investors are aware of the Roth IRA as a tax-advantaged savings vehicle. But certain aspects are often misunderstood. Among them: There’s no minimum age to open a Roth IRA. Even if a young person doesn’t have a formal job but has income from babysitting, for example, he or she can still contribute to a Roth.
Sweat the Big Stuff (Nov. 8, 2020). When we’re early in our career, many of us struggle with a financial conundrum: We know we need to save for the future. But since we don’t know what the future will look like, it’s hard to know how much to save. The solution? I recommend an approach to financial planning I call the John Cleese method.
Happily Misbehaving (June 17, 2018). If one person spends an extra $100,000 on a house while another spends that same amount on a boat, can we necessarily say that one is right and one is wrong? Financial “efficiency” may be in the eye of the beholder.
Mutual Distaste (Feb. 6, 2022). Sometimes, I feel like a broken record when I argue in favor of index funds. But that’s because actively managed funds, in my opinion, carry such a long list of flaws. Among them: They can be extremely tax-inefficient. That brings me to Jane, who years ago purchased a mutual fund for $19,000 and later sold it for $287,000. Despite this obvious profit, Jane nonetheless realized a tax loss on her investment. Her story is a cautionary tale for mutual fund investors.
Six Figures Tiny Taxes (March 7, 2018). In retirement, many things change. Among them: We have a lot more control over our tax bill than we did during our working years. Indeed, effective tax planning might allow a retiree to draw $100,000 from a portfolio while incurring a federal tax rate of just 3%.
Timing Those Taxes (June 13, 2021). Despite greater control over their tax bills, one obstacle looms large for many retirees: required minimum distributions (RMDs). Congress has helped by nudging up the age at which RMDs must start. That provides more of a window to strategize on how to minimize RMDs—but it’s important to begin this task early and not wait until RMDs begin.
When to Roth (Oct. 7, 2018). You’ve probably heard about the tax strategy called a Roth conversion, and it may sound appealing. This is one of the more effective tools in minimizing future RMDs. The challenge, though, is that it can be difficult to know when and how much to convert. I recommend a five-step process for answering those two questions.
Looking Sharpe (May 8, 2018). A discouraging reality about private funds, such as hedge funds, is that the difference between the best and the worst is much wider than it is among publicly available investment funds. That’s one of the reasons I urge individual investors to stay away from them, but it’s not the only reason. Private funds carry many other potential pitfalls.
Grab an Umbrella (May 2, 2021). In my work as a financial planner, I have—unfortunately—seen many different types of financial disaster. That’s why I urge virtually everyone to get umbrella-liability insurance. There are many questions, though. Among them: Which carrier to choose? And how much coverage to buy?
Think Like a Winner (June 14, 2020). In theory, investing is easy. But because markets are so unpredictable, it’s often not as easy as it seems. To help navigate the world of personal finance, I suggest adopting a five-faceted mindset—that of an optimist, a pessimist, an analyst, an economist and a psychologist.

This is the fourth installment in a series devoted to the favorite articles and blog posts penned by HumbleDollar’s most prolific writers. The earlier installments were from  Dennis Friedman ,  Mike Zaccardi and Kristine Hayes .

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Pushing Myself

I LIKE CHALLENGING myself to do hard things. I guess it’s just the way I’m wired.

Recently, I started thinking about the hardest things I’ve done. Convincing my wife to marry me was hard. She was a tough sell. But eventually I wore her down and got the deal done—one of my best deals, by the way.

Attempting Ironman Cozumel at age 68 was hard and, even though I failed, it’s one of my most cherished memories. I enlarged a picture taken of me exiting the water after the swimming segment, and put copies up on the walls of my office and my pain cave in the basement. To motivate me, I also had a magnetized copy made for the refrigerator door.

Whenever I look at that picture, I think of Rocky after his first fight with Apollo Creed. My right eye is swollen shut and I have a look of pure exhaustion on my face. Every time I look at the photo, I break out into a big smile and laugh to myself. What was I thinking?

Believe it or not, writing a book was hard—perhaps even harder than Ironman. I’d never been any sort of writer before. But whenever I get emails from readers telling me my book helped them escape retirement hell, all the hard work feels worth it.

After much reflection, however, I think the hardest thing I’ve ever done was speak in front of an audience. I’m not sure when I developed stage fright. It might have happened when a teacher gave me a hard time after a presentation in grade school. Or it might be the imposter syndrome I suffered from while working in the corporate world. Or maybe it was a bit of both. It got so bad that sometimes, when I was in a meeting and they started going around the room doing the usual introductions, I would excuse myself, pretending to go to the washroom and coming back after they were done.

I turned down a number of promotions because of my fear of public speaking, and it ended up costing me a lot of money. Although I really wanted to and needed to overcome my stage fright, I couldn’t get past it.

But things changed after I wrote my first book. I knew I had to go on the road, giving talks to promote the book. I wanted to help as many people as I could figure out this retirement thing. That was my big “why,” so I finally had to deal with my stage fright. I was caught between a rock and a hard place, and there was no other way out.

That’s why I decided to join Toastmasters, which met every Thursday night. I remember the first meeting as if it happened yesterday. I was sitting in the parking lot, trying to find the courage to go in, but bailed and went home. The following week, I bailed again.

The third week, it was make-or-break time. I knew if I didn’t go in that night I would never be back. Thankfully, I finally made it into the meeting room. A friendly lady approached me right away and started up a conversation. They know first-timers are uncomfortable, and they try to calm you down.

I remember asking her to do me a favor. She asked what that was, and I said, “Could you please lock the door? At some point I’m going to make a break for it, and I don’t want to leave.”

Hearing that, she smiled and walked over to the door. I heard the lock click. That’s when the sweating and hyperventilating started. I was trapped and there was nowhere to run.

Staying there that first night was hard, one of the hardest things I’ve ever done. But it was also one of the greatest things I’ve ever done—because it was life changing.

I kept going back and, because of that, I don’t have to live with a lot of regret, wondering what could have been. Today, I really enjoy giving speeches and conducting seminars.

What I learned from doing hard things is that we’re more capable than we think, and we can accomplish some incredible things if we want it bad enough. I plan on doing more hard things with the time I have left. How about you?

Mike Drak is a 38-year veteran of the financial services industry. He’s the co-author of Longevity Lifestyle by Design, Retirement Heaven or Hell  and  Victory Lap Retirement . Mike works with his wife, an investment advisor, to help clients design a fulfilling retirement. For more on Mike, head to  BoomingEncore.com . Check out his earlier articles.

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Retire Is a Verb

WE LIKE TO ESCAPE the Northeast’s cold each winter, so we just spent 10 days in Sarasota, Florida. Like many others when they’re on vacation, we found our noses pressed against the windows of real-estate offices, perusing the listings and musing about whether we’d want to live there.

Fantasizing about the future is fun and free, but it can also be dangerous. It’s how folks end up buying timeshares and second homes during wonderfully relaxing vacations. But vacation, of course, isn’t real life. When you live somewhere, what seems special quickly becomes unremarkable. You stop noticing how cute Main Street is—because you’re hustling to get to the grocery store before the after-work crowd.

This is also the reason I’m skeptical of those lists of the best places to retire, which are often built around a quantitative assessment of things like crime, tax burden, weather, medical care and so on. Yes, those are important issues. But I don’t think they’re the keys to a happy retirement.

So, what should we focus on? I’d zero in on three factors—the same three factors that I think are crucial to happiness for everybody, retired or not.

Purpose. We won’t spend our retirement simply being. Instead, we’ll be doing. But what will we do each day that’ll make our retirement meaningful and fulfilling? That notion got me to thinking about categories of doing: exercise, hobbies, learning, reading, writing, chores, watching TV, volunteering, worship, working part-time, socializing, cooking, eating out, live entertainment, visiting museums, travel and so on.

Some of these activities—chores, reading, writing, worship, watching TV, cooking—can occupy our time no matter where we live. Location doesn’t much matter. But others depend on the community we’re in. How many theaters, museums and live music venues are nearby? How many decent restaurants? If we want to get outside and exercise, what are our choices? How close are the nearest airport and train station?

Each of us will have a different list of activities we want to engage in. But the crucial thing is to focus on the doing, not the being. We won’t be happy for long simply sitting on the deck and admiring the gorgeous view.

Friends and family. Next, there’s the all-important issue of social connections. We may not want to see others every day. But there’s great joy in spending an occasional evening with family and friends.

Will that be possible wherever we choose to retire? If we head to parts unknown, we’ll likely make friends—eventually. But it’s worth pondering how easy we find it to make new acquaintances, and how easy it’ll be for family and old friends to visit.

And, of course, there will likely be a time when our physical or cognitive deterioration demands help from others. That help can be purchased. But it’ll be a lot cheaper and probably more pleasant if at least some of that help comes from those we love.

Financial contentment. I think money—if used thoughtfully—can buy happiness, though I don’t think it can garner as much happiness as, say, a great night’s sleep or an hour spent at the playground with a grandchild. Good health and social connections are so much more important to happiness than money.

Instead, I believe money is most useful in helping us to avoid worry, especially worries about not having enough money. Yes, that’s the great irony of money: We should accumulate it mostly so we don’t have to think about it.

What does that mean for retirement? I think there are two key implications. First, we should organize our financial life with an eye to minimizing money concerns. That might mean downsizing to a less expensive home so we have ample breathing room in our monthly budget. It might also mean delaying Social Security, buying income annuities and holding plenty of cash so our monthly income is less dependent on the vagaries of the financial markets.

Second, if we move in retirement, we shouldn’t move to an area where we’re surrounded by far wealthier neighbors. Even if we have more than enough money for a comfortable retirement, we may find ourselves comparing our lifestyle to those around us—and suffering a gnawing sense of dissatisfaction.

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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Hearing Voices

READING ABOUT FINANCE can be a little dry at times, so I occasionally turn to TV for relief, relaxation and a little entertainment. What am I drawn to? More than anything, it hinges on a person’s voice.

For instance, I like listening to Neil Cavuto on Fox Business Network. His interviews with business leaders are usually interesting and his demeanor holds my attention. He comes across as earnest.

My parents were transplanted New Englanders, so I never had a heavy Brooklyn accent, but just a hint of one, thanks to being raised there. I worked hard to lose it, but it still slips out when I’m tired. I guess you can take the girl out of Brooklyn but not Brooklyn out of the girl. I’m always glad when I tell people where I’m from and they say, “You don’t sound like you’re from Brooklyn,” as if I were expected to say “dees” for “these,” “dem” for “them,” and “doze” for “those.”

I still remember the late Marty Zweig, a regular panelist on Wall Street Week with Louis Rukeyser. He was an erudite investment advisor and financial analyst, and contributed many articles to Barron’s. He had a certain charm and an interesting personality, and hid his persona behind a  humble, “regular Joe,” almost woebegone demeanor. I recall him saying he liked rock and roll, had a jukebox and enjoyed salsa dancing. He had a wry, dry sense of humor.

I find a pleasant, well-modulated and cultured voice can be so much more interesting and pleasant to listen to than someone who yaps away. It allows the listener to better take in the message that’s being conveyed. I once worked with someone whose voice can only be described as mellifluous. When he spoke, I was almost transfixed. It was like listening to a lovely tune and immediately put you at ease.

I’m not a big fan of CNBC, but I enjoyed listening to Sue Herera, one of the first women anchors to break into business news. She had a soft womanly quality to her voice and a lovely tone that came across as very natural and only enhanced her professionalism. I never saw her get flustered or emotional. When she laughed, it was so lusty and spontaneous, you just knew it was real. She was genuine. Unfortunately, Herera no longer regularly appears on CNBC.

Meanwhile, I don’t understand why so many TV guests—and even a few anchors and reporters—speak in a creaky, croaky, squeaky, choppy voice, and at the end of a sentence their voice goes up as if they’re asking a question. Do they practice speaking that way? It certainly isn’t natural. Maybe I’m behind the times, but I just don’t get it. Prof. Henry Higgins, where are you?

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