Jonathan Clements's Blog, page 196

Bad Guy on Line One

GOOD PARENTS WARN their children about predators who look to take advantage of them. By the same token, good adults should warn and safeguard their elderly parents, as well as the other seniors they care for.

We all use our electronics for accessing information. We sometimes forget the information highway is two-way, and nefarious people use those lines of communication to get to the vulnerable. And it isn���t just about hacking online accounts. Often, elder abuse starts with a simple phone call.

A recent scam illustrates the danger. Seniors received calls informing them that a beloved grandchild was in jail and needed bail money quickly. Told there was no time for formal niceties, the victims were talked into gathering cash that a courier would then pick up.

This sounds suspicious to the removed observer, but it���s a common scam preying on seniors��� devotion to family. Whole networks are organized around this scam. A similar scam in Quebec, which recently resulted in four arrests, netted some $700,000.

It���s not new. Ten years ago, my mother received a call from a scratchy, soft voice that said, ���Hey grandma, it���s your favorite grandson.��� My mother, coincidentally having a running joke with a grandchild about this, replied, ���Michael?���

���Yeah,��� said the soft voice, who then went on to explain he had taken a quick trip to Mexico with friends, was being mistakenly held in jail, and needed cash to get out. Plausible, given our home location in Texas and Michael���s nature. Fortunately, my mother had been with Michael the day before and knew something was amiss with the call.

These phone scams vary in form, but all have the same purpose. Many offer computer tech support at a discount price. Some say the elderly person is due cash back or a full refund. The callers then try to get credit card information from the senior, opening the money tap for the scammers.

It���s a shame we live in a society that not only undervalues seniors, but also has so many people willing to abuse them financially. Unfortunately, as��we age, our brain is less capable of detecting possible fraud. Reports of financial crimes against seniors are on the rise.

Here are four preventative steps you can take to protect elderly friends and family members:

Have a conversation with seniors, stressing that they should never give out personal financial information over the phone, especially credit card or bank information. If the caller is insistent, the senior should ask for a callback number and then inform a trusted family member or financial advisor. Legitimate places don���t mind waiting a day.
Keep the senior informed about his or her finances. Younger family members often don���t want to trouble seniors with details, but remember that it���s the seniors��� money and they���re entitled to know. An elderly woman told me her niece, who manages the woman���s money, is saying the senior needs to move to a smaller studio apartment but gives no details. The elderly woman told me she���s okay doing so if she needs to cut expenses, but she wants more information.
Speaking of relatives, nearly half of elder financial abuse is committed by someone the older adult knows and trusts, like a��relative��or caregiver. It���s good to have multiple family members overseeing a senior���s money, so the savings don���t turn into a tempting illicit resource for a single person who isn���t accountable to others.
There are resources that monitor and respond to elder financial abuse. The Department of Justice maintains the National Elder Fraud Hotline (833-FRAUD-11 or 833-372-8311), managed by the Office for Victims of Crime. Staffed by experienced professionals, it provides personalized support to callers by assessing the needs of the victim and identifying relevant next steps. The department also offers information through its Elder Justice Initiative.

Most of all, maintain an open and nonjudgmental relationship with the senior. Many seniors feel ignored or talked down to. They don���t tell others about scams for fear they���ll suffer embarrassment or be scolded for being foolish.

Jim Wasserman is a former business litigation attorney who taught economics and humanities for 20 years. He's the author of a three-book series on how to teach elementary, middle and high school students about behavioral economics and media literacy. He's also authored several educational children's books. Jim lives in Texas with his wife and fellow HumbleDollar contributor, Jiab. They have a book that examines the impact of social media influencers on youth consumerism and identity development coming out in 2023.��Check out Jim's earlier��articles.

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Ask Around

AH, SUMMER. Over the July 4 weekend, we spent time relaxing at our neighbor���s house. A three-year-old jumped into the pool from the diving board for the first time. He had a big smile and many supporters.

It���s always fun to chat with neighbors we haven���t seen for a while, and also meet new visitors. One man swimming with his kids turned out to be an investigative reporter for a local news station. We didn���t talk for long, but his job seemed interesting. He cautioned us, ���Don���t be my next story.���

Investigative reporting is a form of journalism in which reporters focus on a single topic���perhaps a corporate or political misdeed���and conduct in-depth research and interviews. Such stories can take months or even years to report.

If you���re looking ahead to your retirement, I���d advise you to become an investigative reporter on the topic. This is especially true if you���re interested in non-traditional approaches, such as a retirement that���s phased over time.

This sort of extensive research makes sense because, in seeking to understand how best to tackle a major life change, you should be deeply informed. That means not only doing research and reading widely, but also talking to people. Their insights could turn out to be among the most valuable guidance you receive.

Similar to a professional reporter, know that it may take months to do your research and develop your conclusions. Indeed, I���ve gotten helpful insights into the retirement process simply by asking others about their thoughts and plans. One former colleague shared that what felt like his ���first day of retirement��� actually came about four months after he stopped working. He was getting ready for an annual week away with friends and realized that he could really take his time and focus on the preparations. After a busy end to his career and several months of home projects, he was getting used to the unstructured time and could really enjoy just being retired.

Another former colleague, who���s still working, said his thinking had shifted recently. He always thought of retirement as the financial independence to work when he wanted. But with his career in a ���sweet spot��� right now, it���s occurred to him that retirement will be less about his financial readiness���and more about how exciting and enjoyable he finds his work. When it doesn���t provide the meaning that it does today, he���ll know it���s time for a change.

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My $6,100 Surgery

DICK QUINN RECENTLY wrote about his $233 surgery. I wasn���t so lucky.

When marketplace health plans first became available in 2012 as a result of the Affordable Care Act, my wife and I bought coverage. After my wife signed up for Medicare in 2020, I switched to a solo policy. I���d been counting down the days until I, too, qualified for Medicare at age 65. With a $7,000 deductible on my policy, I was crossing my fingers that my health would remain good. In May, at age 64��, my luck ran out, and it cost me a good bit of money.

It could have been worse���medically. I noted a painful swelling, which Dr. Google diagnosed as an inguinal hernia. My family doctor agreed and referred me to a surgeon. In June, with the assistance of a surgical robot, I had an outpatient repair.

I could have used my experience as a former hospital administrator to research the most cost-effective care. But I didn���t. Instead, I went to my family doctor with a list of general surgeons in my insurance network. Since my doctor is younger than my children, I said, ���Send me to the surgeon you���d send your dad to.���

He laughed, looked at the list and picked a surgeon.

The surgeon said I was a candidate for a robotic procedure. We discussed infection risks and the surgical mesh he would insert, but I never asked if the robot cost more than a non-robotic repair. In fact, I made no effort to hold down the cost of the procedure or find out how my health insurer would handle the bill, and that tells you a lot about the economics of U.S. health care.

I implicitly accepted that I would go to the only hospital where the surgeon was on staff. There are several nearby hospitals in my network, including some outlying community hospitals. It���s unlikely, however, that the community hospitals have $2 million surgical robots. In retrospect, it���s possible I would have been billed less for a non-robotic approach.

The hospital I used is a level 1 trauma center that has both heart and advanced orthopedic surgery programs. None of this mattered in my case, but it���s an indication that the hospital has a lot of surgical overhead, which could have been reflected in the charges billed for my surgery.

But does that matter? Billed charges may or may not relate to what the insurance company and I ultimately paid. Instead, that amount is determined by the deal that the insurance company has with the hospital, and I���m not privy to that. For instance, it���s possible that a common surgery like mine would be covered by a fee schedule where the insurance pays the same amount regardless of where or how it���s done. Alternatively, the contract may specify the payment for the billed charges would be discounted by a certain percentage.

I could have called the insurance company to find out if another hospital would be cheaper, but I didn���t. The hospital provided me with a cost estimate in advance of about $45,000, plus $1,500 for the surgeon.

Why didn���t I worry about any of this? My cost was fixed. I was on the hook for what remained of my $7,000 annual deductible. I knew that���whoever did the surgery and wherever it happened���it was going to cost more than that, so I didn���t care about the total charges.

After meeting with the surgeon, I was sold. Why would I shop around to save my insurance company money? Even if I were on its insurance plan for another 10 years, there���s no reason to think I���d pay lower premiums later if I saved the insurer some money now. But as it happens, I���ll only be on the company���s plan for five more months.

While I didn���t question the cost, I did a little research on the use of surgical robots for hernia repairs. For technical reasons, hernia repairs are particularly amenable to using robots. The data seem to show marginally reduced pain and slightly faster recovery compared to a straight laparoscopic procedure, both of which are substantially better than the traditional open repair. The surgeon suggested there may be a slight reduction in post-op infections with a robot, but otherwise the long-term outcomes were similar.

Nobody questioned whether I needed to recover faster. Since I���m retired, what difference does it make if I stopped post-operation narcotics on day two or day three? I was happy with my recovery, but I would have been just as happy with another day in front of the TV.

In the end, I paid about $6,100 to finish out my annual deductible. The insurance company paid around $8,400 against total hospital and doctor charges of about $42,000. That means more than $27,000 of the charges were written off, thanks to the discount negotiated by the insurance company.

I did have a choice. The surgeon made it clear that I could go indefinitely without a repair, albeit with some discomfort. I also could have waited until I joined Medicare this December to get the $233 deal Dick Quinn received. Indeed, the greatest pain from the procedure was writing that $6,100 check. I comfort myself by remembering that I could have been facing a $42,000 bill if I didn���t have insurance coverage.

I���ll pay about $10,000 in premiums for my health care plan this year, and get more than that back from the insurance company through medical expenses paid and negotiated discounts. That means my annual bet���opting to buy health insurance���has paid off this year. Since 2012, that���s only happened��once before, when my wife needed surgery under her policy.

As it turns out, the biggest benefit my insurance provided was the discounts it negotiated with the hospital and doctor. And the insurance company didn���t do too badly for itself: It paid out less for my operation than I paid the insurer in premiums this year.

One theory about high-deductible health plans, such as my Affordable Care Act coverage, is they will make the patient a better consumer. Maybe that happens with smaller claims. Faced with a big expense, such as surgery, I knew immediately I would exceed my deductible, so I didn���t shop around.

Instead, I went with my family doctor���s judgment. He was paid about $100 for that visit, and yet he was directly responsible for additional costs of more than $14,500 that were paid by my insurer and me. I trust he made the best medical decision. Could he have made a better economic one?

Now that my annual deductible has been met, I���m scheduling a specialist visit and some lab work for things I���ve been putting off. Why not? I have nothing left to lose.

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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Taking the Plunge

WHEN I WAS LEARNING about investing, dollar-cost averaging was one of the first strategies I read about. Over the years, I���ve come across a number of articles debating the strategy���s virtues, usually comparing it to a onetime lump-sum investment.

Dollar-cost averaging consists of making a series of periodic investments rather than buying all at once. These purchases occur at regular intervals, regardless of the investment's price that day. Using this strategy, you can purchase more shares when prices are lower. This may lead to a lower overall cost basis for the total amount invested than would result from a single purchase.

The single purchase approach is variously called lump-sum investing, plunging and���I recently came across the term���"plunking.��� Instead of dividing up the amount to be invested, you invest the entire sum in one go. This gets all your cash in the market right away, giving it more time to grow.

Vanguard Group published a detailed study in 2012 comparing the results of dollar-cost averaging to lump-sum investing. In general, the returns from lump-sum investing were higher than dollar-cost averaging about two-thirds of the time. The paper measured stock and bond returns over rolling 10-year periods in the U.S., U.K. and Australia.

The paper assumed you start with a significant sum to invest. This may be the case for a few folks, as well as some endowments. In my experience, however, this is not the primary way most people save for retirement. Instead, they invest a small sum whenever they get their paycheck. They invest over time because that���s how they get paid.

I believe the best way to save for retirement is to contribute regularly and to automate the process. Today���s technology makes this easy. You might assign a portion of each paycheck to go into your retirement savings, your taxable account and your emergency fund.

The jobs my wife and I held were predominantly salaried positions with biweekly paychecks. There were occasional bonuses and cash awards, but they were infrequent and we didn���t plan on them. The market crash that began in 2007 coincided with our last year of college tuition payments, and thereafter we saved as much as we could for retirement. Regular, automated savings were our path to financial success, and the fact that we got to buy at rock-bottom prices in 2007-09 was a huge help.

What if you���re lucky enough to receive a windfall? You���ll want to consider how best to invest the money. If markets are trending up, investing it as a lump sum gives your money more time in the market to grow. If the market is trending down, dollar-cost averaging allows you to buy more shares at ever-lower prices. In other words, if you can divine the future, choosing between these two strategies should be easy.

What if you don���t have a crystal ball? Think about how important the lump sum is to your financial future. If it would be devastating to invest the money in one fell swoop and then immediately get hit with a market crash, you might opt to dollar-cost average instead.

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When Debt Is Left

WHAT HAPPENS WHEN a person dies without a will and there isn���t enough money to pay all of his or her debts? Who gets paid and who gets shorted?

I���d always heard that funeral expenses were the first priority, and then unsecured creditors got everything else. I���ve recently learned from personal experience that the rules are more complex���and more generous to widows and widowers.

A 60-year-old friend of mine recently died. He hadn���t written a will. I���m helping his widow sort through bills and decide who gets paid. My friend was secretive and shared no financial information with his wife. She had no idea who was owed money and how much.

It turns out my friend was drowning in debt. We���ve determined that he owed at least $60,000 on various credit cards and personal loans. The couple���s income was $2,500 a month, and nearly half of that was spent servicing debts.

The silver lining is that all of this debt was in his name only, so his wife isn���t responsible for repaying it. He made the minimum payments on time, so his credit score was a pristine 750. Periodically, he would find a firm that would extend him another personal loan, which he would use to help keep current on his other obligations.

His few assets included four cars in various states of disrepair, all with high mileage and at least 10 years old. He also had a joint checking account with his wife with about $1,000 in it. His personal possessions, mainly clothes and a few books, have no monetary value.

It was easy for his widow to close their joint bank account and transfer the money to a new account in her name only. Extracting value from the four cars is going to be harder.

One car was registered in both their names, so she���s entitled to it. The Department of Motor Vehicles will issue a new title in her name only. The other three cars, because of their age and condition, are worth about $7,000 altogether.

One question that haunted me was whether his widow would get anything from the disposition of the three cars. Because he owed so much money, wouldn���t it be fair to give that money to his creditors to split?

On the other hand, his widow is struggling financially, so anything would help. Although she has no debts, her income is only $1,400 a month, a combination of Social Security and Veterans Affairs survivor benefits.

My question was settled by state law in Illinois, where the widow lives. She gets to keep the proceeds from the sale of the three cars, thanks to a law that looks out for surviving spouses. A widow is entitled to a minimum of $20,000 before most other creditors receive anything.

Illinois has defined seven classes of creditors when dividing an estate. Each higher class must be fully paid before anyone in a lower class gets a cent. Here���s how the various creditor classes are sorted:

Class 1: Funeral and burial expenses. This includes estate administration expenses, such as executor, legal, CPA and filing fees. It also covers any fees owed to a live-in caregiver for the decedent.
Class 2: Surviving spouse and children. They receive an amount necessary to support the surviving spouse and any minor children for nine months, with a minimum of $20,000 for the surviving spouse and $10,000 for each surviving minor child.
Class 3: Debts owed to the U.S. government.
Class 4: Expenses associated with the decedent���s final illness, plus amounts owed to any employees, capped at $800 per employee.
Class 5: Property and money held in trust for others that���s been mixed with the decedent���s other assets and cannot be separately identified.
Class 6: Debts owed to Illinois and any city or other municipality.
Class 7: All other creditors.

In my friend���s estate, the Class 1 creditors are owed about $3,000, all related to his funeral expenses. They will be fully paid. His widow, in Class 2, gets all the rest.

The credit card and loan companies that my friend owed money to? They���re at the end of the line in Class 7, and so won���t be getting anything.

I was curious as to what would have happened if my friend had left more than enough money to pay his creditors. If you die without a will in Illinois, after the debts are paid, half of any remaining money would go to the surviving spouse and half to surviving children. That���s on top of the $20,000 for his widow, and $10,000 for each minor child.

If there is a surviving spouse but no children, the spouse would get all the remaining money, after all the creditors are satisfied. If there are children but no surviving spouse, the children would get the remaining money. And if there were neither a spouse nor children, then other relatives would be entitled to the remainder of the estate.

Want to make things easier on your family and friends? Write a will���and try not to die with debt.

Larry Sayler is the only person with a Wharton MBA who also graduated from Ringling Bros. and Barnum & Bailey���s Clown College. Earlier in his career, he served as CFO for three manufacturing and service organizations. For 16 years before his retirement, Larry taught accounting at a small Christian college in the Midwest. His brother Kenyon also writes for HumbleDollar. Check out Larry's earlier articles.

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July’s Hits

WHAT INTRIGUED readers during the steamy days of July? Here are last month's most popular articles:

Many retirees resist taking out a reverse mortgage because of the stigma involved. Get over it, advises Mike Drak.
"One clear takeaway: Only collect things for enjoyment rather than as an investment," says John Yeigh. "Another is that the sale of a long-term collection can be annoyingly time-consuming."
If you just received a financial��windfall or you're planning to leave one to your heirs, check out the six pointers from Adam Grossman.
Many pension plans are underfunded, but one has assets that are triple its obligations, says Greg Spears. The credit belongs to��Warren Buffett.
Want to put your portfolio on the right track���or make sure you aren't off course? Adam Grossman answers nine key investment questions.
Steve Abramowitz has owned 30 rental properties over the��past four decades. His contention: Being a compassionate landlord isn't just the ethical thing to do. It's also financially smart.
Nobody likes to sell when the financial markets are down sharply. But Adam Grossman says there are at least four situations where it might make sense to do so.

What about our shorter blog posts? Last month's most popular included my pieces on Take a Bow and Keep the Faith, Richard Quinn's All Shook Up,��Man Overboard��and How Are We Doing, Mike Drak's Nun Sense and Kristine Hayes's Didn't Last Long.

Meanwhile, July's most popular newsletters included my articles on Now and Then,��Changed by the Trip��and��Neglected Ideas, and Kristine Hayes on saying Farewell Paycheck.

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Retirement Riddles

I SPEND SIGNIFICANT time reading the viewpoints of people who are planning for retirement or who are already retired. My frequent reaction: What are they thinking?

When I review retirement planning discussions on Facebook and elsewhere, I often find the participants show little understanding of how to proceed or even what some basic terms mean. Here's a sampling of the confusion and uncertainty I come across:

Should people aim to replace 70%, 80% or some other percentage of their preretirement income? And is that gross income or preretirement spending?
Is it okay to retire with just enough money to pay the bills and get by?
What is discretionary spending?
Do you need to keep a detailed retirement budget?
Does spending decline in retirement?
Is inflation a big deal for retirees?
Will seniors really spend $300,000 on health care in retirement?
How big a risk is longevity?
When should folks claim Social Security���at age 62, 70 or somewhere in between?
Are the days of saving money over once you retire?
Does the 4% rule still work? And how do you compute it?

Maybe the confusion isn���t surprising. You can find financial experts who will answer these questions in entirely different ways. My bigger worry: I see too many people who either overestimate or underestimate their retirement needs, or whose view of the future is either too pessimistic or too optimistic. How���s that for a definitive statement?

I try to be realistic about retirement���from my admittedly conservative financial point of view. My answers are opinions, though opinions based on decades of managing retiree benefits, conducting retirement planning programs and my own 12 years as a retiree. Still, they���re opinions nonetheless. With that caveat in mind, here are my answers to retirement���s thorniest questions:

Replace what? My advice: Aim for 100%��replacement of your gross preretirement income. If you include Social Security, many people can already count on receiving 40% of their preretirement income. If you���re lucky, your employer may help fund part of the remaining 60%.

Frugal isn���t fun. Just getting by in retirement may be the reality for many people, but that shouldn���t be your goal. Do you really want to cut back your lifestyle? Do you want to live so close to the bone that an unexpected expense can wreak financial havoc? Aim higher.

Extras. Discretionary spending is what makes retirement enjoyable, so plan for it. Whatever you dream of doing is discretionary, whether it���s travel, hobbies, dining out or collecting stuff. Helping your children is discretionary, too.

Forget budgeting. You probably already know what you spend on necessities, how much you save and your net income. What���s a budget going to tell you that you don���t already know? Just make sure you set aside enough money to pay off your credit cards in full every month���no exceptions.

Steady spending. Surveys say that spending declines later in retirement. I���ve been retired for 12 years now, and our spending hasn���t fallen. Stuff���expensive stuff���keeps happening, hence my advice to aim for 100% income replacement.

Inflation���s impact. Inflation is a big deal, but its effects vary by person. Are you renting? Do you drive a great deal? Are you looking to buy a house? Don���t forget that, despite the rhetoric, retired people don���t live on a fixed income. If nothing else, Social Security benefits increase with inflation. The 4% withdrawal strategy also assumes annual inflation increases.

Big bucks. Spending on health care varies widely from one retiree to the next, plus that $300,000 figure mostly represents years of Medicare and Medigap premiums. Forecast your property taxes or rental payments for the next 30 years, and you���ll get a big number for those, too.

Longevity. The longer you live, the longer you can expect to live. For a 65-year-old man today, life expectancy is age 84, while at age 75 it���s 87. Longevity means more inflation and more time for unexpected stuff to happen. It���s another good argument for starting retirement with excess income.

Social Security. Forget about the breakeven point. What do you care? You won���t be around to see if you won the Social Security maximization game. Take your benefits when you need the money the most. Remember, there are tax implications and survivor benefits to consider.

Save till you drop. I still save in retirement. Yes, it���s far less than before, but it���s enough to replenish the emergency fund and put something in our grandchildren's 529 plans.

Four percent rule. It isn���t a rule, it���s a guideline. Search the literature, and you���ll find some say 4% is��out of date and that it should now be 3.5% or less. Search further and some experts say retirees are shortchanging themselves and should take more. Nobody knows with 100% certainty, so I would err on the conservative side. If you���re wrong, you can always take out more money later in retirement.

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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Cash No Longer Trash

MONEY MARKET YIELDS are no longer zero. Far from it. With the Federal Reserve raising short-term interest rates by another 0.75 percentage point last week, investors can now park their savings in a safe money-market mutual fund and earn more than 2%.

If you look at Vanguard Federal Money Market Fund (symbol: VFMXX), you won���t see a seven-day SEC yield that���s that high���yet. But give it a few days. Right before the Fed���s move last week, Vanguard���s money market fund yielded 1.5%. Add 0.75 percentage point to that figure, and you���ll get a sense for where we���re headed.

For folks with accounts at Fidelity Investments, another option is Fidelity Money Market Fund (SPRXX). The last time I reviewed Fidelity���s policies, it doesn���t allow that fund to be a default core cash position. Instead, you must opt to purchase the fund���s shares, just like you would any other fund. That means there���s an extra step to get the fund's higher yield, versus Fidelity Government Money Market Fund (SPAXX), which has a lower SEC yield but can be used as a default cash position. I stumbled across a Fidelity Institutional page that lists a ���one-day��� SEC yield of 1.96% for Fidelity Money Market Fund as of July 29.

Earlier this year, I suggested people consider a short-term Treasury bond fund for their emergency savings. At the time, the yields on those funds were attractive relative to bank money market accounts and online savings accounts. I took my own advice. As it turns out, I was early with that call. Rates rose through mid-June, leading to modest share-price declines among the Treasury funds I mentioned in March. But now, with Treasury note yields declining over the past seven weeks while the Fed hikes short-term rates, I decided to make a switch.

Late last week, I exchanged my emergency money, which had been sitting in Fidelity Short-Term Treasury Bond Index Fund (FUMBX), to Fidelity Money Market Fund. My plan now is to keep my cash in that money market fund through at least early 2023. That���s when traders see the Fed���s rate-raising campaign peaking in the 3.25% to 3.5% range. Thanks to the Fed���s actions and a Treasury yield curve that���s the most inverted it���s been since 2000, money-market mutual funds look like a relatively good deal���one that comes with little risk.

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Getting to Happy

THE MEGA MILLIONS drawing on Friday was worth more than $1 billion. Would you be happy if you���d been the lucky winner?

Last week, I talked about the Vanderbilts. Once the wealthiest family in America, they saw their fortune dwindle because of aggressive spending. Back in the 1890s, for example, the family spent $7 million building the Breakers, a summer home in Newport, Rhode Island. That���s the equivalent of��$220 million today. When it was completed, the building itself covered a full acre. The dining room alone was 2,400 square feet. There were 33 bedrooms for servants���to take care of a family of five. It didn���t take long for financial strain to set in.

The Vanderbilts may be in a category of their own, but it���s well known that wealth can be both a blessing and a curse. Managing wealth���even if you aren���t a Vanderbilt���can be tricky. On my bookshelf are titles such as��From Here to Financial Happiness,��Wealth & Happiness��and��Happy Money. And those are just a few. The large number of titles on the topic tells us two things. First, it���s evidence that this is a real issue���that money doesn���t automatically translate into happiness.

And second, it tells us that there are no easy answers. If we spend too much���or too much on the wrong things���we may deplete our assets too quickly. Spending that���s too visible may also invite unwanted attention. Spend too little, on the other hand, and we may be unnecessarily depriving ourselves or our families. Layered on top of all this are estate tax considerations and family dynamics. It can be a challenge to successfully thread this��needle.

Cornelius ���Commodore��� Vanderbilt had 13 children, but he left 95% of his wealth to just one of those 13. Presumably, there was some logic to this decision, but I can���t even imagine how the other 12 felt. This is an extreme case, but it illustrates how decisions around wealth can be fraught.

If you have some wealth, how can you use it to maximum advantage and avoid the kind of heartache experienced by the Vanderbilts, the��du Ponts��and��others? Below are some thoughts.

Giving.��In 2019, Jeff Bezos handed over a sizable chunk of his fortune���nearly $40 billion���when he divorced his wife, MacKenzie. What did she do next? In the years since, MacKenzie has given away nearly��$10 billion��to hundreds of organizations. To be sure, she���s in a different category from the rest of us. But it's still possible to take a page from her book.

Here's why. Elizabeth Dunn, a professor at the University of British Columbia,��has studied philanthropy, and found a clear link between giving and happiness. In an experiment conducted on her campus, Dunn���s team handed out envelopes to passersby. Each contained a small amount of cash along with a note asking the recipient to spend the money by the end of that same day.

There were two groups of notes, though. For��the first��group, the note said the money could be spent in any way the recipient wished. The second group was instructed to either give the money to charity or to spend it on��someone else.

At the end of the day, Dunn reconnected with each of the recipients and asked them to report how they were feeling after having used the money as instructed. Sure enough, those who had spent their money on others were ���measurably happier.���

Of note, the��amount��of money had no effect on the result. The only thing that mattered was how the money was used.��Dunn notes that even spending $5 on someone else was shown to have an impact. In other words, you don���t need to be a billionaire to achieve a boost in happiness from giving���far from it.

Incomparable.��A frequently cited finding from the literature on money and happiness: We should spend on experiences rather than on things. Lavish $1,000 on a weekend getaway, for example, and it���s likely to provide more of a long-lasting lift than devoting that same $1,000 to a new iPhone. That research is well known, but why is this the case?

Dunn has looked at this question as well. One reason is because experiences tend to be ���pro-social������that is, they bring people together. Another explanation is more subtle: Experiences tend to be unique and thus harder to compare to those enjoyed by others. If a neighbor comes home with a great-looking new car, that provides an obvious opportunity for comparison���and for feeling bad about having an older or more modest vehicle. In other words, material things are easy to compare. But if my neighbor goes on vacation to one place and I go to another, it���s much harder to compare the two. We can each enjoy our own experiences with very little risk of comparing.

There���s a fair amount of evidence supporting the notion that comparisons detract from our happiness. Many people find it surprising, for example, that Nordic countries tend to be��rated��among the happiest in the world. They aren���t the wealthiest, and their weather is among the worst. What they have in their favor, though, is relatively less income inequality than in the U.S. The implication: As a driver of happiness, the amount someone earns is less important than what he earns��relative to his peers.

Unless you plan to move to Finland, there isn���t a lot you can do to change your relative income. But Dunn���s research offers a good solution: Spend your money in ways that defy easy comparison to the Joneses.

Simplicity.��The British royal family is sometimes��referred��to as ���The Firm.��� That, I think, has something to do with its dysfunction. The Queen, as the CEO of sorts, controls access to vast resources, including castles, jewels and extensive��land holdings. The result: Instead of each focusing on their own lives, family members��� daily lives are oriented around the family���s power, position and wealth.

What does The Firm have to do with you and me? In my experience, there are two kinds of wealthy families. The first operates like the royal family. They might have a family compound, multi-generational trusts or maybe a shared family foundation. In other words, their wealth defines them���in their own eyes and certainly in the eyes of others���and it consumes much of their time and energy.

I once knew a family with an oceanfront compound. Among the homes there, one was��referred to as��the ���big��house,��� while another was called the ���barracks.��� The hierarchy was clear.

By contrast, other wealthy families keep things simple. Children might be given a helping hand, but there are no sprawling trust structures and certainly no sprawling estates. They give to charity but not in a high-profile kind of way.��To the outside world, this kind of family appears relatively normal. They focus on their vocations and their avocations rather than on their wealth.

If you���re a parent and thinking about how to structure things for your family, I would recommend this second model. It doesn���t guarantee happiness. Nothing does. But by keeping things simple and not letting wealth take on a life of its own, the results��may be better for everyone. And if the Mega Millions numbers eventually come up in your favor, you'll be well prepared.

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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Famous Last Words

YOU PROBABLY RECALL many firsts: Your first car, your first kiss, maybe even the first stock you purchased.

Firsts are exciting. Firsts are easy to demark. You���ve never purchased an item before, so���when you do purchase it���it���s a first. By contrast, lasts sneak up on you. There���s always a chance that you���ll replace an item one more time.

My wife has caused me to start thinking about my lasts.

This winter, my 36-year-old winter mittens finally wore out. In fairness, it was the outer mitten that wore out. I���d earlier replaced the wool liners three times. When I went looking for a new pair, I was startled by the $80 price tag. My wife said, ���Don���t worry about the cost. This will be the last pair you���ll ever buy.���

That shocked me. But realistically, in 36 years, I���ll be replacing this pair of mittens when I���m age 98. Assuming that I���m still around, I���m less likely to be doing winter camping or walking the dog in the dead of winter, so she���s probably correct. This will be my last pair of mittens.

Our 26-year-old CRT television finally wore out. The replacement TV I purchase may be the last TV I���ll ever buy. If a new one lasts as long as my old one, I���ll be age 88 when it���s time to get a replacement. True, the odds are a bit better that I���ll need a new TV than a new pair of mittens���but not much. It can be a bit depressing to count down your life by the list of things that you���ll never need to purchase again.

Still, I disagree with my wife on one item. She has said that our current dog will be my last dog. I���m only willing to concede that he will be the last dog I get while married to my first wife.

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