Jonathan Clements's Blog, page 249
November 27, 2021
A Difficult Choice
FEAR OF MISSING OUT, or FOMO, seems to be everywhere. We suffer it when we read about our friends��� fabulous experiences on social media. We can also suffer it when investing, as we fret that our friends are making more on their investments than we are.
My own concern in recent months, however, hasn���t been FOMO, but FOLB. No, it doesn���t roll off the tongue like FOMO. It���s my own invention���and it stands for fear of losing big, a particular worry of mine.
The U.S. stock market is near record highs. With my regular rebalancing, my stock allocation sits at 60%. When I look at the dollar value of that 60%, and think about the possibility of losing 30% to 40% of it in a bear market, I hear alarm bells.
When I focused on the percentage I had in stocks, I thought I could weather a bear market. But I���d lost sight of the total dollars at risk. Losing 30% to 40% of that money doesn���t feel nearly as manageable. That���s why I���ve let my stock allocation trend down from 64% a year ago.
I���ve lived through several bear markets. I���d learned to look at them as buying opportunities. I also have sufficient cash reserves to go several years without having to sell a stock or stock fund.
Theory says that as long as I don���t sell after a big drop, the possible paper loss is irrelevant. I can add to my positions while the market is down, and the next bull market will make me whole again and then some. These thoughts should be comforting. But the sheer magnitude of the potential dollar loss is disquieting.
The other concern I have: There are few good alternatives to owning stocks. Cash earns next to nothing. Bonds have the potential to lose value if interest rates rise. And if inflation persists, cash and bonds could have negative real returns. On top of all that, selling my stock holdings would lead to taxable gains, which is another reason to stay invested in this record-high market.
I have a difficult choice. I can either sell more stocks and accept the low returns that come with holding cash or bonds. This may lead to FOMO if stocks continue to climb. Or I can stick with a higher stock allocation and suffer bouts of FOLB.
I have no plans to make a radical shift, but I expect to continue selling stocks if the market keeps rising. I���ll hold more cash than I otherwise might, waiting for the next buying opportunity. Whenever it arrives.
My own concern in recent months, however, hasn���t been FOMO, but FOLB. No, it doesn���t roll off the tongue like FOMO. It���s my own invention���and it stands for fear of losing big, a particular worry of mine.
The U.S. stock market is near record highs. With my regular rebalancing, my stock allocation sits at 60%. When I look at the dollar value of that 60%, and think about the possibility of losing 30% to 40% of it in a bear market, I hear alarm bells.
When I focused on the percentage I had in stocks, I thought I could weather a bear market. But I���d lost sight of the total dollars at risk. Losing 30% to 40% of that money doesn���t feel nearly as manageable. That���s why I���ve let my stock allocation trend down from 64% a year ago.
I���ve lived through several bear markets. I���d learned to look at them as buying opportunities. I also have sufficient cash reserves to go several years without having to sell a stock or stock fund.
Theory says that as long as I don���t sell after a big drop, the possible paper loss is irrelevant. I can add to my positions while the market is down, and the next bull market will make me whole again and then some. These thoughts should be comforting. But the sheer magnitude of the potential dollar loss is disquieting.
The other concern I have: There are few good alternatives to owning stocks. Cash earns next to nothing. Bonds have the potential to lose value if interest rates rise. And if inflation persists, cash and bonds could have negative real returns. On top of all that, selling my stock holdings would lead to taxable gains, which is another reason to stay invested in this record-high market.
I have a difficult choice. I can either sell more stocks and accept the low returns that come with holding cash or bonds. This may lead to FOMO if stocks continue to climb. Or I can stick with a higher stock allocation and suffer bouts of FOLB.
I have no plans to make a radical shift, but I expect to continue selling stocks if the market keeps rising. I���ll hold more cash than I otherwise might, waiting for the next buying opportunity. Whenever it arrives.
The post A Difficult Choice appeared first on HumbleDollar.
November 26, 2021
Keeping It Going
AS 2022 APPROACHES, countless people will begin thinking about New Year���s resolutions���both financial and otherwise. There���s nothing quite like the start of a new year to inspire hope. Many of us will set big dreams and resolve to drop bad habits.
According to Statista, just 9% of those who make New Year���s resolutions manage to keep them all. Meanwhile, by year-end, 28% haven���t kept any of their resolutions.
What differentiates these two groups? Is it willpower or the lack thereof? Is it the audacity of the resolutions themselves?
I don���t claim to know the answers to these questions. I do, however, know one thing. When it comes to keeping resolutions or forming new habits, there���s immense power in one phenomenon: keeping a streak going.
Jerry Seinfeld discovered this truth decades ago. When asked for advice by a young comic, Seinfeld reportedly said, ���The way to be a better comic is to create better jokes, and the way to create better jokes is to write every day.���
He went on to describe his process. A large wall calendar hung in his room. Each day that he completed his task of writing jokes, he put a big red X over that day. Eventually, he would have a chain of Xs. His goal: Never break the chain.
Two things about this strike me as salient. First, he focused on the process, not the final result. He didn���t resolve to become a great comic. He simply resolved to write every day. I imagine that some days were a struggle. But he put in the time all the same. He focused on writing jokes, one day at a time. In short, he was singularly focused on process.
Second, the chain became a motivating force in and of itself. The longer the chain, the more motivated he became to keep it going.
Software engineers and app developers know all about the power of streaks. Three of my favorite apps��� Fitbit,��the YouVersion Bible��and��Headspace��for meditation���all employ streaks to keep users engaged. It���s no coincidence that these are among the apps I use most consistently.
In 2019, I described how I adopted Jerry Seinfeld���s hack to develop a writing habit. That writing streak lasted well over 365 days. Right now, I have a 159-day streak going for writing and meditation.
There are lots of days when I don���t feel like doing one or the other. Not breaking the chain provides the motivation I need to keep going.
By the way, there���s a powerfully simple app that���s dedicated to developing good habits���and breaking bad ones���by leveraging the power of streaks. It���s called Way of Life. I highly recommend it.
According to Statista, just 9% of those who make New Year���s resolutions manage to keep them all. Meanwhile, by year-end, 28% haven���t kept any of their resolutions.
What differentiates these two groups? Is it willpower or the lack thereof? Is it the audacity of the resolutions themselves?
I don���t claim to know the answers to these questions. I do, however, know one thing. When it comes to keeping resolutions or forming new habits, there���s immense power in one phenomenon: keeping a streak going.
Jerry Seinfeld discovered this truth decades ago. When asked for advice by a young comic, Seinfeld reportedly said, ���The way to be a better comic is to create better jokes, and the way to create better jokes is to write every day.���
He went on to describe his process. A large wall calendar hung in his room. Each day that he completed his task of writing jokes, he put a big red X over that day. Eventually, he would have a chain of Xs. His goal: Never break the chain.
Two things about this strike me as salient. First, he focused on the process, not the final result. He didn���t resolve to become a great comic. He simply resolved to write every day. I imagine that some days were a struggle. But he put in the time all the same. He focused on writing jokes, one day at a time. In short, he was singularly focused on process.
Second, the chain became a motivating force in and of itself. The longer the chain, the more motivated he became to keep it going.
Software engineers and app developers know all about the power of streaks. Three of my favorite apps��� Fitbit,��the YouVersion Bible��and��Headspace��for meditation���all employ streaks to keep users engaged. It���s no coincidence that these are among the apps I use most consistently.
In 2019, I described how I adopted Jerry Seinfeld���s hack to develop a writing habit. That writing streak lasted well over 365 days. Right now, I have a 159-day streak going for writing and meditation.
There are lots of days when I don���t feel like doing one or the other. Not breaking the chain provides the motivation I need to keep going.
By the way, there���s a powerfully simple app that���s dedicated to developing good habits���and breaking bad ones���by leveraging the power of streaks. It���s called Way of Life. I highly recommend it.
The post Keeping It Going appeared first on HumbleDollar.
Who We Were
MILLIONS OF RETIRED baby boomers struggle financially, and yet they don���t eat avocado toast, don���t have a daily Starbucks habit and didn���t graduate college with a degree in women���s studies.
What���s my point? In the comments section of HumbleDollar, there are two recurring themes���that young adults spend recklessly and that college is of questionable value. I understand these concerns and even share them to some extent. But I���d favor a more nuanced view.
Let me start with four points of agreement. First, I agree that college has become unaffordable for many families and that college pricing is maddeningly opaque. Second, I agree that many school systems fail to instill the basics in their students, forcing colleges to teach remedial math and English���not a great use of tuition dollars. Third, I agree that college isn���t for everybody, and that encouraging teenagers to pursue a trade often makes sense. Finally, I agree that we should encourage 20-somethings to spend less and save more.
But this is where I part ways with some HumbleDollar commenters, and it all begins with a vague recollection of who I was as a teenager and 20-something. Put it this way: There are those of us who recall acting irresponsibly���and then there are those who suffer from amnesia. That leads me to offer two perhaps unpopular opinions.
First, kids need to go away to college���for the sake of all concerned. I raised two children, and also had a hand in raising two stepchildren. College came at just the right time.
It gives teenagers a chance to learn how to fend for themselves���not just the basics like nutrition, personal hygiene and managing money, but also how to balance the demands of academic work and extra-curriculars. This is an ugly process, and it���s best if Mom and Dad don���t watch.
Even the Amish understand this. There���s the tradition of rumspringa, during which the rules are relaxed for Amish teenagers. It isn���t clear how much misbehaving goes on. I suspect it���s far less than depicted in the documentary Devil���s Playground . But I also suspect that, like the rest of us, most Amish parents realize that kids often mature more quickly if they���re left to figure it out for themselves.
College, of course, is meant to be more than an extended summer camp. When we pay six figures for those four years, we���re hoping our kids get a good education. But what does that mean? If your student is studying engineering or architecture, it���s obvious. If it���s history or English, it���s harder to connect what���s learned directly to a future paycheck. But that doesn���t mean going to college isn���t valuable.
We shouldn���t throw up our hands in horror just because students never use the knowledge they acquire during their undergraduate days. Instead, what matters is learning to work effectively and think critically. In that regard, writing papers on Weberian sociology and Wittgensteinian philosophy may not seem like preparation for the real world. But that���s how I spent my college years.
Second, today���s high spending among young adults is a sign not of excess, but of success. I recall spending virtually every dollar I earned in my teens and early 20s. All that changed when I married at age 24 and became a father at 25, and had no choice but to become super-careful about money. My hunch: Most HumbleDollar readers were also financially wayward youths.
Today, I���m a fierce advocate of saving diligently early in life, so you quickly buy yourself a sense of financial security and put yourself on the fast track to financial independence. But I���m also a realist. It takes time for young adults to develop a long-term financial view���and, in the meantime, we shouldn���t be surprised if they spend more than we did at their age.
After all, per-capita GDP climbs over time. It���s up an inflation-adjusted 49% over the past three decades. We should expect each successive generation to live a little more lavishly. This is something to celebrate, rather than clucking with disapproval at the folly of youth.
I never dreamed of taking a gap year before or after college. I���ve never leased a car. In fact, I've only once bought a new vehicle, and it was a Geo Metro, at the time the second-cheapest car on the market. I clean my house myself, rather than paying someone. If I order food for takeout, I almost always pick it up myself, rather than have somebody deliver to my door. I almost never get Starbucks. I like avocado toast���but I make it myself.
This is not how today���s young adults think. But who���s being foolish? I���m happy with my spending choices. I���m not really comfortable with the idea that somebody���s going to clean up my mess or bring food to my door. But I also realize that I���m not taking full advantage of the bounty offered by today���s economy���and that those who are younger may be striking a better balance than me.
Latest Posts
HERE ARE THE SIX other articles published by HumbleDollar this week:
"The happiest people I���ve met are those who are grateful for what they have," writes Don Southworth. "An attitude of gratitude comes not from how much we have, but from how we look at life."
How much will a moderately affluent family pay for college? Kyle McIntosh ran the numbers on 20 public and private colleges���and came away with some eye-opening results.
"There's been a lot of discussion about inflation-linked bonds," notes Adam Grossman.��"But investors often overlook a potentially more profitable way to protect against inflation: stocks."
Planning to downsize or relocate? Retirees often do so to cut living costs, lower taxes and enjoy warmer weather. But maybe the overriding factor should be proximity to family, says Dick Quinn.
"I feel like I���ve won the game and I want to take a victory lap," says Mike Drak. "I have my freedom back. I���m happy to work part of the time���but only on my terms and only doing things I love."
Vacationing abroad can be cheaper than traveling in the U.S. Want to see the world? Jiab Wasserman offers tips on how to hold down the cost of airfares, accommodation and meals out.
Also be sure to check out the past week's��blog posts, including��Rick Connor on faith rewarded, Mike Zaccardi on bond market bears, Kyle McIntosh on Peloton���s stock, Greg Spears on target-date funds, Sanjib Saha on the 4% rule, John Lim on behaving better and Dennis Friedman on tipping.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier��articles.
What���s my point? In the comments section of HumbleDollar, there are two recurring themes���that young adults spend recklessly and that college is of questionable value. I understand these concerns and even share them to some extent. But I���d favor a more nuanced view.
Let me start with four points of agreement. First, I agree that college has become unaffordable for many families and that college pricing is maddeningly opaque. Second, I agree that many school systems fail to instill the basics in their students, forcing colleges to teach remedial math and English���not a great use of tuition dollars. Third, I agree that college isn���t for everybody, and that encouraging teenagers to pursue a trade often makes sense. Finally, I agree that we should encourage 20-somethings to spend less and save more.
But this is where I part ways with some HumbleDollar commenters, and it all begins with a vague recollection of who I was as a teenager and 20-something. Put it this way: There are those of us who recall acting irresponsibly���and then there are those who suffer from amnesia. That leads me to offer two perhaps unpopular opinions.
First, kids need to go away to college���for the sake of all concerned. I raised two children, and also had a hand in raising two stepchildren. College came at just the right time.
It gives teenagers a chance to learn how to fend for themselves���not just the basics like nutrition, personal hygiene and managing money, but also how to balance the demands of academic work and extra-curriculars. This is an ugly process, and it���s best if Mom and Dad don���t watch.
Even the Amish understand this. There���s the tradition of rumspringa, during which the rules are relaxed for Amish teenagers. It isn���t clear how much misbehaving goes on. I suspect it���s far less than depicted in the documentary Devil���s Playground . But I also suspect that, like the rest of us, most Amish parents realize that kids often mature more quickly if they���re left to figure it out for themselves.
College, of course, is meant to be more than an extended summer camp. When we pay six figures for those four years, we���re hoping our kids get a good education. But what does that mean? If your student is studying engineering or architecture, it���s obvious. If it���s history or English, it���s harder to connect what���s learned directly to a future paycheck. But that doesn���t mean going to college isn���t valuable.
We shouldn���t throw up our hands in horror just because students never use the knowledge they acquire during their undergraduate days. Instead, what matters is learning to work effectively and think critically. In that regard, writing papers on Weberian sociology and Wittgensteinian philosophy may not seem like preparation for the real world. But that���s how I spent my college years.
Second, today���s high spending among young adults is a sign not of excess, but of success. I recall spending virtually every dollar I earned in my teens and early 20s. All that changed when I married at age 24 and became a father at 25, and had no choice but to become super-careful about money. My hunch: Most HumbleDollar readers were also financially wayward youths.
Today, I���m a fierce advocate of saving diligently early in life, so you quickly buy yourself a sense of financial security and put yourself on the fast track to financial independence. But I���m also a realist. It takes time for young adults to develop a long-term financial view���and, in the meantime, we shouldn���t be surprised if they spend more than we did at their age.
After all, per-capita GDP climbs over time. It���s up an inflation-adjusted 49% over the past three decades. We should expect each successive generation to live a little more lavishly. This is something to celebrate, rather than clucking with disapproval at the folly of youth.
I never dreamed of taking a gap year before or after college. I���ve never leased a car. In fact, I've only once bought a new vehicle, and it was a Geo Metro, at the time the second-cheapest car on the market. I clean my house myself, rather than paying someone. If I order food for takeout, I almost always pick it up myself, rather than have somebody deliver to my door. I almost never get Starbucks. I like avocado toast���but I make it myself.
This is not how today���s young adults think. But who���s being foolish? I���m happy with my spending choices. I���m not really comfortable with the idea that somebody���s going to clean up my mess or bring food to my door. But I also realize that I���m not taking full advantage of the bounty offered by today���s economy���and that those who are younger may be striking a better balance than me.
Latest Posts
HERE ARE THE SIX other articles published by HumbleDollar this week:
"The happiest people I���ve met are those who are grateful for what they have," writes Don Southworth. "An attitude of gratitude comes not from how much we have, but from how we look at life."
How much will a moderately affluent family pay for college? Kyle McIntosh ran the numbers on 20 public and private colleges���and came away with some eye-opening results.
"There's been a lot of discussion about inflation-linked bonds," notes Adam Grossman.��"But investors often overlook a potentially more profitable way to protect against inflation: stocks."
Planning to downsize or relocate? Retirees often do so to cut living costs, lower taxes and enjoy warmer weather. But maybe the overriding factor should be proximity to family, says Dick Quinn.
"I feel like I���ve won the game and I want to take a victory lap," says Mike Drak. "I have my freedom back. I���m happy to work part of the time���but only on my terms and only doing things I love."
Vacationing abroad can be cheaper than traveling in the U.S. Want to see the world? Jiab Wasserman offers tips on how to hold down the cost of airfares, accommodation and meals out.
Also be sure to check out the past week's��blog posts, including��Rick Connor on faith rewarded, Mike Zaccardi on bond market bears, Kyle McIntosh on Peloton���s stock, Greg Spears on target-date funds, Sanjib Saha on the 4% rule, John Lim on behaving better and Dennis Friedman on tipping.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier��articles.The post Who We Were appeared first on HumbleDollar.
Off Target
NEW RESEARCH suggests that target-date retirement funds���which currently receive a majority of contributions to 401(k) plans���are missing the mark.
Target funds��� returns, in aggregate, lagged those of replica portfolios built with exchange-traded funds (ETFs) by one percentage point a year, according to University of Arizona finance professor David C. Brown, one of the study's authors.
The majority of the underperformance was due to higher fees, Brown said. Target-date funds are funds-of-funds. Most fund families charge investors layers of management fees���both on the target-date fund itself and on the underlying funds.
Active management also cuts into target funds��� returns, according to the study. Active managers, as a group, tend to lag the market averages. The good news: Some target-date funds have some or all of their assets in market-tracking index funds.
Finally, the timing of asset allocation adjustments was a small reason for target funds��� performance lag, accounting for about 1/20th of the return difference, according to the study.
Brown���s study, co-authored with the University of Colorado's Shaun Davies, is titled ���Off Target: On the Underperformance of Target-Date Funds.��� It was presented Nov. 12 at a conference sponsored by the CFP Board Center for Financial Planning.
To assess target funds��� returns, Brown and Davies mixed replica portfolios using 50 low-cost, passively managed ETFs from Vanguard Group. Their performance was compared to equivalent target funds from 2008 to 2020.
���In dollar terms, target-date funds underperformed cumulatively by $35 billion,��� Brown said. The underperformance reached nearly $10 billion in 2019, as target funds��� assets grew to almost $1.6 trillion.
Many workers are automatically invested in target funds when they���re enrolled in their employer's��401(k) plan. Employees can change to other plan investments, but relatively few do. Target funds receive nearly 60% of all plan contributions, according to Cerulli Associates.
The relatively poor performance of most target-date funds may sound disturbing. But before target-date funds took off, many 401(k) plans used a money-market fund as the default investment option���and many participants never changed investments, so they ended up with miserably low investment returns. By contrast, owning a mediocre target-date fund is arguably a big step in the right direction.
What can today���s investor do?
The best scenario: Be lucky enough to have a good fund family supply the target funds in your 401(k), Brown said. Vanguard���s target funds lagged the study���s ETF replica portfolios by just 0.01 percentage point a year. Full disclosure: I worked for Vanguard until I retired last year.
Otherwise, Brown suggested investors could build their own replica target funds by mixing six ETFs���U.S. stock, U.S. bond, international stock, international bond, inflation-indexed bond and real estate.
There are problems with this approach, however. As of 2018, only 21.5% of 401(k) plans offered a brokerage window that would allow participants to buy ETFs, the study noted. It also assumes a level of interest that many 401(k) investors don���t possess.
Alternatively, you could simply invest in a set of low-cost index funds���again, assuming they���re available through your 401(k) plan. Not sure what mix to buy? You could take your cues from a target fund geared to a retirement date similar to when you plan to retire.
Target funds��� returns, in aggregate, lagged those of replica portfolios built with exchange-traded funds (ETFs) by one percentage point a year, according to University of Arizona finance professor David C. Brown, one of the study's authors.
The majority of the underperformance was due to higher fees, Brown said. Target-date funds are funds-of-funds. Most fund families charge investors layers of management fees���both on the target-date fund itself and on the underlying funds.
Active management also cuts into target funds��� returns, according to the study. Active managers, as a group, tend to lag the market averages. The good news: Some target-date funds have some or all of their assets in market-tracking index funds.
Finally, the timing of asset allocation adjustments was a small reason for target funds��� performance lag, accounting for about 1/20th of the return difference, according to the study.
Brown���s study, co-authored with the University of Colorado's Shaun Davies, is titled ���Off Target: On the Underperformance of Target-Date Funds.��� It was presented Nov. 12 at a conference sponsored by the CFP Board Center for Financial Planning.
To assess target funds��� returns, Brown and Davies mixed replica portfolios using 50 low-cost, passively managed ETFs from Vanguard Group. Their performance was compared to equivalent target funds from 2008 to 2020.
���In dollar terms, target-date funds underperformed cumulatively by $35 billion,��� Brown said. The underperformance reached nearly $10 billion in 2019, as target funds��� assets grew to almost $1.6 trillion.
Many workers are automatically invested in target funds when they���re enrolled in their employer's��401(k) plan. Employees can change to other plan investments, but relatively few do. Target funds receive nearly 60% of all plan contributions, according to Cerulli Associates.
The relatively poor performance of most target-date funds may sound disturbing. But before target-date funds took off, many 401(k) plans used a money-market fund as the default investment option���and many participants never changed investments, so they ended up with miserably low investment returns. By contrast, owning a mediocre target-date fund is arguably a big step in the right direction.
What can today���s investor do?
The best scenario: Be lucky enough to have a good fund family supply the target funds in your 401(k), Brown said. Vanguard���s target funds lagged the study���s ETF replica portfolios by just 0.01 percentage point a year. Full disclosure: I worked for Vanguard until I retired last year.
Otherwise, Brown suggested investors could build their own replica target funds by mixing six ETFs���U.S. stock, U.S. bond, international stock, international bond, inflation-indexed bond and real estate.
There are problems with this approach, however. As of 2018, only 21.5% of 401(k) plans offered a brokerage window that would allow participants to buy ETFs, the study noted. It also assumes a level of interest that many 401(k) investors don���t possess.
Alternatively, you could simply invest in a set of low-cost index funds���again, assuming they���re available through your 401(k) plan. Not sure what mix to buy? You could take your cues from a target fund geared to a retirement date similar to when you plan to retire.
The post Off Target appeared first on HumbleDollar.
Cheaper Abroad
JIM AND I JUST CAME back from two weeks��� vacation in Greece and Turkey. We planned the trip at the last minute, and booked our tickets less than a week before flying.
��Many imagine high prices when they think of travelling abroad. But in fact, there are many international destinations that are more affordable than vacationing in the U.S. We spent much less on lodging and food���the costliest items after airfare���than we would in America.
October isn���t exactly high season, so overall prices were very reasonable. Most European countries have a high��vaccination��rate, so we found it quite safe to travel. We had to show our vaccination cards to be admitted to museums and to dine indoors at restaurants.��Want to travel abroad without busting the budget? Here are some tips.
Airfare. Book early and go during the off-season. Better yet, be flexible on dates and places. Search for flights on Google to explore possible destinations.
During the off-season, international airfares can be very cheap. I used our travel points to pay for our airfare, so we paid nothing for tickets. Without travel points, our multi-city flights from Dallas to Athens and then Istanbul to Dallas would have cost us $666 each.
Experts recommend booking 120 days ahead for European vacations during peak season. Had we bought our tickets earlier, it would have been cheaper, maybe a bit under $600.
Lodging. We paid an average of $78 a night in Greece and Turkey. When we left the U.S., we had reservations for the first three nights in Athens and the last five nights in Istanbul. We had no reservations for the six nights in between because we weren���t sure where we wanted to go.
Many of our bookings were made on the fly, usually the night before. Still, we spent less than we would in the U.S. From 2019 to 2021, the average��room rate in North America was $203. It was $100 for ���budget friendly��� hotels, such as Best Western.
When you travel internationally, don���t get hung up on terminology like hotel, pension or even��hostal. People often think a pension is of lesser quality than a hotel. But in truth, pensions are often much nicer than hotels, but with limited reception hours.
Usually pensions are small, family-run businesses. You may get a great room���but no one to bring you extra towels after midnight. On our trip, we stayed in excellent pensions in good locations. Our top requirements were a private bathroom, a balcony and air-conditioning.
We were willing to pay more for a good location, usually in the historic district. It saves time and money when touring a city. We rented a car for two days to travel outside of Athens. Most days, however, we explored the sights on foot.
Our pension in Santorini was in Firostefani, on the west side of the Greek island. It offered us great views of the famous volcano, the caldera and sunsets. It had just six rooms, and ours had a private balcony, bathroom and jacuzzi. It cost just $90 a night, complete with daily breakfast and maid service.
Even our four-star hotel in the Istanbul historic district, across from the ancient Hagia Sophia, cost just $60 a night. It included breakfast, maid service, and a daily supply of water, tea and coffee in our room.
Food. Eat where locals eat. Growing up in Bangkok, the most visited��city in the world,��I learned it���s best to avoid eating in tourist spots. The food is not as authentic and the prices are usually much higher. When we travel, we ask around, seeking out places where locals eat.
For most of our trip, breakfast was included with our lodging. That helps to explain why we averaged $36 a day for food. Our most expensive day was $87 for three meals on the island of Hydra. The least expensive day was for two meals in Istanbul, where we sampled local and street food for a total of $9.35.
Our best meal was in Megara, a small town outside Athens. We found a little restaurant there owned by a husband and wife. As we sat under a grove of trees looking over the town square, we asked the husband for the menu. He said there was no menu, and proceeded to tell us what he could make that day.
We ordered fried anchovies cooked in the local way, grilled cod, and fresh salad served with home-made Greek yogurt dressing. The meal was unexpectedly delicious, and cost just $29. When I tried to look up the restaurant on Google or Yelp to give it a good review, it wasn���t even listed.
Jiab Wasserman, MBA, RICP��, has lived in Thailand, the U.S. and Spain. She spent the bulk of her career with financial services companies, eventually becoming vice president of credit risk management at Bank of America, before retiring in 2018.��Head to Linktree to learn more about Jiab, and also check out her earlier articles.
��Many imagine high prices when they think of travelling abroad. But in fact, there are many international destinations that are more affordable than vacationing in the U.S. We spent much less on lodging and food���the costliest items after airfare���than we would in America.
October isn���t exactly high season, so overall prices were very reasonable. Most European countries have a high��vaccination��rate, so we found it quite safe to travel. We had to show our vaccination cards to be admitted to museums and to dine indoors at restaurants.��Want to travel abroad without busting the budget? Here are some tips.
Airfare. Book early and go during the off-season. Better yet, be flexible on dates and places. Search for flights on Google to explore possible destinations.
During the off-season, international airfares can be very cheap. I used our travel points to pay for our airfare, so we paid nothing for tickets. Without travel points, our multi-city flights from Dallas to Athens and then Istanbul to Dallas would have cost us $666 each.
Experts recommend booking 120 days ahead for European vacations during peak season. Had we bought our tickets earlier, it would have been cheaper, maybe a bit under $600.
Lodging. We paid an average of $78 a night in Greece and Turkey. When we left the U.S., we had reservations for the first three nights in Athens and the last five nights in Istanbul. We had no reservations for the six nights in between because we weren���t sure where we wanted to go.
Many of our bookings were made on the fly, usually the night before. Still, we spent less than we would in the U.S. From 2019 to 2021, the average��room rate in North America was $203. It was $100 for ���budget friendly��� hotels, such as Best Western.
When you travel internationally, don���t get hung up on terminology like hotel, pension or even��hostal. People often think a pension is of lesser quality than a hotel. But in truth, pensions are often much nicer than hotels, but with limited reception hours.
Usually pensions are small, family-run businesses. You may get a great room���but no one to bring you extra towels after midnight. On our trip, we stayed in excellent pensions in good locations. Our top requirements were a private bathroom, a balcony and air-conditioning.
We were willing to pay more for a good location, usually in the historic district. It saves time and money when touring a city. We rented a car for two days to travel outside of Athens. Most days, however, we explored the sights on foot.
Our pension in Santorini was in Firostefani, on the west side of the Greek island. It offered us great views of the famous volcano, the caldera and sunsets. It had just six rooms, and ours had a private balcony, bathroom and jacuzzi. It cost just $90 a night, complete with daily breakfast and maid service.
Even our four-star hotel in the Istanbul historic district, across from the ancient Hagia Sophia, cost just $60 a night. It included breakfast, maid service, and a daily supply of water, tea and coffee in our room.
Food. Eat where locals eat. Growing up in Bangkok, the most visited��city in the world,��I learned it���s best to avoid eating in tourist spots. The food is not as authentic and the prices are usually much higher. When we travel, we ask around, seeking out places where locals eat.
For most of our trip, breakfast was included with our lodging. That helps to explain why we averaged $36 a day for food. Our most expensive day was $87 for three meals on the island of Hydra. The least expensive day was for two meals in Istanbul, where we sampled local and street food for a total of $9.35.
Our best meal was in Megara, a small town outside Athens. We found a little restaurant there owned by a husband and wife. As we sat under a grove of trees looking over the town square, we asked the husband for the menu. He said there was no menu, and proceeded to tell us what he could make that day.
We ordered fried anchovies cooked in the local way, grilled cod, and fresh salad served with home-made Greek yogurt dressing. The meal was unexpectedly delicious, and cost just $29. When I tried to look up the restaurant on Google or Yelp to give it a good review, it wasn���t even listed.
Jiab Wasserman, MBA, RICP��, has lived in Thailand, the U.S. and Spain. She spent the bulk of her career with financial services companies, eventually becoming vice president of credit risk management at Bank of America, before retiring in 2018.��Head to Linktree to learn more about Jiab, and also check out her earlier articles.The post Cheaper Abroad appeared first on HumbleDollar.
November 25, 2021
Faith Rewarded
I RECENTLY WOKE UP early to try and catch the peak of the Leonid meteor shower. Because the celestial event coincided with a full moon, the best time to view the meteors was at 5 a.m., just after moonset.
The estimates I read indicated that there were typically 11 to 17 meteors per hour during the peak. But there was no guarantee.
At 5 a.m., I got up and went to the front porch, which has a perfect eastern view of the night sky. It was cold but clear. After 15 minutes in the cold, I was considering packing it in and returning to a warm bed.
But I decided to hang in there a little longer. Shortly thereafter, my faith was rewarded when a brilliant streak appeared right in front of me. A little later, I saw another, albeit less bright streak, and later a few more.
Pretty soon, the first pastel glimpses of dawn appeared on the horizon. The Leonids were over for the night. They were replaced by the blues and pinks of a coastal sunrise.
As I sat in the cold and dark, waiting and hoping to see a meteor, a few lines from a favorite Bruce Springsteen song came to me:
This train, dreams will not be thwarted
This train, faith will be rewarded
I was raised to believe that faith would be rewarded. But I was also taught that ���faith without works is dead.��� This applies to so many areas of our lives.
On that morning, I had faith that the astronomers had correctly calculated the orbits of the earth, sun, moon and asteroid, so that my early rising would not be in vain. I had faith that the meteorologist���s prediction of clear skies would hold. I believed they had the knowledge and expertise to make sound predictions.
The extension of that metaphor to our financial lives is simple. We have faith that our combination of democracy and capitalism provides a financial system that we can all trust. In my 40-year investing lifetime, I���ve known war, volatility, economic chaos, natural disasters, and political and civil discord. But my faith in our system has allowed me���and many others���to participate and be rewarded.
Will that faith continue to be rewarded? I think the evidence is strong that it will, but not without the works mentioned above. What is the work that we can do that will continue our economic and financial growth? Here are some simple things I consider important:
Participate in the economy. Engage in meaningful work that provides the goods and services our citizens need and want.
Participate in our financial system. Regular investments in our economy should reward us over time.
Seek to learn. Question our beliefs. None of us knows everything or is always right.
Live with integrity. Be fair and ethical in all our dealings, especially financial ones.
Find a way to pass on our wisdom.
In my experience, faith is often a conscious decision. I know people who have had deeply profound experiences that inform and inspire their faith. I���ve never had that type of experience. But I choose to struggle on, hopeful in the benefits of my beliefs, and acting where I can be rewarded.
The estimates I read indicated that there were typically 11 to 17 meteors per hour during the peak. But there was no guarantee.
At 5 a.m., I got up and went to the front porch, which has a perfect eastern view of the night sky. It was cold but clear. After 15 minutes in the cold, I was considering packing it in and returning to a warm bed.
But I decided to hang in there a little longer. Shortly thereafter, my faith was rewarded when a brilliant streak appeared right in front of me. A little later, I saw another, albeit less bright streak, and later a few more.
Pretty soon, the first pastel glimpses of dawn appeared on the horizon. The Leonids were over for the night. They were replaced by the blues and pinks of a coastal sunrise.
As I sat in the cold and dark, waiting and hoping to see a meteor, a few lines from a favorite Bruce Springsteen song came to me:
This train, dreams will not be thwarted
This train, faith will be rewarded
I was raised to believe that faith would be rewarded. But I was also taught that ���faith without works is dead.��� This applies to so many areas of our lives.
On that morning, I had faith that the astronomers had correctly calculated the orbits of the earth, sun, moon and asteroid, so that my early rising would not be in vain. I had faith that the meteorologist���s prediction of clear skies would hold. I believed they had the knowledge and expertise to make sound predictions.
The extension of that metaphor to our financial lives is simple. We have faith that our combination of democracy and capitalism provides a financial system that we can all trust. In my 40-year investing lifetime, I���ve known war, volatility, economic chaos, natural disasters, and political and civil discord. But my faith in our system has allowed me���and many others���to participate and be rewarded.
Will that faith continue to be rewarded? I think the evidence is strong that it will, but not without the works mentioned above. What is the work that we can do that will continue our economic and financial growth? Here are some simple things I consider important:
Participate in the economy. Engage in meaningful work that provides the goods and services our citizens need and want.
Participate in our financial system. Regular investments in our economy should reward us over time.
Seek to learn. Question our beliefs. None of us knows everything or is always right.
Live with integrity. Be fair and ethical in all our dealings, especially financial ones.
Find a way to pass on our wisdom.
In my experience, faith is often a conscious decision. I know people who have had deeply profound experiences that inform and inspire their faith. I���ve never had that type of experience. But I choose to struggle on, hopeful in the benefits of my beliefs, and acting where I can be rewarded.
The post Faith Rewarded appeared first on HumbleDollar.
Thankful Tomorrow
I RARELY PREACH these days���at least in front of congregations���but I still recall how hard it was, every Thanksgiving week, to come up with something new to say about gratitude.
The messages we hear and see this week will be fairly consistent: Buy more food and stuff. But also: Thanks be to God. Thanks for the life we enjoy.
Expressing gratitude is indeed good. Practice more of it in your life, and life will be sweeter. Each year, I would express such sentiments and try to add some new angle to the message.
The problem: At this time of year, gratitude becomes a cliche. My inner eight-year-old remembers how much I hated reciting everything I was grateful for at school and then again at the Thanksgiving dinner table. An eight-year-old gets tired of being grateful over and over again for his cat, his baseball cards and his family. It can get boring and eventually he starts making things up. At least this eight-year-old did.
One of our challenges this time of year is to remember to cultivate an attitude of gratitude���and not an attitude of taking it for granted. As the holidays near, and we���re bombarded with requests for donations and holiday shopping commercials, it���s easy to forget that gratitude isn���t just a cliche to help sell things.
Gratitude is one of the most important spiritual traits, and we would be wise to nurture and practice it. Research has shown that, ���Gratitude helps people feel more positive emotions, relish good experiences, improve their health, deal with adversity, and build strong relationships.��� A giving of thanks shouldn���t happen just on the second Monday of October or the fourth Thursday of November, depending on whether you live in Canada or the U.S. It���s a story and a way of life for every day of the year.
What���s gratitude have to do with investing and personal finances? Plenty. The happiest people I���ve met, as well as the most spiritually and emotionally healthy, are those who are grateful for what they have. While they may strive for more, they know that what they have is enough. Sometimes, these folks have ample material wealth, but sometimes they don���t. An attitude of gratitude comes not from how much we have, but from how we look at life.
Over the years, I���ve recommended and practiced many ways to deepen a sense of gratitude. Writing daily gratitude lists. Waking up early and watching a sunrise. Sending a ���thank you��� letter every day. Making a list of all the things and experiences I���ve enjoyed in my life that I didn���t initiate, but instead which others created or gave to me. Such practices can help us avoid taking life for granted.
But one practice is better than all these.
If you turn over the gratitude coin, you���ll find another ���g��� word. Whenever I���m conscious of being grateful, I���m filled with the need and desire to share that gratitude with someone else. The practice of doing that is called generosity.
It���s no accident that two of my favorite preaching holidays of the year were Thanksgiving and annual pledge drive Sunday. Gratitude invites���and perhaps demands���that we give some of that gratitude away, whether it���s by sharing our time, our money, our excitement or our prized possessions. Like love, the more we give, the more we keep.
Financial planning can lead to many fine things. But if the results don���t include a growing sense of gratitude and generosity, I want no part of it. Our financial resources may be limited, but gratitude and generosity are not. I can have and practice more of both, and so can you. Share a sunrise, share a meal, share a blessing, share a financial gift this week. And next week, too. Happy Thanksgiving���not just today, but every day of the year.
Don Southworth is a semi-retired minister, consultant and tax preparer living in Chapel Hill, North Carolina. He recently completed his Certified Financial Planner education.��Don is passionate about the intersection between spirituality and money, and he encourages people to follow their callings wherever they lead.��Follow Don on Twitter @Calltrepreneur��and check out his earlier articles.
The post Thankful Tomorrow appeared first on HumbleDollar.
November 24, 2021
Betting Against
I���M USUALLY BORING when it comes to investing. My portfolio is mostly comprised of stock and bond index funds. I dabble in individual stocks when I come across something I see as interesting, but individual stocks have never made up more than 5% of my portfolio. I currently hold just three individual stocks amounting to less than 2% of my investment holdings.
While my interest is occasionally piqued by stocks with upside potential, I���m more often drawn to companies I see as having significant downside. This glass-half-empty orientation likely reflects the professional skepticism that comes with being a CPA. I���ve never acted on my bearish instincts���until now. Recent developments at Peloton Interactive (symbol: PTON) have led me to wager that the stock will continue declining.
I���ve followed Peloton closely for years. I love its product. But a series of management missteps have caused me���and many others���to become bearish on the stock. The company���s troubles have included bungling a product recall and unexpectedly bad financial performance. The last straw for me: Peloton recently raised $1 billion through a stock sale���just two weeks after the company���s chief financial officer indicated such an infusion of capital was unnecessary.
To act on my bearishness, I decided that buying a put option was the most prudent approach. Unlike shorting a stock���which has an unlimited downside if shares rise���a put option limits my possible loss to the premium I pay for the put. After considering the array of options available, I paid $200 for a put that gives me the right to sell 100 shares of Peloton at a ���strike price��� of $35 a share in April 2022.
There���s a wide range of possible outcomes for this option position, but I���ll give two possibilities. If the stock trades above $35 in April 2022���which is likely, given that the shares have lately been trading in the low-to-mid $40s���my loss will be the amount of the premium. If the stock trades below $33, however, I stand to make a profit.
For instance, if the shares trade at $30 in April 2022, I���ll earn a $300 profit. How so? I���d make $500 by exercising the put and selling 100 shares at the $35 strike price, equal to $3,500���shares for which I���d only need to pay $30 each, or $3,000 total. That $500 gain would be partly offset by the $200 premium I paid for the put.
If I don���t like holding this option over the next few months, I can sell it at the market price, just as I could any stock holding. Yes, this is a small investment. But I���m a person who learns by doing. The worst that can happen: I���ll have paid $200 to get an education in options trading.
While my interest is occasionally piqued by stocks with upside potential, I���m more often drawn to companies I see as having significant downside. This glass-half-empty orientation likely reflects the professional skepticism that comes with being a CPA. I���ve never acted on my bearish instincts���until now. Recent developments at Peloton Interactive (symbol: PTON) have led me to wager that the stock will continue declining.
I���ve followed Peloton closely for years. I love its product. But a series of management missteps have caused me���and many others���to become bearish on the stock. The company���s troubles have included bungling a product recall and unexpectedly bad financial performance. The last straw for me: Peloton recently raised $1 billion through a stock sale���just two weeks after the company���s chief financial officer indicated such an infusion of capital was unnecessary.
To act on my bearishness, I decided that buying a put option was the most prudent approach. Unlike shorting a stock���which has an unlimited downside if shares rise���a put option limits my possible loss to the premium I pay for the put. After considering the array of options available, I paid $200 for a put that gives me the right to sell 100 shares of Peloton at a ���strike price��� of $35 a share in April 2022.
There���s a wide range of possible outcomes for this option position, but I���ll give two possibilities. If the stock trades above $35 in April 2022���which is likely, given that the shares have lately been trading in the low-to-mid $40s���my loss will be the amount of the premium. If the stock trades below $33, however, I stand to make a profit.
For instance, if the shares trade at $30 in April 2022, I���ll earn a $300 profit. How so? I���d make $500 by exercising the put and selling 100 shares at the $35 strike price, equal to $3,500���shares for which I���d only need to pay $30 each, or $3,000 total. That $500 gain would be partly offset by the $200 premium I paid for the put.
If I don���t like holding this option over the next few months, I can sell it at the market price, just as I could any stock holding. Yes, this is a small investment. But I���m a person who learns by doing. The worst that can happen: I���ll have paid $200 to get an education in options trading.
The post Betting Against appeared first on HumbleDollar.
Winning Retirement
AMERICANS THINK they need an average $1.9 million to retire, according to a survey of 401(k) plan participants by Charles Schwab. Years ago, a finding like that would have terrified me.
I worked really hard in my younger years and socked away money diligently. But between paying off the mortgage, saving for the kids��� education and being hit by an unexpected divorce, there���s no way I could ever have amassed $1.9 million.
Still, I���ve learned to live well in retirement. How? By emulating my favorite movie, Scent of a Woman , starring Al Pacino. The lessons it taught led me to write my first book, Victory Lap Retirement .
In the movie, Pacino plays retired Army Lieutenant��Colonel Frank Slade, a blind and bitter alcoholic. He survives on a disability pension, living in a converted garage behind his niece���s house.
Once an aide to President Lyndon Johnson, Slade knew the high life. But now he spends the bulk of his time alone, slumped in an armchair, feeling miserable and sorry for himself. He knows his best days are behind him.
Slade comes up with a plan to go out with a bang (pun intended). The movie is filled with a series of last-chance adventures that are deeply pleasurable to Pacino���s character.
He uses money saved from his disability payments to travel by limo to New York City and check into the Waldorf Astoria Hotel. He gets to dance a tango with a beautiful woman, drive a Ferrari and flirt with a seamstress as she fits him for an expensive suit���the last one he will ever own.
It���s his last hurrah. To end his trip, he plans to don his Army uniform and then shoot himself with his service pistol at the Waldorf. But, of course, it doesn���t turn out that way.
Like Pacino���s movie character, there are many folks who don���t have enough for a comfortable retirement. Fully 45% of U.S. baby boomers have no retirement savings, according to a report by the Insured Retirement Institute.
Retirees with no savings can try to get by on Social Security, but it���s no fun. It���s a constant struggle to pay the rent or property taxes, and for food, utilities and health care. I know plenty of retirees who never eat out, never go to a show, never take a trip. They can end up angry and bitter, just like Pacino���s character.
I never wanted to live that way, which is why I���ve been frugal all my life. I scrimped, saved and made sacrifices, so I could provide financial security for my family. I know what it���s like to take the kids on vacation���and yet feel like I couldn���t afford all the fun things we wanted to do.
Now, the kids are grown, I���ve achieved financial independence and I want to do all those fun things that I didn���t do back then���while I���m still healthy enough to enjoy them.
My basic living expenses are covered by pension income and savings. I withdraw from my savings at a sustainable rate. I pay for my peak experiences with the fun money I earn from part-time work.
Now that I know I won���t run out of money, I don���t worry how much dinner will cost at a nice restaurant. My goal is to live better than I did before retirement by enjoying as many peak experiences as possible. I want to do what Slade did���except for the suicide part���and make it last for as long as I can.
I feel like I���ve won the game and I want to take a victory lap in retirement. I have my freedom back. I���m happy to work part of the time���but only on my terms and only doing things I love.
Mike Drak is a 38-year veteran of the financial services industry. He���s the author of
Retirement Heaven or Hell
, published in 2021, as well as an earlier book,
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.
I worked really hard in my younger years and socked away money diligently. But between paying off the mortgage, saving for the kids��� education and being hit by an unexpected divorce, there���s no way I could ever have amassed $1.9 million.
Still, I���ve learned to live well in retirement. How? By emulating my favorite movie, Scent of a Woman , starring Al Pacino. The lessons it taught led me to write my first book, Victory Lap Retirement .
In the movie, Pacino plays retired Army Lieutenant��Colonel Frank Slade, a blind and bitter alcoholic. He survives on a disability pension, living in a converted garage behind his niece���s house.
Once an aide to President Lyndon Johnson, Slade knew the high life. But now he spends the bulk of his time alone, slumped in an armchair, feeling miserable and sorry for himself. He knows his best days are behind him.
Slade comes up with a plan to go out with a bang (pun intended). The movie is filled with a series of last-chance adventures that are deeply pleasurable to Pacino���s character.
He uses money saved from his disability payments to travel by limo to New York City and check into the Waldorf Astoria Hotel. He gets to dance a tango with a beautiful woman, drive a Ferrari and flirt with a seamstress as she fits him for an expensive suit���the last one he will ever own.
It���s his last hurrah. To end his trip, he plans to don his Army uniform and then shoot himself with his service pistol at the Waldorf. But, of course, it doesn���t turn out that way.
Like Pacino���s movie character, there are many folks who don���t have enough for a comfortable retirement. Fully 45% of U.S. baby boomers have no retirement savings, according to a report by the Insured Retirement Institute.
Retirees with no savings can try to get by on Social Security, but it���s no fun. It���s a constant struggle to pay the rent or property taxes, and for food, utilities and health care. I know plenty of retirees who never eat out, never go to a show, never take a trip. They can end up angry and bitter, just like Pacino���s character.
I never wanted to live that way, which is why I���ve been frugal all my life. I scrimped, saved and made sacrifices, so I could provide financial security for my family. I know what it���s like to take the kids on vacation���and yet feel like I couldn���t afford all the fun things we wanted to do.
Now, the kids are grown, I���ve achieved financial independence and I want to do all those fun things that I didn���t do back then���while I���m still healthy enough to enjoy them.
My basic living expenses are covered by pension income and savings. I withdraw from my savings at a sustainable rate. I pay for my peak experiences with the fun money I earn from part-time work.
Now that I know I won���t run out of money, I don���t worry how much dinner will cost at a nice restaurant. My goal is to live better than I did before retirement by enjoying as many peak experiences as possible. I want to do what Slade did���except for the suicide part���and make it last for as long as I can.
I feel like I���ve won the game and I want to take a victory lap in retirement. I have my freedom back. I���m happy to work part of the time���but only on my terms and only doing things I love.
Mike Drak is a 38-year veteran of the financial services industry. He���s the author of
Retirement Heaven or Hell
, published in 2021, as well as an earlier book,
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.The post Winning Retirement appeared first on HumbleDollar.
November 23, 2021
Hopping Around
THERE���S BEEN MUCH talk in 2021 about the future of work, with a big focus on remote and hybrid office arrangements. But I���m more intrigued by another major trend: job hopping. Each month, labor economists get a fresh read on the pace of hirings, firings and quits. In fact, the ���quit rate��� has become a household term in 2021, as workers change jobs to snag higher pay.
That got me thinking about conventional personal finance wisdom, which says that employees should contribute as much as possible to their 401(k) plan. Capturing the employer���s matching contribution is a must, or so say nearly all personal finance gurus.
That���s still good advice today���but maybe not tomorrow. I believe companies will put in place crafty incentives and clauses to retain employees. Perhaps stretched-out schedules for vesting on 401(k) matching contributions and stock options, as well as for receiving student loan payback benefits, will become more common in the coming years.
For those fresh out of college, it might not be wise to contribute to a 401(k) if they must stay with an employer for many years to get the match. Sure, they���ll still get the initial tax deduction for their contributions, but they'll also end up with limited���and potentially high-priced���investment options. The median tenure for workers ages 25 to 34 is less than three years, according to the Bureau of Labor Statistics. That survey was conducted before the pandemic began. Younger workers are likely job hopping even faster today.
I���ve been interviewing for finance jobs recently. Two major firms I spoke to didn���t even offer a matching retirement plan contribution, but they did offer other financial incentives that came with lengthy vesting periods. Is that going to be the new normal? With employee turnover hitting a record high, companies must not only work hard to hire quality workers, but also they���ll need to get creative if they want to retain them.
That got me thinking about conventional personal finance wisdom, which says that employees should contribute as much as possible to their 401(k) plan. Capturing the employer���s matching contribution is a must, or so say nearly all personal finance gurus.
That���s still good advice today���but maybe not tomorrow. I believe companies will put in place crafty incentives and clauses to retain employees. Perhaps stretched-out schedules for vesting on 401(k) matching contributions and stock options, as well as for receiving student loan payback benefits, will become more common in the coming years.
For those fresh out of college, it might not be wise to contribute to a 401(k) if they must stay with an employer for many years to get the match. Sure, they���ll still get the initial tax deduction for their contributions, but they'll also end up with limited���and potentially high-priced���investment options. The median tenure for workers ages 25 to 34 is less than three years, according to the Bureau of Labor Statistics. That survey was conducted before the pandemic began. Younger workers are likely job hopping even faster today.
I���ve been interviewing for finance jobs recently. Two major firms I spoke to didn���t even offer a matching retirement plan contribution, but they did offer other financial incentives that came with lengthy vesting periods. Is that going to be the new normal? With employee turnover hitting a record high, companies must not only work hard to hire quality workers, but also they���ll need to get creative if they want to retain them.
The post Hopping Around appeared first on HumbleDollar.
