Jonathan Clements's Blog, page 279
July 31, 2021
Go to Extremes
IT���S RISKY TO LAY down hard-and-fast rules for money management because, for every rule, there will almost inevitably be exceptions.
Still, as they say, ���nothing ventured, nothing gained.��� Below you���ll find 18 rules. Want to quibble? Hey, that���s why HumbleDollar allows readers to comment on articles.
1. Minimize cash. With short-term interest rates so low, keeping money in savings accounts and money market funds seems especially grim right now. But the truth is, cash has always been a lousy long-term holding, pretty much guaranteeing your money will depreciate once inflation and taxes are figured in.
2. Maximize stocks. Owning a diversified stock portfolio has proven to be a remarkably simple way to build wealth over the long haul���and the only struggle is ignoring the constant temptation to focus on short-run results. No, you shouldn���t have money in the stock market that you���ll need to spend in the next five years. But it���s a great place to invest the rest of your portfolio.
3. Minimize complexity. This is advice Wall Street desperately wants you to ignore because, for the Street, complexity is the key to higher fees. Don���t understand an investment or investment strategy? Just say no.
4. Minimize trading. If athletes train harder or business owners put in longer hours, they���ll often get better results. But for investors, vigorous activity���as represented by more trading���is usually a recipe for disaster. Not only is trading costly (yes, even when commissions are zero), but also it can trigger big tax bills.
5. Maximize tax deferral. I���ve lately been hearing a fair amount of carping about traditional retirement accounts, where you get an initial tax deduction but have to pay income taxes on withdrawals. I think this is wrongheaded. Do the math and you���ll find the initial tax deduction often effectively pays for the eventual tax bill. Don���t think the math will work in your favor? You can always opt not for tax-deferred growth, but tax-free growth���by favoring Roth 401(k)s and Roth IRAs, including the so-called��backdoor Roth.
6. Maximize indexing. Every dollar of your portfolio that you actively manage is a dollar that���ll likely end up earning mediocre returns, thanks to the investment expenses you incur. Want to avoid needless costs and ensure you keep pace with the market averages? Buy broad market index funds.
7. Maximize compounding. This is partly about maximizing time in the market by buying stocks early in life and by helping the next generation to get started. But it���s also about diversifying broadly and thereby avoiding the hefty losses that can come with betting on a single market sector or a handful of stocks. Such losses can devastate compounding because they���re so hard to recover from.
8. Minimize noise. By this, I mean minimize consumption of useless information and especially market information. Listening to CNBC and tracking the financial markets throughout the day will likely lead to more bad decisions than good. What if you can consume this information without acting on it? You���re still wasting great gobs of precious time.
9. Minimize unnecessary debt. You may need to take on debt to pay for college, buy a home or purchase your first car. But you should strive to avoid unnecessary debt. Yes, you might want a new wardrobe or a new TV. But will you be able to pay off the credit card bill when it arrives? Yes, you might want to remodel the kitchen. But how about saving up the necessary money rather than taking out that 401(k) loan?
10. Minimize insurance. If there���s a financial risk you can���t afford to shoulder on your own, it���s crucial to protect yourself with insurance. That said, you want to keep coverage to a minimum because money spent on insurance will usually be money lost.
Don���t have any financial dependents? Skip life insurance. Have $5,000 in emergency savings? Maybe you should opt for deductibles of that size on your auto, homeowner���s and health coverage. Have enough saved to pay long-term-care (LTC) costs out of pocket? Think twice before buying LTC insurance.
11. Maximize Social Security. Make a thoughtful decision about when to claim benefits, rather than simply applying as soon as you turn age 62 or as soon as you leave the workforce. To that end, you���ll need to consider factors like��life expectancy, spousal benefits and family benefits. The upshot: You shouldn���t necessarily wait until age 70 to claim Social Security���though that���ll often be the best strategy.
12. Minimize fixed living costs. Our dollars get divvied up among four main buckets: fixed living costs like housing and car payments, discretionary ���fun��� spending, taxes and the savings we set aside. Want to have more money for discretionary spending and savings? Try to hold down your fixed living costs and carefully manage your annual tax bill.
13. Minimize possessions. We all need some possessions to lead a comfortable life and we all have some possessions that we treasure. But it���s the other stuff that���s the problem���the stuff that finds its way into the basement and, if it never leaves, ends up being a burden to our heirs. By contrast, money spent on experiences doesn���t turn into a burden. Instead, after an experience such as a concert, a meal out or a vacation, all that���s left is the memory���and, more often than not, it���s a fond one.
14. Minimize impulsive spending. There���s nothing wrong with spending���provided you buy stuff you truly want or need. The best way to avoid wasteful spending: Think long and hard before cracking open your wallet.
15. Maximize anticipation. An added reason to think long and hard: You���ll enjoy a lengthy period of eager anticipation���which may prove to be the most pleasurable part of any expenditure. Planning to buy a new car or take a vacation? Start thinking about these things far ahead of time, so you have months to savor your future spending.
16. Minimize hassles. When we imagine owning a boat or a second home, we tend to think only about how much fun it would be. But what about the hassles? After the initial thrill, the fun from such purchases will start to fade���and the hassles will likely loom large.
17. Minimize unhappy times. This isn���t just about avoiding purchases that come with significant hassles. It also means spending the least time possible commuting, doing disliked chores and with disagreeable people.
18. Minimize money worries. Rule No. 1 was to minimize cash. But that doesn���t mean you should hold no cash. If there���s money you���ll need to spend soon or will use to cover emergencies, it should be in cash investments. But holding cash also has another important role: If you want to reduce financial anxiety, a plump savings account can work wonders.
Latest Posts
HERE ARE THE SIX other articles published by HumbleDollar this week:
"The goal is to move toward financial independence in the first half of life," advises Joe Kesler. "It���s wonderful to have resources set aside so we have the freedom to reinvent ourselves."
Maybe it's no surprise that Americans fail to save for retirement and struggle to pay for health care���because the rules are so confusing. Dick Quinn offers seven examples.
Want to make the most of your employer���s retirement plan? Drawing on Vanguard Group���s annual How America Saves report, Mike Zaccardi offers five tips.
"The 4% rule is hardly a rule," says Adam Grossman. "Like most things in personal finance, the answer that makes sense for someone else will rarely make sense for you."
Michael Perry wanted to reward his nephew for his academic success, unload some appreciated fund shares and get his nephew to fund a Roth IRA. Here's what was involved.
"Stories that 'she made it regardless of' shouldn���t override what the data say," notes Jiab Wasserman. "Just because we know people who succeeded despite it doesn���t mean discrimination doesn���t exist."
While you're at it, be sure to check out the past week's��blog posts, including Andrew Forsythe on credit card rewards, Greg Spears on used boats, Sanjib Saha on his inflation jitters and Rick Connor on his��parking��problems.
Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier��articles.
Still, as they say, ���nothing ventured, nothing gained.��� Below you���ll find 18 rules. Want to quibble? Hey, that���s why HumbleDollar allows readers to comment on articles.
1. Minimize cash. With short-term interest rates so low, keeping money in savings accounts and money market funds seems especially grim right now. But the truth is, cash has always been a lousy long-term holding, pretty much guaranteeing your money will depreciate once inflation and taxes are figured in.
2. Maximize stocks. Owning a diversified stock portfolio has proven to be a remarkably simple way to build wealth over the long haul���and the only struggle is ignoring the constant temptation to focus on short-run results. No, you shouldn���t have money in the stock market that you���ll need to spend in the next five years. But it���s a great place to invest the rest of your portfolio.
3. Minimize complexity. This is advice Wall Street desperately wants you to ignore because, for the Street, complexity is the key to higher fees. Don���t understand an investment or investment strategy? Just say no.
4. Minimize trading. If athletes train harder or business owners put in longer hours, they���ll often get better results. But for investors, vigorous activity���as represented by more trading���is usually a recipe for disaster. Not only is trading costly (yes, even when commissions are zero), but also it can trigger big tax bills.
5. Maximize tax deferral. I���ve lately been hearing a fair amount of carping about traditional retirement accounts, where you get an initial tax deduction but have to pay income taxes on withdrawals. I think this is wrongheaded. Do the math and you���ll find the initial tax deduction often effectively pays for the eventual tax bill. Don���t think the math will work in your favor? You can always opt not for tax-deferred growth, but tax-free growth���by favoring Roth 401(k)s and Roth IRAs, including the so-called��backdoor Roth.
6. Maximize indexing. Every dollar of your portfolio that you actively manage is a dollar that���ll likely end up earning mediocre returns, thanks to the investment expenses you incur. Want to avoid needless costs and ensure you keep pace with the market averages? Buy broad market index funds.
7. Maximize compounding. This is partly about maximizing time in the market by buying stocks early in life and by helping the next generation to get started. But it���s also about diversifying broadly and thereby avoiding the hefty losses that can come with betting on a single market sector or a handful of stocks. Such losses can devastate compounding because they���re so hard to recover from.
8. Minimize noise. By this, I mean minimize consumption of useless information and especially market information. Listening to CNBC and tracking the financial markets throughout the day will likely lead to more bad decisions than good. What if you can consume this information without acting on it? You���re still wasting great gobs of precious time.
9. Minimize unnecessary debt. You may need to take on debt to pay for college, buy a home or purchase your first car. But you should strive to avoid unnecessary debt. Yes, you might want a new wardrobe or a new TV. But will you be able to pay off the credit card bill when it arrives? Yes, you might want to remodel the kitchen. But how about saving up the necessary money rather than taking out that 401(k) loan?
10. Minimize insurance. If there���s a financial risk you can���t afford to shoulder on your own, it���s crucial to protect yourself with insurance. That said, you want to keep coverage to a minimum because money spent on insurance will usually be money lost.
Don���t have any financial dependents? Skip life insurance. Have $5,000 in emergency savings? Maybe you should opt for deductibles of that size on your auto, homeowner���s and health coverage. Have enough saved to pay long-term-care (LTC) costs out of pocket? Think twice before buying LTC insurance.
11. Maximize Social Security. Make a thoughtful decision about when to claim benefits, rather than simply applying as soon as you turn age 62 or as soon as you leave the workforce. To that end, you���ll need to consider factors like��life expectancy, spousal benefits and family benefits. The upshot: You shouldn���t necessarily wait until age 70 to claim Social Security���though that���ll often be the best strategy.
12. Minimize fixed living costs. Our dollars get divvied up among four main buckets: fixed living costs like housing and car payments, discretionary ���fun��� spending, taxes and the savings we set aside. Want to have more money for discretionary spending and savings? Try to hold down your fixed living costs and carefully manage your annual tax bill.
13. Minimize possessions. We all need some possessions to lead a comfortable life and we all have some possessions that we treasure. But it���s the other stuff that���s the problem���the stuff that finds its way into the basement and, if it never leaves, ends up being a burden to our heirs. By contrast, money spent on experiences doesn���t turn into a burden. Instead, after an experience such as a concert, a meal out or a vacation, all that���s left is the memory���and, more often than not, it���s a fond one.
14. Minimize impulsive spending. There���s nothing wrong with spending���provided you buy stuff you truly want or need. The best way to avoid wasteful spending: Think long and hard before cracking open your wallet.
15. Maximize anticipation. An added reason to think long and hard: You���ll enjoy a lengthy period of eager anticipation���which may prove to be the most pleasurable part of any expenditure. Planning to buy a new car or take a vacation? Start thinking about these things far ahead of time, so you have months to savor your future spending.
16. Minimize hassles. When we imagine owning a boat or a second home, we tend to think only about how much fun it would be. But what about the hassles? After the initial thrill, the fun from such purchases will start to fade���and the hassles will likely loom large.
17. Minimize unhappy times. This isn���t just about avoiding purchases that come with significant hassles. It also means spending the least time possible commuting, doing disliked chores and with disagreeable people.
18. Minimize money worries. Rule No. 1 was to minimize cash. But that doesn���t mean you should hold no cash. If there���s money you���ll need to spend soon or will use to cover emergencies, it should be in cash investments. But holding cash also has another important role: If you want to reduce financial anxiety, a plump savings account can work wonders.
Latest Posts
HERE ARE THE SIX other articles published by HumbleDollar this week:
"The goal is to move toward financial independence in the first half of life," advises Joe Kesler. "It���s wonderful to have resources set aside so we have the freedom to reinvent ourselves."
Maybe it's no surprise that Americans fail to save for retirement and struggle to pay for health care���because the rules are so confusing. Dick Quinn offers seven examples.
Want to make the most of your employer���s retirement plan? Drawing on Vanguard Group���s annual How America Saves report, Mike Zaccardi offers five tips.
"The 4% rule is hardly a rule," says Adam Grossman. "Like most things in personal finance, the answer that makes sense for someone else will rarely make sense for you."
Michael Perry wanted to reward his nephew for his academic success, unload some appreciated fund shares and get his nephew to fund a Roth IRA. Here's what was involved.
"Stories that 'she made it regardless of' shouldn���t override what the data say," notes Jiab Wasserman. "Just because we know people who succeeded despite it doesn���t mean discrimination doesn���t exist."
While you're at it, be sure to check out the past week's��blog posts, including Andrew Forsythe on credit card rewards, Greg Spears on used boats, Sanjib Saha on his inflation jitters and Rick Connor on his��parking��problems.
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 Go to Extremes appeared first on HumbleDollar.
July 30, 2021
Travels with Poppy
FOR OUR SUMMER vacation, my family traveled from California to South Carolina. My wife and daughter opted to fly, but my son and I saw it as an opportunity to take a cross-country road trip with our goldendoodle, Poppy. Here are three observations from our journey along Interstate 40:
Summer 2021 may not be a good time to buy a car. We saw dozens of car dealerships as we traveled. In nearly every case, it seemed that more than 50% of the spaces that normally would have cars and trucks for sale were empty. With such low inventory, it���s easy to believe reports that dealers are charging more than the manufacturer���s suggested retail price. High prices and limited selection make it prudent���if possible���to delay your car purchase until supply levels normalize.
Don���t get your hopes up for the free hotel breakfast. When we���re on the road, I look for efficient and effective ways to feed my 14-year-old son. We try to start the day with a free breakfast, which usually involves cereal and unlimited waffles. But on our way to South Carolina, two of the three hotels advertising free breakfast had reduced the meal to a grab-and-go bag filled with a granola bar and a fruit cup. Both hotels explained that they provided these bags because they hadn���t been able to fill the ���breakfast attendant��� position.
Expect to wait longer than usual for a restaurant table. Once our family reunited on the East Coast, my wife and I got away to Asheville, North Carolina, for a few nights. Consistent with what my son and I experienced in hotels across the country, my wife and I saw the impact of labor shortages in the hospitality industry. Even though it���s peak travel season, many restaurants in the Asheville area are closed two days a week because they don���t have enough workers. With travel demand getting back to normal following a slow 2020 season, it was difficult to find good places to eat that weren���t crowded. We usually like to make impromptu arrangements once we���ve made it to our destination, but next time we���ll be sure to make dinner reservations.
Summer 2021 may not be a good time to buy a car. We saw dozens of car dealerships as we traveled. In nearly every case, it seemed that more than 50% of the spaces that normally would have cars and trucks for sale were empty. With such low inventory, it���s easy to believe reports that dealers are charging more than the manufacturer���s suggested retail price. High prices and limited selection make it prudent���if possible���to delay your car purchase until supply levels normalize.
Don���t get your hopes up for the free hotel breakfast. When we���re on the road, I look for efficient and effective ways to feed my 14-year-old son. We try to start the day with a free breakfast, which usually involves cereal and unlimited waffles. But on our way to South Carolina, two of the three hotels advertising free breakfast had reduced the meal to a grab-and-go bag filled with a granola bar and a fruit cup. Both hotels explained that they provided these bags because they hadn���t been able to fill the ���breakfast attendant��� position.
Expect to wait longer than usual for a restaurant table. Once our family reunited on the East Coast, my wife and I got away to Asheville, North Carolina, for a few nights. Consistent with what my son and I experienced in hotels across the country, my wife and I saw the impact of labor shortages in the hospitality industry. Even though it���s peak travel season, many restaurants in the Asheville area are closed two days a week because they don���t have enough workers. With travel demand getting back to normal following a slow 2020 season, it was difficult to find good places to eat that weren���t crowded. We usually like to make impromptu arrangements once we���ve made it to our destination, but next time we���ll be sure to make dinner reservations.
The post Travels with Poppy appeared first on HumbleDollar.
Lean Times Ahead?
THE HEADLINE GRABBED my attention���because it seemed to speak to my situation: ���Planning for Retirement: Women in Two-Income Households at Highest Risk.��� The article suggested that women in their 50s in two-income households are at greater risk of being unable to maintain their preretirement standard of living when compared to single women and women in one-income households.
A big factor: Dual-income households tend to save a smaller percentage of their income compared with single-income households. The article also cited less-generous Social Security benefits for dual-income couples than for those with only one wage earner. In addition, the research found that two-income households tend to spend more on fixed expenses such as mortgages and car payments.
I don���t dispute the findings. As someone who in the past decade has been both single and married, I know I managed to save a larger percentage of my salary when I was single. That was because I chose to lower my standard of living, opting for an apartment and a used car, rather than owning a house and buying newer vehicles.
Where the study is flawed: It assumes I wouldn���t be willing to lower my standard of living again. When I leave working life behind, I���ll be willing to forgo certain luxuries. In planning for retirement, my husband and I don���t expect to maintain a dual-income lifestyle. Our goal is simply to have more time together doing activities we both enjoy.
A big factor: Dual-income households tend to save a smaller percentage of their income compared with single-income households. The article also cited less-generous Social Security benefits for dual-income couples than for those with only one wage earner. In addition, the research found that two-income households tend to spend more on fixed expenses such as mortgages and car payments.
I don���t dispute the findings. As someone who in the past decade has been both single and married, I know I managed to save a larger percentage of my salary when I was single. That was because I chose to lower my standard of living, opting for an apartment and a used car, rather than owning a house and buying newer vehicles.
Where the study is flawed: It assumes I wouldn���t be willing to lower my standard of living again. When I leave working life behind, I���ll be willing to forgo certain luxuries. In planning for retirement, my husband and I don���t expect to maintain a dual-income lifestyle. Our goal is simply to have more time together doing activities we both enjoy.
The post Lean Times Ahead? appeared first on HumbleDollar.
Harder for Some
IS SUCCESS WITHIN reach for anybody willing to work hard? We like to think of the U.S. as a meritocracy with a one-to-one correlation between effort and achievement. It���s a notion that allows us to feel that we���re in control of our destiny and that we���ve fully earned the success we enjoy.
But in truth, there are many factors that continue to tilt the playing field one way or another. Socioeconomic status, race and gender still sway the game. While the impact of such factors may have been reduced, comprehensive data show they remain important.
Warren Buffett is clearly a winner at the success game, but even he says that not every person gets an even chance. Acknowledging persistent gender and race discrimination, he used the phrase "ovarian lottery" at a 1997 shareholder��meeting.
The ovarian lottery is ���the most important event in which you���ll ever participate,��� Buffett said. ���It���s going to determine way more than what school you go to, how hard you work, all kinds of things.��� He noted that he didn���t have to overcome barriers of race or gender. As Buffett admitted, ���We won it by being White. You know, no tribute to us, it just happened that way.���
Buffett���s comments from 24 years ago are still valid today. Consider three recent studies:
A 2019 study by the Bill and Melinda Gates Foundation examined inequality and concluded that, no matter where you're born, ���life will be harder if you are born a girl.���
A large genome-based study of economic data bluntly challenges the idea of our system being a pure meritocracy, summed up by the headline, ���It���s better to be born rich than gifted.��� It found that the least-gifted children of high-income parents graduate from college at higher rates than the most-gifted children of low-income parents.
Federal Reserve data show that the typical White family has eight times the wealth of the typical Black family and five times the wealth of the typical Hispanic family.
The bottom line: There���s clear evidence that factors beyond our control conspire to affect our ability to play the game before we even arrive at the table. But despite such studies, many folks remain skeptical, noting they���ve never observed such discrimination and citing stories of women, minorities and those from poorer households who got ahead. Perhaps, however, we can all agree on three things:
Anecdotal stories that "she made it regardless of" shouldn���t override what the data say. Just because we ourselves don���t experience discrimination���or just because we know of people who have succeeded despite it���doesn���t mean discrimination doesn���t exist.
We all benefit the closer the system comes to fully employing the talents of all citizens. As Jackie Robinson showed, you want the best player on the field for the good of the team, regardless of how choosing players was done before.
Most of us are privileged in some ways and less privileged in others. I didn���t win the ovarian lottery, but I consider myself extremely privileged in many ways. I was born in Thailand, a developing country with its fair share of political turmoil. But I was lucky enough to be born into a family with progressive and well-educated parents who insisted I got the same education opportunities as my three brothers.
I���ve met many Americans who happily acknowledge they were ���born on third base��� because they had the good fortune to grow up in the U.S. rather than in, say, Myanmar. But maybe it���s time we also acknowledge that we���re fortunate and unfortunate in other ways that are beyond our control. As Buffett warned, the great ���enemy of change��� lives in ���the ingrained attitudes of those who simply can���t imagine a world different from the one they���ve lived in.���
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.
But in truth, there are many factors that continue to tilt the playing field one way or another. Socioeconomic status, race and gender still sway the game. While the impact of such factors may have been reduced, comprehensive data show they remain important.
Warren Buffett is clearly a winner at the success game, but even he says that not every person gets an even chance. Acknowledging persistent gender and race discrimination, he used the phrase "ovarian lottery" at a 1997 shareholder��meeting.
The ovarian lottery is ���the most important event in which you���ll ever participate,��� Buffett said. ���It���s going to determine way more than what school you go to, how hard you work, all kinds of things.��� He noted that he didn���t have to overcome barriers of race or gender. As Buffett admitted, ���We won it by being White. You know, no tribute to us, it just happened that way.���
Buffett���s comments from 24 years ago are still valid today. Consider three recent studies:
A 2019 study by the Bill and Melinda Gates Foundation examined inequality and concluded that, no matter where you're born, ���life will be harder if you are born a girl.���
A large genome-based study of economic data bluntly challenges the idea of our system being a pure meritocracy, summed up by the headline, ���It���s better to be born rich than gifted.��� It found that the least-gifted children of high-income parents graduate from college at higher rates than the most-gifted children of low-income parents.
Federal Reserve data show that the typical White family has eight times the wealth of the typical Black family and five times the wealth of the typical Hispanic family.
The bottom line: There���s clear evidence that factors beyond our control conspire to affect our ability to play the game before we even arrive at the table. But despite such studies, many folks remain skeptical, noting they���ve never observed such discrimination and citing stories of women, minorities and those from poorer households who got ahead. Perhaps, however, we can all agree on three things:
Anecdotal stories that "she made it regardless of" shouldn���t override what the data say. Just because we ourselves don���t experience discrimination���or just because we know of people who have succeeded despite it���doesn���t mean discrimination doesn���t exist.
We all benefit the closer the system comes to fully employing the talents of all citizens. As Jackie Robinson showed, you want the best player on the field for the good of the team, regardless of how choosing players was done before.
Most of us are privileged in some ways and less privileged in others. I didn���t win the ovarian lottery, but I consider myself extremely privileged in many ways. I was born in Thailand, a developing country with its fair share of political turmoil. But I was lucky enough to be born into a family with progressive and well-educated parents who insisted I got the same education opportunities as my three brothers.
I���ve met many Americans who happily acknowledge they were ���born on third base��� because they had the good fortune to grow up in the U.S. rather than in, say, Myanmar. But maybe it���s time we also acknowledge that we���re fortunate and unfortunate in other ways that are beyond our control. As Buffett warned, the great ���enemy of change��� lives in ���the ingrained attitudes of those who simply can���t imagine a world different from the one they���ve lived in.���
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 Harder for Some appeared first on HumbleDollar.
July 29, 2021
Labor Pains
I ALMOST MADE a waitress cry yesterday. It isn���t what you think. I didn���t yell at her for poor service. Quite the contrary.
My wife and I went out for lunch at an Irish pub. I noticed the help wanted ad on the front door as we went inside. When it came time to pay our bill, I simply shared my heartfelt appreciation that she was willing to work and serve us in the midst of the current labor shortage.
She teared up and told us how hard it is to offer good service when they���re short-staffed. I was so moved by her emotional reaction that I gave her a 30% tip. That���s a big deal for a frugal guy like me.
I spent 40 years in banking working with Main Street businesses, but I���ve never seen anything like the current labor situation. And it isn���t just anecdotal evidence. We���ve set new records for job openings in each of the past three months.
Labor shortages are disrupting everything. Banks are closing branches. New businesses are delaying opening. Restaurants are running at half-staff. Hospitals are losing nurses. In fact, nurses willing to travel are making more than $3,000 a week as contract laborers. It���s a mess.
What should we do? I think about my dad and how he joined the army in the Second World War to fight fascism. He was a member of the Greatest Generation���a moniker they earned with their selfless giving. Perhaps we need some of that attitude for a time like this. Instead of asking how quickly we can retire, maybe we should ask how we can help even more. As we find our wait times growing, maybe we���ll once again view work not as a burden, but as a way to be of service to others.
My wife and I went out for lunch at an Irish pub. I noticed the help wanted ad on the front door as we went inside. When it came time to pay our bill, I simply shared my heartfelt appreciation that she was willing to work and serve us in the midst of the current labor shortage.
She teared up and told us how hard it is to offer good service when they���re short-staffed. I was so moved by her emotional reaction that I gave her a 30% tip. That���s a big deal for a frugal guy like me.
I spent 40 years in banking working with Main Street businesses, but I���ve never seen anything like the current labor situation. And it isn���t just anecdotal evidence. We���ve set new records for job openings in each of the past three months.
Labor shortages are disrupting everything. Banks are closing branches. New businesses are delaying opening. Restaurants are running at half-staff. Hospitals are losing nurses. In fact, nurses willing to travel are making more than $3,000 a week as contract laborers. It���s a mess.
What should we do? I think about my dad and how he joined the army in the Second World War to fight fascism. He was a member of the Greatest Generation���a moniker they earned with their selfless giving. Perhaps we need some of that attitude for a time like this. Instead of asking how quickly we can retire, maybe we should ask how we can help even more. As we find our wait times growing, maybe we���ll once again view work not as a burden, but as a way to be of service to others.
The post Labor Pains appeared first on HumbleDollar.
Saving Smarter
VANGUARD GROUP released its latest
How America Saves
report last month. The survey details the behavior of participants in Vanguard-managed 401(k) and similar retirement plans.
Wall Street likes to depict everyday investors as fools. But the Vanguard report paints a very different picture: Employees are getting smarter. They���re saving more, trading less and aren���t so inclined to take big positions in their employer���s stock.
As I flipped through the numbers and charts with a cup of coffee on a recent Saturday morning, it struck me that today���s savers are doing many things right, while employers are often adopting policies that make matters easier for employees. Here are five ways to be smarter with your retirement savings, along with insights from the Vanguard study.
1. Snatch the match. Most 401(k) plans offer an employer match. In a common arrangement, employers will kick in 50 cents for every $1 an employee contributes, with the maximum employer match equaling 3% of the employee���s pay. The Vanguard survey found that, among the plans it handles, there were more than 180 distinct matching formulas.
The good news: A whopping 86% of plans feature a company match. (Another 10% of plans offer an employer contribution, even if employees don���t contribute.) The average value of the promised match was 4.5% of a worker���s pay. The caveat is there might be a waiting period, known as vesting, before you can keep the match.
Among plans with an employer match, 48% offered immediate vesting, while more than a quarter used a five- or six-year gradual vesting schedule. Check your benefits booklet or ask human resources if your employer has a match and what the vesting schedule is.
If you���re a job-hopper at an employer with a six-year vesting period, it might not seem worth contributing to the 401(k). But remember, you���ll still get the immediate tax savings for traditional 401(k) contributions and the tax-free growth offered by a Roth 401(k). For most employees, the smart play is to contribute at least enough to get the full employer match.
2. Fund a target-date fund. These are one of the financial industry���s greatest recent innovations. The funds allow investors to ���set it and forget it��� by offering an asset allocation geared to an individual���s life stage. The funds��automatically turn more conservative as the target retirement date approaches. Moreover, a target-date fund (TDF) rebalances itself. No grunt work is needed. According to the study, 95% of Vanguard���s plans offered TDFs, up from 82% in 2011. Among the participants covered by the survey, 54% were invested in a single TDF.
3. Avoid trading. The Vanguard survey found that increased adoption of TDFs helped investors avoid trading. Even during the 2020 market crash, just 10% of individuals exchanged funds within their 401(k). In aggregate, just 3% of money moved from stocks to fixed-income investments last year. Moving in and out at the wrong time is called ���decision risk������the risk that an investor has a great plan in place but mucks it up by selling out at the wrong time. Few traders, if any, can successfully time the market, so it���s best to settle on an asset allocation that fits your ability and willingness to accept risk���and then stay put.
4. Accept the nudge. Vanguard���s survey found that 54% of plans auto-enroll employees. That���s more than tripled since 2006. Auto-enrollment helps nudge people to participate in a 401(k), though individuals can always opt-out. Since humans are subject to inertia bias, auto-enrollment plays on our tendency to just stay the course.
Among plans with auto-enrollment, most also offer automatic annual contribution increases. A behavioral trick you can play on yourself is to auto-increase your 401(k) contributions each January. Auto-increase means you raise your contribution rate by perhaps 1% each year to coincide with a bump up in salary. Chances are you'll barely notice the difference in your take-home pay and you���ll build a bigger nest egg in the process.
5. Consider a Roth. These accounts allow investors to pay income tax on their 401(k) contributions now and avoid tax later. A traditional 401(k) works the opposite way: You get a current-year tax break, but then you���re taxed upon withdrawal. Anyone who expects their tax rate to be higher in retirement should consider contributing to a Roth 401(k).
Keep in mind that employer contributions are always pretax���meaning you���ll eventually have to pay tax on those dollars���so adding your own Roth contributions can diversify your tax risk. On the other hand, if you���re in your peak earning years, you might want to favor pretax contributions, so you lower today���s taxable income.
The survey found that 74% of Vanguard plans offered a Roth feature and 14% of participants elected that option. This might seem low. But consider that all plan sponsors with automatic enrollment default to traditional pretax contributions for employees. Vanguard expects more participation in Roth 401(k)s in the future.
Mike Zaccardi is an adjunct finance instructor at the University of North Florida, as well as an investment writer for financial advisors and investment firms. He's a CFA�� charterholder and Chartered Market Technician��, and has passed the coursework for the Certified Financial Planner program. Follow Mike on Twitter @MikeZaccardi, connect with him via LinkedIn, email him at MikeCZaccardi@gmail.com��and check out his earlier articles.
Wall Street likes to depict everyday investors as fools. But the Vanguard report paints a very different picture: Employees are getting smarter. They���re saving more, trading less and aren���t so inclined to take big positions in their employer���s stock.
As I flipped through the numbers and charts with a cup of coffee on a recent Saturday morning, it struck me that today���s savers are doing many things right, while employers are often adopting policies that make matters easier for employees. Here are five ways to be smarter with your retirement savings, along with insights from the Vanguard study.
1. Snatch the match. Most 401(k) plans offer an employer match. In a common arrangement, employers will kick in 50 cents for every $1 an employee contributes, with the maximum employer match equaling 3% of the employee���s pay. The Vanguard survey found that, among the plans it handles, there were more than 180 distinct matching formulas.
The good news: A whopping 86% of plans feature a company match. (Another 10% of plans offer an employer contribution, even if employees don���t contribute.) The average value of the promised match was 4.5% of a worker���s pay. The caveat is there might be a waiting period, known as vesting, before you can keep the match.
Among plans with an employer match, 48% offered immediate vesting, while more than a quarter used a five- or six-year gradual vesting schedule. Check your benefits booklet or ask human resources if your employer has a match and what the vesting schedule is.
If you���re a job-hopper at an employer with a six-year vesting period, it might not seem worth contributing to the 401(k). But remember, you���ll still get the immediate tax savings for traditional 401(k) contributions and the tax-free growth offered by a Roth 401(k). For most employees, the smart play is to contribute at least enough to get the full employer match.
2. Fund a target-date fund. These are one of the financial industry���s greatest recent innovations. The funds allow investors to ���set it and forget it��� by offering an asset allocation geared to an individual���s life stage. The funds��automatically turn more conservative as the target retirement date approaches. Moreover, a target-date fund (TDF) rebalances itself. No grunt work is needed. According to the study, 95% of Vanguard���s plans offered TDFs, up from 82% in 2011. Among the participants covered by the survey, 54% were invested in a single TDF.
3. Avoid trading. The Vanguard survey found that increased adoption of TDFs helped investors avoid trading. Even during the 2020 market crash, just 10% of individuals exchanged funds within their 401(k). In aggregate, just 3% of money moved from stocks to fixed-income investments last year. Moving in and out at the wrong time is called ���decision risk������the risk that an investor has a great plan in place but mucks it up by selling out at the wrong time. Few traders, if any, can successfully time the market, so it���s best to settle on an asset allocation that fits your ability and willingness to accept risk���and then stay put.
4. Accept the nudge. Vanguard���s survey found that 54% of plans auto-enroll employees. That���s more than tripled since 2006. Auto-enrollment helps nudge people to participate in a 401(k), though individuals can always opt-out. Since humans are subject to inertia bias, auto-enrollment plays on our tendency to just stay the course.
Among plans with auto-enrollment, most also offer automatic annual contribution increases. A behavioral trick you can play on yourself is to auto-increase your 401(k) contributions each January. Auto-increase means you raise your contribution rate by perhaps 1% each year to coincide with a bump up in salary. Chances are you'll barely notice the difference in your take-home pay and you���ll build a bigger nest egg in the process.
5. Consider a Roth. These accounts allow investors to pay income tax on their 401(k) contributions now and avoid tax later. A traditional 401(k) works the opposite way: You get a current-year tax break, but then you���re taxed upon withdrawal. Anyone who expects their tax rate to be higher in retirement should consider contributing to a Roth 401(k).
Keep in mind that employer contributions are always pretax���meaning you���ll eventually have to pay tax on those dollars���so adding your own Roth contributions can diversify your tax risk. On the other hand, if you���re in your peak earning years, you might want to favor pretax contributions, so you lower today���s taxable income.
The survey found that 74% of Vanguard plans offered a Roth feature and 14% of participants elected that option. This might seem low. But consider that all plan sponsors with automatic enrollment default to traditional pretax contributions for employees. Vanguard expects more participation in Roth 401(k)s in the future.
Mike Zaccardi is an adjunct finance instructor at the University of North Florida, as well as an investment writer for financial advisors and investment firms. He's a CFA�� charterholder and Chartered Market Technician��, and has passed the coursework for the Certified Financial Planner program. Follow Mike on Twitter @MikeZaccardi, connect with him via LinkedIn, email him at MikeCZaccardi@gmail.com��and check out his earlier articles.
The post Saving Smarter appeared first on HumbleDollar.
July 28, 2021
Treating Ourselves
WHEN LYING IN BED at night, I sometimes hear the horn from the distant train that once took my wife and me to San Diego. We used to ride that train to its last stop, which was walking distance to our hotel. From the hotel, we would then walk to Petco Park to catch a baseball game. After the game, we���d head over to the Gaslamp Quarter and choose a nice restaurant for dinner. Then we would take a nice long stroll back to our hotel.
The next morning, we would go to our favorite restaurant, the Broken Yolk, for breakfast. The place was always packed and full of energy. It seemed like everyone knew each other. The atmosphere had an unusual feel to it. You felt like you were in a scene in a movie, waiting for the director to yell ���cut.����� Afterwards, we���d head to the train station for our ride home.
Until our lives were threatened by a dangerous and mysterious virus, I never realized how important those short weekend trips were to my well-being. How the trips weren���t just a chance to have some fun, but how vital it was to allow me to escape for a short while from all the pressing problems I might have had at the time.
Isabel Gillies, author of Cozy: The Art of Arranging Yourself in the World, told AARP Bulletin that ���being good to yourself offers a necessary reprieve from whatever horrors threaten us from out there.��� Perhaps treating yourself every so often isn���t wasteful spending after all.
The next morning, we would go to our favorite restaurant, the Broken Yolk, for breakfast. The place was always packed and full of energy. It seemed like everyone knew each other. The atmosphere had an unusual feel to it. You felt like you were in a scene in a movie, waiting for the director to yell ���cut.����� Afterwards, we���d head to the train station for our ride home.
Until our lives were threatened by a dangerous and mysterious virus, I never realized how important those short weekend trips were to my well-being. How the trips weren���t just a chance to have some fun, but how vital it was to allow me to escape for a short while from all the pressing problems I might have had at the time.
Isabel Gillies, author of Cozy: The Art of Arranging Yourself in the World, told AARP Bulletin that ���being good to yourself offers a necessary reprieve from whatever horrors threaten us from out there.��� Perhaps treating yourself every so often isn���t wasteful spending after all.
The post Treating Ourselves appeared first on HumbleDollar.
Tale of Two Refunds
A FEW DAYS AGO, I drove up to a JP Morgan Chase ATM to make a cash withdrawal. The infernal machine not only wouldn���t spit out the cash or a receipt, but also it was a struggle even to get my card back. I parked and went inside, expecting a quick resolution.
The teller told me that she could see on her computer that my account was dinged for the cash withdrawal. But she also told me that the ATMs are managed by a third-party vendor, so they couldn���t do anything to help me there at the branch. In fact, they couldn���t even hang a sign on the ATM warning that it was unavailable���even though another customer had had a similar problem earlier that day.
Instead, I was forced to go home and call Chase to report the problem. After an hour on the phone, including endless robot obstructions and a couple of disconnections, I finally got the customer claims department, where I could report the issue and initiate a claim. A few days later, I received a credit for the erroneous ATM debit.
Meanwhile, I���ve also been a customer, occasional seller and big fan of eBay since 2001. Around the same time as my Chase problem, I was having an issue with an eBay seller. There was no tracking information on my order. The seller stopped responding to messages. And then came the big one: The seller was now showing as ���no longer a registered user.���
Even though my purchase was only a few days late, I decided this stunk to high heaven and I wasn���t going to wait. Unlike with Chase, there was no need to call and speak to someone. I just clicked a button to report a problem with the transaction. I requested a refund and provided a brief explanation of the problem. Ebay immediately created my ���case��� and then emailed me that it had been decided in my favor���13 minutes later.
The teller told me that she could see on her computer that my account was dinged for the cash withdrawal. But she also told me that the ATMs are managed by a third-party vendor, so they couldn���t do anything to help me there at the branch. In fact, they couldn���t even hang a sign on the ATM warning that it was unavailable���even though another customer had had a similar problem earlier that day.
Instead, I was forced to go home and call Chase to report the problem. After an hour on the phone, including endless robot obstructions and a couple of disconnections, I finally got the customer claims department, where I could report the issue and initiate a claim. A few days later, I received a credit for the erroneous ATM debit.
Meanwhile, I���ve also been a customer, occasional seller and big fan of eBay since 2001. Around the same time as my Chase problem, I was having an issue with an eBay seller. There was no tracking information on my order. The seller stopped responding to messages. And then came the big one: The seller was now showing as ���no longer a registered user.���
Even though my purchase was only a few days late, I decided this stunk to high heaven and I wasn���t going to wait. Unlike with Chase, there was no need to call and speak to someone. I just clicked a button to report a problem with the transaction. I requested a refund and provided a brief explanation of the problem. Ebay immediately created my ���case��� and then emailed me that it had been decided in my favor���13 minutes later.
The post Tale of Two Refunds appeared first on HumbleDollar.
Rising Tide
YOU CAN ADD ANOTHER item to the list of things in short supply: Up here in Maine, used boats are hard to find.
���You can���t buy a house, a car or a boat this summer,��� said Sean, manager of the local lobster dock in Bremen, Maine. Luckily, you can still buy lobsters from Sean, though they���re mighty pricey.
Every afternoon, scuffed-up boats with names like Chomper and Sandollar glide up to the dock to winch their catch up to Sean���s lobster tanks. On a recent July day, hard-shell lobsters fetched $10.95 a pound and soft-shells, which have less meat inside, $9.95.
The same lobsters cost $6 and $5 last summer. Back then, China wasn���t buying, and neither were restaurants. Now everyone wants Maine lobsters, Sean said, including Canadian canning houses that let their inventories run down.
To an economist, it looks like too many dollars chasing too few goods���the classic recipe for inflation. At a conference organized by University of Pennsylvania���s Wharton School in April, Prof. Jeremy Siegel noted that M2 money supply���ready money, including cash and deposits in checking accounts, savings accounts, certificates of deposit and money market funds���jumped 25% in less than a year. It has never expanded by that much before, Siegel said, not even during the difficult days of the Second World War.
Siegel predicted a burst of inflation for the next three or four years. ���When will it start?��� someone asked. Right away, Siegel answered.
After the conference, I bought shares in an inflation-protected Treasury bond fund. Who knows what will happen, but I hope to ride inflation like a surfer on the crest of a wave. Too bad I didn���t think of the really smart inflation play���to buy a used boat in Maine last summer.
���You can���t buy a house, a car or a boat this summer,��� said Sean, manager of the local lobster dock in Bremen, Maine. Luckily, you can still buy lobsters from Sean, though they���re mighty pricey.
Every afternoon, scuffed-up boats with names like Chomper and Sandollar glide up to the dock to winch their catch up to Sean���s lobster tanks. On a recent July day, hard-shell lobsters fetched $10.95 a pound and soft-shells, which have less meat inside, $9.95.
The same lobsters cost $6 and $5 last summer. Back then, China wasn���t buying, and neither were restaurants. Now everyone wants Maine lobsters, Sean said, including Canadian canning houses that let their inventories run down.
To an economist, it looks like too many dollars chasing too few goods���the classic recipe for inflation. At a conference organized by University of Pennsylvania���s Wharton School in April, Prof. Jeremy Siegel noted that M2 money supply���ready money, including cash and deposits in checking accounts, savings accounts, certificates of deposit and money market funds���jumped 25% in less than a year. It has never expanded by that much before, Siegel said, not even during the difficult days of the Second World War.
Siegel predicted a burst of inflation for the next three or four years. ���When will it start?��� someone asked. Right away, Siegel answered.
After the conference, I bought shares in an inflation-protected Treasury bond fund. Who knows what will happen, but I hope to ride inflation like a surfer on the crest of a wave. Too bad I didn���t think of the really smart inflation play���to buy a used boat in Maine last summer.
The post Rising Tide appeared first on HumbleDollar.
An Appreciated Gift
MY NEPHEW GRADUATED from high school this past spring and starts college in the fall. Alex is fortunate to have received a full scholarship from his college of choice.
Wait, scratch that.
Alex isn���t fortunate. Rather, his diligence and academic success in high school have been rewarded.
While Alex needs no help paying for college, his notable accomplishment should still be recognized. We���d write him a check, but where���s the fun in that? How about a financial gift that���ll allow some one-on-one time that might spark an interest in sensible investing?
For instance, we could gift him some appreciated stock, which would also absolve ourselves of a future capital-gains tax burden. Or we could make a contribution to a Roth IRA up to the amount of his earned income and start him on a lifetime of tax-free growth. Problem is, we can���t put appreciated assets in an IRA, only cash. That means we can���t unload our appreciated assets and help Alex start a Roth.
Or can we?
It turns out we can, but there will be a few steps involved. Here are the steps and considerations we need to keep in mind:
We���ll have Alex set up a taxable brokerage account in which to receive the gift, as well as a Roth IRA to be funded later. There are several firms that would be suitable, but since we���re at Fidelity Investments and understand its website and customer service, we���ll have him set up Fidelity accounts. Being at the same institution should make it easier to navigate the various steps.
Once Alex has his brokerage account open, we���ll instruct Fidelity to make the transfer of an appreciated holding from my wife���s taxable brokerage account to Alex���s. This can be done in a few days.
Once Alex has received the shares, he can sell and then invest some or all of the proceeds in his Roth IRA.
That sounds straightforward, but aren���t there tax considerations? Well, of course there are:
On our end, each of us can gift up to $15,000 per recipient without needing to track this for future estate tax implications. No problem there.
On the receiving end, Alex doesn���t need to report the gift as income. But what about the sale of the shares?
This is where it gets a little complicated. While we were aware of the rules on inherited stock, the IRS has different rules for gifted stock. Inherited stock currently gets a step up in cost basis to the value at the time of the original owner���s death or six months later, at the discretion of the estate. By contrast, with gifted shares, the recipient must pay tax on any capital gain tax based on the giver���s cost basis and holding period.
This is good news. If your shares are already long-term holdings when you give them, they���ll still be long-term holdings for recipients when they sell, even if they sell immediately. In the case of young adults, the news may be even better, as they may have so little income that they���ll pay capital gains tax at the 0% rate. That said, families need to be aware of both the college financial aid and kiddie tax implications of the gift.
The question of what to give is intriguing. Should it be the holding with which we can gift ourselves out of the largest capital gains exposure? The holding we���re ready to get rid of anyway, even if there���s not as much benefit from reduced gains exposure? The holding we���d recommend as the best choice for an 18-year-old, unless we���re suggesting he sell immediately?
In the end, we���re giving shares of an actively managed world stock fund. It has significant capital gains, so we give away that exposure. It���s somewhat tax-inefficient, so we improve our own portfolio in that way. Finally, while we���ll suggest Alex sell, and put two-thirds in a U.S. stock index fund and one-third in an international stock index fund, he might never get around to it. If that���s the case, the gifted fund is also fine to continue holding.
Aside from our case of rewarding a new high school graduate, the considerations here about gifting (and selling gifted) shares are applicable in other situations as well. Indeed, they might be even more important if giving to someone who���s already in the workforce making a significant income. In any case, if you gift shares, whether for a graduation, birthday, wedding, new child or some other reason, be sure to tell the recipient your cost basis in those shares, and to make clear why he or she needs that information.
Michael Perry is a former career Army��officer and external��affairs executive��for a Fortune 100��company. In addition to personal finance and investing, his interests include reading, traveling,��being outdoors,��strength training and coaching, and cocktails.��
Wait, scratch that.
Alex isn���t fortunate. Rather, his diligence and academic success in high school have been rewarded.
While Alex needs no help paying for college, his notable accomplishment should still be recognized. We���d write him a check, but where���s the fun in that? How about a financial gift that���ll allow some one-on-one time that might spark an interest in sensible investing?
For instance, we could gift him some appreciated stock, which would also absolve ourselves of a future capital-gains tax burden. Or we could make a contribution to a Roth IRA up to the amount of his earned income and start him on a lifetime of tax-free growth. Problem is, we can���t put appreciated assets in an IRA, only cash. That means we can���t unload our appreciated assets and help Alex start a Roth.
Or can we?
It turns out we can, but there will be a few steps involved. Here are the steps and considerations we need to keep in mind:
We���ll have Alex set up a taxable brokerage account in which to receive the gift, as well as a Roth IRA to be funded later. There are several firms that would be suitable, but since we���re at Fidelity Investments and understand its website and customer service, we���ll have him set up Fidelity accounts. Being at the same institution should make it easier to navigate the various steps.
Once Alex has his brokerage account open, we���ll instruct Fidelity to make the transfer of an appreciated holding from my wife���s taxable brokerage account to Alex���s. This can be done in a few days.
Once Alex has received the shares, he can sell and then invest some or all of the proceeds in his Roth IRA.
That sounds straightforward, but aren���t there tax considerations? Well, of course there are:
On our end, each of us can gift up to $15,000 per recipient without needing to track this for future estate tax implications. No problem there.
On the receiving end, Alex doesn���t need to report the gift as income. But what about the sale of the shares?
This is where it gets a little complicated. While we were aware of the rules on inherited stock, the IRS has different rules for gifted stock. Inherited stock currently gets a step up in cost basis to the value at the time of the original owner���s death or six months later, at the discretion of the estate. By contrast, with gifted shares, the recipient must pay tax on any capital gain tax based on the giver���s cost basis and holding period.
This is good news. If your shares are already long-term holdings when you give them, they���ll still be long-term holdings for recipients when they sell, even if they sell immediately. In the case of young adults, the news may be even better, as they may have so little income that they���ll pay capital gains tax at the 0% rate. That said, families need to be aware of both the college financial aid and kiddie tax implications of the gift.
The question of what to give is intriguing. Should it be the holding with which we can gift ourselves out of the largest capital gains exposure? The holding we���re ready to get rid of anyway, even if there���s not as much benefit from reduced gains exposure? The holding we���d recommend as the best choice for an 18-year-old, unless we���re suggesting he sell immediately?
In the end, we���re giving shares of an actively managed world stock fund. It has significant capital gains, so we give away that exposure. It���s somewhat tax-inefficient, so we improve our own portfolio in that way. Finally, while we���ll suggest Alex sell, and put two-thirds in a U.S. stock index fund and one-third in an international stock index fund, he might never get around to it. If that���s the case, the gifted fund is also fine to continue holding.
Aside from our case of rewarding a new high school graduate, the considerations here about gifting (and selling gifted) shares are applicable in other situations as well. Indeed, they might be even more important if giving to someone who���s already in the workforce making a significant income. In any case, if you gift shares, whether for a graduation, birthday, wedding, new child or some other reason, be sure to tell the recipient your cost basis in those shares, and to make clear why he or she needs that information.
Michael Perry is a former career Army��officer and external��affairs executive��for a Fortune 100��company. In addition to personal finance and investing, his interests include reading, traveling,��being outdoors,��strength training and coaching, and cocktails.��
The post An Appreciated Gift appeared first on HumbleDollar.
