Jonathan Clements's Blog, page 362

An Old Man’s Gripes

THOMAS JEFFERSON said, ���Honesty is the first chapter in the book of wisdom.���

It���s well known that we tend to believe what we want or what fits our preconceived notions. But this is getting out of control. Here���s what drives me nuts on the misinformation superhighway:

1. ���Health care is unaffordable.��� There���s no denying health care is expensive and insurance premiums can be a heavy financial burden. And, yes, surveys find that Americans think health care is unaffordable. But what about a day at the ballpark? Is that cheap? Have you ever seen a survey about that?

Nobody, it seems, wants to spend their hard-earned money on health care. They don���t even want to fork over a modest co-pay. We each need to come to grips with health care spending as a regular part of our family budget.

2. ���Health insurance is the problem.��� Health insurance premiums reflect the cost and use of health care. If the cost and use of health care rises, so too will premiums. Health care costs drive premiums, not the other way around.

The real problem with health insurance is that it isn���t insurance at all. We expect our health insurance to reimburse us for everything we spend, rather than just for extraordinary expenses. That���s not how real insurance works.

3. ���Health insurance company profits are the problem.��� That���s ridiculous. Those profits have nothing to do with health care costs���and they represent just a small portion of health insurance premiums.

Moreover, most Americans have health care coverage that doesn���t involve insurance, because their employer is self-insuring or they���re covered by a government program. The profit margins for health insurance companies are nearly the same as regulated utilities���in the 3��% to 10% range. When you read that an insurance company has billions in profits, divide it among all the policies in effect and you���ll see the individual impact is modest.

4. ���Teachers are underpaid.��� It isn���t possible to pay good teachers commensurate with the value they bring to a community or a child. But generally, they aren���t underpaid. Yes, you need to consider their salary. But you also need to consider vacation time, benefits while working and benefits received once retired, notably pension benefits.

5. ���Social Security has a surplus.��� A surplus implies you have more than is needed to meet obligations. The reality: Social Security has unfunded liabilities in the tens of trillions of dollars. What Social Security has is a reserve���a trust fund that���s gradually being depleted. The reserve, by itself, is sufficient to pay current benefits for about 53 months.

6. ���Social Security is going bankrupt.��� Wrong again. As long as there are taxes coming in, Social Security can���t go bankrupt. But when the Social Security trust fund is depleted, the incoming taxes won���t be sufficient to pay 100% of promised benefits.

7. ���Congress stole the trust fund.��� This is a rumor that just won���t die. Nobody stole the Social Security trust fund. It���s invested in special interest-generating Treasury bonds. Last year, those bonds paid $80 billion in interest, which was then used to pay Social Security benefits.

8. ���Congress should give retirees more.��� There���s a misconception that the annual Social Security cost-of-living increase is determined by Congress or the president, both of whom get the blame when there���s little or no ���pay raise��� for retirees.

But in truth, the increase is based on the annual change in a key inflation measure, CPI-W. There���s no annual decision by Congress or the president. Many people want to move to CPI-E, which is designed to better reflect the inflation rate experienced by seniors. But CPI-E is no guarantee of a higher Social Security cost-of-living increase���and often the difference isn���t significant.

9. ���Congressmen are paid their salary for life.��� This is another persistent rumor. To receive a pension, a member of Congress must have five years of service, which means a member of the House of Representatives would need to be reelected twice. A pension is nothing close to full pay. And, yes, members of Congress pay Social Security taxes and contribute toward their pensions.

10. ���Members of Congress are overpaid.��� At $174,000 a year, which is nearly three times the median household income, it���s easy to feel members of Congress are paid too much. But I���d argue Congress is underpaid.

Think of it this way: You have a good job or run a small business. You have a family. You then win a job in Congress���which you may lose two years later. Could you afford to move your family to Washington, DC? Could you afford to maintain two homes, one in your home state and one in the District of Columbia? The cost of living in the Washington area is nearly 60% higher than the national average. Members of Congress had their pay last increased more than a decade ago. Some estimate that tight family finances compel 50 to 100 members to live in their offices.

11. ���Times��are different.��� Change doesn���t mean loss of opportunity. Rather, it means different opportunities���requiring different strategies to cope. Yes, baby boomers had the advantage of the post-Second World War economic boom. But today���s millennials have the advantage of vastly improved technology and a more open world. Why all the complaining?

12. Assumptions and consequences.��It drives me nuts that so few people ask about the assumptions used or the possible���and sometimes unintended���consequences of… just about anything. The cost, or the projected savings from, a new government program can be swayed by tweaking assumptions. Take state pension funds. Assume a higher rate of investment return and the funding can suddenly look a whole lot better.

13. ���I can���t afford to save.��� As Henry Ford may have said, ���Whether you believe you can do a thing or not, you are right.���

Except for the chronically poor, everyone can save. The first step is taking an honest look at where your money goes, especially differentiating between necessities and other spending. The secret is to pay yourself first, preferably through an automatic savings program.

14. ���How much money will I need for retirement?��� How am I supposed to know? There���s no quick and easy answer, because there are so many factors���and those factors vary with every individual. What standard of living do you want to maintain? How much savings will you need to maintain that standard of living through a long retirement that���ll likely see at least modest inflation? What will your Social Security benefit provide each month? Gather all that information and you can get a reasonable answer to your question.

15. Shopping carts. I���ve saved my favorite gripe for last���and, I���ll freely admit, it has nothing to do with misinformation. What is it that prevents so many people from returning their shopping carts to where they belong? I���ll go out on a limb here and say it���s a reflection of how these folks behave in other areas of their lives. And, yes, they probably don’t believe in facts, either.

Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include Money Pit,��Crying Poverty,��Shortsighted��and��Farewell Money.��Follow Dick on Twitter��@QuinnsComments.

Do you enjoy��reading the articles by Dick and HumbleDollar’s other writers? Please support our work with a��donation.

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Out on a Lim

THIS WILL SOUND like heresy to buy-and-hold investors. But I believe risks are building within the financial system���and we ignore these risks at our peril.

If you���re a diehard buy-and-hold investor who, come hell or high water, plans to dollar-cost average into the stock market, feel free to skip this article. It is not for you. On the other hand, if you believe���as I do���that there are more and less advantageous times to invest one���s capital, please read on.

Like death and taxes, economic and market cycles are indisputable facts of life. It has been a long time since the U.S. has had a recession. The last one���the Great Recession���ended in June 2009. That means the current economic expansion is now a decade old. If we get through June without a recession, this will be the longest economic expansion on record.

There is no law that limits the length of an economic expansion to one decade. By the looks of it, this economic expansion is headed for the record books. But here���s my concern: Many risks and warning signs are seemingly being ignored by investors, perhaps due to the unprecedented length of the current economic cycle and bull market. Here are nine huge risks���which, I believe, investors are blithely ignoring:

1. The yield curve is inverted. Based on the difference between 10-year and three-month Treasury yields, the yield curve inverted in March of this year and again in May. As I���ve discussed previously, this has been a reliable harbinger of recessions.

In fact, I suspect the yield curve would have inverted earlier and, indeed, is currently more inverted than it appears, due to the Fed���s quantitative tightening (QT) program, which began in October 2017. As the Fed has attempted to shrink its balance sheet, QT has the effect of increasing the supply of long-term Treasurys, which raises their yields. In other words, just as quantitative easing (QE) lowered long-term interest rates, reversing QE raises them. The bottom line: Without QT, 10-year Treasury yields would likely be even lower and the yield curve even more inverted.

2. Stock market valuations���particularly in the U.S.���are very high by historical standards. By some measures, the market is as expensive as it has ever been. One of Warren Buffett���s favorite metrics for overall stock market valuation���the market value of all publicly traded stocks divided by GNP���currently stands at about 190% in the U.S. In Buffett���s own words during a 2001 speech, ���If the ratio approaches 200%���as it did in 1999 and a part of 2000���you are playing with fire.���

3. Interest rates have been lower, and lower for longer, in this cycle than ever before. The enormous importance of interest rates cannot be understated. Nothing has a greater influence on the economy and markets. Interest rates determine the price of all financial assets by discounting future cash flows. Interest rates also control the availability of credit, which is the lifeblood of the economy.

In December 2008, the Federal Reserve lowered short-term interest rates���as reflected in the federal funds rate���to essentially zero, where they remained for the next seven years, until the first rate hike in December 2015. This extraordinary policy was known as ZIRP, or zero interest rate policy. The fed funds rate remained below 2% until September 2018, or nearly a decade of extraordinarily low interest rates. To put this in perspective, from July 1954 to December 2008, the fed funds rate was below 2% for a combined total of just 66 months, or 5�� years.

I don���t pretend to know the ramifications of keeping interest rates extraordinary low for so long���but then again, neither does the Federal Reserve. One thing is certain: Easy money induces risky behavior, and money has never been easier.

4. The jury is still out on the Federal Reserve���s quantitative easing experiment. QE simply refers to the policy by the Federal Reserve to lower long-term interest rates by buying up Treasury bonds. Since the Fed can ���print��� money, this also has the effect of injecting liquidity into the economy. When the Fed embarked on this policy, it described it as a temporary measure.

But as with many things in life, the Fed may be discovering that QE was easier to get into than out of. The Fed���s balance sheet is down just 15% from its peak of $4.5 trillion. Moreover, it���s important to remember that QE is a global experiment. The European Central Bank just ended its version of QE six months ago. Japan���s QE is still going strong, buying not only bonds, but also stocks.

Where has this massive global QE experiment left us? Negative interest rates, for one thing. Both the German and Japanese 10-year bonds are slightly negative. Imagine lending your money to the government for 10 years and having to pay for the privilege. If extraordinary times require extraordinary measures���the rationale for QE in the first place���might extraordinary measures not lead to extraordinary times?

5. Corporate debt is at record levels. Right now, companies are able to pay the interest on their debt with relative ease. But what happens during the next recession? Or when interest rates eventually rise?

6. Trade wars and tariffs threaten to squelch global trade. This topic receives more than enough attention in today���s press, so I have only two words to say about it: Smoot-Hawley.

7. This year has seen a huge jump in initial public stock offerings, including tech unicorns going public. It���s expected that the money raised in IPOs this year will exceed that in 1999, the height of the dot-com boom. That fact alone is not necessarily worrisome, as our economy is obviously much larger than two decades ago. What is worrisome is the valuation and lack of profitability of this year���s crop of IPOs. Stock prices reflect investor pessimism or optimism. Too much of the latter often leads to disappointment.

8. Federal government debt is exploding even during the peak of this economic cycle. Economists Carmen Reinhart and Kenneth Rogoff wrote a paper in 2010, exploring the relationship of government debt and GDP. The one-sentence summary: When the ratio of government debt to GDP exceeds 90%, growth in GDP falls significantly.

The current economic expansion has been one of the slowest on record. One possible explanation: U.S. government debt as a percent of GDP has climbed sharply since the Great Recession, exceeding 90% in 2010 and never looking back. Today, it stands at 105%. The last time this ratio breached 90% was 1944 to 1949, due to the cost of the Second World War. Here���s something uncomfortable to ponder: What will happen to our debt during the next recession, when tax revenue will likely shrink?

9. Student debt is at record levels. To be sure, of all the forms of debt, student loans are probably the most benign, as they���re an investment in future earnings potential. Still, there are limits to even this. Today, there���s more than $1.5 trillion in student loans outstanding, which is almost 8% of GDP.

John Lim is a physician who is working on a finance book geared toward children. His previous articles include My Sentence,��Yielding Clarity��and��Grab the Roadmap . Follow John on Twitter @JohnTLim .

HumbleDollar makes money in three ways: We accept�� donations, ��run advertisements served up by Google AdSense and participate in�� Amazon ‘s Associates Program, an affiliate marketing program. If you click on this site’s Amazon links and purchase books or other merchandise, you don’t pay anything extra, but we make a little money.

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May’s Hits

IT WAS ANOTHER record month at HumbleDollar, with the highest number of page views in our 29-month history. What were folks reading? These were the seven most popular articles:

Farewell Money
Calling the Shots
After the Windfall
Debtor’s Dozen
Crying Poverty
Power of Two
Beat the Street

In May, we launched our 13-step financial life planner, which also attracted a slew of readers. But it seems most folks went straight to the end of the story, because the most visited page was step 13, which is devoted to generating retirement income.

Many, many thanks to the more than 200 readers who have support HumbleDollar with financial gifts since late April, when we launched our donation page. That’s allowed us to strip all but one of the advertisements from the home page, as well as some of the other advertising on the site.

Follow Jonathan on Twitter�� @ClementsMoney ��and on Facebook .��His most recent articles include Down the Drain ,�� Great Debates ��and�� Here to Retirement . Also check out his new��podcast with Creative Planning’s Peter Mallouk, as well as last week’s��article for Creative, Bet on the Humans. Jonathan’s ��latest books:��From Here to��Financial��Happiness��and How to Think About Money.

HumbleDollar makes money in three ways: We accept��donations,��run advertisements served up by Google AdSense and participate in��Amazon‘s Associates Program, an affiliate marketing program. If you click on this site’s Amazon links and purchase books or other merchandise, you don’t pay anything extra, but we make a little money.

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Down the Drain

TODAY, I REVEAL this year���s most embarrassing moment: On a recent Sunday, 14-year-old Sarah���stepdaughter of a moderately well-known financial writer���spent $16.47 to have two Starbucks specialty drinks brought to her by the food delivery service DoorDash.

Let that sink in for a moment.

In our defense, my wife and I were away for the weekend, and Sarah was staying at a friend���s house. In my defense, we aren���t talking about my DNA.

As you might imagine, this incident prompted quite the dinnertime conversation. I pointed out that, in many states, someone with a minimum wage job would need to work two hours to buy the two drinks. I also noted that $16.47 represented 11�� days of Sarah���s pocket money. But mostly, I suggested that it simply isn���t right to have an adult pick up two drinks from Starbucks and then deliver them to two 14-year-olds. Children should not have adults at their beck and call.

Sarah���s response: ���It���s my money.���

We live in a wealthy town just north of New York City. My wife and I joke that we���re in the town���s low-income housing, which would seem even funnier, if you knew how much our apartment cost. Amid this affluence, Sarah���s behavior is no aberration. From what I gather, students regularly call the local pizza parlor from school and have them deliver to the main entrance���even if it���s just a single slice.

All this appalls me���for reasons good and bad. Whenever I go to the grocery store, I���m shocked at the bill. When did everything become so expensive? I���ve self-diagnosed this as ���old people���s disease.���

And my ailment doesn���t stop there: If the cost of living strikes me as expensive, the way people live seems even more extravagant. Who needs those luxury cars, or the latest iPhone, or countless cable channels?

But then I tell myself I���m being silly. Why shouldn���t people live more extravagantly? Inflation-adjusted per-capita GDP is double what it was 41 years ago. We should be living better.

I���m just not sure 14-year-olds should be. When I order pizza to be delivered, I remember being in my 20s���and not ordering pizza, because I couldn���t afford it. That makes today���s pizza taste that much better. There���s nothing like the pleasure of a gradually rising standard of living.

But if you���re 14 and you���re already spending $16.47 to have two specialty drinks delivered, how much better can it get? I fear the good folks at Starbucks have their work cut out for them.

Follow Jonathan on Twitter�� @ClementsMoney ��and on Facebook . ��His most recent articles include Great Debates,��Debtor’s Dozen��and��Here to Retirement. Also check out his new��podcast with Creative Planning’s Peter Mallouk, as well as last week’s��article for Creative, Bet on the Humans.��Jonathan’s ��latest books:��From Here to��Financial��Happiness��and How to Think About Money.

HumbleDollar makes money in three ways: We accept�� donations, ��run advertisements served up by Google AdSense and participate in�� Amazon ‘s Associates Program, an affiliate marketing program. If you click on this site’s Amazon links and purchase books or other merchandise, you don’t pay anything extra, but we make a little money.

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Rewriting the Rules

WHEN POLITICAL parties set aside partisan bickering and agree on an issue, it’s worth taking note. Such was the case last week when the House of Representatives voted 417���3 in favor of a bill known as the SECURE Act. This legislation would represent the most significant set of changes to retirement rules in more than a decade.

Why the sudden bipartisan cooperation? For better or worse, both parties recognize that a growing number of Americans face a retirement crisis. According to Boston College���s Center for Retirement Research, fully half of households are ���at risk��� when it comes to retirement readiness.

The new legislation includes more than a dozen changes, big and small. Below are three provisions that I see as most significant, along with the steps I’d consider if they became law:

1. Expanded coverage. According to Pew Charitable Trusts��� research, more than a third of private sector workers don’t have access to a workplace retirement plan. In most cases, that’s because these plans are costly and complicated to establish, and there are steep penalties for falling out of compliance. The new legislation would include both financial incentives and administrative fixes to ease this burden. That should be good for our collective financial health.

The new rules would also help boost participation rates. Long-term part-time workers could no longer be excluded from company 401(k) plans, as they are now. And employers would be permitted to auto-enroll participants at higher contribution rates. Since the original auto-enrollment rule went into effect in 2006, participation rates have climbed steadily, and research has shown that���once enrolled���people generally continue contributing through thick and thin.

What to do?��If your employer doesn’t currently offer a retirement plan, or if you aren’t permitted to participate, keep an eye on Washington. Assuming these new rules take effect, you may want to lobby your human resources department. Encourage your HR folks to establish a 401(k) and point them toward best practices, such as including low-cost index funds.

2. Death of the stretch. Expanding coverage will result in more workers deferring more income and therefore paying less taxes. To help pay for these measures, the legislation would tighten the rules in other areas���including eliminating the so-called stretch IRA.

What���s the stretch IRA? Suppose you inherit an IRA from a parent. Under the current rules, you���re required to take minimum distributions each year from the IRA. Unless the money���s coming from a Roth, you have to pay taxes on those distributions. But to minimize the tax bite, you���re permitted to stretch out the distributions over the course of your lifetime. This can be an especially valuable benefit if a parent passes away during your peak earning years, when your tax rate is likely at its highest.

But this valuable tax break may soon disappear. The new legislation would significantly limit the timetable for these distributions, forcing IRAs inherited after Dec. 31, 2019, to be liquidated within 10 years.

What to do?��If you have substantial assets���more than you foresee spending during your lifetime���this new 10-year rule may require some serious rethinking of your retirement-income plans. The goal: Limit the overall portion of your IRA that���s lost to taxes���both during your lifetime and after your death.

This is complicated, because it requires estimating not only your own future tax bracket, but also your children’s. One way to hedge your bets: Consider Roth conversions during your lifetime. That would lessen the impact of potentially large required IRA distributions on your children’s tax returns.

Fortunately, the new legislation contains another provision that may facilitate tax-efficient Roth conversions. Under current rules for IRAs that aren’t inherited, you���re required to begin taking distributions��once you reach age 70��. Those distributions boost your taxable income, often making Roth conversions financially unattractive after that age. But under the new rules, you’ll have another few years���until age 72���to begin those distributions. That would widen the window for additional Roth conversions at lower tax rates.

“The disappearance of pensions is, in my view, largely responsible for the retirement crisis we face today.”

Another option: If you have both taxable and tax-deferred assets, you could weight your withdrawals more heavily toward tax-deferred accounts during retirement, so the mix of assets you leave your children includes a smaller embedded tax bill. Under current rules, if you bequeath taxable account investments with large unrealized capital gains, that potential tax bill disappears���thanks to the step-up in cost basis upon death.

A final option: If you have charitable intentions, you can make qualified charitable distributions from your IRA once you get into your 70s and beyond. Now that 2017���s tax law has limited many people’s ability to itemize deductions, this may be an appealing strategy that���ll allow you to help your favorite charities, while reducing your taxable income today and leaving less traditional IRA assets to your heirs.

3. Greater access to annuities. The new rules would make it easier for employers to add annuities to their retirement plan���s menu of investment options. In addition, the new law would provide portability for these annuities, as an employee moved from job to job. Taken together, these new provisions would effectively allow workers to create their own personal pensions.

This is potentially very positive, because it would restore retirement���s traditional three-legged stool: Social Security, savings and a pension. For years, that was the recipe for a secure retirement. But in the 1980s, companies began phasing out pensions in favor of 401(k)s. The disappearance of pensions is, in my view, largely responsible for the retirement crisis we face today.

But will the availability of annuities be a plus for retirement savers? They���re a controversial investment, for two reasons. First, depending on the type of annuity, they may require you to roll the dice on your own longevity. Unlike typical 401(k) investments, you can’t leave an income annuity to your children (though they usually have a survivorship option for spouses). This prospect of losing a lifetime of savings is one big reason annuities can be unattractive. Second, annuities can be weighed down by layers of opaque fees. And the reason they���re so opaque? Because often those fees are unreasonably high.

What to do?��If you have substantial assets, the right answer may be to simply ignore the new annuity option. But you shouldn’t be too quick to write it off. It���s possible that the legislation will spark a round of innovation in the annuity market and perhaps lead to lower-cost, higher quality offerings. If that���s the case, it might be worth allocating a portion of your annual savings to an annuity.

In fact, you could use another of the new law’s provisions to help guide your decision. In the House bill, there���s a requirement that retirement plan statements estimate what a worker’s balance might be worth in terms of future monthly payments in retirement. If that projection shows you coming up short with traditional 401(k) investments, you might instead opt for the security of an annuity.

Adam M. Grossman���s previous articles��include Danger Ahead,��Know Doubt��and��Beat the Street . Adam is the founder of�� Mayport Wealth Management , a fixed-fee financial planning firm in Boston. He���s an advocate of evidence-based investing and is on a mission to lower the cost of investment advice for consumers. Follow Adam on Twitter�� @AdamMGrossman .

Do you enjoy the articles by Adam and HumbleDollar’s other writers? Please support our work with a donation.

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School’s Out

THIS TIME of year, nightly news shows often feature a montage of clips from various commencement and graduation speeches. The speakers, mostly well-known business people, politicians and celebrities, dish out anecdotes and inspirational words to hordes of newly minted college graduates.

If I were ever invited to speak at a commencement, I���d offer a more commonsense approach, sharing some of the insights I���ve gained from working in higher education for more than two decades. In particular, here are five tips I���d give to young graduates venturing into ���adulting���:

1. Realize you probably don���t know what you���re good at. Also realize you don���t really know what you want to do with the rest of your life.

I started my college career as a journalism major who hated science. When I was forced to take a biology course to fulfill a graduation requirement, I discovered I was fascinated by the field of genetics. I switched my major to biology, but swore I���d never work in a laboratory. One unpaid internship later, I discovered I was not only good at lab work, but also enjoyed it. Now, I���ve been working in labs for most of my adult life���but when I was 20-years-old, it was a career that wasn���t even on my radar.

According to some studies, nearly half of college graduates don���t work in the field their degree is in. To make matters worse, nearly 45% of college graduates may be underemployed, working at a job that doesn���t require a college degree at all. My advice: Take advantage of various career and learning opportunities as they arise. They might just lead you on a career path you never dreamed of.

2. Get an education���just not too much. Studies continue to show that a��college degree��leads to significantly higher lifetime earnings. But the statistics may be starting to��change. With the increasing cost of a college education, a four-year-degree no longer comes with the guaranteed payoff it had just a few decades ago.

Too many students seem to think that, even though they hated sitting in a classroom for the first 12 years of their education, they���ll suddenly love it when they go to college. Nothing could be further from the truth, and many end up dropping out. Millions of Americans are saddled with student debt, but no degree to show for it.

My advice: Consider alternatives like trade schools, apprenticeships, community college certificate programs and the military. All offer pathways to rewarding and financially stable jobs. The best part: Most of them cost a fraction of the tab for a four-year degree.

3. Follow your passion, but do it as a hobby.��I admit I���ve contemplated trying to turn my hobbies into a career. Who wouldn���t love to earn a living doing what they consider their passion? But once your hobby becomes your job, it will likely cease to be your passion. Instead, it���ll probably turn into a stress-filled, 18-hour-a-day job as you struggle to stay afloat, build a business and make money.

The cold, hard truth is only about 35% of small businesses survive��more than a decade. My advice: Find a job you enjoy and a hobby you love. Maintain a healthy work-life balance. Dare to dream about retiring early and then save the money to make it happen. Once you leave the workforce, you���ll have nothing but time to pursue all the activities you love.

4. Learn to cook. I���m no gourmet chef, but I can read a recipe and create something reasonably tasty from a few simple ingredients. The few times a year when I go out to eat, I���m usually disappointed with the food I get and astonished��by the cost.

My advice: Invest in some good cookware and a couple of good cookbooks. Learn how to shop for��groceries on a budget. Once you���ve become familiar with the price of common food items, you���ll realize the restaurant meal you just paid $25 for contained just $3 of ingredients.

5. Examine all benefits of a job. It took working nearly 20 years at my current job for my salary to double. I���ll probably never come close to making a six-figure salary. But I���ve had jobs with fabulous retirement benefits and I���ve had jobs where working less than 40-hours-a-week was still considered fulltime. At my current job, my dogs can accompany me to work every day���a huge benefit when it comes to raising and training a puppy.

My advice: Don���t just consider the salary when examining a potential job. Factor in retirement benefits, paid time-off and any other perks that come with the position. While it���s the salary that pays the monthly bills, often it���s the benefits that make a job desirable and worthwhile in the long run.

Kristine Hayes’s previous articles for HumbleDollar include Six Year Later,��State of Change��and��A Better Trade. Kristine��enjoys competitive pistol shooting and hanging out with her husband and her two corgis.

Do you enjoy articles by Kristine and HumbleDollar’s other writers? Please support our work with a��donation.

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Money Pit

ON JUNE 6, 2018, we closed on our new condo in a 55-plus community. The time had come to avoid the stairs in our three-story house. Moving after more than 40 years was quite a transition. Still, condo living is great���so much less house stuff to do or worry about. Eventually, our monthly expenses will be greatly reduced.

Notice I haven���t mentioned selling our house. That���s because we haven���t. The thought of cleaning out a house, closing on the sale and moving within a few days was beyond comprehension, so we did what any pair of sensible 75- and 79-year-olds would do. We took out a $600,000 mortgage to buy the condo, which we���d pay off when the house was sold a few months later.

That few months is now close to one year���and the wait could go on for months, if not longer. What the heck was I thinking? This reminds me of 1987, when I bought a beach house four months before the oldest of our four children started college.

Given my confidence that the condo mortgage would only last a few months, I put down just 10%, thus incurring both the cost of mortgage insurance and a higher interest rate. That proved to be a questionable strategy. The ���good news��� is, our 2018 itemized deductions exceeded the $24,000 standard deduction and we got a whopping tax refund���in return for losing $13,000 to mortgage interest.

For almost 12 months, I���ve been paying property taxes, insurance and utilities on two residences, plus the beach house. I was smart enough to cancel one cable service, though. Did I mention the monthly condo homeowners��� association fee?

It seems we���re paying a high price for our questionable stress-reduction strategy���which lately hasn���t been so good for my stress level. I now marvel at the apparent efficiency of others. A woman moved into our new condo building a few months after we did. She���s fully settled in and has yet to place a single item in the two large storage units that come with each condo. Ours are bulging at the seams, with more stuff to come.

I pride myself on being fiscally conservative, logical and practical, covering all the bases when it comes to money. But as you can see, there are exceptions. Downsizing? You might want to consider a different strategy from ours.

Richard Quinn blogs at QuinnsCommentary.com. Before retiring in 2010, Dick was a compensation and benefits executive. His previous articles include Crying Poverty,��Shortsighted��and��Farewell Money.��Follow Dick on Twitter��@QuinnsComments.

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Courting Success

I JUST ATTENDED the Madrid Open, a major clay court tennis tournament. It���s one of nine Masters series tournaments, ranked just below Grand Slams like Wimbledon and the U.S. Open. It was amazing to witness the players��� speed and agility at such close range.

Because it was early in the tournament, most of the matches I saw were part of the first and second round, with top 10 players pitted against contenders outside of the top 100. Despite that, two of the matches went to a full three sets and were narrowly won by the top 10 players. They were exciting from beginning to end. There were many moments when we spectators sat at the edge of our seats, gasping in amazement at the incredible touch, power and athleticism of both players.

Although the higher ranked player won each match, I observed that there was little to no difference in athletic ability between top 10 players and those just outside the top 100. Watching the matches, however, gave me a perspective on what it takes, beyond raw talent, to be at the top of one���s game���not just in tennis, but also in personal finance and even life more generally.

The case for consistency.��While one or two mistakes may not appear to make much difference, every little thing adds up. Top players rarely give anything away. Brilliant moves are impressive. But if they���re too often followed by a thoughtless error, an entire game can be lost.

The same is true in life. We���re often not disciplined enough. But if we do the right thing consistently, even if it���s something small, we increase our chances of success���whether it���s reaching our retirement goal, becoming healthier, losing weight or having a happy family life. Want to retire early? It���s more likely to be gained through consistent savings than a big lottery win.

Set aside emotion.��Tennis is a mentally challenging sport. You have to move on to the next point, no matter what just happened. While top players aren���t immune to getting upset, they are slightly better at handling their emotions. There are only 20 seconds between the end of the last point and the next one. If you get upset, there���s simply not a lot of time to reset mentally and regain composure. Yet top players manage to do just that. They don���t waste their mental energy on the past, but instead quickly move on and refocus.

The same holds true when you invest over the long term. It���s important not to be panicked and let emotions take over when the markets suffer short-term losses. It is also important to set emotions aside when making big-ticket purchases like a home or a car. It���s tempting to buy that flashy new car model, even if we know it���s better to pay cash for a used vehicle. We may feel social pressure to buy that big, beautiful, recently upgraded house, but we need to remember that we can live comfortably in a cheaper, more modest home.

Be an all-around player.��Top players don���t just have a big serve or a big forehand. Instead, they have a strong all-around game, which is crucial���because even great players can���t fire on all cylinders in every match. On days when one part of their game isn���t working, they can rely on the rest of their game to carry them through.

It���s also why we diversify our investment mix. Broad diversification means we should still earn okay results, even if some parts of our portfolio are struggling.

Tennis is just a game.��There are things more important than winning. Good behavior���on and off the court���is a quality embraced by top players.

I had a rare chance to see Roger Federer practice���and to see how friendly he was and how much he appreciated the fans who waited to see him. He waved, smiled and looked grateful for the cheering. There was no air of arrogance. It was no surprise that the whole stadium cheered for Federer in every one of his matches.

Similarly, during the flood of Rafael Nadal���s home island of Mallorca last year, he suspended his practice to help out with the clean-up effort. He swept the streets with a broom, covered in mud. He also opened up his tennis academy to victims in need of shelter.

Jiab Wasserman recently left her job as a financial analyst at a large bank at age 53. She’s now semi-retired. Her previous articles include Buen Camino,��Takes Skill��and Living Small.��Jiab and her husband Jim, who also writes for HumbleDollar, currently live in Granada, Spain. They blog about downshifting, personal finance and other aspects of retirement���as well as about their experience relocating to another country���at��YourThirdLife.com.

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Private Matters

WISH YOU COULD invest in one of those exclusive investment funds that buy private companies? Maybe it���s lucky you can���t.

It���s easy to see why institutional investors and wealthy individuals are so keen on private equity. It���s a useful diversifier. It also offers the potential for higher returns than publicly traded companies at a time when, for a variety of reasons, pension plans, university endowments and other bigtime investors are under pressure to improve investment performance.

But that old mantra ���buyer beware��� is just as relevant to private equity as it is to public equity, and arguably even more so.

It might seem obvious���but needs stating anyway���that private equity fund managers have a vested interest in selling their products. They naturally want to make their merchandise appear as desirable as possible. There���s considerable temptation to make past performance look better than it is and to disguise the full extent of their fees and charges.

The latest concerns about transparency���or the lack thereof���have been voiced by none other than Warren Buffett. ���We have seen a number of proposals from private equity funds where the returns are really not calculated in a manner that I would regard as honest,��� Buffett told this year���s annual meeting of Berkshire Hathaway shareholders. ���If I were running a pension fund, I would be very careful about what was being offered to me.���

Buffett was especially critical of the way, when calculating management charges, that firms generally include money that���s sitting in government bonds waiting to be deployed. That same money, however, is often excluded when calculating the so-called internal rate of return, which is the performance measure by which most funds are judged.

���It makes their return look better if you sit there a long time in Treasury bills,��� Buffett told Berkshire Hathaway shareholders. ���It���s not as good as it looks.���

His business partner Charlie Munger was more blunt, describing the practice as ���lying a little bit to make the money come in.���

Interviewed by��Bloomberg, investment manager Dan Rasmussen said ���there are tons of issues��� with internal rate of return. ���The fact that IRR math is easily gamed is extremely well-known,��� he said. Indeed, consultancy firm Cambridge Associates claimed last year that the IRR quoted��by private equity firms can be as much as��three percentage��points higher than the actual figure.

When you also factor in concerns about cost transparency, the need for investors to be diligent comes into even sharper focus.��To quote Oxford University finance professor��Ludovic Phalippou, ���We do not know the exact total of fees and expenses paid by investors because a lot of effort is spent by private equity managers to ensure this information remains as secret as the recipe for Coca-Cola.���

For Phalippou, private equity outperformance is a��myth��that needs to be debunked. The American Investment Council, a lobbying group for the U.S. private equity industry, claims that over the 10 years through June 30, 2018, private equity narrowly��outperformed��both the S&P 500 Index and the Russell 3000 Index. Phalippou says the true picture, once costs are taken into account, is that the average fund has failed to beat the returns from an S&P 500 index fund since 2006.

Mutual fund investors enjoy transparency about costs and performance. But it���ll likely be several years before private equity catches up. Until it does, investors should treat every claim that product providers make with the utmost caution���and everyday investors should be grateful they can���t afford the often-steep minimums required to invest in a private equity fund.

Robin Powell is an award-winning journalist. He’s a campaigner for positive change in global investing,��advocating better investor education and greater transparency. Robin is the editor of�� The Evidence-Based Investor , which is where a version of this article first appeared. Follow him on Twitter @RobinJPowell.

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Into the Woods

JADAV PAYENG lives on a remote river island in India and is eloquently known as ���Forest Man.��� He has been planting trees his entire life, one at a time, to revive the ecosystem of his native land.

Today, the island is a dense 1,300-acre forest. It’s home to hundreds of thousands of trees and a variety of animals, such as tigers, deer, monkeys and elephants. How did he do it? Payeng credits nature.

In a 2017 interview��with NPR, he said, ���It���s not as if I did it alone. You plant one or two trees, and they have to seed. And once they seed, the wind knows how to plant them, the birds here know how to sow them, cows know, elephants know, even the Brahmaputra river knows. The entire ecosystem knows.���

From my perspective, building a forest, where once there was barren land, isn���t that different from saving for retirement. When you graduate from college with little or nothing in the bank, you���re starting with an empty desert. As you contribute to your retirement account every paycheck, bit by bit and over many years, you���re planting your own future forest.

Just as trees produce new seeds, your retirement investments produce new income in the form of dividends. By reinvesting those dividends, you promote the compounding process. Before you know it, you���re well on your way to building a retirement forest.

Payeng was also wise enough to diversify the trees he planted. He started with bamboo trees, then switched to cotton trees. ���I kept planting���all different kinds of trees,��� he said.

Much like building a healthy forest, a healthy investment portfolio requires diversification. You don���t want to rely too heavily on one company���s shares or one market sector.

When you start investing, you may be primarily focused on stocks. But as your portfolio grows and you near retirement, adding more stable, income-producing investments should help ensure your retirement forest���s consistent health. These types of investments typically include bonds and real estate.

What impresses me most: Payeng wasn���t asked to build a forest. He wanted to help his land to thrive once again, so he took the initiative. No one is going to knock on your door, asking you to save for retirement. There���s always going to be another, more immediate financial need or want begging for your attention. Want a comfortable retirement? You���ll have to be the one to take that first step.

Ross Menke is a certified financial planner and the founder of Lyndale Financial , a fee-only financial planning firm in Nashville, Tennessee. He strives to provide clear and concise advice, so his clients can achieve their life goals. Ross���s previous articles include The Happy Employee,��Par for the Course��and��Not Toast . Follow Ross on Twitter @RossVMenke .

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