Jonathan Clements's Blog, page 415

Protect Your Privacy

ERIC SCHMIDT SAID THIS when he was Google’s chief executive: “If you have something that you don’t want anyone to know, maybe you shouldn’t be doing it in the first place.”

In his Congressional testimony last week, Facebook chief executive Mark Zuckerberg didn’t say anything nearly as condescending or abrasive. But his testimony was a good reminder that we’re in a very different world privacy-wise than we were even 10 years ago, when Schmidt made his comment.

In recent years, stories about data breaches have become routine. They come in two general categories. First, there’s hacking, either directly into a victim’s computer network or indirectly, via the systems of an organization that holds the victim’s data. Recent examples include data thefts from Target, health insurer Anthem, Yahoo and even the Federal government’s own Office of Personnel Management.

Second, there are phishing attacks, also known as social engineering, that dupe victims into opening the door to a thief. This is the strategy, for example, that hackers used to access emails during the 2016 presidential campaign.

But it turns out there’s a third category: Internet companies share vast amounts of personal data in ways that are perfectly legal—and that’s what really seemed to bother legislators at last week’s hearings. Take Acxiom, a company that’s in the business of matching consumers’ offline and online activity. Buy diapers at the supermarket, for example, and that information will be available to marketers online. For years, Acxiom had been a data provider to Facebook. In the wake of the recent controversy, they terminated this partnership, but there was nothing at all impermissible about it.

As a consumer, what can you do? Internet regulation is still an open question. Fortunately, though, laws exist to protect consumer privacy in most other industries that handle sensitive information. In medicine, HIPAA—the Health Insurance Portability and Accountability Act—has been in place since 1996. In financial services, the 1999 Gramm-Leach-Bliley Act requires financial institutions each year to provide consumers with a breakdown of the information they collect and how they share it. They must also give customers an opportunity to opt out of at least some of this sharing.

Still, these rules put a large part of the responsibility on consumers—to read dense disclosure statements and to take steps to opt out of data sharing when companies give them that option. To manage this, I see four approaches you could take:

1. Do nothing. If the only shows you watch on TV are PG-rated movies, if the only things you buy at the drugstore are vitamins and if your only bank transactions are charitable donations, you might decide that data sharing really doesn’t bother you. In that case, perhaps you just leave well enough alone.

2. Opt out of data sharing. If you’d prefer to limit the degree to which your data is trafficked, you could take five or 10 minutes to read through the privacy notices you receive each year. Look for the “Can you limit sharing?” information and then follow the instructions for opting out. In most cases, you can go online to make these elections and it takes just a minute. Once you opt out, it’s good for five years, so be sure to renew your preferences from time to time.

3. Avoid companies with overly aggressive data sharing practices. If you’re shopping for a new bank or credit card, review each firm’s privacy policy before you open your account. There are significant differences among institutions. In my research, I’ve found that smaller regional banks definitely share less and provide more of an opportunity to opt out than the big national banks. But it’s worth checking.

4. Avoid creating sensitive data. It’s impossible these days to stay completely “off the grid.” But if there’s a particularly sensitive purchase you want to make, it’s not too hard to stay below the radar of internet marketers: Don’t search Google for the best price, don’t buy it online and don’t pay with a credit card. Instead, go into a brick-and-mortar store, don’t use the loyalty card the store gave you—and pay good old-fashioned cash.

Adam M. Grossman’s previous blogs include Fancy Your Chances, Free Lunch and  Plan, Prioritize, Proceed .  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 .

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Teachable Moment

FOR THREE-QUARTERS of students, loans have become a standard part of the college experience. Scholarships, grants and parental funding may be preferable. But the reality is, many families will need student loans to pay college expenses.

Navigating this world can be baffling. There are many different kinds of loans and repayment programs, and choosing the right option is important. After all, you’ll be living with your choices for 10 years or more.

Federal student loans are backed by the federal government and offered through the Department of Education. There are two major types of federal loan—Direct and Perkins. The Direct Loan program is by far the largest of the federal offerings. With the Direct Loan program, the Department of Education is the lender; with the Perkins Loan program, the school itself is considered the lender.

When it comes to federal direct student loans, the driving criteria is financial need; creditworthiness isn’t a factor in the decision. There are four kinds of direct loans through the federal government: direct subsidized and unsubsidized, direct PLUS (for both parents and graduates) and consolidation loans. While each type differs slightly, in all cases the student will borrow from the federal government and will make their payments to a servicing company the government selects.

Benefits to borrowing through the government are many. Typically, borrowers get a lower interest rate with federal loans. There are also many repayment options available, including graduated and extended repayment plans. For borrowers who get into financial trouble, there are income-driven repayment programs, direct consolidation loans, forbearances and deferments—all designed to help borrowers stay out of default.

There are, however, drawbacks as well. While all loans affect your credit score, a federal loan can also affect your ability to get an income tax refund or other federal services. If you default on a federal student loan, for instance, you won’t just see your credit score drop. On top of that, you could see your tax refund put toward your loan payments or find your paycheck garnished.

Private student loans are an alternative for those who don’t want to go the federal route. This type of student loan is offered by a bank or other lender, and is based upon creditworthiness instead of financial need. They’re getting more popular. About 1.4 million students take out private student loans each year, though this number still pales next to the 12.9 million annual federal borrowers.

Private loans often fill the gap between the cost of school and the total financial package awarded to a student. What are the drawbacks? For starters, you’ll usually pay higher interest rates than on federal loans. Private loans also require repayment to begin immediately. While some lenders allow you to pay only interest, they do demand some sort of payment while you’re still in school—unlike federal loans.

In addition, there are far fewer protections with a private student loan. There are no deferment or forbearance options available to students who need help paying back their loan. Since the loan is only between you and the lender, it’s handled much like any other loan—and can affect your credit score after only one late payment. If you can’t pay back the loan, there’s a good chance that your wages will still be garnished, and you could be hounded by private debt collectors.

So what’s the best way to pay for college? With both federal and private loans having pros and cons, it can be a bit confusing deciding between the two.

My advice: Think first about the amount you need to borrow and what it’s for. If you need to borrow a large sum for tuition, a federal loan is probably the better option. You’ll see a lower interest rate—which means the loan will cost you less in the long run if it’s paid on schedule—plus the flexible repayment options could be a big help later.

Still, there are some occasions when a private loan is a good idea. Let’s say you have some specific, small expenses—such as a new computer or textbooks—and you’ll have the money to pay the loan off quickly. In that situation, a private loan could be the better option. If you find that, even after scholarships, grants and federal loans, you need yet more money, you might also check out private loans. But keep the drawbacks in mind.

Andrew Rombach is a content associate at LendEDU, a consumer education website with an editorial mission of improving financial literacy. Check out the LendEDU blog to learn about finance, read up on industry news or check out the latest data-driven studies.

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Living Larger

NOTICE ANYTHING different? This week, we’re rolling out an expanded homepage for HumbleDollar. Our three latest blogs are now stripped across the top of the desktop version’s homepage. If you’re viewing the site on a mobile device, you’ll see the blogs stacked one on top of the other.

But the big changes are just below. We’ve scrapped the old “This Week” feature and replaced it with “Act.” Twice a week, we’ll suggest steps you might take to improve your finances.

We’ve also introduced two new features. “Numbers” aims to deliver a steady stream of intriguing statistics. “Think” regularly recaps key ideas that should guide you as you look to make the most of your money.

All this is in addition to the daily insight carried at the top of the homepage, our daily preview of a key section from our money guide, and our monthly newsletter. Put it all together, and every day we hope you’ll find something new and interesting to read on HumbleDollar.

Follow Jonathan on Twitter  @ClementsMoney  and on Facebook .

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Fueling the Fire

I’VE BEEN EMPLOYED on at least a part-time basis since I was 17 years old. For almost three decades now, I’ve been working fulltime. It’s probably not surprising that, at almost 51 years old, I’ve reached the point where I spend considerable energy contemplating a life beyond work.

The idea of achieving financial independence and retiring early—captured by the acronym FIRE, short for financial independence/retire early—is never far from my thoughts. As a born planner, I’m all about drawing up a strategy and putting it into action. But even for me, figuring out exactly what it will take to leave my fulltime job often seems overwhelming. Faced with so many variables and unknowns, I’ve tried to solve my retirement equation the only way I know how: by breaking the plan down into smaller, more manageable chunks.

I started by thinking about how to move from fulltime employment to fulltime retirement. Since I didn’t get serious about saving and investing until I was well into my 40s, I’m assuming I’ll need to work part-time for at least a few years before I leave the workforce entirely. Part-time employment will be beneficial in a couple of ways. It will allow me to have more “me time” to do the things I enjoy, while letting my investment accounts grow for a few more years before I start taking substantial withdrawals.

Next, I started thinking about actual numbers. How much money would I need to save before I felt comfortable bidding farewell to a 40-hour work week? There’s certainly no shortage of advice on the subject. I settled on a goal of $500,000. It was an amount I felt I could realistically achieve through aggressive saving and frugal living. When combined with my pension and Social Security, that $500,000 should allow me to maintain a reasonably comfortable lifestyle.

Of course, estimating how much I need to save is determined, in large part, by how much I spend to maintain my lifestyle. Over the past four years, I’ve drastically trimmed expenses and now live on roughly half my gross income. When it comes time to transition to part-time employment, living modestly means I should be free to choose what I want to do, with little regard to how much it pays.

The next item on my agenda was determining when I could access my various retirement investments. The accounts I have with my current employer contain the bulk of my nest egg. I can take withdrawals from them as early as age 55, provided I leave my job. My Roth IRA contributions, as well as my taxable mutual funds, can be accessed at any age. I can begin drawing money out of my pension as early as age 58 and as late as age 70, and I’ll be eligible for full Social Security benefits when I turn 67. Knowing the ages at which I can access these various funds has guided me as I wrestle with how long to continue with either fulltime or part-time work.

Health care coverage is a major concern for anyone contemplating early retirement. Fortunately, I have access to generous benefits through my current employer—and it’s a major reason I can even contemplate leaving my job before full retirement age. Once I reach age 55, I can continue to receive the same health care coverage I currently have, even if I leave my job. And at age 65, I’ll receive a monthly stipend to help offset the cost of any Medicare supplement plans I choose to purchase.

Kristine Hayes is a departmental manager at a small, liberal arts college in Portland, Oregon. Her previous blogs include longevity.Stanford.edu, Independence Day and Case Closed .

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This Week/April 15-21

BUNCH CHARITABLE CONTRIBUTIONS. The 2017 tax law’s higher standard deduction, coupled with the $10,000 cap on deducting state and local taxes, means you may not get any tax benefit from charitable gifts. One possibility: Bunch, say, three years of contributions into a single tax year. You might even set up a donor advised fund and spoon out gifts from there.

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Saving Is Sexy

WE DON’T PROMISE THINNER thighs and harder abs here at HumbleDollar. But—unbeknownst to us—we could be the secret to your relationship success.

This revelation comes from an academic paper, “A Penny Saved Is a Partner Earned: The Romantic Appeal of Savers,” by Prof. Jenny G. Olson and Prof. Scott I. Rick, which is based on Olson’s dissertation research.

Conventional wisdom—and earlier academic work—suggest that, if men flaunt their wealth, they’re likely to have greater dating success. But it turns out that big spenders are more likely to go home alone.

The Olson and Rick paper grew out of a series of experiments, which found that savers, both men and women, were viewed as more desirable romantic partners, because they’re perceived to have greater self-control.  In truth, it isn’t clear that good savings habits and greater overall self-control really are connected. But because good savers are viewed that way, they’re seen as less likely to, say, lose their temper, drink too much or be unfaithful.

Not all the news is good. While good savings habits may help you find a long-term partner, it may not help if you’re hoping for a short-term fling. For that, it seems spenders fare just as well as savers—and sometimes even have an edge. Those who toss their money around may be viewed as more fun and exciting, and hence a better choice for a one-night stand.

“The exact same photo labeled ‘saver’ was perceived as physically more attractive than the exact same photo labeled ‘spender’,” says Olson in a YouTube video devoted to her research. “But savers were perceived as significantly less exciting.”

Still, when you’re sitting at the bar, how could anybody possibly know your financial habits? Olson ran an experiment that found we’re pretty good at sizing up who’s a saver and who’s spender, even if no words are exchanged. Exactly how we do so isn’t clear. But maybe if folks are, say, in good physical shape or aren’t too flashy in the way they dress, we might infer they’re generally good at self-control—including being good savers.

“People’s snap judgments were incredibly accurate,” notes Olson in her video. The upshot: “Spending a lot of money to get a first date probably isn’t wise, because it conveys a lack of self-control.”

Follow Jonathan on Twitter  @ClementsMoney  and on Facebook .

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Fancy Your Chances?

ANYONE WHO FOLLOWS MY WORK knows I am a staunch advocate of index funds and believe that stock-picking is a difficult road. That said, there are three undeniable facts about picking stocks:

All of the great fortunes—Rockefeller, Carnegie, Gates, Buffett—were built by owning one stock: a very good one but, nonetheless, just one.
There are rare investors who are able to outperform the market averages by picking the right stocks. It’s hard, but it can be done.
Stock-picking can be fun.

While I don’t recommend stock-picking to anyone—since the data clearly show the odds are against you—I do recognize the appeal. If you want to go down that road, preferably with a small portion of your portfolio, here are five books I would recommend as a curriculum of sorts:

The Intelligent Investor by Ben Graham. This book was written in the 1940s by Ben Graham, who was Warren Buffett’s teacher, employer and mentor. Buffett often cites this book as the one that got him really interested in investing. It can be dense, but I’d recommend starting with two chapters: “The Investor and Market Fluctuations” and “Margin of Safety as the Central Concept of Investment.”

Common Stocks and Uncommon Profits by Phil Fisher. Most people don’t know much about Fisher, but he was a giant in his time. Some of his examples are dated—for example, he talks about color TV as a new technology—but the principles still apply. Unlike Ben Graham, Fisher was a growth investor, so I would read this together with The Intelligent Investor to clearly understand the difference between growth and value investing.

One Up on Wall Street by Peter Lynch. As most people know, Lynch had an outstanding track record running a fund at Fidelity Investments from 1977 to 1990. This book is both entertaining and incredibly informative. Like Fisher, Lynch was a growth investor and coined the term “ten bagger.” He didn’t get bogged down in Graham’s valuation discipline. Instead, he hunted for good companies that looked like they were going to get much bigger. And it worked very well.

The Little Book That Beats the Market by Joel Greenblatt. The author ran a hedge fund that for years racked up staggering returns, easily offsetting his fees. He was in the tradition of Graham, and he provides in this book a simple formula for identifying value stocks.

The Most Important Thing by Howard Marks. The author is chairman of an investment firm on the West Coast, but his commentaries have a wide audience. He writes excellent periodic memos, which you can subscribe to through his website. This book is a compilation of some of his best pieces. Marks focuses a lot on the emotional side of investing and really makes you think.

Arguably, the real father of investment analysis—and specifically, the notion of intrinsic value—was not Ben Graham, but a fellow named John Burr Williams. His book is 600 pages and dense, so I don’t recommend it. But I quote from it and cite the central ideas in this article I wrote on the importance of intrinsic value.

Finally, if you like podcasts, I would recommend “Invest Like the Best,” hosted by Patrick O’Shaughnessy. He interviews investors of all stripes. In college, he was a philosophy major and it shows: The discussions are always thoughtful and informative.

I feel obliged to repeat that, if you choose to pick stocks, the data and the odds are against you. Feeling good about your chances? As a reality check, see the work of University of California finance professors Brad Barber and Terrance Odean, who for years have studied the results of individual investors.

Full disclosure: If you purchase the above books by clicking through to Amazon using the embedded links, HumbleDollar will earn a small fee. 

Adam M. Grossman’s previous blogs include Plan, Prioritize, Proceed, Free Lunch and  Face Plant. 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 .

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An Ode to Owing

A MEDIA-SAVVY IRS OFTEN ANNOUNCES that one of its top priorities is combatting criminals who steal tax-related information. The good news: Reports of tax identity theft have declined markedly in recent years. The bad news: Resourceful identity thieves remain active and constantly introduce new schemes.

One consistently remunerative ploy is to use stolen Social Security numbers and other information to file fraudulent tax returns that claim hefty refunds—claims that generally are submitted at the start of the filing season. In my experience, most taxpayers are unaware that they can avail themselves of an uncomplicated, perfectly legal way to limit the personal impact of such thefts—by endeavoring to file tax returns where there’s a balance due.

How can they do that? Let’s start with employees. Sally receives wages from employment. She could decrease her withholding by revising her W-4, the form workers provide to employers to determine withholding from paychecks. Some reminders for Sally and other employees who go that route: Head to IRS.gov for the W-4 that was recently updated to reflect changes introduced by the new tax law. Also check out the IRS’s newly released tax withholding calculator. It provides the information needed to revise a W-4.

Next, let’s move onto freelancers and other self-employed individuals. Mary is a freelance writer. Unlike Sally, whose taxes are paid through withholding, Mary makes quarterly payments of estimated taxes. Mary and other self-employed persons could decrease their estimated payments.

Finally, let’s consider retirees. Tess supplements her Social Security with a pension from her former job and money she removes from her IRA. Like Mary the freelancer, Tess could decrease her estimated payments. Unlike Mary, Tess and other retirees could even skip their estimated payments entirely, while also adjusting the withholding from their pensions, annuities, Social Security benefits and distributions from IRAs, 401(k)s and other tax-deferred retirement plans.

How badly could things turn out if Sally, Mary and Tess don’t decrease withholding or estimated payments, and instead file returns that claim refunds? If their identities have been stolen, they may receive impersonal responses from the IRS that go something like this: “This is to acknowledge our previous receipt of a 1040 showing your name and Social Security number and claiming a refund. Alas, we paid it. Be patient while an understaffed and underfunded agency undertakes what could prove to be an interminable investigation. You should eventually get the refund to which you’re entitled, but don’t expect to get it any time soon.”

Contrast their possibly prolonged plights with what happens if they submit 1040 forms showing a balance due. All three send a check for the amount owed. Their returns reach the IRS after the agency received 1040s from thieves, which show their names and Social Security numbers, and which claimed refunds that a snookered IRS promptly paid.

In this second scenario, where there’s a balance due, Sally, Mary and Tess should look forward to a terse response from the IRS: “We’ve already received a return from you, or so we thought. Still, we’ll accept your return and cash your check.” Cue enlightened IRS sleuths. They’re tasked with tracking down the thieves, which isn’t a concern for Sally, Mary and Tess. Still, it’s best they check whether the thieves have defrauded them in other ways—for instance, obtained loans or made purchases in their names. This would be a good moment to check their credit reports.

Meanwhile, even though their 1040s show they owed money, they probably needn’t fret that the IRS will exact penalties for underpayment of taxes. Generally, filers are off the hook for penalties, provided they satisfy one of several requirements.

First, the IRS doesn’t seek penalties from filers whose balance due is less than $1,000. What if the amount owed is north of $1,000? The agency doesn’t penalize those who paid at least 90% of the actual taxes they owe for the current year or 100% of the taxes shown on their 1040 for the prior year. The 100% requirement rises to 110% for those whose adjusted gross income exceeds $150,000 ($75,000 for those who are married and filing separately from their spouses).

Julian Block writes and practices law in Larchmont, New York, and was formerly with the IRS as a special agent (criminal investigator). His previous blogs include Right on Schedule, No Substitute and Rendering Unto Caesar. This article is excerpted from Julian Block’s Year-Round Tax Savings, available at JulianBlockTaxExpert.com. Follow Julian on Twitter @BlockJulian.

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Cracking the Wallet

MOST AMERICANS AREN’T SAVING nearly enough. Last year, we collectively salted away just 3.4% of our after-tax disposable personal income. That’s a far cry from the 9% or more that Americans socked away every year between 1950 and 1984. Since those heady days, our ability to delay gratification has all but disappeared, with the savings rate averaging just 4.8% since 1998.

But HumbleDollar isn’t read by the typical American. This is the place folks end up after they’ve tried dating stocks, chasing hot funds and seeking solace at the shopping mall. By the time they arrive here, they’re ready to settle down and get serious about money. Saving for the future may be a problem for the rest of America. But it usually isn’t a problem for HumbleDollar’s readers.

Instead, the problem is often spending—or, to be more precise, a profound reluctance to do so.

That brings me to a recent conversation with an old friend, Meir Statman, a finance professor at Santa Clara University in California. Statman is the author of What Investors Really Want and Finance for Normal People. I reviewed the latter book last year.

“If I’d known how much I would have at this age, I would have been freer with my spending,” Statman says. He notes that, when he and his wife fly internationally, he now happily coughs up full fare for business class, even though it means paying dollars, while others in business class are forking over frequent-flier points.

He believes the emphasis on delaying gratification can be overdone. “Saving has become a virtue and spending has become a vice,” Statman argues. “Saving is a virtue when you’re young. It’s not a virtue throughout life.”

But Statman also concedes that, for those who are diligent savers during their working years, making the switch to spending isn’t easy. Once retired, “the habits we have developed to be conscientious, to save, to compare prices, become enemies,” he says. “You have to figure out whether you care enough for your future self—or whether you care too much.”

If we’re overly frugal, we need to find some way to give ourselves permission to spend, while also trying not to fear for the future quite so much. To be sure, as we get into our 80s, there’s an increased risk we will need long-term care and all the associated costs. But as we age, we’re also less likely to get out and about, let alone travel, so spending for most retirees tends to slow in their 80s. “Have you ever met anybody who has run out of money?” Statman asks.

HumbleDollar’s readers may indeed care too much about their future self. But what about others, who are saving little or nothing? Statman makes a plea for empathy. “I don’t think we have so many young people who are spendthrifts,” he says. “I think we have so many young people who are squeezed.”

Statman encourages parents to cut their 20-something children a little financial slack. He also says he’d like to see mandatory contributions to 401(k) plans, just as we have mandatory contributions to Social Security. And he wishes companies would contribute more to these plans, especially on behalf of employees with lower incomes.

“People don’t lack self-control,” Statman contends. “They know how to save. What they lack is money. Corporations pay them less, they make them pay more for health insurance, and then we complain that they don’t save enough. And when they do have money, the financial services companies rob them blind.”

Follow Jonathan on Twitter  @ClementsMoney  and on Facebook .

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Plan, Prioritize, Proceed

IS FINANCIAL PLANNING a product or a process? In other words, is a financial plan a document that you can print, bind and put on your shelf—or is it an ongoing activity? This is something of a religious debate within the finance community.

Supporters of the “it’s a product” view are usually dyed-in-the-wool financial planners. Not surprisingly, they believe that financial planning should result in a physical plan—an exhaustive, detailed document that’s full of analysis and projections.

Meanwhile, supporters of the “it’s a process” philosophy are usually people whose DNA leans more toward investing than planning. They prefer the action and excitement of the stock market and see financial planners as bean counters who spend too much time fine-tuning their spreadsheets. These folks believe most financial planning can be done on the fly and that the best plan is simply to find winning investments. To be fair, they might produce a chart or two, but then it’s off to the races with investments.

Which group is right? Like most religious debates, each side makes valid points, but I also believe each is too extreme. The ideal solution, in my experience, blends both product and process. Others have made the analogy to a military battle plan. You wouldn’t rush onto a battlefield without a plan. But once there, you need to be flexible, because things never go exactly to plan. As long as you achieve your objectives, it’s okay if your ultimate path deviates from your original plan.

To me, that approach represents the ideal blend of product and process. Think of financial planning as involving three steps.

Step No. 1: Plan. This is the “product” part of financial planning. As a first step, I always start with the “big four”—that is, your assets, liabilities, income and expenses. If you can get those basics on one or two pieces of paper, you’ll be off to a great start. Continuing with the military analogy, these four variables tell you which way to march.

Step No. 2: Prioritize. Managing your finances isn’t your fulltime job, so you want to focus first on your top priorities. These will be different for each person. But pressing issues might include a portfolio that’s too risky, insufficient life insurance, or a potential estate-tax bill that would outstrip a family’s liquid assets and put the family business at risk. In my experience, if you can address these kinds of tasks right away, you’ll sleep easier—and then you can tackle the longer list of lower-priority items.

Step No. 3: Proceed. This is where financial planning becomes a process. As life evolves, certain events will unfold just as you had hoped: getting married, having children, building your career, sending your children to college, celebrating their weddings, retiring.

But many events will be unexpected. Some will be positive: professional success, a lucky investment or perhaps a large inheritance. And some will be negative, such as an illness or career setback. Because everyone will experience some mix of the positive and not-so-positive, it’s important that your plan is built with a margin for error and that you revisit it regularly.

How regularly? In my experience, you want to update your plan at each life event that materially changes the “big four.” You’ll also want to mark your calendar to take certain steps in every tax year. Depending on your stage in life, this might be an IRA contribution or distribution, a 529 contribution, a charitable gift, exercising stock options or chipping away at a large, concentrated position in an investment.

Adam M. Grossman’s previous blogs include  Free Lunch ,  Face Plant  and  Eye on the Ball . 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 .

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