Jonathan Clements's Blog, page 94

Lessons of a Lifetime

MY RETIREMENT finances today are based on actions I took over six-plus decades, starting at age 18. Early on, I tried my hand at picking stocks and beating the market—to my regret. As time went on, I became more sensible.

Want to avoid my mistakes? Here are 10 tips based on my lifetime of managing money:

Start saving as soon as you have cash—it might be from shoveling snow, raking leaves or loose change—and never stop.
Time is your greatest ally.
Always have savings that aren’t earmarked for retirement—the proverbial emergency fund.
Save a portion of “found money.” That could be a year-end bonus, overtime pay, a small inheritance, a tax refund, even winnings from the Super Bowl pool—which, for me, was $175 this year.
Always increase your regular savings with every increase in income.
Invest in low-cost stock-index mutual funds of different types—large cap, small cap and so on. Don’t play the market with your retirement nest egg.
Include a small percentage in bond mutual funds as well. Reinvest the interest until you need the income. Increase your bond holdings when you get within a decade or so of retirement. I own municipal bond funds, but check your marginal tax bracket to see if they make sense for you.
If you have a 401(k) or similar employer plan available to you, always contribute enough to get the full employer match.
If possible, within your employer plan, fund both the traditional, tax-deductible 401(k) and the Roth 401(k). Ditto for your IRA, splitting your money between traditional and Roth accounts. That’ll give you greater flexibility in retirement to manage your tax bill.
Always have some money in a regular taxable investment account, so you have money you can access without paying the penalty owed on early retirement-account withdrawals.

I’ll add one more that’s a bit controversial and perhaps not for everyone: Take a small portion of your savings and buy a few high-quality dividend-paying stocks when you’re young, reinvest the dividends and let it ride. Down the road, that’ll give you a stream of income from the dividends.

At my urging, two of my grandsons, ages 15 and 19, just bought a few shares of my old employer, Public Service Enterprise Group (symbol: PEG), along with a few mutual funds. Public Service Enterprise Group has paid dividends for the past 117 years and today comprises about 17% of my portfolio. I wouldn’t suggest that relatively high percentage for anyone who depends on their portfolio for their living expenses. I have a misplaced loyalty—but I also have the safety net provided by a pension.

The dollar amount you have to save and invest isn’t important. It will always be relative to your income, but so will your living expenses in retirement. The important thing is to get started.

But saving for retirement is arguably the easy part. Up next: using the money in retirement. I see one basic question: Do you set your spending budget first and let that determine your annual withdrawals, or do you settle on a prudent amount to withdraw each year and then let that determine what’s available to spend? When working, your income determines your ability to spend. Should retirement be any different? 

A person living on a $60,000-a-year pension has no choice but to live within that amount. Similarly, a person using a percent withdrawal strategy should do the same.

Let’s say you have a $1.5 million nest egg. Your spending—including the sum needed for taxes—shouldn’t exceed $60,000 a year, assuming a 4% withdrawal rate. It doesn’t matter what you want to spend or what your budget says. Instead, your spending should be limited by what your accumulated investments can sustain.

Richard Quinn blogs at QuinnsCommentary.net. Before retiring in 2010, Dick was a compensation and benefits executive. Follow him on X (Twitter) @QuinnsComments and check out his earlier articles.

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The Changes Ahead

THE SECOND HALF of life isn’t just a continuation of the first. Rather, it's an opportunity for transformation, new adventures and deepening wisdom. As we navigate these years, understanding the five key stages of this journey can help us live more joyfully and meaningfully. What five stages? Here’s a look at each:

Phase 1: Pre-Rapture. This stage, typically between ages 45 and 60, is marked by a feeling of newfound freedom and independence. With grown-up children flying the nest, you might experience a mix of emotions—pride, nostalgia and perhaps a sense of loss. This is also, however, a time of great opportunity.

It's a period to rediscover yourself, invest in hobbies or career paths you've always wanted to explore, and strengthen your relationships beyond your parental role. This phase sets the foundation for a fulfilling second half of life.

Phase 2: Transition. This is the prelude to retirement, when you start to ease out of full-time work. This could involve shifting to part-time or consulting work, or even beginning a completely new, less demanding career.

It's a time for preparation—financially, emotionally and socially—for the full retirement that lies ahead. This stage is crucial: It helps you gradually adapt to a new way of living, ensuring the change isn't abrupt, but instead a smooth segue into the joys of retirement.

Phase 3: Rapture. Welcome to the rapture stage—the golden early years of retirement, when you can live out the dreams you've been harboring for years. Whether it's traveling to exotic places, dedicating more time to hobbies, volunteering, or spending quality time with family and friends, this stage is about fulfillment and enjoyment.

You might still be working in some capacity. But the difference now is that it's on your terms. It's a time of exploration, learning and experiencing the beauty of unstructured time.

Phase 4: Post-Rapture. In this stage, things start to slow down. Our late-retirement years are about finding joy in the quieter, more stable aspects of life. Your focus may shift toward creating a comfortable and safe living environment, maintaining good health, and enjoying the simpler pleasures, such as reading, gardening or spending time with grandchildren. It's a time for reflection, appreciating the small moments, and maintaining a sense of community and connection.

Phase 5: Fragility. This is the twilight of life. It's a time when health and mobility may decline, and you become more dependent on others for care and support. This stage calls for a dignified approach to aging—acknowledging limitations while cherishing the life you've lived. It's about ensuring comfort, receiving appropriate care and staying connected with loved ones. It's also a time to pass on wisdom, share stories and leave a legacy that reflects the richness of your life’s journey. 

So, what does all this mean for you? Living a rapturous second half of life is about embracing each stage with awareness and grace. By understanding and preparing for these phases, you can ensure that every chapter of your life is lived with purpose, joy and a sense of fulfillment. Remember, every stage has its beauty and its challenges, and it's up to you to make the most of them.

Dan Haylett is a financial planner and head of growth at TFP Financial Planning, a U.K. firm that specializes in modern-day retirement planning. Dan’s “pull back the duvet every morning” purpose is helping clients spend their time and money on what’s truly important to them. A version of the above article first appeared on Dan’s website, where you can also learn about his Humans vs. Retirement podcast. Follow him on X (Twitter) @DanHaylett.

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Why We Spend

PAUL NEWMAN WAS BEST known as an actor, but he was also passionate about auto racing. He took his hobby seriously, improved his driving skills and won many races, including on his “home track” at Lime Rock, Connecticut.

His wife, actress Joanne Woodward, supported her husband’s auto racing career, but also worried about him. She bought him a Rolex watch to wear when he raced. To personalize the gift, she had an inscription added to the back. It read: “Drive Carefully, Me.” Photographs show that Newman did indeed wear the watch when racing.

In 2017, the watch—which Newman had given to his daughter's onetime boyfriend—was auctioned off for charity, and sold for $17.8 million.

It’s a watch. It will not be used by the buyer to tell time, which is the purpose of a watch. It will likely sit on a shelf. The buyer will probably show it off to his friends, bragging that he paid almost $18 million.

The more money folks have, the more they can spend. But $17.8 million for a watch? How much money would you need socked away to spend $17.8 million on a watch without flinching? I imagine you’d need at least $100 million, and probably much more.

Imagine telling your wife, “Honey, I'm going out to buy a watch today.”

“That’s nice, dear,” she says. “How much are you going to spend?”

“$18 million,” you reply nonchalantly.

She smiles, “Have fun.”

What each of us buys depends upon our needs, values and ego. For the very rich, I think their ego probably drives the vast majority of their purchases.

When you're sitting around the country club having your cigar and scotch, you need something to talk about. Why not tell them how much money you were able to spend at a charity auction? You’re doing good. In fact, you’re able to do a very large good, as measured by dollars. Good for you.

When we invest, we want a return on our investment (ROI). The bigger the return, the more satisfied we are with our investment decisions.

Bill Gates, founder of Microsoft, has suggested that charitable donations should be approached in the same way we handle investment decisions. Not all charities utilize money effectively. Many devote large sums to advertising and administrative expenses, rather than to good work.

Whatever we do with our money, we get an ROI. Seeking the highest ROI will help us get greater pleasure from our dollars. After all, isn’t that the main reason we saved our money?

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Our Waiting Game

A FEW MONTHS AGO, my wife and I were searching for an exciting diversion on a Saturday evening. It didn’t take long to agree on the perfect experience—logging onto SSA.gov to check out our estimated Social Security benefits.

What’s so thrilling about that? Like many people, Social Security will comprise a key component of our retirement income. Even now, those future funds exert a strong influence on our plans.

Background. I’ll turn age 62 this month and still work full-time. Sharon is 58½ and works a few hours a month. We have no debt, and don’t expect to incur any. The only expenses looming in the near term are college costs for our 18-year-old daughter, along with our current living expenses. College is covered, and we live a modest lifestyle supported by our present salaries, with money left over for savings.

Destination. Our clearest retirement-income goal lies eight years down the road—postponing my Social Security until age 70 to get the maximum monthly benefit. For us, that eight-year delay is an easy decision.

For starters, we’ve no pension awaiting us, apart from a minuscule sum I’m eligible to draw at age 65. Because of that, we’re counting on Social Security as the anchor that’ll provide steady income amid the financial markets’ ups and downs.

The value of a U.S. government-backed, lifetime income stream that won’t be eroded by inflation can’t be overstated. Even the immediate-fixed annuities we’re considering as a supplement to Social Security, while commendable, can’t compare. For this reason, we want our monthly Social Security check to be as large as possible until the last of us leaves this world. We think it’ll help us sleep more soundly until that final day.

On top of that, waiting to claim makes good financial sense. We think the case for delaying Social Security withdrawals until age 70 has been well-argued, both here and elsewhere. My wife and I are in good health and expect our genes to give us long lives, so we strongly believe we’ll be around to profit from our patience.

At present, our salaries supply virtually all the money we spend and save. If we pare away all spending except on essentials, we’re left with core costs that we think will be largely covered by our combined Social Security benefits when I reach age 70. Sharon expects to have already claimed her check when she’s first eligible, at 62. This is the best strategy for us according to OpenSocialSecurity.com.

The balance of our core retirement spending needs could be supplied by immediate income annuities. This option was off our radar a few years ago, but—to be honest—so was any serious thought of shifting from saving to spending. The more we study the topic, however, the more sensible it sounds.

Getting there. We know where we’re headed, but the exact route is an open question. We both agree that I should work full-time until I reach age 65. But at that juncture, our thoughts diverge on how to pay the bills until I start collecting Social Security at age 70. Which road do we take?

My wife would like me to fully retire at age 65. We’d have my tiny pension and her early Social Security, and draw the balance of our income from our investments. We could do it. While we’re not awash in money, socking away 35% to 40% of our income each year has allowed us to amass a modest pile of savings. We think trading some of those savings for a higher Social Security payout down the road is a sensible exchange.

Nevertheless, I know the decision to spend the precious treasure we’ve nurtured won’t be easy. We like the comfort of conservative investments. We already have more than enough money out of the market to carry us through the five years from my ages 65 to 70. But even with this backstop, I don’t think I could stomach pulling the retirement trigger in the face of a bear market.

What to do? I’m inclined to ease into retirement by shifting to part-time work, maybe clocking 25 hours per week. Those earnings, along with my pension and my wife’s Social Security, would easily fund our living expenses, with an ample amount left over for the fun my wife envisions.

The money from part-time work pays off in the future, as well. Each year we delay pulling money from savings means a year of spending still safely ensconced in our retirement accounts, hopefully ballooning ever larger. When added to my growing Social Security benefit, the potential returns from hanging on at the physical therapy clinic a little longer are compelling.

Cutting back without cutting loose also means I can stay flexible about when to call it quits. Most work carries a certain element of tedium, but that’s often true of life in general. I don’t lack for jobs to do or plans to pursue outside of work. But until those other activities overwhelm the sense of purpose that comes from my contribution at the clinic, I’m inclined to stay put. Both my boss and my patients seem to appreciate the service I provide. I’m not yet ready to fully forsake that feeling.

Like all life plans, ours has unique personal wrinkles that have yet to be ironed out. I suspect, though, that moving to part-time retirement in a few years will allow us to test the waters until we’re certain the time is right to take the plunge.

Ed Marsh is a physical therapist who lives and works in a small community near Atlanta. He likes to spend time with his church, with his family and in his garden thinking about retirement. His favorite question to ask a young person is, "Are you saving for retirement?" Check out Ed's earlier articles.

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The Taxman Cometh

FOR A FEW YEARS early in my career, I was an internal revenue agent for the IRS. I audited the tax returns of small businessmen, drug dealers, doctors, lawyers, a professional basketball player and everybody in between.

That was 43 years ago, when the IRS was much bigger relative to the population. One result: A larger percentage of the population were subjected to audits.

I saw and heard a lot. Some people would put dogs, cats or imaginary children on their tax returns, and claim an exemption for them. That was when you weren’t required to list Social Security numbers for dependents.

I remember one guy who gave his girlfriend thousands of dollars and had her sign promissory notes, which he promptly wrote off as bad business debts. This also kept his wife from knowing what he was doing.

Another guy started a little business out of his house that never generated any real money. But he wrote off everything as business expenses, including his house, meals out, cars and vacations.

One small businessman didn’t report, in today’s dollars, $310,000 of income. In addition, he paid all his employees in cash, which meant more unreported income. The boss also benefited by not paying the employer’s share of Social Security payroll taxes on their wages. One of the employees got mad at the boss and told on him.

There were more sophisticated tax scams. For instance, at that time, there was a widespread art donation scam and a master song recording scam. I won’t bother you with all the details. But it involved thousands and thousands of dollars just on the one case that I dealt with, which consisted of bogus charitable contributions, along with bogus business tax credits and deductions. This resulted in refunds going to the perpetrators of a well-oiled tax scam machine. Everybody involved benefited at the expense of other taxpayers.

You hear every now and then about the IRS beating up on some “poor” taxpayer in court. When I was an agent, the IRS wouldn’t go to court unless it was 99.9% certain of a conviction. If the IRS was actually taking you to court, you were in big trouble. It had decided it had a slam-dunk case and wanted to make an example of you to others planning the same thing. I imagine it’s the same today. The folks I audited took the wiser course: They paid the tax and maybe a civil penalty.

Court cases sometimes involved tax law that was so ambiguously written by Congress that it could be interpreted in many different ways. The IRS chose one way, the taxpayer another and the courts had to sort it out.

Audits not only catch tax cheats and honest mistakes, but also serve another purpose. Those being audited were a warning to others that the government was indeed at work collecting taxes. This included where the big tax money is—and, by that, I mean large corporations.

My strangest experience came long after I left the IRS.  A successful and devoutly religious small businessman started “confessing” to me that he had been blatantly cheating the government out of large amounts of taxes, and had been involving his family. One result was that these family members were eligible for government welfare programs because they appeared to have low incomes.

Why was he telling me all this? I think he wanted me to tell him that it was “okay” and his sins were “forgiven.” I didn’t.

The IRS has been a favorite whipping boy of politicians for decades, resulting in inadequate funding. One result is there are now fewer audits as a percentage of all taxpayers. It sends the message that the politicians don’t care if you fail to pay your taxes. That means a lot of folks—the types I used to audit—are getting away with tax murder. You can’t find tax cheats if you don’t audit them. They’re emboldened, thinking they can do what they want without getting caught.

You should want a strong and well-funded IRS to help drive down national deficits by enforcing the tax laws passed by Congress. A good rule of thumb is that, for every dollar spent on the IRS, we get back $10 in taxes collected.

Ken Begley has worked for the IRS and as an accountant, a college director of student financial aid and a newspaper columnist, and he also spent 42 years on active and reserve service with the U.S. Navy and Army. Now retired, Ken likes to spend his time with his family, especially his grandchildren, and as a volunteer with Kentucky's Marion County Veterans Honor Guard performing last rites at military funerals. Check out Ken's earlier articles.

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Inns and Outs

MOST READERS HAVE likely graduated from the vacations of their youth, where they saved a few dollars by sleeping on a friend’s hand-me-down couch. Still, some of my fondest travel memories were shaped by such frugal accommodation.

I once traveled cross-country on a summer camp trip with 48 other teens, touring the greater U.S. in a converted Greyhound bus. It was an eye-opener, visiting such heralded landmarks as the Statue of Liberty and the St. Louis Gateway Arch, as well as must-see kitsch like the Cadillac Ranch and the world’s largest ball of twine.

We stayed in a different motel every night. The trip’s operator held down costs by favoring motels in the cheaper part of town, with four teens to a room, where they shared two double beds. Such sleeping arrangements never bothered me.

I especially loved the motel rooms with vibrating beds. Twenty-five cents went a long way back then. Now, any room with a coin-operated bedframe is a warning sign. Same for any suite that has a coin-operated dispenser in the bathroom.

From there, my taste in overnight stays evolved. Shortly after marrying my bride of now 36 years, I vividly remember taking her to Bar Harbor, Maine, to visit Acadia National Park. We stopped at lighthouses and cider houses along the way, and—for one night—found a cheap roadside motel with a partly shorted-out neon vacancy sign.

It felt reminiscent of the Bates Motel, with an off-beat, standalone cabin office complete with a wraparound colonial porch. The sleeping quarters were located upwind in a heavily wooded area located 100 paces behind the office. The entire complex felt like the Hitchcock movie, creepy with a sense of unresolved mystery. I didn’t realize that we’d need to upgrade our stay if we wanted a room with windows. We slept with the lights on.

Eerier still was a relatively elegant 15-story hotel in Philadelphia. Upon exiting the elevator, we were greeted by a Joan Miró painting, exactly like the reprint my family had on the kitchen wall when I was a child. Gee, I always thought ours was an original.

Unbeknownst to us, my son hit the wrong elevator button and we exited one story above our room. The same Miró greeted us as we left the lift. We walked to where our assigned room should have been, only to find our key unable to open the lock. We took the lift back to the main lobby to obtain a new key from the front desk.

As people entered and exited the elevator, we saw the same Miró positioned on every floor. It shattered my view of fine art. I still have Shining-type nightmares about that stay, plus it skewered my view of my father’s fine art collection.

On a trip to visit our son in Scotland, we spent a night in an inn just outside of London. To say the room was tiny would be an overstatement. We had to use a shoehorn to squeeze between the door and the bed frame. Indeed, there had been more square feet in the airplane lavatory than in our hotel room’s bathroom. I think we used the bidet as the shower, not realizing there was a communal wash area down the hall. The stupid things we Americans do.

I was once invited by a former student to give a talk in the Netherlands. She was kind enough to take care of all the details for the trip, including reservations for an overnight stay. Much to my chagrin, the room was located in Amsterdam’s red-light district. I slept fully clothed on top of the sheets, not daring to look at what I might find beneath the covers.

To this day, I still don’t know what I did to deserve that accommodation. I would like to think it was because my former student was working with a shoestring budget. More likely: She was still upset that our published scientific article didn’t appear in a higher-quality journal.

Now that I'm retired, it's belatedly dawned on me that a good night's sleep is worth paying for. My past frugal lodgings may have made for better memories, but today's better accommodation leaves me a little less cranky in the morning.

Jeffrey K. Actor, PhD, was a professor at a major medical school in Houston for more than 25 years, serving as an academic researcher with interests in how immune responses function to fight pathogenic diseases. Jeff’s retirement goals are to write short science fiction stories, volunteer in the community and spend time in his garden. Check out his earlier articles.

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Smaller Than It Looks

I RECENTLY STUMBLED on a retirement planning blog listing the top 10 regrets of retirees. Planning for health care costs was among the things that people wish they’d handled differently.

The site had this suggestion: “Before you retire, you should get a reasonable estimate of your health care costs and make sure you can afford them. Medicare does not cover everything and most people spend hundreds of thousands of dollars in out-of-pocket health care expenses in retirement—not even including funding a long-term-care need.”

This statement is scary—and very misleading. Those “hundreds of thousands of dollars” include decades of premiums for Medicare and supplemental coverage. This doesn’t represent one big chunk of money due all at once, but rather a reasonably predictable ongoing expense, just like property taxes or rent.

I often wonder why retiree health care costs are presented in such a frightening manner. Let’s consider a more realistic view of health care spending.

In retirement, for those age 65 and older, annual out-of-pocket medical costs will be very low and perhaps even zero. Medicare and supplemental insurance pay virtually all charges, except for the Part B deductible, which is $240 in 2024. Medicare Part B covers out-of-hospital medical care, including doctor visits.

What if you retire before age 65? Typically, your best bet is to buy insurance through your state’s health-care exchange, for which you may receive a government subsidy. Once you reach 65, your primary health care expense will be your various monthly Medicare premiums, which will vary in part based on your age and location. The standard monthly Medicare premium is $174.70 in 2024.

Medigap Plan G, the most popular supplemental coverage, reimburses out-of-pocket costs except the Part B deductible. The monthly premium starts at around $250, but can be higher depending on the insurance company and where you live. There are also cost variables based on how the premiums are set. Premiums can be:

Community rated. Premiums are the same for all people who have the same type of policy.
Issue-age rated. The younger you are, the lower your premium is. Premiums don’t increase because of age.
Attained-age rated. Your premium increases every year as you age.

I have attained-age coverage because I didn’t need Medicare supplemental insurance until my employer eliminated its retiree health coverage when I was age 77. My premium for Plan G is currently $273.41 a month, while my wife is charged $261.84. Over 25 years, our Medicare and Medigap premiums would total some $160,000, ignoring inflation.

Add it all up and, yes, it is indeed hundreds of thousands of dollars. But it isn’t due all at once, but rather slowly over the decades. The fact is, if you calculate any ongoing expense over 25 years, you’ll get a big, scary number. My property taxes, ignoring future increases, would equal $337,500 over 25 years, while my homeowners’ association fees would come to $270,000.

Prescription drug costs are another big expense for some seniors, but the costs can be managed with a Medicare Part D prescription drug insurance plan. My monthly Part D premium is $64.80. In addition, annual Part D out-of-pocket costs will be capped at $2,000 starting in 2025. Also, beneficiaries will have the option to pay out-of-pocket costs in monthly amounts over the plan year, instead of in a lump sum when they occur.

For some of us more fortunate retirees, the Medicare premium surcharges known as the income-related monthly adjustment amount (IRMAA) can add significantly to health care costs. This year, couples with taxable income above $206,000 and single seniors with income over $103,000 pay more for Medicare Parts B and D. But only about 7% of Medicare recipients pay income-based premiums.

What about other expenses? The average retiree spends about $1,000 a year for dental care, which is roughly the same as the annual cost of veterinary care for a dog or cat.

Medicare covers vision expenses when they’re related to a medical condition, such as cataracts, dry eye, glaucoma, or vision issues related to diabetes. Other vision care, which is uncovered, is generally manageable and predictable.

My advice: Forget about those big, scary meaningless numbers. Plan realistically for your monthly Medicare and supplemental premiums as you would for any other ongoing, known retirement expense.

What about purchasing dental or vision coverage? It generally isn’t worth the premium. Premiums can be low, but so too are the benefits.

If you’re concerned about paying for potential out-of-pocket spending on prescriptions, dental and vision care, accumulate a pool of money before retirement for that purpose. A tax-advantaged plan, such as a health savings account, is best. But you can also build up such a fund in a bank savings account. Thereafter, consider adding to it each month in retirement.

Over my working life, I accumulated $18,000 in such a fund with my employer. After 14 years of retirement, there’s about $5,000 left. Much of the $13,000 paid out was spent on one tooth.

For retirement planning purposes, I suggest adding up your Medicare Part B and Part D premiums, along with your likely Medigap monthly premium. Then increase that total by 6% annually to account for inflation.

I haven’t mentioned Medicare Advantage. Even though these plans are popular, their use of limited networks, internal deductibles, co-pays and managed care make them difficult to evaluate. Some seniors will find Medicare Advantage plans acceptable, others will not.

Ironically, these plans employ all the strategies to manage costs that Americans complain loudly about when they’re working and have employer-provided health insurance. Importantly, if you later seek to leave Medicare Advantage and return to original Medicare with a Medigap supplemental plan, there’s no guarantee you’ll be accepted for Medigap coverage.

Needless to say, future Congresses can change any of these programs. The curmudgeon in me says stay alert and informed, and hedge your bets with overly adequate retirement income.

Richard Quinn blogs at QuinnsCommentary.net. Before retiring in 2010, Dick was a compensation and benefits executive. Follow him on X (Twitter) @QuinnsComments and check out his earlier articles.

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Keeping It Simple

"I NEVER MEMORIZE anything I can look up." Albert Einstein, it seems, said this or something similar. I first heard the quote in my freshman physics class. The teacher asked a student to recite a formula. The student’s response: “I never memorize anything I can look up.”

I’ve adopted the same philosophy. My wife loves to point out that I don’t remember the names of streets in our neighborhood. But I don’t need to know them. I don’t live on those streets. I never provide directions to anyone who wants to go down those streets. Why fill my brain with unnecessary facts?

We humans make decisions on a daily basis that require remembering certain facts: your name, address, Social Security number, mother’s maiden name. You could look these up, but it’s more efficient to memorize them since they’re required on a frequent basis.

But what about other facts? I have a terrible memory. I know this, and it doesn’t bother me. I write down the facts that I think I’ll need, and I know where to find them. Consider my cell phone, which I keep in my car. I don’t remember the number, but I can look it up when I need it.

While president, Barack Obama owned only blue and gray business suits, so he wouldn’t have to give much thought to what he’d wear on any given day and hence make yet another decision. I understand this logic.

Many people are familiar with KISS, short for keep it simple, stupid. Keeping things simple means my days are simpler—and there’s less chance that I or my wife will make mistakes.

For instance, I use the same mutual fund for my Roth account as my wife uses. My theory is that, when I die and my wife consolidates our accounts, she’ll consolidate my Roth with hers, and not make the mistake of mixing traditional IRA dollars with Roth dollars and thus pay unnecessary taxes. Let’s hope my plan works.

My wife and I have all our retirement monies with the same mutual fund company. As with my Roth, I have just one mutual fund in my traditional IRA. I like simple and, again, I believe it'll be easier for my wife after I die.

We also use just one brick-and-mortar bank and one online bank for our joint accounts. That’s it. We could have more, but why? If I thought I was brilliant in moving money around, I’d invest more time in making financial moves.

But instead, I invest my time in trying to understand where I might trip up. Buying or selling usually involves trading costs, so fewer trades mean fewer costs. Maybe I’m leaving money on the table, but at least I’m not losing money. That’s more important to me than trying to make more.

I have a degree in mathematics, but I’m lousy at arithmetic. If I want to be sure I’m correct when I add or subtract, I need to use a calculator. I know this. I have the tool to get the job done. It’s simple and cheap, I know where to find it—and, when I need math answers, it allows me to look them up. Simple.

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Every Bit Helps

IN NEW ORLEANS, a lagniappe refers to a small gift or bonus—like receiving 13 items for the price of 12, or a so-called baker’s dozen. Today, credit card points are a popular form of lagniappe, delivering a modest bonus every time you spend. But many other lagniappes are also readily available:

Banking. If you’ve ever paid a fee to use an ATM, Charles Schwab Bank’s checking account is worth a look. You can use any bank’s ATMs and, when other banks impose fees, Schwab will rebate them—without limitation. Another benefit: Use this ATM card overseas and, unlike most other cards, Schwab won’t charge any foreign transaction fees. 

Borrowing. Mortgage rates have doubled over the past few years, so this might not seem like the ideal time to refinance. But there are two ways to potentially cut your interest costs.

First, while rates are still high, they’ve come down from their peak last fall. Depending on when you purchased, a better rate might be available now. Another way to lower your rate: If there’s extra cash flow in your budget, you could refinance to a mortgage with a shorter term. Rates on 10-, 15- and 20-year loans can be much lower than those on 30-year mortgages.

Saving. Just a few years back, bank savings rates were near zero. But today, it’s easy for savers to earn as much as 5%. The challenge, though, is that rates are far from uniform, with some banks still paying very little. If your bank is among those offering a meager rate, it’s worth considering online banks such as Barclays (advertising 4.35%), Capital One (4.35%), CIT (5.05%), Marcus (4.5%) and Synchrony (4.75%). 

If your savings exceed the FDIC insurance limit, you could split the balance up among multiple banks, but that can be cumbersome. An alternative: Open a brokerage account and buy a money market fund that holds only Treasury bills. Because Treasurys are backed by the same entity as the FDIC—the federal government—your money is effectively protected the same way, but with no limit on coverage. This approach is slightly more inconvenient than holding cash in the bank, but it’s the easiest way to protect a large balance.

Paying bills. Most insurance companies offer a discount for paying the entire annual premium all at once. But with savings rates so much higher today, it might make sense to opt for monthly or quarterly payments. By stretching out the payments, you can keep your cash in the bank for longer earning interest.

Cellular service. These days, most cellular customers opt for one of the big three carriers: Verizon, AT&T or T-Mobile. But there’s an alternative called Mint Mobile that offers substantially cheaper plans. Until last year, Mint was an independent company. It’s now owned by T-Mobile and runs on its network. A potential downside: Data speeds for Mint customers are sometimes throttled, so it’s not for everyone. But it might be worth a look.

Investing. When the research firm Morningstar surveyed mutual funds, it reached this conclusion, “In every single time period and data point tested, low-cost funds beat high-cost funds.” Textbook economics dictates that “there’s no such thing as a free lunch.” But when it comes to investing, index funds offer investors just that. Jack Bogle, the late founder of Vanguard Group, said it best: “In investing, you get what you don’t pay for.”

E-commerce. Shopping online? Three services are worth your attention. Ibotta and Rakuten offer cash back on purchases, while Honey searches for coupons and applies them automatically. What’s the catch? I assume these services are all collecting—and presumably selling—data on your shopping habits. That’s not great, but I’m not sure it’s any worse than what search engines and social networks are already doing. 

Birthdays. When I was a kid, a local ice cream shop offered customers a free cone on their birthday. Many merchants now offer an online equivalent. Here are links to just a few: Starbucks, Dunkin’, J. Crew, Kohl’s and Sephora. The Krazy Coupon Lady website offers dozens more, and this site lists others.

Lottery tickets. I don’t advocate playing the lottery. But sometimes an investment opportunity might look a bit like a lottery ticket. Consider bitcoin. I’ve never liked it and still don’t. I see it as too speculative. At the same time, if you’d purchased even a small amount 10 years ago, you would have seen an approximately 80-fold increase in the price.

That’s why I sometimes make this recommendation: If you see something that looks crazy, but also wonder if it might work out, invest a small amount. If it turns into the next bitcoin, even a small investment will deliver a meaningful gain—and, perhaps just as important, it can help to minimize regret. On the other hand, if it goes to zero, you won’t have lost much.

Everywhere else. California’s In-N-Out Burger is famous for its off-menu items, which are readily available but not advertised. This type of thing isn’t limited to In-N-Out, though, and it gets at a final strategy for uncovering lagniappes: simply asking. To be clear, you aren’t asking for special treatment.

Rather, you’re looking for benefits that are available but not necessarily advertised. Because they aren’t the merchant’s first choice, you might have to ask a few different ways to uncover them. What’s an example? Some golf courses allow kids to play for free at certain hours. It’s surprising sometimes what a simple inquiry can uncover.

Adam M. Grossman is the founder of Mayport, a fixed-fee wealth management firm. Sign up for Adam's Daily Ideas email, follow him on X (Twitter) @AdamMGrossman and check out his earlier articles.

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What Lies Beneath

MONEY IS A TOOL. But a tool for what? We might imagine it’s simply a way to purchase the goods and services we need or want. But in truth, there are all kinds of things that money can do for us—some worthy, some not so much.

Want to use your wealth more wisely? I think all of us should spend time pondering what money represents to us, how we use it and why we like to have it. Here are just nine of the reasons that folks look to amass money:

1. More options. I’ve heard folks describe their savings as “f— you” money, offering the chance to give the middle finger to the boss whenever work becomes unbearable. Less crassly, others have said money represents “stored energy” or “financial freedom.”

The notion: Even if we aren’t currently putting our money to use, we know we could—and that potential is one of money’s most appealing qualities. I agree, though I’m also aware that the seemingly endless options offered by money come with a catch: As soon as we take advantage of them, our pool of money dwindles, and with it our financial options.

2. Financial security. “You’ve saved all that money. When are you going to spend it?” I’ve long thought “never” was a perfectly fine answer.

Money may represent the financial freedom to purchase all manner of goods and services. But instead of buying things, we can use money to buy freedom from worry. In a world where many—and perhaps most—folks fret constantly about their finances, I think the freedom not to worry about money is one of the top reasons to amass some savings.

3. More time. Research has found that, if our goal is greater happiness, one of the more effective strategies is using money to pay others to do tasks we find distasteful, whether it’s cleaning the house, mowing the lawn, painting the bathroom or whatever else makes our personal list of loathsome tasks.

This strikes me as a wise way to spend money: Time is the ultimate limited resource, and we don’t want to squander it on tasks we loathe. But—fingers crossed—having money should also save us time for another reason: Once we have a healthy sum set aside, we should be able to spend less time worrying about financial issues.

4. Fewer hassles. Money doesn’t just allow us to pay others to do tasks we find distasteful. It can also make life easier and less stressful. Travel is an obvious example. Thanks to money, we might take a taxi rather than a bus, or fly first class rather than economy.

Still, if we aren’t careful, money can have the opposite effect, resulting in even more hassles. For instance, emboldened by our fat financial accounts, we might buy another car or purchase a second home. These additional items might seem like they’d enhance our life. But often, they quickly become a burden, because we now have to care for these possessions, with all the wasted time and hassles that are involved.

5. Helping others. We tend to focus on how we might use money to benefit ourselves. But don’t overlook the pleasure of using money to help others, including both family members and nonprofit organizations. If it weren’t for this pleasure, I suspect that today I’d have scant interest in earning further money or continuing to work. But I still enjoy both—because of the happiness I get from using my time and money to help others.

6. Better health. Have you ever not gone to the doctor because of the potential cost? Do you regularly favor fast food and frozen meals because they’re less pricey than preparing your own food? Are you so busy with work that you can’t find time to exercise? Have you ever lost sleep worrying about money?

For some, the connection between life's financial demands and poor health couldn’t be more obvious. For others, it’s more subtle. But the effect across the population is clear: Based on life expectancy as of age 50, the top 20% of U.S. income earners live a dozen years longer than those in the bottom quintile.

7. Pride. Money is a key yardstick for measuring worldly success. Sure, we might be a better society if our preferred yardstick was how hard folks work, or what they achieve, or how many friends they have, or how much happiness they deliver to others. But these other attributes are harder to measure, while money is a straightforward, easy-to-grasp yardstick.

Is it bad to focus on money and take pride in amassing more or earning more? I don’t think so. Measuring such things can provide great motivation. But for our own peace of mind, the ultimate goal shouldn’t be “more,” but rather settling on a number where we’re willing to declare “enough.”

8. Status. For money to accord status, others need to know we have it. But how? Folks are unlikely to brag about the size of their portfolio or paycheck. Instead, they typically signal their financial success with their purchases. This, I believe, is one of the biggest drivers of wasteful spending, though presumably the spenders don’t see it that way, instead viewing the admiring glances they receive as evidence their money has been well spent.

9. Power. No, we might not be spending millions to support our favored political party or to get ourselves elected. Even so, money can be a source of power—or lack thereof. For instance, the family breadwinner often ends up with a bigger say in how the household’s money gets spent, leading to resentment or worse.

Anything missing from the above list? Oh yeah, we could spend the stuff. But as you might gather, spending—or not spending—is often just a manifestation of the reasons listed above. We might think we’re buying a bottle of wine, or a vacation, or a house. But often there’s a complicated stew of motivations underpinning what we do with our dollars.

Jonathan Clements is the founder and editor of HumbleDollar. Follow him on X @ClementsMoney and on Facebook, and check out his earlier articles.

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