Jonathan Clements's Blog, page 98

Lessons I’ve Learned

I DIDN'T ALWAYS LIKE my retirement. After I quit my full-time job, I briefly went to work for another aerospace company. It seemed like the perfect arrangement for a retiree: just 16 hours a week, with the luxury of setting my own schedule.

But it was the same old pressure cooker environment that I’d wanted to get away from. Although I was working fewer hours, it didn’t feel like I was retired. Instead, it felt like the same old grind.

That’s when I realized a successful retirement was less about whether you worked or not, and more about doing things you enjoy. If I’d liked that part-time job, perhaps I would have felt like other folks, who call themselves retired and yet continue to work.

That was a key lesson I learned early in retirement. Here are four other important lessons I’ve learned in the years since:

1. Staying independent. In California, if you’re age 70 or older, you have to pass a written test to renew your driver’s license. Many seniors dread the test. When my mother took it, there were 30 questions and you can only miss three.

I was so proud of my mother, who at age 92 passed on her first try. My mother was a good driver in her later years. She had no physical or mental ailments that would keep her from driving. She valued her independence, and loved driving to her local grocery store or a nearby restaurant.

Except I made one big mistake.

After I retired and started spending more time with my mother, I drove her everywhere she wanted to go. By the time it dawned on me that I should let her drive to keep her driving skills sharp, it was too late. She no longer felt comfortable behind the wheel. She’d lost confidence and the feel for the road. She never drove again.

My mother used to walk a mile every day. But she had an injury that kept her from walking for a couple of months. After she recovered, she was never able to walk that far again. Her favorite afternoon walk was gone for good.

The saying “use it or lose it” is especially applicable to the elderly. As you get older, it’s so easy to lose something for good, even if you stop doing it for just a short while. If you’re consistent in your daily routine, you’re more likely to remain independent.

2. Buying Series I savings bonds. When inflation-protected savings bonds were yielding 9.62% in 2022, I thought about purchasing some through TreasuryDirect.gov. As a retiree, I’m always looking for a good, safe investment return. But I was concerned about the fixed rate being 0%.

The fixed rate is one of two components of a Series I bond’s yield, and it stays the same throughout the life of the bond. The other component is a variable rate that changes every six months based on inflation. With a fixed rate at 0%, you could never beat inflation. But if the fixed rate is above 0%, you’re guaranteed to beat inflation, at least before taxes. That’s why today’s I bond rate of 5.27%, which includes a fixed rate of 1.3%, looks so appealing.

If you had purchased an I bond back in 2022, when it was yielding 9.62% but with a 0% fixed rate, today’s yield would be just 3.94%—a lot less than the current 5.27% yield. If you were lucky enough to have purchased an I bond back in September 1998, when the fixed rate was 3.4%, you’d be earning a whopping 7.41%.

The lesson: If you’re thinking about buying I bonds, it’s important to pay close attention to the fixed rate, and not to be too enamored of the current inflation-driven nominal yield. There are other disadvantages to I bonds: You can’t spend the income if you need it. Although the income is earned from the first day you buy, you don’t have access to that interest until you redeem your bonds.

Another drawback: You have to wait at least a year before selling. Moreover, if you sell before five years, you lose the last three months of interest. You should also be aware that $10,000 is the maximum you can purchase annually per person. The IRS, however, allows you to purchase an additional $5,000 with your tax refund.

3. Choosing the right Medicare plan. About one in three Medicare beneficiaries use an insurance agent or broker to choose a Medicare plan. If you’re among them, you should be aware of a key conflict of interest.

Commonwealth Fund conducted focus groups with brokers and found most are paid more—and sometimes a lot more—to enroll folks in a Medicare Advantage plan, rather than a Medigap plan that supplements traditional Medicare. The brokers in the focus group also said most Medicare Part D drug plans don’t offer commissions and, among those that do, it isn’t much money. Brokers don’t receive any money for enrolling someone in traditional Medicare.

It was also revealed that the commission structure on Medigap plans encourages agents and brokers to sell high-premium plans, such as plans G and F, that cover most of the costs that aren't paid by traditional Medicare. Plans like K and L, with lower premiums but also limits on out-of-pocket expenses, might be more appropriate for someone on a shoestring budget—but these plans also tend to pay smaller commissions to insurance brokers and agents. When these salespeople were asked what they’d choose for themselves, most said they’d pick traditional Medicare.

4. Staying positive. Today, I’m enjoying retirement immensely. But it’s not always easy growing old. There are more health issues to contend with. As you age, you lose more family members and friends. Then there’s the stark reality that you might have to live alone for some part of your retirement.

I read a New York Times article by Melissa Kirsch where she asked her readers to submit the best changes to their routines in 2023. One reader responded: “Each week this year I wrote something that happened that I was grateful for on a slip of paper and put it into a jar.”

I thought that was a great way to try to stay positive when things aren’t going your way. If we write down some of the good things in our life that we tend to forget, we can revisit them during difficult times. We might also put the jar where we can see it, so it’s a constant reminder of all the positive things in our life.

Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor's degree in history and an MBA. A self-described "humble investor," he likes reading historical novels and about personal finance. Check out his earlier articles and follow him on X (Twitter) @DMFrie.

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Winning Ways

ROGER PENSKE STARTED as a race car driver, but soon found he’d be better off as a team owner. Penske's holding company also has stakes in Penske Truck Leasing, among other businesses, as well as the Indianapolis Motor Speedway, home of the Indy 500.

One of Penske’s criteria when hiring race car drivers: select folks with a burning desire to win. Penske has said he can guide a driver’s thinking about the best way to pursue wins, but he can’t teach someone the will or desire to win.

At the track, he’s called “the captain.” He has a team of managers who oversee the pit crew, mechanics, statisticians and driver coaches. But when he gets on a driver’s radio, everyone else shuts up and lets Penske coach the driver.

In most cases, he’s calming the drivers down because they’re like pit bulls in a dog fight. They want to kill. This is the energy that Penske wants. He just needs to harness a driver’s fight so the team benefits—meaning the driver wins.

Notice what Penske said about the desire to win. He can’t teach that. It either exists inside the driver or it doesn’t. We all want to win or, at least, not lose. The difference lies in our willingness to focus all our energies on winning.

How important is winning to you? To me, it's not that important. I don’t focus on winning. Instead, I concentrate on not losing. That’s a big difference.

A stock purchase that increases by 10% is a winner, but not a great winner. By contrast, a 10-bagger is a winning stock that soars to 10 times your original purchase price. To pick a 10-bagger, you either need to really know what you’re doing or you need to get very lucky. But to pick a stock that increases by 10% usually just involves waiting a little while.

Hitting home runs is hard. Hitting singles is easier, and they get you on base. Both are winning activities. The difference is how you define winning.

According to psychologist Daniel Kahneman, most of us would rather not lose than win. The joy of winning is dwarfed by the pain of losing. The important thing is to understand who you are. Must you have major wins to feel good, or would you be satisfied with minor victories? Minor wins occur more frequently, so they offer the chance to feel good more often. Who doesn’t want to frequently feel good?

Many amateur gamblers want to be big winners. They say, “Put it all on red.” When they hit red, bells go off. At that moment, if they took their money and walked away, they’d probably be ahead. But in many cases, they say, “Let it ride.” The result usually isn’t what they wanted.

By contrast, professional gamblers go for minor wins. They play the sure things, even if the winnings aren’t great per hand. The more winning hands they have, the more their gambling earnings grow. They take the money and walk away from the table, knowing there will always be another game tomorrow.

If Penske was your coach, would he need to control your pit bull fight, or could he simply let you drive your race and get the points for finishing? Unrestrained pit bulls don’t win every race—and, in fact, they often crash out. Less aggressive drivers are easier on the equipment and bring home an un-wrecked car, so the vehicle is ready for the next race.

The same notion applies to investing. Do you tend to go for the big win, often leaving you broke? Or are you happy to get through the year unscathed, ready to collect further gains next year?

David Gartland was born and raised on Long Island, New York, and has lived in central New Jersey since 1987. He earned a bachelor’s degree in math from the State University of New York at Cortland and holds various professional insurance designations. Dave’s property and casualty insurance career with different companies lasted 42 years. He’s been married 36 years, and has a son with special needs. Dave has identified three areas of interest that he focuses on to enjoy retirement: exploring, learning and accomplishing. Pursuing any one of these leads to contentment. Check out Dave's earlier articles.

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No Need to Dwell

WHEN I WAS A KID, a popular expression was “same difference.” It meant that two choices were essentially interchangeable. It turns out the idea can be helpful in financial planning.

While some financial decisions are very important—and thus warrant careful analysis—others make far less of a difference. In those cases, additional analysis typically contributes little. According to one study, it can even be counterproductive. Below are several topics where extensive analysis is often less important than it might seem.

Asset allocation. When it comes to building a portfolio, personal finance author Mike Piper sums it up this way: “Asset allocation is like making a fruit salad…. If you put in more blueberries, nothing magical happens, nor is there any disaster.”

Piper argues that the same applies to building a portfolio. It’s simply not worth getting too hung up on the details. This is especially true when it comes to the world of investment choices, where it’s impossible to know the result of a given decision without the benefit of hindsight.

The number of potential decisions is endless. Should you tilt your portfolio toward small-cap or value stocks? Should you stick with the simplicity of the S&P 500 or opt for a broader total market fund? Should you add a sliver of real estate or commodities? Should you opt for the safety of government bonds or venture into corporate debt?

At the end of the day, as long as none of these decisions takes your portfolio too far in any one direction, the difference in long-term returns will likely be minor. What’s much more important is getting the big decisions right. How much you hold in stocks versus bonds will have far more impact than whether you choose to overweight one corner of the market or another.

Fund choices. As I noted last week, there are more than 3,500 exchange-traded funds available to U.S. investors. Within many categories, there are hundreds of choices. Consider the most basic asset class: large-cap U.S. stocks. The obvious choice is a fund that tracks the S&P 500-index, but there are many alternatives, including the Dow Jones Industrial Average, Russell 1000, MSCI U.S. Prime Market 750 and Wilshire 5000. Which should you choose?

Run the numbers using a tool like Portfolio Visualizer, and you’ll find the correlations among these indexes are between 0.95 and 1, meaning they move nearly in lockstep, plus their annual returns are within one percentage point of one another. The upshot: While these indexes aren’t identical, they’re awfully close, so no one should lose sleep trying to choose among them.

Pension choices. These days, only a minority of workers have a traditional pension. For those who do, though, this benefit requires a long list of decisions. The first question is the most fundamental: Employees can claim their benefit as a single lump sum or in the form of guaranteed monthly payments for life.

Those who accept the lump sum can roll it over into another retirement account and manage it the way they do the rest of their portfolio. But for those who opt for the monthly payments, there are several additional options to consider.

Workers who are married can choose a survivor benefit—typically 50%, 75% or 100% of the worker’s own benefit. Those who worry their spouse might predecease them can choose a “pop-up” benefit, which increases the workers’ own payments if their spouse dies early. And for those who worry about their own longevity, some pensions offer benefits that are guaranteed for a period of years.

If this all seems complicated, it is. Because the choice is irrevocable, it tends to induce stress. But here’s what’s surprising: If you run the numbers, the differences often aren’t as significant as they might seem. To understand why, let’s look at the math used to evaluate complicated choices like this.

Present value analysis allows us to compare the value of a dollar today with the value of a dollar received at some point in the future. Intuitively, it makes sense that a dollar you receive today would be worth more than a dollar next month or next year. And a dollar received further in the future—say, in 10 years—would be worth even less than that. Using a “discount rate” of 7%, which is what you might earn by investing a sum of money today, the value of a dollar today falls to just $0.51 after 10 years and to just $0.26 after 20 years.

This is relevant to pension analysis because it reveals the diminishing value of payments received far in the future. Let’s look at a simplified example. Suppose a pension offers these two options:

$3,000 a month for life with no survivor benefit
$2,700 a month for life with a survivor benefit of 50%

The difference between these two options—$300 per month or $3,600 per year—might seem significant today. But because of the present value dynamic described above, it isn’t nearly as significant as it might seem. Using that same 7% discount rate, that $300 difference would shrink to just $152 in 10 years and $77 in 20 years. The survivor benefit would potentially extend the number of years of payments, albeit at a lower rate.

The bottom line: You should never give financial decisions short shrift. But as these numbers reveal, it may not be worth belaboring the decision. Whichever option you choose, the pension benefit is going to be worth far less in the distant future—and having a plan to cope with that shortfall is where you should probably focus your energies.

Social Security. Retirees can claim their benefit at any time between ages 62 and 70. For each year the retiree waits, the monthly benefit increases. But each year a retiree waits is also a year with no benefit at all. As a result, retirees need to guess how long they’ll live, and that’s never easy. Is there another way to make this decision?

If you’re unmarried and in generally good health, the decision is straightforward: Most everyone—myself included—recommends waiting until age 70 for the largest possible benefit. But if you’re married, should you both wait until 70? At first glance, that might seem like the logical choice—and that’s what the math says. But sometimes the differences are insignificant.

When most people run the numbers, what they find is that there’s only a modest difference for the lower-earning spouse if he or she claims a bit earlier—say, at 68 or 69 instead of 70. Why? For starters, none of us knows how long we’ll live, so claiming earlier always has an inherent advantage. And because of the present value effect, the true value of forgoing benefits today for a larger check later may be smaller than it appears.

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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Drawn From Memory

WE'RE ALL CAPTIVES of our own experiences. Want to behave more rationally? We should set aside our life’s anecdotal evidence and instead make decisions using the best information we can find. Yet our experiences—especially those during childhood and that involve family—tend to triumph, shaping our world view and potentially setting us up for costly financial mistakes.

What drives your behavior, financially and otherwise? A little introspection could help you better understand your financial choices—a crucial first step to behaving better. As I look back, here are some key influences on my thinking:

Boarding school. When I was age three, my parents moved from London to Washington, D.C., where my father joined the World Bank. Not long before my 10th birthday, he was posted to Bangladesh for four years, and I went from a coddling elementary school in an affluent D.C. suburb to a spartan English boarding school.

My time at boarding school could hardly have been more defining. In my first term, I found myself sleeping in a dormitory with 11 other kids. Later, there would be a dormitory with 34 others. The buildings were so chilly that students would park their backsides on the cast iron radiators to fend off the cold.

As for the food, I can still picture the huge chunks of slimy white fat dwarfing the accompanying slivers of beef, along with the cabbage cooked so long that the leaves had melded into a pungent, soupy sludge. One consequence: I was left with a lifelong appreciation of basic pleasures like warm showers and good food.

Bangladesh. This gratitude for basic comforts was reinforced by visits to my parents in Dhaka during the school holidays. Even now, I can vividly recall walking through shanty towns and refugee camps, passing the outstretched hands of maimed children and adults.

All this moving around early in life compounded my sense that I was from nowhere. Yes, a few areas of England have a special place in my heart, notably Richmond, Devon and Cambridge. Still, I don’t have deep roots anywhere, and I envy those who do.

By the time I was age 17, I was so used to solo international travel that my parents had few qualms about letting me spend a month traveling around Europe on my own, with $800 in American Express traveler’s checks stuffed in my backpack. I returned with $600.

Being from nowhere—or, to give it a more positive spin, being from “everywhere”—gives me, I believe, a different perspective. One result: I’m much more inclined to invest abroad than most Americans.

Divorce. In retrospect—and having gone through two divorces myself—I think my parents handled their divorce remarkably well, at least from a child’s perspective. I felt like we children were always a priority. Still, I remember the sense during this period that money was in short supply, and I’ve long wanted to avoid that in my own life.

Moving up. My paternal grandfather—whom everybody called Clem—grew up in poverty and left school at age 12. But he went to night school, passed the exam to become a clerical worker in the U.K. Civil Service and ended up solidly middle class. Along the way, he and my grandmother raised two children who both went to Cambridge University, no small achievement in the 1950s for two kids from state schools in the north of England. In fact, when my aunt got into Cambridge, it made the front page of Newcastle’s daily newspaper.

From my father and my paternal grandparents, I learned that education paid dividends. But I also learned that the measure of success wasn’t money, but achievement. Yes, I grew up wanting financial security. But I wanted professional success even more.

Moving down. While my paternal grandparents represented upward social mobility, the reverse was true for my maternal grandparents. My grandfather had come from great wealth. His grandfather was one of Britain’s richest men when he died in 1888. But years of overspending eviscerated the family fortune. When I was growing up, my mother often spoke of the financial mistakes that had been made over the generations, and those stories stayed with me.

By the end of their lives, my maternal grandparents struggled to keep up appearances. Most of their house—except the kitchen and living room—was almost unbearably cold in winter, and mold and water stains marked the ceiling and walls. After my grandmother’s death, the house was promptly torn down by the next owner. Is it any wonder I’m careful with money?

Lean years. As a child and college student, I don’t recall being especially frugal. But frugality became a necessity in my 20s, when I was a poorly paid reporter living in one of the world’s most expensive cities and trying to support a graduate-student wife and two young children.

I was engaged at age 23, married at 24 and a father at 25. Still, I have no regrets about this rush into adulthood, even though the marriage didn’t last. I have two wonderful children, plus the forced frugality meant I developed good money habits that saved me from a lifetime of money stress and put me on the fast track to financial independence.

My father’s retirement. My father was not only a fine athlete—even in his 60s, he could run a 5k at a seven-minute-mile pace—but also highly accomplished. After Cambridge, he spent a decade as a financial journalist in London, including working for the Financial Times and The Telegraph, followed by two decades with the World Bank. His influence on me could hardly be more obvious: I, too, fought to get into Cambridge and then went into journalism.

Despite my father’s impressive career, as soon as he had the chance to take early retirement, he retreated from the world. I came to realize how introverted he really was, and what a struggle it must have been to put on the public face needed to navigate the work world.

A few years after retiring, my father moved to Key West, Florida. It may be paradise to tourists—but it’s also a place where he found little social and intellectual stimulation, and it showed. At age 75, while riding his bicycle, he was struck and killed by a car. But even at that point, there were signs that the years of social isolation had taken their toll. For me, the lesson was clear: Even in retirement, it’s crucial to stay engaged with the world.

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

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Prophet Motive

LARRY BURKETT WAS one of my early financial influences. Burkett, who passed away from cancer in 2003 at age 64, had a daily program called Money Matters on our local Christian radio station. For years, it came on during my commute home from work, and I’d faithfully tune in.

Burkett was a prolific author, publishing more than 70 books. His final book, Wealth to Last, co-authored with Ron Blue, has been in my financial library for two decades. The subtitle is Money Essentials for the Second Half of Life and is targeted at those age 50 and older.

Burkett’s Christian faith and understanding of biblical principles informed everything he wrote and said about money. Two quotes from the introduction of Wealth to Last set the stage:

“You should have two financial goals in life: to make a little money first, and then to make a little money last.”—Unknown
“Instruct those who are rich in this present world not to be conceited or to fix their hope on the uncertainty of riches, but on God, who richly supplies us with all things to enjoy. Instruct them to do good, to be rich in good works, to be generous and ready to share, storing up for themselves the treasure of a good foundation for the future, so that they may take hold of that which is life indeed.” —I Timothy 6:17-19

Many of Burkett’s themes—diversify your portfolio, be careful with debt, spend less than you make—should resonate with most HumbleDollar readers regardless of whether they share his Christian faith. What are some distinctive nuggets from Wealth to Last? Here are some that I think will be of most interest to the HumbleDollar community.

Chapter 4 is entitled Retiring Conventional Wisdom About Retirement. It’s subtitled A Retirement Is a Terrible Thing to Waste. It opens by contrasting the productive later years of S. Truett Cathy, the founder of Chick-fil-A who retired at age 92, with the life of a power plant retiree of the same age named Mr. Darton.

Darton kept a 10-year calendar in which he crossed off the days until his much-anticipated retirement at age 60. After retiring, he declined various service opportunities in his church, saying, “I’m retired now. I have a lot of things I want to do. Besides, we hope to do some traveling.”

The story continues: “After five years of retirement, Mr. Darton had seen all the TV he wanted, read all the books he wanted, kept his yard perfect, and was very bored. Still healthy and mentally sharp, he had considered ‘doing some consulting’ to increase his income and help his budget. But he was a bit proud that he was retired and didn’t want it to appear that he couldn’t make it on his own. Besides, no consulting opportunities came along.”

The book goes on: “Turning seventy, his ten years of retirement had evolved into a routine of reading the paper for an hour, having coffee with old coworkers, and griping with them about his pension and the cost of prescription drugs. The highlight of his day was getting the mail; the highlight of his week was mowing the lawn.”

When Darton turned 80, his doctor told him at his annual physical that he was in great shape and would likely live several more years. Darton’s response? “Ho-hum. I can’t imagine several more years like the last twenty years.” He tended to daydream about his career days while riding his lawn mower. Missing the feeling of contributing and the camaraderie from those days, he wondered why he had so looked forward to retirement.

The contrast between productive Truett Cathy and bored Darton is designed to support the authors’ prescription for a fulfilling retirement: “What’s our solution? It is a four-letter word: W-O-R-K. Keep working. Change careers and begin another. Work as a volunteer or work for pay. Work part-time. Work full-time intermittently at various jobs. Work in the winter, play golf and fish in the summer. Get attuned to the idea of continuing to work.”

One of the reasons continuing to work in our later years can be an attractive option is that most service and knowledge jobs these days don’t require as much physical stamina as they once did. Another reason is the increased longevity we enjoy. From the book: “After hearing of an acquaintance dying suddenly at age sixty, haven’t you said something like, ‘My! That’s young!’ Your great-grandparents would rarely have uttered such a remark.” A longer lifespan translates to increased financial needs for retirement. Working a bit can help with that.

Wealth to Last was written for a Christian audience. It addresses the question, “Is retirement scriptural?” The authors list three reasons Americans think they’re entitled to retirement:

Leisure is more valuable than work.
Older people are less useful and less productive.
At an arbitrary age, we can withdraw from responsibilities to enjoy the comfortable rewards from past labors.

The authors’ conclusion, supported by Bible passages, is that these premises are not biblical. In contrast to what they see as the typical American retirement dream, the authors present numerous examples of both secular and religious people who stayed engaged, accomplishing much in their later years.

The authors are careful to say that their message is not that all retirement is wrong or bad. Many retire because of health issues or disabilities. Others retire to take care of aging parents, an ill spouse or grandchildren. Some people are forced to retire because of the nature of their work or industry.

They also take pains to say they don’t want to imply that work is the most important activity in life: “We do not advocate a workaholic approach. We are simply saying that if a Christian has a good, full life and enjoys what he does, he will be useful throughout his entire life, not just in his early years.”

In the Q&A section at the end of the chapter, Burkett answers a question about saving for retirement with some thoughts that might seem jarring to readers: “I do have a concern though. Some in America have developed a mania about retirement savings and the necessity for storing large amounts of assets. People often save 10 to 15 percent of their income in a retirement plan but then say that they cannot afford to give 10 percent to God’s work.”

He goes on: “Some think they need to retire with a vast amount of assets and then spend much more than they did during their working years. That is not true. Once you set a pattern for living, it will not change substantially after retirement, except in many cases it may go down. If you have learned to adjust your standard of living during the working years, then retirement will be a comfortable adjustment. The Christian who hoards money to be used for retirement is being deceived.”

Burkett continues: “There is nothing wrong with saving in moderation for retirement. But there is something wrong with storing unnecessarily, believing that is the only way to provide for later years. Whatever its guise, living for retirement and hoarding is the wrong approach…. This pressure to have enough resources to begin and sustain retirement lifestyles results in stress, worry, and an earthly focus rather than a Kingdom focus.”

The key to understanding Burkett: His faith was fundamental to his being. His views on money reflected that paradigm. Unlike some these days who “peddle the word of God for profit,” Burkett was in the game to spread the message, not to enrich himself.

Ken Cutler lives in Lancaster, Pennsylvania, and has worked as an electrical engineer in the nuclear power industry for more than 38 years. There, he has become an informal financial advisor for many of his coworkers. Ken is involved in his church, enjoys traveling and hiking with his wife Lisa, is a shortwave radio hobbyist, and has a soft spot for cats and dogs. Check out Ken's earlier articles.

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January’s Hits

THE NEW YEAR OFTEN sparks a renewed interest in personal finance. What were folks reading as we kicked off 2024? Here are the 10 most popular articles and blog posts published by HumbleDollar in January:

Charlie Munger made his name by beating the market. But along the way, he offered everyday Americans great wisdom on how to better manage their money, as Adam Grossman details.
Consumer prices drop when inflation falls. Estate planning is for the wealthy. Everyone needs life insurance. Sanjib Saha lists eight misconceptions he's encountered as he's tried to teach folks about money.
When a lawyer set up an irrevocable trust for Ken Begley's father in 1996, the trust made a ton of sense. By the time Ken's father died 23 years later, it made no sense at all.
Money is crucial to a successful retirement—but so, too, is a robust network of friends. Dan McDermott offers some tips on how to avoid loneliness and cultivate meaningful friendships.
Modern medicine is very good at extending life. But will those extra years be good years? Howard Rohleder offers some pointers from Peter Attia's 2023 bestselling book.
Want to maintain your brain health for as long as possible? Sonja Haggert lists eight steps that could help you stave off cognitive decline.
Rick Connor and his wife recently bought a new house that's closer to their children and grandchildren. The $779,000 purchase has had a host of financial ramifications.
"I liked the redefinition, which included remaining fully engaged in life, including doing work that you love," writes Joe Kesler. "My resistance to retirement was slowly softening. Then it was accelerated by a really bad day."
Ed Marsh and his wife used to have fairly straightforward financial lives. They're trying to figure out how to return to those simpler times.
Easy come, easy go: Dennis Friedman managed to sharply reduce his Medicare drug plan premiums for 2024—which is just as well, because this year he's getting hit with Medicare premium surcharges.

What about our twice weekly newsletters? The most popular Wednesday newsletters were Sundar Mohan Rao's More Than Money and Dave Gartland's Retirement Ready, while the best-read Saturday newsletters were Dennis Friedman's A Time to Spend and my article on Our Money Pit. Don't get our free newsletter? You can sign up here. We also put out a free daily alert about the site's latest articles, which you can sign up for here.

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First Things First

THE FIRST TIME I GOT laid off, I was working in an insurance company’s training and development department. I’d been working in another department at the company when I saw a job posting for the position. The training department was looking for someone with subject matter expertise and experience in teaching.

At that point, I’d been working in property and casualty underwriting for 14 years. On top of that, I was a certified instructor for the Dale Carnegie course in public speaking. This opportunity appeared to be a perfect match for me, and it was.

The training department appreciated my knowledge of insurance underwriting, as well as my ability to stand up and lead a class. This was a skill set the department was lacking until I came along. Everything was working in my favor. I thought I’d found my niche. And then it ended.

The company was experiencing financial difficulties due to a slew of costly claims resulting from hurricanes, tornadoes and floods. The first department to be dissolved was the training department. I was given a generous severance package. The company also paid for an outplacement service. The service gave laid-off workers an office space to go to, with coffee, fax services, research materials and classes to help us get back on our feet.

The outplacement service’s stated objective was to guide us not just to a new job, but to the perfect job. I’d always wanted a successful career, and I believed the service could be my ticket to the utopian experience I’d been hoping for.

One of the biggest advantages of losing my job this time around: I wasn’t alone. My whole department was shut down, so we were all in the same boat. We all needed a new job, and finding the ideal job was a goal worth pursuing.

On the other hand, this wasn’t the best time to be out of work. My son was four years old. We were starting to see signs that he had a learning disability. My wife wasn’t working, so she could focus on raising our son, but that also meant we had no paycheck coming in. Meanwhile, we had a mortgage, plus I had some medical problems, which meant I had to rely on COBRA coverage for my health insurance needs.

For those on COBRA, it’s a blessing and a curse. You have medical coverage, but the price is often steep. The subsidy your employer previously provided toward medical insurance is gone. You have to pick up the entire tab. The coverage was expensive, but I needed it.

Despite these financial burdens, I was determined to find that ideal job. This philosophy was also shared by other members of my department—that is, until the father of one of my coworkers straightened us out. He said, “It’s nice you want the ideal job, but first you need a job. After getting a job, you can then go after the ideal job.”

Talk about a Debbie downer. I was excited about turning this negative situation into a great, big positive, and then this reality check pops my bubble. But he was right. Utopia is nice, but first you need to put food on the table and a roof over your head before seeking your pie-in-the-sky dream.

To dream is great. It allows us to reach for the sky. The bigger our dream, the higher our final landing spot will potentially be. There’s a great self-help book called The Magic of Thinking Big by David Schwartz. The title says it all.

There’s certainly magic in thinking big—as long as you already have the foundation of income that gives you the financial leeway to pursue that ideal job. I ended up taking a job in Upstate New York that was two-and-a-half hours’ drive from our New Jersey home. Not ideal.

I rented a studio apartment to use on weekdays and came home at the weekend. The job wasn’t in training, as I wanted, but I sold my new employer on hiring me as an underwriting manager who was skilled in training. It was a small company, with just 30 employees, so having someone with multiple skills was a good fit.

What about that ideal job? That came about 12 years later—by happenstance. The company where I was working got bought out, and that led to new responsibilities for me. The new job was in regulatory compliance, which was a better fit for my skills. Sometimes patience pays off.

David Gartland was born and raised on Long Island, New York, and has lived in central New Jersey since 1987. He earned a bachelor’s degree in math from the State University of New York at Cortland and holds various professional insurance designations. Dave’s property and casualty insurance career with different companies lasted 42 years. He’s been married 36 years, and has a son with special needs. Dave has identified three areas of interest that he focuses on to enjoy retirement: exploring, learning and accomplishing. Pursuing any one of these leads to contentment. Check out Dave's earlier articles.

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Going Solo

ON OUR RECENT TRIP to Alaska, I was surprised by the number of solo women passengers. It turns out I shouldn’t have been.

According to a recent report from Road Scholar, a not-for-profit travel company geared toward those age 50 and older, a quarter of its travelers were single, with 85% of them women. That group included married folks traveling solo. It’s a growing trend. The Road Scholar study reported that 60% of the company's solo travelers in 2022 were married.

Why would a married person want to travel solo? Among the women surveyed by Road Scholar, there were two major reasons: Either their spouse wasn’t interested in travel, or the spouses had different travel interests. We know couples where one of the spouses is eager to travel, while the other is a confirmed homebody. The third most-cited reason for traveling solo: Health issues limited travel for one partner.

The solo travelers I’ve spoken to like having an experienced company make all the arrangements and provide local support if things go awry. That preference, however, can limit travel options and may mean paying a premium. Many of these planned trips, especially cruises, seem to be based on double occupancy. I looked at prices for the same Road Scholar trip to Alaska’s Inside Passage that my wife and I took in September 2023. There are 10 trips scheduled for 2024. All 10 had double cabins available, but only four offered single cabins.

The per-person price for a double cabin for a late August 2024 trip was quoted at $10,499. A single traveler booking the same cabin would pay $13,499. Road Scholar will try to connect a solo traveler with a cabin partner, but there are no guarantees. The company says it’s designing more trips with solo travelers in mind.

Interested in traveling alone? There’s an enormous amount of information available. An article in Travel & Leisure lists the 14 best tour companies for seniors. Several were highlighted for their attention to the needs of solo travelers. Road Scholar has a page listing “singles at no extra cost” trips, while EF Go Ahead Tours has a special page for solo tours, as does Overseas Adventure Travel.

Here are some ways to trim costs if you’re traveling solo.

Find a friend. Or a sibling, cousin or acquaintance. Two or more can usually travel more cheaply than one, because you can share costs like rental cars and hotel rooms.
Do it yourself. Planning your own travel is often the frugal way to go. Travel companies like the ones mentioned above can provide great service, but that comes at a cost.
Ask for a roommate. Many travel companies will try to match you up with another solo traveler, so you can share costs.
Accept the additional expense as the price of comfort and privacy. Many retirees have spent a lifetime working and saving. Perhaps it’s time to enjoy a little of that hard-earned wealth.

My wife has done trips with her girlfriends for many years. These have included “girls’ weekends” at the Jersey shore, Las Vegas, Boston, and several houseboat trips in central Pennsylvania and Arkansas. For some reason, I’ve never done a guys’ trip, although I’m thinking about it. Maybe it’s because of the extensive travel I did during my career. Some years, I was on the road for at least part of 40 weeks. Some of the travel was with colleagues, but much of it was on my own. I didn’t mind the travel too much, but I was always glad to get home.

I’ve been happily married for almost 42 years, plus Vicky and I dated for five years prior to marrying. After all that time, the thought of single life is daunting. Maybe traveling solo, while we still have our spouses and partners around, is good training for our eventual singlehood. In a HumbleDollar article last year, Laura Kelly wrote about how she and her husband are taking steps to develop and maintain their independence. To that end, they’re planning some independent trips in 2024.

Richard Connor is a semi-retired aerospace engineer with a keen interest in finance. He enjoys a wide variety of other interests, including chasing grandkids, space, sports, travel, winemaking and reading. Follow Rick on Twitter @RConnor609 and check out his earlier articles.

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Things I’ve Picked Up

IT'S BEEN MORE THAN 10 years since my retirement journey began at age 52. For almost 30 years, I’d worked hard, especially the last two decades, when my twin brother and I owned a landscaping company. Vacations were few and far between, and even on vacation I was always on call.

I was burned out and ready for a new chapter. Going into retirement, I was well-prepared financially. But how I’d fill my days was something of a mystery.

Why wasn’t I worried about money? I’m frugal—a family trait—and had saved diligently in anticipation of an early retirement. I’d paid off my mortgage early and had no other debt. The house that my husband and I live in is only 750 square feet, making for reasonable utility bills and maintenance costs.

As I approached retirement, I’d calculated that, along with my husband’s government pension, we’d be able to live off the income and capital gains distributions from my Vanguard Group and T. Rowe Price mutual funds, and I wouldn’t have to sell fund shares.

Yes, 2022’s nerve-racking drop in the stock and bond markets had a significant impact on my portfolio. But having lived through several downturns during my 35 years of investing, I knew the best approach was to stay the course. Besides, there wasn’t much I could do. Going to all cash—with the resulting tax implications—was hardly an appetizing option. Indeed, I pay more attention to our taxable income nowadays, working to ensure we minimize taxes and stay below the Medicare premium surcharge income thresholds.

Spending time. While I was set financially, there was still the issue of what I’d do with my time. During my working years, I didn’t have many interests or hobbies. Like many retirees, figuring out what to do with my days was a matter of trial, error and frequent change.

I’d taken up cycling in a serious way a few years prior to retirement. Once retired, I spent many hours on the bike, cycling 8,000 to 10,000 miles each year. I enjoyed the physical challenge of 100-mile rides, and in 2017 put my body to the test, riding 35 centuries. But that was also the last year I rode a century, and since then my riding has slowly been replaced by hiking and walking, far safer activities with less risk from bike crashes and aggressive drivers, and not as taxing on the body. On these walks and hikes, I’d bring along my camera, and I began to enjoy the challenges of bird photography. I met some great photographers along the way, and learned much from them.

Early in retirement, I volunteered at a local immigrant advocacy organization, which I found somewhat rewarding but not enough for me to continue with it for much more than a year. In 2015, I was asked if I’d become chairman of the community’s beautification committee, something to which I was well-suited, given my background in landscaping.

Beautifying the community was gratifying, and I was able to meet a good number of my neighbors, who volunteered for the various beautification activities. This kept me engaged with others, something that’s important in retirement. But after a few years as chairman, I was ready for a change. I’d accomplished what I set out to do and I was ready for new challenges.

Talking trash. Litter within my county and state has always bothered me. Whether driving the highways or cycling the country roads, I was struck by just how much roadside trash there was. I began picking up litter within my community, and recruited volunteers for weekly litter patrols.

Trash would blow into the neighborhood from the main roads. On garbage day, trash wouldn’t always end up in the garbage truck. There was never a shortage of litter to be picked up. Soon, my efforts expanded to the nearby business district, where I worked with county inspectors to have businesses comply with various ordinances that require them to keep their lots clean.

During the pandemic, I’d hike the woodlands that are part of the local water company’s watershed. It’s a beautiful area where I could get out into nature and not see anyone for hours. Unfortunately, not everyone respects the area’s beauty. On my hikes, I was alarmed at the amount of trash I saw along the shoreline of the reservoir and thrown into the vegetation along the hiking trails.

With help from my husband, we began to clean up the area, taking out dozens of bags of trash, mostly beer bottles and cans, but also fish bait containers, fishing line and more. Now, we can go to the area and do some maintenance litter pickup, enjoying the beauty of the watershed without the distraction of mounds of trash.

My cleanup efforts have continued into two other watersheds. I’m now the “litter hot spot coordinator” for one of these watersheds and hope to soon be a board member of the other. My involvement with these organizations keeps me engaged, and allows me to meet more and more people, young and old, from different walks of life.

This community involvement reinforces what I’ve long known—that where I’ve lived for most of my life is where I also want to stay in retirement. My husband and I have thought about moving to his home state of Texas to be close to his family. But increasingly, we realize that we’re happy in our Maryland home, and that getting to Texas to see his family, or to Florida or Philadelphia to see mine, is just a short plane or train trip away.

The cost of living in Maryland is high and the traffic is bad, but we have access to excellent health care, and there are parks and a beautiful public garden close by. When we balance out the pros and cons, Maryland still wins. Traveling to other continents doesn’t hold much appeal for us, but we do enjoy our trips to family and friends in the U.S. I also travel often to Mexico, where I have numerous friends, many of them my former employees. We then travel together to different parts of Mexico.

Working life seems like a distant memory. My many hobbies and activities, and the connections I’ve made within the community, have been important. But I don’t expect things to stay the same.

There are limits to what you can do physically as you age, and I’ve adjusted accordingly. My husband encourages me to slow down, and I’m trying. I want to stay physically active for as long as possible, and taking care of myself is a must. As I’ve gone through retirement, I find it’s important to keep exploring, to find new opportunities that excite me—and not to let retirement become routine.

Nicholas Clements is retired and lives just outside Washington, DC. His younger brother is HumbleDollar's editor. Check out Nick’s earlier articles .

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My Father’s Daughter

MY LATE FATHER SPENT his entire career, from the time he dropped out of college to marry my mother until the day he died at age 61, in the insurance business. My father was also a huge fan of the San Francisco 49ers, our hometown NFL team.

Last year, the 49ers cruised through the playoffs, led by the team’s dynamic young quarterback, Brock Purdy. But then, in the NFC Championship game against the Philadelphia Eagles, Purdy was injured early in the game. The backup quarterback then went down with a concussion. The 49ers had to play more than half the game without a functioning quarterback. The Eagles won easily and advanced to the Super Bowl.

The NFC Championship debacle prompted the 49ers to sign an experienced young quarterback named Sam Darnold to be Purdy’s backup. As it happens, Purdy stayed healthy this season and Darnold has hardly played at all. Still, my father would have approved: Darnold is the insurance that helps 49ers’ management—and the team’s fans—sleep better at night.

As an insurance man’s daughter, I got the message early and often that life is full of uncertainties and even danger, and that there’s no such thing as too much insurance. But as I’ve gone through life and started questioning various beliefs, especially about personal finance, I wonder if I’ve occasionally overdone things.

Insurance we have now. We currently have insurance for life, health, dental, vision, our cars, our home, umbrella-liability and long-term care.

Insurance we’ve dropped or soon will. My husband and I purchased our term-life policies from my dad when our kids were born. We wanted to not only protect them, but also provide for each other. We’re both counting on the other’s pension, which will have 100% survivor benefits. Our term policies end in 2025 and 2029, and we have no plans to renew them. Our kids are grown and, by then, we’ll be drawing our pensions.

Until recently, we also had disability coverage to protect our income. I dropped mine within the past year when I realized that I could get up to a year of paid medical leave if I needed it. On top of that, if I got really sick or was permanently disabled, I’d just retire, since I’m so close to the finish line anyway.

I should mention that I was happy to have disability coverage when I had to go on bedrest during my second pregnancy. My husband was finishing law school at the time and I was supporting the family, so the complete loss of my income would have been catastrophic.

Learning to appreciate insurance. Despite wondering sometimes if we’re over-insured, several recent family events have made me appreciate the value of insurance. Our 20-something daughter has been in two separate car accidents in the past 18 months. Both times she was a passenger and both times she was seriously injured, requiring an ambulance ride and emergency surgery.

As it happened, the driver at fault in her first accident was well insured, and his insurance company offered her a generous and fair settlement. Not so with the second driver—he has the minimum coverage required by state law, and that won’t come close to compensating my daughter for her lost wages, let alone for things like physical therapy or counseling for post-traumatic stress.

Fortunately, we carry underinsured motorist coverage on our own family policy, and she may be able to get additional funds that way. She was also informed by the district attorney prosecuting the driver that there’s a state-run crime victims compensation fund that she can apply to. This has been quite a learning curve.

The other family situation involves my mother-in-law, now age 83, and her long-term-care (LTC) insurance. She and her husband purchased the LTC policy some 20 years ago. Now, she’s in the advanced stages of Alzheimer’s and needs to activate the policy for in-home caregivers. Her husband is also over 80, and has a hard time managing things like LTC insurance portals and claim forms. We’ve been helping him from 400 miles away, including several conference calls to the LTC insurance provider. Again, we’ve had to learn a lot quickly.

Getting acquainted with my mother-in-law’s LTC policy and procedures has made me think about our own coverage. Do we need LTC insurance? Ironically, thinking this through has made me realize that while my in-laws perhaps didn’t need it, my husband and I probably do. My in-laws are very well off and could pay as they go for care. At $1,000 a month, their LTC premium is expensive. Even though they’ll be using it now, the coverage may not have been worth it. By contrast, because we bought our LTC policies when we were in our 40s, they aren’t as expensive, plus we don’t have the resources that my in-laws do to self-insure.

We carry maximum liability coverage on our auto insurance, plus a substantial umbrella policy. My dad was the first to advise us to get umbrella insurance: “If you lose a lawsuit, you could be working for someone for the rest of your life.”

My husband’s torts professor in law school also urged his students to obtain coverage: “You’ll be earning money once you’re practicing lawyers, so you could be targets in a lawsuit.” Seeing how our daughter’s life has been upended twice by other drivers has reminded us that good liability coverage is both prudent for us and responsible toward others.

Insurance on the go. Our most recent insurance acquisition is an annual travel policy. I bought it earlier this year after reading an article on The Points Guy website. I had vaguely assumed that we didn’t need it because a combination of our own health insurance plus travel protections offered by credit cards would take care of any emergencies.

It turned out I was underthinking this. The medical insurance we had didn’t offer coverage while traveling abroad, so we changed policies during open enrollment at the end of 2022. As for the credit card coverage, that can be cumbersome to use, and there are lots of ways to do it wrong. Maybe most important, our travel policy gives a generous allowance for emergency transportation, whether being airlifted to a hospital or taking an unexpected flight home.

This travel policy is not the same as one you might buy when booking a pricey cruise or land tour. Those are primarily to cover your investment in the trip itself. The annual policy we bought does provide some modest benefits for things like trip delays or lost luggage, but the primary benefits are for medical emergencies. The policy I bought from Allianz costs $560 for my husband and me, and it covers every trip, domestic or abroad, during the year. It also has a generous allowance if a rental car is damaged or stolen.

I hope we’ll never need to cash in on many of our insurance policies, but I’ve learned to expect the unexpected. While insurance doesn’t solve every problem, it can remove a major stressor in a difficult situation. I shudder to think what could have happened if our daughter didn’t have access to medical coverage and to auto insurance when she was a victim of those car accidents. The lack of insurance could have compromised her care, ruined her financially, and put extra pressure on us just as we're trying to settle on a retirement date.

My dad wasn’t always right. But I think he nailed this one.

Dana Ferris and her husband live in Davis, California. She’s a professor in the writing program at the University of California, Davis, and is the author or co-author of nine books on teaching writing and reading to second language learners. Dana is a huge baseball fan and writes a weekly column for a San Francisco Giants fan blog under the nom de plume DrLefty. When not working, she also loves cooking, traveling and working out. Follow Dana on X (Twitter) @LeftyDana and check out her earlier articles.

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