Relative to Blanchett’s earlier work on how retirees change their spending over time, his latest paper had two particularly noteworthy findings.

Median vs Mean

The first especially interesting finding was the difference between the median and mean (average).

For the median retiree, inflation-adjusted spending decreases throughout retirement.

For the average (mean) retiree, however, inflation adjusted spending goes back up at older ages (though it still stays below the initial level of spending).

The difference appears to be significantly due to large health-related costs at older ages, which are included when calculating a mean, but which do not affect the median retiree. For example, as Blanchett writes, “among those who passed away at the age of 95, the median cumulative real lifetime unexpected out-of-pocket medical expenses were only about $50,000 compared to roughly $250,000 at the 95th percentile.”

Reducing Spending by Choice

The second particularly interesting finding is that even households that are “funded or overfunded” still reduce spending. That is, while some retiree households reduce their spending due to limited funds, even households who don’t need to reduce spending nonetheless typically do still reduce spending over time.

As Blanchett writes, “Only those respondents who were the most well-funded and spending at lower levels tended to increase in spending. Average real spending declined for all respondents spending $80,000 or more, regardless of funded status, although spending declines were lower as funded status tended to improve.”

Why People Reduce Spending

To me, it’s not surprising at all to find that people reduce spending over their retirement, even when they aren’t forced to do so.

For example, imagine a world in which there was absolutely no uncertainty. You know exactly what your career earnings and investment returns will be. You know what inflation is going to be. You know exactly how long you (and your spouse, if applicable) will live. You know exactly what your health care costs (and other “lumpy” costs such as home repairs) will be each year.

And so you’re left with some, definitively known, amount of discretionary spending, which you can allocate across the years of your life.

In that world, how would you allocate those dollars, across time?

There’s no right or wrong answer here. But most people would choose to do more discretionary spending in their earlier years and less in their later years, simply because it’s easier to enjoy discretionary spending at a younger age. At 25 it’s easier to have a travel-the-world type of adventure than at 45. It’s easier at 45 than at 65. And it’s easier at 65 than at 85. And the same things goes for most types of discretionary spending. It’s just easier to do it the younger we are.

Some people might choose the classical economics “consumption smoothing” idea of having your spending stay level over time. But it’s hard to imagine many people intentionally choosing an increasing spending path all the way through life (e.g., pinching pennies at age 35 so that you can “live large” at age 85).

Now let’s bring back one type of uncertainty: lifespan. So we’re still assuming no investment risk, no uncertainty as to health care costs or other big expenses. But now we don’t know how long you’ll live. Naturally, that means we need to plan for a scenario where you live longer than your life expectancy, but there’s another aspect here that is often left out. And that is: would you weight earlier years more heavily (i.e., choose to spend more in those years than in the above case) simply because you know you’ll be alive in those years? In other words, separate from the decision you made above about year-by-year spending preferences, when we add longevity uncertainty into the mix, would you now choose to, for example, further shift the spending in the direction of the earlier years, simply because you’re more likely to be alive during those years?

Again, different people will answer differently here. But this factor is either not important to you, or it’s a point in favor of more spending in earlier years. Nobody would say, “I’m less likely to be alive at age 95 than at age 65, and therefore I will plan to allocate more dollars to spending at age 95 than at age 65.”

So we have two factors, both of which point in favor of weighting earlier spending more heavily than later spending (though to differing degrees from one person to another). For most households, that’s broadly the goal that we’re trying to achieve.

“Reducing spending throughout retirement” might sound bad. (And indeed, being forced to do so is probably not what we want.) But “intentionally choosing to spend more in earlier retirement” is another way of saying the same thing, and it is broadly something that people want to do.

What is the Best Age to Claim Social Security?

Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less Click here to see it on Amazon.

Disclaimer:Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Michael Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Michael Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Michael Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. The information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

You may unsubscribe at any time by clicking the link at the bottom of this email (or by removing this RSS feed from your feed reader if you have subscribed via a feed reader).

Earlier this year, Vanguard announced that “Morningstar” would be added to the names of the various funds that track indexes now run by Morningstar (previously run by CRSP). For example, Vanguard Total Stock Market Index Fund would become the Vanguard Morningstar Total Stock Market Index Fund.

On Wednesday of last week, those new names took effect.

Just to be clear, it’s a name change only. Same funds, same indexes being tracked, slightly new name.

Other Recommended Reading

• Treasury Flags Concern Over ‘Potentially Abusive’ Tax Trades from Zachary Mider, Justina Lee, and Denitsa Tsekova
• Picking Stocks in a Bloodbath from Ben Carlson
• How the CFP Board Sold Out the Public & the Profession from Allan Roth
• Are Stocks Going Up or Is the Dollar Going Down? from Nick Maggiulli
• The Retirement Expense You May Be Missing from Christine Benz
• The Pope’s Official App Exposes 700,000+ User Emails from Jowi Morales

Thanks for reading!

What is the Best Age to Claim Social Security?

Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less Click here to see it on Amazon.

Disclaimer:Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Michael Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Michael Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Michael Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. The information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

You may unsubscribe at any time by clicking the link at the bottom of this email (or by removing this RSS feed from your feed reader if you have subscribed via a feed reader).

“I have question about your VT + TIPS choice. Will you maintain that two fund portfolio throughout your life? Was wondering if your choice reflects a personal judgement about holding BND in a portfolio. BND has certainly not been a stellar performer for several years. Makes me wonder if going with TIPS only for the non-stock portion of our portfolio is also the right choice for us. Currently looking at a 50/50 BND/TIPS for fixed income as I start retirement next year, but your choice is making me doubt the wisdom of that approach.”

Bonds can perform two separate roles in a portfolio. In our household, we’re using them in a way that only individual TIPS held to maturity is really the right fit. But if they are being used as basically “the thing that’s less volatile than stocks, which will be rebalanced with the stock part of the portfolio” there are tons of options that would be fine. This article has more on that:

• What’s the Point of Bonds in a Portfolio? (And Why Individual TIPS, Held to Maturity, Are Unique)

Personally I have no significant qualms about a “total bond market” fund such as BND in that second role. Its performance in recent years is not anything strange or alarming. That’s just what happens when interest rates go up. And they went up, by a lot, from 2021-2022 (especially in 2022). If you find the fund on Vanguard, click to the performance section, then click the tab for “annually,” you’ll see the year-by-year returns. It’s really just those two years (especially 2022 with a -13.15% total return by NAV) that makes all of the performance figures look bad — and it’ll be that way until those years fall out of the various calculations. (Note that the fund’s 3-year performance is much better than 5-year performance for exactly this reason.)

And again, it’s not as if the fund did anything wrong over the 2021-2022 period. BND has an average duration of 5.8 years. That means that for every percentage point change in interest rates for bonds similar to those in the portfolio, the fund’s price should move in the opposite direction by about 5.8%. From the beginning of 2021 to the end of 2022, yields on 7-year Treasury bonds went from 0.64% to 3.96%, an increase of 3.32%. Multiplied by an average duration of 5.8, we’d expect a price decline of about 19% over the period, offset somewhat by the fund collecting some interest over those two years. (Also note that the fund holds corporate bonds as well as government-backed bonds, so the change in yield was a bit different than we see here.)

Essentially, any intermediate-term bond fund (and especially long-term bond funds) had a terrible year in 2022. That’s just the math of what happens when yields go up. For instance:

• Vanguard Intermediate-Term Treasury ETF was down by 10.67% in 2022.
• Vanguard Inflation-Protected Securities Fund was down by 11.85%.
• Vanguard Intermediate-Term Investment-Grade Fund was down by 13.78%.

The flip side of course is that all of those funds look much more attractive now, with their higher yields.

In our specific household, we aren’t using bonds as “a thing to rebalance with stocks.” Rather, we’re just planning to hold the bonds until they mature, then spend the money. So we want individual TIPS for that. And with long-term TIPS yields well over 2% (very close to 3% in fact), we’re very happy to have the bond part of our portfolio earn inflation plus 2.X% for the next 20-30 years — especially given that for most of our careers, TIPS yields were practically zero and at some times even negative.

What is the Best Age to Claim Social Security?

Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less Click here to see it on Amazon.

Disclaimer:Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Michael Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Michael Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Michael Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. The information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

You may unsubscribe at any time by clicking the link at the bottom of this email (or by removing this RSS feed from your feed reader if you have subscribed via a feed reader).

For comparison, NVIDIA’s annual revenue also grew by 39% annualized from 2015-2025. And over that time NVIDIA went from being a company most people hadn’t heard of to being the largest or second largest company in the world. (It’s a tight race with Apple at the moment.)

So it’s safe to say that cybercrime is a growth industry in the US right now. (It has been growing rapidly with victims under age 60 as well, just not as rapidly.)

I’ve been writing about the topic here on the blog this year, corresponding with readers, and discussing the topic with clients. (I also picked up a few cybersecurity-related certifications along the way, so that I could speak and write about it more intelligently.)

And after learning more about it and discussing it with so many people, I’m pretty firmly convinced that cybersecurity should be considered another core area of personal finance — no different from insurance planning, for instance. To spend decades working, saving, and investing, only to then leave the proverbial doors wide open to would-be thieves makes no sense. (And, just like with dangerous gaps in insurance coverage, most people with dangerous cybersecurity gaps aren’t doing it intentionally.)

Within the personal finance realm though, most of what you’ll see written about cybersecurity and fraud prevention is essentially a) telling the reader to freeze their credit and b) descriptions of types of scams. To be clear, it is a good idea to freeze your credit. And it is valuable to be aware of the common types of scams. But the reality is that “don’t fall for scams” is not a sufficient cybersecurity policy. A policy that relies on always getting it right, every time, your whole life, is simply not good enough.

To that end, I’ve been working on a book (current working title: A CPA’s Guide to Cybersecurity: How to (Hopefully) Not Get Hacked or Lose Your Financial Accounts to Fraud).

It’s not finished yet, but it’s getting closer and closer. It’s at the stage where I could use the assistance of somebody who works in cybersecurity, who could serve as technical editor. If that’s something you’d be open to doing, please get in touch.

Update: thank you to everybody who got in touch! I have found multiple people to provide their expertise as technical editors.

Other Recommended Reading

• Go While You Still Can from Derek Hagen
• Retiree Spending Doesn’t Rise in Lockstep With Inflation, Blanchett Finds (Again) from Dinah Wisenberg Brin (Or here’s Blanchett’s article itself.)
• Should Retirees Fear another Lost Decade? from Amy Arnott
• Your Life Matters (Even If You’re Not Famous) from Darius Foroux
• The Quirky Roth IRA MAGI Rule and In-Plan Roth Conversions from Sean Mullaney
• The Cult of Equities from Ben Carlson
• Between Financial Independence and Retirement from Jim Dahle
• The Most Famous AI Writing Tic Is Also the Most Mysterious from Will Oremus
• Microsoft Patches a Record 570 Security Flaws from Brian Krebs
• The Seven Sins of Active Fund Management from Larry Swedroe

Thanks for reading!

What is the Best Age to Claim Social Security?

Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less Click here to see it on Amazon.

Disclaimer:Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Michael Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Michael Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Michael Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. The information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

You may unsubscribe at any time by clicking the link at the bottom of this email (or by removing this RSS feed from your feed reader if you have subscribed via a feed reader).

“With Spacex’s recent IPO and other upcoming IPOs and the changes that the index fund providers are making, would it be more advantageous right now (until at least things calm down a bit) to mix my own choice of domestic/international funds versus going with a ‘pre-mixed’ blend fund like VT, target date, or something like AOA?”

It’s always the case that if you have a prediction that you think is better than the market’s collective prediction — and you turn out to be right — then doing something other than a boring market-weighted index fund would have given you better results. The challenge of course is somehow managing, on your own, to know better than the market’s collective knowledge.

My prior article, “Why Stock Prices Are Still Volatile in an Efficient Market,” is applicable here. Here’s the relevant part, edited for brevity:

The idea of an efficient stock market isn’t that the stock market can predict the future. Nobody knows what is ultimately going to happen with any given stock.

That is, the market price for a stock doesn’t mean that this is where the price will stay; it’s simply the consensus best estimate, given the information that is currently available.

By way of analogy, imagine that I’m hosting a raffle, in which the winner gets $100. I’m going to sell exactly 100 tickets to the raffle. How much is each ticket worth?

Each ticket is worth $1, because each ticket has a 1% chance of winning $100.

Of course, the reality is that, of the 100 tickets, 99 of them will turn out to be completely worthless, and one lucky ticket will turn out to be worth $100. But we don’t know in advance which ticket will be the lucky one, so until the raffle actually happens, each ticket is worth $1.

The point of the efficient market concept isn’t that an efficient market would successfully predict which raffle ticket will be the winning ticket. Rather, the point is that an efficient market would successfully price each ticket at $1 prior to the raffle.

With regard to SpaceX’s market price, it’s a similar concept. Everybody knows that the current price is not the ultimate “right” price. But the challenge is that there’s a pretty good chance the company will turn out to never be profitable and thus the shares will ultimately be worthless or nearly so. And then there’s also a small chance that it will someday be wildly profitable, possibly even the most profitable company in the world. So the current market price is the market’s attempt to probability-weight those two potential outcomes (as well as potential outcomes in between).

And of course nobody really knows the percentage probabilities of any of those outcomes, nor does anybody have a good way of calculating how profitable the company would be in the best scenarios. So there’s a lot of guesswork going on here. But:

1. “A lot of guesswork going on here” is something that is true for a lot of stocks, a lot of the time, and
2. It is, at least, the collective guesswork of the market, which is probably better than my own guesswork anyway.

What is the Best Age to Claim Social Security?

Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less Click here to see it on Amazon.

Disclaimer:Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Michael Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Michael Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Michael Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. The information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

You may unsubscribe at any time by clicking the link at the bottom of this email (or by removing this RSS feed from your feed reader if you have subscribed via a feed reader).

Newport writes, “We should consider taking as strong a stance against ultraprocessed content as we already do against ultraprocessed food. Which is to say: Most people should avoid these diversions most of the time. In the same way that you’re unlikely to eat Twinkies as a regular snack or still believe that Pop-Tarts provide a balanced breakfast, stop consuming ultraprocessed content. ”

• There’s a Good Reason You Can’t Concentrate from Cal Newport (It’s a paywalled New York Times article. This is a gift link which will let some of you view it, but those seem to stop working in relatively short order.)

For anybody for whom that link does not work or for anybody interested in reading further, here’s one of the papers he references, which I found worth reading:

• The Mere Presence of a Smartphone Reduces Basal Attentional Performance from Jeanette Skowronek, Andreas Seifert, and Sven Lindberg

Other Recommended Reading

• The Case for a “Good Enough” Portfolio from Christine Benz
• Great Reasons to Have Tax-Deferred Accounts from Jim Dahle
• The Finances of Foster Care: A Foster Parent’s Perspective from Adam Safdi
• Should You Start Social Security Early Before Possible Benefit Cuts? from Steve Vernon
• AI Systems Out-Persuade Expert Humans from Hackenburg et al.
• How Global Scammers Use US Tech to Fleece People from Erika Kinetz
• IRS Offers Gift Tax Safe Harbor for Contributions to Trump Accounts from Martha Waggoner
• National Taxpayer Advocate: IRS Had Strong Filing Season for Online Taxpayers, Weaker for Others from Martha Waggoner
• Why Poorer Students Earn Less (Even With the Same Degree) from Nick Maggiulli

Thanks for reading!

What is the Best Age to Claim Social Security?

Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less Click here to see it on Amazon.

Disclaimer:Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Michael Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Michael Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Michael Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. The information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

You may unsubscribe at any time by clicking the link at the bottom of this email (or by removing this RSS feed from your feed reader if you have subscribed via a feed reader).

Here it’s worth backing up a step and looking at historical security breaches in general. For instance, there have been many cases in which some company (e.g., an insurance company, a credit bureau, a hospital system, or a large retailer) gets hacked, and the attacker is ultimately able to access customer/patient information, such as contact info and Social Security numbers.

But wouldn’t that data have been encrypted on the company’s servers? In other words, even if the attacker was able to download the data, why weren’t they stuck with unusable encrypted data? Sadly, in some cases, the answer is that no, the data in fact was not encrypted on the company’s servers. But even in many cases in which the data was encrypted, the attacker was ultimately able to decrypt the data. Generally, that’s not because the attacker was able to defeat the encryption. (Modern best-practice encryption is quite secure.) Rather, the explanation is a simpler one: the attacker was able to access the decryption keys.

In most cases, when a company is storing encrypted data, they also need to be able to decrypt that data themselves, so that they can use the data when needed. So the decryption keys must be accessible in some way by systems (and sometimes people) at the company. And that is where the security often fails. In the major data breaches that you’ve heard about, what has generally been the case is that the decryption keys were stored in some way that was itself insecure, or the attackers were able to access an application that has access to the keys. The details vary, but the result is typically that the attacker is able to download the encrypted data and access the decryption keys, thereby allowing them to simply decrypt the data.

Now back to our discussion of password manager software specifically. The details vary by provider, but many password managers (including Bitwarden or 1Password) use what is known as zero-knowledge architecture. The idea of zero-knowledge architecture is that the password manager provider itself never has your master password, the key necessary to decrypt your data, or a decrypted version of your usernames, passwords, etc. Your encrypted vault is stored on their servers, and when the vault needs to be decrypted (in order for you to access saved information) that decryption happens entirely on your device. Your device uses your master password to derive the decryption key and then uses that decryption key to decrypt the requested data. To reiterate: with zero-knowledge architecture, the password manager provider never has your master password, the decryption key, or a decrypted version of your vault.

What this means is that, if your password manager is using zero-knowledge architecture with strong encryption practices, and you are using a strong master password, then even if an attacker were able to breach the password manager’s servers and download your encrypted vault, they would almost certainly not be able to decrypt the information. There’s a fundamental difference here between this sort of setup and a setup in which the company is saving not only your encrypted data but also the means to decrypt that data.

Of course, it would still be preferable for your password manager provider not to be hacked at any point. And if you ever learn that your password manager provider has suffered a breach involving customer vaults, you should promptly change the passwords of your most important accounts, and then change the remaining passwords as soon as practical. But if you and your password manager are both following best practices, you don’t need to worry that a data breach would mean that an attacker would immediately have access to all of your passwords.

There are also options for offline password managers. For instance, KeePassXC is a dedicated offline password manager. Alternatively, Bitwarden can be self-hosted on your own server. In these cases, your vault would not be stored on the vendor’s servers and thus would not be accessible at all if the vendor’s servers were breached. One downside is that syncing your passwords across devices or sharing with other family members becomes something you must set up and manage yourself. Also, now you would be fully responsible for security (including backups and other security-related policies). Whether that’s a good thing or a bad thing depends on your skills and how much time you want to spend on the endeavor.

Finally, on the topic of password manager breaches, we have to talk about LastPass. In 2022, LastPass was the subject of a major breach. In addition to being breached, it became clear that they were not following certain other best practices. For one, they were not encrypting the URLs of the websites for which users were saving usernames and passwords. That made it easier for the attacker to pick specific vaults to target for brute-force decryption attacks. (Specifically, the attacker appears to have gone after vaults that had cryptocurrency assets.) Secondly, the vaults of LastPass users with older accounts were not as securely encrypted as they should have been. In 2018, LastPass had upgraded its default for new users, but older users were still on older encryption policies unless they explicitly adjusted the setting themselves. That made it easier for the attacker to effectively use brute-force attacks on customer vaults. (Weaker encryption settings meant that the attacker could make many more password guesses per second against those vaults.) We know that some people did have money stolen as a result. Finally, LastPass customers were not informed that their encrypted vaults had been accessed until months after it had occurred. A more timely notification could have allowed customers to update all of their passwords promptly and avoid any actual losses. For the above reasons, many experts in the field simply no longer feel comfortable using or recommending LastPass. Regardless, the event illustrates the importance of a password manager provider following best practices.

What is the Best Age to Claim Social Security?

Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less Click here to see it on Amazon.

Disclaimer:Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Michael Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Michael Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Michael Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. The information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

You may unsubscribe at any time by clicking the link at the bottom of this email (or by removing this RSS feed from your feed reader if you have subscribed via a feed reader).

• Summary report here
• Full report here (as pdf)

Other Recommended Reading

• Long-Term Care And Estate Planning For Childfree People from Jay Zigmont
• Why I’ve Changed My Mind About Dividend-Paying Stocks from Christine Benz
• Should You Reinvest Dividends? from Amy Arnott
• What Happens to the Stock Market When Baby Boomers Sell? from Ben Carlson
• The Sandbox Problem (on the risks of using agentic AI) from Adrian Johnstone and Dan Arnison
• A 5-Point Checklist for Managing Your Aging Parents’ Money (NYT) from Lisa Rabasca Roepe
• The World’s Leading Deepfake Expert No Longer Trusts His Own Eyes (NYT) from Eli Saslow and Erin Schaff

Thanks for reading!

What is the Best Age to Claim Social Security?

Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less Click here to see it on Amazon.

Disclaimer:Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Michael Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Michael Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Michael Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. The information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

You may unsubscribe at any time by clicking the link at the bottom of this email (or by removing this RSS feed from your feed reader if you have subscribed via a feed reader).

“What is your view on owning TIPS ladder (Bogleheads preferred) or short term TIPS fund when the majority of expenses are covered by pension and/or social security which are COLA adjusted.

One view I read is from Charles Ellis, who views all sources of stable retirement income (pension, social security) as bond like assets, essentially an indirect TIPS ladder.”

On the “should Social Security or a pension be treated as a bond” topic, my answer is that, no, they aren’t bonds. They are clearly fixed-income. But they are not bonds. (For a more full explanation, please see Social Security: It is an Asset, But Not a Bond.)

The case in which Social Security or an inflation-adjusted pension entirely covers spending needs is just a subset of the broader category of cases in which the household is spending at a very low rate from the portfolio in retirement. That is, for this purpose, we can lump together all cases in which a household is spending anywhere from zero to roughly 2% of the portfolio per year.

In cases like that, there is a huge range of asset allocations that would be reasonable. The household does not need high returns, so they can use a very conservative allocation. On the other hand, the volatility of an aggressive portfolio would not put their well-being at risk either, so an aggressive allocation would also be acceptable. Or anywhere in between.

In other words, at this point, it becomes entirely a matter of preferences. The retirement spending goal has been entirely satisfied. So now the question becomes:

• Should we use an aggressive allocation, in order to increase the expected bequest to heirs?
• Or should we use a conservative allocation, in order to not have to experience as much volatility?

Either answer is acceptable.

And because a very broad range of allocation (from highly aggressive to highly conservative) is reasonable, all the various sub-topics within the asset allocation topic become even less important.

Should this household own a ladder of individual TIPS? Sure, if that appeals to them. Or not.

Should they own a short-term TIPS fund? Again, sure, if that sounds good to them.

They could use a single LifeStrategy fund or iShares Core Allocation ETF.

Or they could use a “VT + TIPS” portfolio like I do. Or they could use a three-fund portfolio, with the bond fund being any of several different bond funds (short-term TIPS, intermediate-term TIPS, short-term nominal Treasuries, intermediate-term nominal Treasuries, a total bond fund, etc.). Or they could use any of 1,000 other more complicated portfolios, if one such portfolio appeals to them for a particular reason.

In general, when creating or assessing a portfolio, we want to be sure of five things:

1. The portfolio is diversified (no huge allocation to a single stock).
2. The portfolio’s risk level is appropriate for the household’s circumstances.
3. The portfolio is simple enough to manage.
4. The portfolio does not include anything with unreasonably high costs.
5. The portfolio is reasonably tax-efficient.

For any given household, there are going to be many potential options that satisfy all five requirements. There is no perfect portfolio, but there are countless perfectly fine portfolios.

And specifically for a retiree household with a very low spending rate, requirement #2 on the list becomes less of a limiting factor than it often might be, so now there is an even broader range of acceptable portfolios.

What is the Best Age to Claim Social Security?

Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less Click here to see it on Amazon.

Disclaimer:Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Michael Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Michael Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Michael Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. The information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

You may unsubscribe at any time by clicking the link at the bottom of this email (or by removing this RSS feed from your feed reader if you have subscribed via a feed reader).

If you think it would be helpful for you or a loved one, I’d encourage you to grab a copy. Or leave a review if you’ve read it in the past and found it helpful:

• Taxes Made Simple: Income Taxes Explained in 100 Pages or Less

Other Recommended Reading

• Can Equity Investments Help Social Security’s Finances? from Anqi Chen, Alicia Munnell, and Jean-Pierre Aubry
• High Inflation May Continue: How It Could Affect Your Investing from Allan Roth
• Did you Already Win in Life? from Elliott Appel
• Keeping More of What You Earn (YouTube discussion with Paul Merriman and myself, in which we discuss a range of topics)
• Trust Distributions: Timing, Tax, and Practical Considerations from Douglas Yost
• Vanguard’s VOO Hits $1 Trillion of Assets in ETF Industry First from Katie Greifeld

Thanks for reading!

What is the Best Age to Claim Social Security?

Social Security Made Simple: Social Security Retirement Benefits and Related Planning Topics Explained in 100 Pages or Less Click here to see it on Amazon.

Disclaimer:Your subscription to this blog does not create a CPA-client or other professional services relationship between you and Michael Piper or between you and Simple Subjects, LLC. By subscribing, you explicitly agree not to hold Michael Piper or Simple Subjects, LLC liable in any way for damages arising from decisions you make based on the information available herein. Neither Michael Piper nor Simple Subjects, LLC makes any warranty as to the accuracy of any information contained in this communication. The information contained herein is for informational and entertainment purposes only and does not constitute financial advice. On financial matters for which assistance is needed, I strongly urge you to meet with a professional advisor who (unlike me) has a professional relationship with you and who (again, unlike me) knows the relevant details of your situation.

You may unsubscribe at any time by clicking the link at the bottom of this email (or by removing this RSS feed from your feed reader if you have subscribed via a feed reader).