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In some areas like financial markets, new laws and regulations, social change, and work conditions we are witnessing years or even decades of change compressed into months. In other areas like schools, sports, entertainment, and travel time has slowed to a crawl or stopped. My equilibrium is off. 

The Best

Selected articles this month cover unique planning scenarios and economic conditions that 2020 has created. We also explore potential investing and planning impacts of the upcoming election.

Some topics covered are timeless: creating retirement income, portfolio withdrawal strategies, tax planning, and how to boost your savings rate.

Articles explore perception vs. reality of the FIRE movement. We close with some excellent reads on topics that motivate many of us to pursue financial independence: creating more happiness and personal freedom.

Enjoy the articles and have a great month!

Creating Retirement Income

Darrow’s 2015 research about The Best Retirement Withdrawal Strategies highlighted a strategy of retirement withdrawals based on CAPE (cyclically adjusted price to earnings) ratios. Since then, the validity of CAPE has been questioned due to changing accounting laws and economic conditions. Michael Fink reports that the demise of CAPE ratios has been greatly exaggerated, writing The Remarkable Accuracy of CAPE as a Predictor of Returns.

I more recently covered the topic of creating income from a portfolio in times of extreme low interest rates. Allan Roth warns Investing to Create Retirement Income Can Be Dangerous.

Tax Planning

Michael Kitces writes Navigating Income Harvesting Strategies: Harvesting 0% Capital Gains vs. Partial Roth Conversions.

Mike Piper covers a different tax topic and reaches the same conclusion: tax decisions are case specific. He writes Social Security and Tax Planning.

We’re Still In the Third Quarter of 2020

Michael Batnick writes that in 2020 markets have taught us to Expect the Unexpected.

In response to my recent post about The Impact of Early Retirement on Social Security Benefits, several astute readers pointed out that massive unemployment due to COVID-19 could cause deflation of average wages for the year.

People turning 60 years old in 2020 could see lifetime social security benefits cut substantially. This is due to a technicality in the way an individual’s lifetime wages are indexed to average wages.

A reputable article published in mid-April reported the cut could be by as much as 14% per year for this cohort. Another from late July backed this general idea up, but they reported the hit could be as much as 9%.

Just last week Kiplinger published 2021 COLA: A Raise Likely for Social Security Recipients After All due to the economic recovery in recent months. The final cost of living adjustment will be based on data released in mid-October. This is still about a month and a half away in real time, or at the rate things are happening in 2020 about five years from now in normal time.

It is unclear what impact the economic recovery will have on the average wage index, which determines the impact on the 60 year old cohort. That won’t be known until data comes in for the whole year. Stay tuned!

I often end these “Best of” collections with something fun. Just a few months ago I featured an episode of House Hunters International featuring Jim, Lisa and their daughter Faith, the FIRE household behind Route to Retire. It was filmed about a year ago when they were moving to Panama to start their early retirement, prior to the pandemic. A lot has changed since then. Jim now asks Is Our Retirement in Panama Unexpectedly Over?

What Moves the Needle?

There is a lot of focus in personal finance on things that don’t make much of a difference on your ultimate outcome. Catey Hill analyzed research on “Super Savers” who save more than 20% of their income and wrote The No. 1 thing people with fat savings accounts scrimp on that you likely don’t.

Do Elections Move the Needle? As November approaches, Peter Mallouk writes Elections and the Markets.

Perception vs. Reality

The blogger behind A Purple Life writes FIRE Is For Wimps. She makes an interesting counterpoint to those who think the lifestyles of those pursuing FIRE are in some way extreme.

Getting Outside of the FIRE Cult

I agree with A Purple Life that FIRE gets a bad rap, causing a lot of people to dismiss key principles that can radically transform their lives. It has been my mission to spread those principles outside of the “FIRE cult” through my work on the blog and the Choose FI book.

That work has opened doors to some interesting conversations. This month I’d like to share three that I particularly enjoyed.

I talked with the Good Dad Project’s Larry Hagner who aims to help men become better husbands, fathers, and leaders on the Dad Edge Podcast: Super Simple Financial Independence.

Journalist and CFP Bobbi Rebell dug deep to get to the root of why I started pursuing financial independence on the Financial Grownup Podcast: Life and Death and the FIRE Movement.

I frankly had no idea what to expect when sitting down to talk with Bob Wheeler. His bio ranges from being a certified CPA to CFO of the World Famous Comedy Store in Los Angeles. What resulted was a really fun and wide ranging conversation: Money You Should Ask: Can I Retire Yet?

Finding Happiness

Financial independence is really a means to an end, rather than the end itself. One thing we’re ultimately pursuing is happiness.

Mr. Money Mustache shares his experiences and perspective, writing The Sweet Spot.

Arthur Brooks writes ‘Success Addicts’ Choose Being Special Over Being Happy.

Finding Freedom

Another thing we’re ultimately pursuing is more freedom. However, freedom can mean different things to different people. Brendan Leonard expresses this beautifully writing You Can Walk Anywhere You Want.

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[Chris Mamula used principles of traditional retirement planning, combined with creative lifestyle design, to retire from a career as a physical therapist at age 41. After poor experiences with the financial industry early in his professional life, he educated himself on investing and tax planning. Now he draws on his experience to write about wealth building, DIY investing, financial planning, early retirement, and lifestyle design at Can I Retire Yet? Chris has been featured on MarketWatch, Morningstar, U.S. News & World Report, and Business Insider. He is also the primary author of the book Choose FI: Your Blueprint to Financial Independence. You can reach him at chris@caniretireyet.com.]

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