February 2021 Best of the Web
I was originally attracted to this blog by Darrow’s consistent focus on the things that really matter. It helped me to improve my financial situation and use my money to live my best life.
Like many of you, I’ve gotten sucked into articles, podcasts, social media posts, etc. this month about hot financial topics. They include “meme stocks,” GameStop, AMC, Robinhood, Bitcoin, and the opinions of people like Elon Musk, Mark Cuban, and Dave Ramsey.
With so much attention being given to these topics, it’s hard to ignore them. But we should try, or at least keep them in context.
This month, I tried to bring the focus back to those things that really matter for those of us trying to save more, invest better, and retire sooner. Dig in….
What Really Matters?
Peter Mallouk wrote What Works for Financial Media Goals Doesn’t Necessarily Help You Reach Yours.
The next selection is a great contrast to the “click bait” market forecasting Mallouk points out. From the Vanguard blog: Why talk about a market downturn now? Why not?
Jim Dahle shares the Top 7 Uses for Bitcoin. Multiple family members and friends who I doubt ever read the blog recently asked me whether they should be buying Bitcoin. Moving forward, my response will be to share this article.
First Principles
When the world around us seems crazy, it is good to zoom out, look at the bigger picture, and regain perspective. Perhaps no one does that better than legendary investor Charlie Munger. From the farnam street blog, The Munger Operating System: How to Live a Life That Really Works.
It is hard to find two people who are smarter and more well respected when it comes to all things related to investing and the financial advice industry than Jason Zweig and Michael Kitces. So when they spoke on Kitces’ podcast, I listened. I wasn’t disappointed and I promise you won’t be either.
Troubling Trends
Mary Beth Franklin provides a sobering look at the finances of the average retiree writing Retiree debt doubles during pandemic. Most of this audience is doing much better than average. That’s great! Still there are lessons to be learned. A big one is only about 3 out of 10 retirees retired when they had planned. In a community full of meticulous planners, it’s important to remember we don’t control everything.
Over the past few months I’ve been meeting with readers. A common challenge among multiple people I’ve spoken to is finding good financial advice at a fair price.
Paying attention to leaders in the financial planning industry on their blogs, podcasts, and social media gave me the impression that financial advice was improving and becoming more affordable. Talking with readers made me aware of the disconnect between the industry’s version of the story and the experience of actual consumers.
Quality of advice consumers receive varies considerably. Costs are consistently high. My observation of costs was confirmed by Derek Tharp: Financial Advisor Fee Trends And The Fee Compression Mirage.
We spend a lot of time focusing on safe withdrawal rates. It’s an important topic. Knowing how much you can take from a portfolio determines how large of a portfolio you need at the start of your retirement.
The 4% “safe withdrawal rate” provides a starting point. Many experts recommend lowering that assumption in the current investing environment.
You may fret about how much larger a portfolio you will need to start retirement with a lower withdrawal rate. Christine Benz provides a different perspective, writing The Good News About Retirement Income.
Ignoring Trends
Don’t place too much attention on the future and trends we can’t know or control. There is a lot we can know and control right now.
Mike Piper writes Long-Term Tax Planning Requires Guessing. Focus on the Near-Term.
Harry Sit provides vital information for readers who are planning around health insurance premium subsidies this year. He writes 2020 2021 2022 Federal Poverty Levels (FPL) For ACA Health Insurance.
Too Important To Ignore
This month, I critiqued a popular article about the FIRE movement. Unfortunately, I didn’t express my points as well as I would have liked. The article elicited polarized responses that turned off readers I most wanted to reach. That said, the topics of taking agency and making better decisions are at the core of everything else we write about on this blog. So they are too important to ignore.
One of the people whose ideas I cited in that article was former poker player Annie Duke. This month, she was on the Art of Manliness podcast talking about How to Decide.
I am critical when FIRE principles are presented unfairly, particularly on major websites or in media. It is only fair to offer praise when they get it right. Michelle Jackson was given a platform by Business Insider to share her relatable, actionable, and inspiring story. She described how she applied FIRE principles to transform her life, writing I didn’t want to wait decades for retirement, so I made 3 money changes that let me live a ‘retirement’ lifestyle right now.
Celebrating a Milestone
Joe Saul-Sehy has been a long-time friend and supporter of this blog. Darrow has been a guest on his Stacking Benjamins podcast multiple times. I’ve also been a guest and he hosted me in Detroit to support the launch of my book.
So, I would like to return the favor by giving Stacking Benjamins some attention. I realized the show is no longer able to attract such interesting guests and they need our help (EXTREME SARCASM!).
This month Joe spoke with Netflix co-founder Marc Randolph. It is a fascinating conversation about overcoming Randolph’s fears as an entrepreneur, the role timing, luck, and continuing through adversity have on success, building a great team (or getting hired onto one), and much more. Two days later, Stacking Benjamins released the 1,000th episode of the podcast.
CONGRATULATIONS to Joe, Doug, OG, and the rest of the SB team for building such a successful show by making personal finance fun! If you haven’t given this podcast a listen you should. That’s no joke.
Have a great month and let me know what articles resonated with you so I can continue to better serve your needs.
* * *
Valuable Resources
- The Best Retirement Calculators can help you perform detailed retirement simulations including modeling withdrawal strategies, federal and state income taxes, healthcare expenses, and more. Can I Retire Yet? partners with two of the best.
- New Retirement: Web Based High Fidelity Modeling Tool
- Pralana Gold: Microsoft Excel Based High Fidelity Modeling Tool
- Free Travel or Cash Back with credit card rewards and sign up bonuses.
- Monitor Your Investment Portfolio
- Sign up for a free Empower account to gain access to track your asset allocation, investment performance, individual account balances, net worth, cash flow, and investment expenses.
- Our Books
- Choose FI: Your Blueprint to Financial Independence
- Can I Retire Yet: How To Make the Biggest Financial Decision of the Rest of Your Life
- Retiring Sooner: How to Accelerate Your Financial Independence
* * *
[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. After achieving financial independence, Chris began writing about wealth building, DIY investing, financial planning, early retirement, and lifestyle design at Can I Retire Yet? He is also the primary author of the book Choose FI: Your Blueprint to Financial Independence. Chris also does financial planning with individuals and couples at Abundo Wealth, a low-cost, advice-only financial planning firm with the mission of making quality financial advice available to populations for whom it was previously inaccessible. Chris has been featured on MarketWatch, Morningstar, U.S. News & World Report, and Business Insider. He has spoken at events including the Bogleheads and the American Institute of Certified Public Accountants annual conferences. Blog inquiries can be sent to chris@caniretireyet.com. Financial planning inquiries can be sent to chris@abundowealth.com]
* * *
Disclosure: Can I Retire Yet? has partnered with CardRatings for our coverage of credit card products. Can I Retire Yet? and CardRatings may receive a commission from card issuers. Some or all of the card offers that appear on the website are from advertisers. Compensation may impact on how and where card products appear on the site. The site does not include all card companies or all available card offers. Other links on this site, like the Amazon, NewRetirement, Pralana, and Personal Capital links are also affiliate links. As an affiliate we earn from qualifying purchases. If you click on one of these links and buy from the affiliated company, then we receive some compensation. The income helps to keep this blog going. Affiliate links do not increase your cost, and we only use them for products or services that we're familiar with and that we feel may deliver value to you. By contrast, we have limited control over most of the display ads on this site. Though we do attempt to block objectionable content. Buyer beware.
Hey, man! Great roundup, and thanks for the kind words about our podcast. Because you and I have had some great discussions about fees, I’ll continue it here. I don’t think Tharp’s analysis is comprehensive. The trend for advisors has been toward CHARGING fees at all vs. away from collecting commissions. I believe if you looked at the total universe you would see fees coming down but not where he’s looking. Fees are dropping on the product side, and that’s good. I’ve never heard of compression on the advisory fee side. In short, what I believe is happening is twofold: commission advisors are dying off (not shown in Tharp’s piece) but they’re finding ways to recoup much of these costs (the part he’s analyzing).
This is no different than the ongoing story with brokerage fees. When the industry went to zero trading fees in 1999 this was the ultimate in fee compression. However, I’m sure they were immediately finding ways to make up that cash in other areas. Schwab isn’t hurting for money, even if they go to zero-commission trades. In this instance, while fee compression for brokerages was a real thing I’m sure if you look at a wider picture, you’ll see that they made up the money elsewhere.
To that extent, I agree with Tharp. If you think fees are going down overall, they aren’t and I’m not sure they ever will. This isn’t a reason to avoid finding good people to surround yourself with, though. You have a choice: find smart people to work in your corner to help you more easily navigate your plans, or go it alone. I’ll take smart people any day over going it alone. That means, knowing the above, that because the barriers to entry are so low in financial planning (my frustration with the industry), your interview skills to FIND the right people are as important as ever. Like any business or football team, you’re only as good as the people around you. Hire good ones and avoid idiots.
That said, financial planning IS a lucrative job and as you can see, with the AUM model, clients can pay through the nose if they aren’t careful. As always, I believe if you want to get ahead it’s your job to understand the value proposition. Ask first what you receive and then ask what they charge. That applies to your financial coaches, fitness experts, or otherwise.
Hey Joe,
I enjoy our conversations because we have such different backgrounds and viewpoints, but at the end of the day we both want what is best for people trying to do better with their money. I don’t disagree with anything you write. Though I am often critical of financial advisors, I totally agree that most people need at least some help.
It’s just a shame how hard the financial industry makes it for every day consumers to find those “right people” to work with, when they are such rare fish swimming around in an ocean full of sharks.
I would say that anyone who reads this blog, listens to your podcast, etc. has a way above average interest in personal finance that should help them “avoid idiots” and get “good people” around them. So I was surprised learning about the questionable at best advice our readers are getting and the price they’re being charged for it.
I feel for the people that don’t understand the conflicts of interest and blindly trust these “professionals.” I was one of those who didn’t know what I didn’t know for a long time, which is why I’m now so passionate about helping others, whether they decide to do things on their own or seek help.
Cheers!
Chris
Thanks for sharing the Munger Operating System post. Really great read!
Agree! Thanks for the feedback.
X2 on Charlie Munger’s “How to Live a Life That Really Works” . It was an excellent piece of thought provoking writing – and perspective. I wanted to read Mary Beth Franklin’s article about retiree debt, but Investment News required a registration or subscription so I skipped it. But that’s just me. Michelle Jackson’s article on “Slow FIRE” successfully underscores the point that retirement planning is not a one-size-fits-all situation. Some of us race along the road to retirement, some of us meander, and some of us, like Michelle, choose a middle of the road pace that works best for us. As always, Chris, a solid collection of articles.
I appreciate the feedback Mary. As a rule, I don’t share anything that is behind a paywall b/c I know that turns readers off. I will periodically create a free account to get access to articles I think are valuable, and then I forget which they are. I apparently did that last month as well. Sorry for any inconvenience.
Best,
Chris