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Welcome to episode 81 of the One for the Money podcast. I am always glad and grateful you have taken the time to listen. There are a host of options when it comes to investing and there is an order of priority in which these should occur. In this episode, I’ll share my thoughts on that order.

In the tips, tricks, and strategies portion, I will share a tip regarding 401k contributions for those nearing retirement.

In this episode...

• Cash Flow Management [1:58]
• Emergency Fund [4:17]
• Contributing up to Company Match [5:51]
• Paying Down High-Interest Debt [6:20]
• Funding an HSA [7:50]
• Saving Further into a 401(k)/IRA [9:03]
• Extra Savings [10:12]

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I recently re-read the classic book, The Richest Man in Babylon. It’s a great story on how simple steps can help one build wealth, even those who are mired in debt. The truths contained therein are conveyed so well through the story that I’m having my oldest two boys read the book.

In the book The Richest Man in Babylon, its emphasis was more on savings than investing. Presently there are almost countless ways one can invest. For that reason and others the investment world can be overwhelming and as a result, many choose not to participate. And that is literally and figuratively unfortunate as far too many fail to make small changes that over time have massive results. This episode is meant to help demystify which investments one should select and in what order.

But of course, before we can even think of investing we need to ensure we are monitoring our cash flow. That is the money coming in and the money going out. Some call that a spending plan others call it a budget. I’ll go with the former as it seems more palatable and less restrictive than a budget.

The general rule of thumb when it comes to spending plans is pretty straightforward. One should allocate ~20% of your spending plan to your savings. Those savings can include an emergency fund as well as your retirement and non-retirement savings vehicles. I mention savings first as you should always get in the habit of paying yourself first. It’s an absolute game-changer. As Warren Buffett said so well, Do not save what is left after spending but spend what is left after saving.

Approximately ~50% of one’s budget should be spent on their needs. This would include housing (be it a mortgage or rent), groceries, electricity, transportation, etc. Finally, ~30% of your budget should be allocated to your wants such as a gym membership, eating out at restaurants, travel, etc. However, this should only be the case if all one’s higher interest-rate debt is paid off. I would define higher-interest debt as over 6% which is not your mortgage. Now some might argue that one’s health is paramount and that you should devote money to gym memberships, etc. I agree that one’s health is critical as I recently shared in episode 78 how the first wealth is health, but one can work out without the need of a gym. Additionally, one can eat without the need to go to a restaurant. For those reasons, these are considered “wants instead of their needs” expenditures.

Now that I’ve set a framework regarding cash flow planning the next step is to consider what should be the order of where one puts their money. This may seem similar to the baby steps that Dave Ramsey has made famous. I will share a few key differences between those steps. Dave’s Ramsey’s Baby Steps are great as a general rule and the impact he has had on thousands upon thousands of Americans is nothing short of remarkable so I’m in no way trying to belittle his steps.

The first step, which I will call 1a, which is similar to Dave Ramseys, is building up an emergency fund. As JP Morgan notes in its Guide to Retirement - Life is uncertain –spending shocks and/or...

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Welcome to episode 80 of the One for the Money podcast. I am always glad and grateful you have taken the time to listen. This episode is part 2 of a 2 part series on Medicare, which is the Federal health insurance program that helps pay for the health care costs of retirees. In episode 79, which was part 1 of this series, I shared what one needs to understand about Medicare and in this episode I’ll share the most common Misunderstandings and Mistakes people make with Medicare.

In the tips, tricks, and strategies portion I will share a tip regarding choosing between Medicare Advantage and Medicare Supplement Insurance.

In this episode...

• Medicare Isn't Cheap [2:23]
• Late Medicare Enrollment [4:47]
• Skipping Part D [5:46]
• Enrollment isn't One-time [6:48]
• Ignoring Pre-existing Conditions [7:50]

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In Episode 79 of the One for the Money podcast, I shared how expensive healthcare can be in retirement, even with Medicare covering a lot of the expenses. According to a survey released by the investment company Fidelity in August of 2024, most individuals expect healthcare costs in retirement to be~ $75,000 per person or $150,000 per couple but the actual expenses are $165,000 per person or $330k per couple. That is more than double what people estimate they will have to shell out.

Medicare will play a major role with regard to their health care in retirement. However, the Medicare system itself can be challenging to fully comprehend given the various coverage options, expenses, and deadlines involved.

Due to these misunderstandings far too many American’s make critical mistakes regarding their Medicare coverage. Here are five of the most common mistakes

First, many Americans might assume (given that they've paid into the Medicare system through payroll taxes throughout their careers) that Medicare coverage is completely free. Whereas, in reality, several parts of Medicare (e.g., Part B medical coverage (doctor visits) Part C, and Part D (which provides prescription drug coverage) require you to pay premiums. Further, even if one understands that they will have to pay premiums, they might not be familiar with Income-Related Monthly Adjustment Amount (IRMAA) surcharges (aka IRMAA), which apply to retirees with higher incomes in retirement which can increase their costs further. And so the Mistake people make is thinking Medicare is inexpensive or free but Medicare does not cover 100% of your healthcare  costs.

• Medicare part A covers inpatient hospital care, skilled nursing facility stays, hospice care, and some home health care,

Part A Deductible and Coinsurance Amounts for Calendar Years 2024 and 2025

by Type of Cost Sharing

2024

2025

Inpatient hospital deductible

$1,632

$1,676

Daily hospital coinsurance for 61st-90th day

$408

$419

Daily hospital coinsurance for lifetime reserve days

$816

$838

Skilled nursing facility daily coinsurance (days 21-100)

$204.00

$209.50

• Medicare Part B (Medical Insurance):.
• Part B is optional and available to anyone who qualifies for Part A. It requires a monthly premium, regardless of work history.
• Part B covers doctor visits, outpatient care, medical services like lab tests, and most preventive services.
• Premiums for part B in 2025 as low as 185/mo or as high as 628.90/month based on your income from the previous years. Those higher premiums are a result of the IRMAA charges I...

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Welcome to episode 79 of the One for the Money podcast. I am always glad and grateful you have taken the time to listen. This part 1 of a 2 part series on Medicare. Medicare is a significant part of every single American’s retirement planning. Knowledge of Medicare is critical to making the most of your retirement. In this episode I’ll share what you need to understand about Medicare and in Episode 80 airing on February 15th, I’ll share the Misunderstandings and Mistakes people make with Medicare.

In the tips, tricks, and strategies portion I will share a tip regarding Medicare enrollment.

In this episode...

• Rising Healthcare Costs [1:53]
• Medicare Basics [2:57]
• Importance of Annual Medicare Reviews [12:03]

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In Episode 79 of the One for the Money podcast, I shared how the first wealth is health. I also shared the importance of exercise and nutrition and how they can increase not only one’s life span, but their health span, which is the years one has good health. Because healthier retirees incur fewer health related expenses it really is in retirees long term financial interest to INVEST in their health because health care related expenses in retirement are WAY higher than what most people anticipate.

In fact last August, the investment company Fidelity released its Fidelity's latest Retiree Health Care Cost Estimate, which surveyed retirees. Most individuals surveyed expect their share of health care related expenses in retirement to be ~ $75,000 retirement (or $150k per couple), but current retiree healthcare expense data shows that each individual should expect to pay $165,000 or $330k/couple in retirement for health care expenses. That is more than double what people estimate they will have to shell out. Now these estimates assume that these individuals have health care coverage through Medicare. This might have many scratching their heads wondering what Medicare actually pays for. Quite a lot actually, it’s just that health care is incredibly expensive especially as one ages.

I’ll first explain what Medicare is and what it takes to be eligible before explaining why health care costs in retirement are still expensive even with Medicare.

Medicare is health insurance for retired Americans. According to usdebtclock.org, the the US government spent ~ $1.8 Trillion dollars on Medicare/Medicaid in 2024 which accounts for over 25% of the annual Federal budget.

Some of Medicare is paid for through payroll taxes. Employees pay 1.45% of their income and employers pay another 1.45% of their employees income to the government to help fund Medicare and Medicaid. These are part of the Federal Insurance Contributions Act or (FICA) taxes that we pay on our income. Social Security is funded with a tax of 6.2% paid by the employee and another 6.2% paid by the employer. However this is only paid on the first $176,100 of income. Any income earned above that level is not subject to the SS tax, and that’s because there is an upper limit on the social security benefit one could receive. However, the 1.45% medicare tax has no income limit so whether a person earns income of $10,000 or $10 million the Medicare taxes are applied to the entire amount.

Now Medicare has been around for a long time.

In 1935: President Franklin D. Roosevelt’s New Deal included the Social Security Act, which provided retirement benefits but did not include health insurance. Efforts to include health coverage in the program were unsuccessful due to political opposition.

By the 1960s, about half of Americans over 65...

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Welcome to episode 78 of the One for the Money podcast. I am always glad and grateful you have taken the time to listen. In this episode I’ll share why the first wealth is health.

In the tips, tricks, and strategies portion I will share a tip regarding Health Saving Accounts.

In this episode...

• The Holiday Season [0:57]
• Health vs. Wealth [1:57]
• Health Expenses in Retirement [4:04]
• Exercise and Long-Term Health Benefits [5:38]

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This episode airs on January 15th when we get a pretty good sense on how well we are doing on the resolutions we made a few weeks back. Often times, those resolutions focus on our health, which makes a lot of sense given all the delicious food we at during the holidays.

According to one medical Journal

Several studies suggest that the holiday season, starting from the last week of November to the first or second week of January, could be critical to gaining weight.

But it’s not just the holiday foods to blame. As noted in an article by the University of Rochester Medical Center

Shorter days, longer nights, cold weather, decreased exercise and changes in sleep habits all contribute to winter weight gain. When you add in the abundance associated with holiday meals and our tendency to overeat at special occasions, many of us enter the New Year a few pounds heavier than we were before Thanksgiving.

This may seem like unusual financial planning advice, but as the great American author Ralph Waldo Emerson said, The first wealth is health. And as Bronnie Ware noted in her Regrets of the dying essay, that health brings a freedom that few realize until it’s gone.

Years ago, I read an article that featured several prominent financial planners who worked with financially wealthy clients and when asked what was the most important advice they gave their clients, all of them emphasized the importance of health. One of the advisors recommended that for those over 50 you should plan to spend at least 1 hour a day on their physical health. Now some might think, of course these clients were already wealthy so they could in turn focus on their health, but it just goes to show that wealth isn’t anything unless one has their health. Many think you should exercise so you can have a longer enjoyable life but often times, your life can be just as long, but just not enjoyable, as I’ve seen in my own family. Many in my family have a long life span but sadly a poor health span which are the years in which you have good enough health to enjoy it.

According to growwellthy.com, which is for an exercise physiologist that helps financial planners stay healthy, 96% of retirees say health is more important than wealth.

The website includes a health check quiz that goes over key elements of one’s health; namely: Nutrition, regular and appropriate exercise, good sleep, ie more than 7 hours a night, taking more than 7000 steps a day, strength train at least 2 times per week, there were also questions regarding one’s physical fitness such as: are you able to get down and up off the floor easily, Can you hang from a bar for at least 30 seconds, do you eat protein at most meals, drink alcohol sparingly and do you drink lots of water? I heard a great quote a while back “A man’s health can be judged by which he takes two at a time — pills or stairs.”

And it’s not just about feeling great, it’s having more money to spend on other things that you would enjoy. It really is in your long term financial interest to INVEST in your health and to keep exercising. Because health expenses in retirement are far higher than what most people anticipate.

According to

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Welcome to episode 77 of the One for the Money podcast. Happy New Year as well as this episode is airing on Jan 1st, 2025. Crazy how time flies. I am both glad and grateful you have taken the time to listen. In this episode, I’ll share the biggest lessons I have learned in over 25 years as an investor.

In the tips, tricks, and strategies portion, I will share a tip regarding setting financial goals.

In this episode...

• The Importance of Starting Early [3:27]
• The Power of Paying Yourself First [4:19]
• Market Timing is a Fool’s Errand [5:36]
• The Need for Proper Planning & Tax Strategy [8:02]
• Spending While You Are Healthy [12:11]

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I’ve been investing in the stock market for a little more than 25 years and I’ve learned a lot about investing and building wealth during that time so I thought it might be helpful for me to share the biggest lessons I’ve learned at my silver jubilee investing anniversary.

But first, I should share that I was introduced to the stock market by accident. I was told by a university guidance counselor that graduate schools and future employers expected those they accepted to be well-read and that one should read the paper every day. After that guidance every day I would grab our local paper and read the current events in the world which would feature such things as natural disasters, politics, wars, etc. I would then skip over the business section to review the sports section. However, as I turned the pages on the business section I often wondered what all of these abbreviations and numbers represented. I learned later that these represented companies that the general public could invest into. Well, one day the newspaper advertised a free investing seminar at the public library in the city closest to my small town. I attended the presentation and it was incredibly interesting. The gentleman who presented spoke of one Warren Buffett and how the stock market was the way to build wealth. At the time of this investing seminar, Warren Buffet’s company Berkshire Hathaway had a stock price of a whopping ~$60,000 per share. If you think that’s amazing today a single share of Berkshire Hathaway stock is over $700,000.

A short time after I was introduced to investing, it seemed the rest of America became interested due to the dot com era. At the time the World Wide Web was a new phenomenon and the stock market rocketed higher. The stock market eventually crashed down to earth, but despite the volatility, I became very interested in investing.

These experiences started my journey into investing and here a little over 25 years later are the biggest lessons I have learned about investing and building wealth.

The first lesson I’ve learned in my 25 years is that little actions have massive consequences when given time. In other words, it is WAY more important to start investing than the actual amount you have to invest. Every little dollar can grow to mind-boggling sums given time. One of the best examples I share with clients is that of an apple seed. It’s hard to conceive that this tiny little seed could grow into a large tree that could produce thousands of apples, and yet that’s exactly what it can do, of course, given the critical ingredient of time. But your wealth can’t grow if you don’t plant the seeds to start with.

As the old proverb goes - The best time to plant a tree was 20 years ago; the second best time is now. As you get older you usually can make more money but you can never get more time!

The second lesson I’ve learned in my 25 years is understanding how paying yourself first makes all the difference. As Warren Buffett said so well “Do not save what is left after spending; spend what is left after saving.” People who know how to manage their cash flow have the best life in the future. They have more freedom, more...

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Welcome to episode 76 of the One for the Money podcast. I am both glad and grateful you have taken the time to listen. In this episode I’ll share how you can use a drop in the stock market to your advantage.

In the tips, tricks, and strategies portion I will share a tip regarding year end planning strategies.

In this episode...

• Opportunities in Down Markets [0:59]
• Investment Strategies During Market Declines [2:55]
• The Historical Behavior of the Stock Market [11:10]

MAIN

Better Planning Leads to a Better Life, and that can especially be the case in down markets. Many people fear stock market downturns but hopefully at the end of this episode you are able to see the silver linings amongst the rain clouds. In fact that reminds me of a fantastic quote by one of the worlds most famous investors, Mr. Warren Buffett.

He said and I quote ““Big opportunities come infrequently. When it’s raining gold, reach for a bucket, not a thimble.”

This speaks to the tremendous opportunities that a down market can present, but you have to have the stomach to handle them. During such times it’s easy to get gripped by fear and I don’t blame people as losses are incredibly hard to stomach. In fact losses are twice as impactful for investors than equivalent gains. Studies have shown that a 10% loss hurts twice as much as a 10% gain. I know this from personal experience when very early in my time as an investor, I purchased a stock which then dropped 50%. I sold out only for the stock since that time to increase over 7,900%. that’s right, instead of selling I should have bought more and enjoyed a nearly 8 thousand percent gain. For more details on this painful lesson see episode 18 of this podcast entitled, when life gives you lemons, stay invested.

With a pessimistic mindset, you can make really poor decisions and miss incredibly once-in-a-generation type of opportunities, like I did, but with the right mindset you can see the economic rain storms and instead of running for cover you grab a bucket as Warrant Buffett said so well. And when you employ these better investment strategies it will make for an even better life.

Here are the strategies to consider based on how far down the market is. I’ll use each calendar year, January 1st, as the starting point.

Here is what one should do when the stock markets are down 5%.

If the stock markets are down 5% from where there were on January 1st, there really is nothing one should do other than stay the course. Drops in this magnitude are far more typical than one might imagine. In fact in the last 44 years, the stock market has been down on average 14.2% at some point during the calendar year. So at one point between January 1st and December 31st of every year since 1980, the stock market was down around 14% on average and yet, 33 of those 44 years, the markets ended up higher on December 31st than where it had started on New years day.

Most times the best thing you can do is nothing at all.

Here is what one should do when the stock markets are down 10% , the definition of a correction.

Your first option is to do nothing and stay the course but there are also some ways to take advantage of these likely temporarily lower prices.

The first consideration is to rebalance your accounts. For example, let’s say you have identified a portfolio of 80% stocks and 20% bonds to be your ideal portfolio to help achieve your goals. Now let’s also say there is a drop in the stock market of ~10% and this causes the stock holdings to go down to 70% from 80%. Alternatively the bonds portion of your portfolio rises by from 20% to 30% in this hypothetical example. Rebalancing merely, shifts your portfolio back to it’s initial distribution, so 10% of bonds or bond funds are sold and 10%...

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Welcome to episode 75 of the One for the Money podcast. I am both glad and grateful you have taken the time to listen. They say wisdom is learning from the mistakes of others and in that spirit, this episode will feature the mistakes a retirement expert made about her own retirement and I’ll share ways to avoid these same mistakes.

In the tips, tricks, and strategies portion, I will share a handy rule of thumb regarding knowing if you are on track for retirement.

In this episode...

• Who Is Alicia Munnell? [1:45]
• Mismanagement of Investments [2:47]
• Failure to Utilize Roth 401(k) [5:24]
• Premature Government Pension Withdrawal [8:14]
• Using Retirement Funds Early [10:07]

MAIN

Most people really only have one shot at retirement so you want to be sure you get it right and you will want to be sure to avoid any mistakes. They say wisdom is learning from the mistakes of others and in that spirit, there was a recent article in the WSJ on the ways a retirement authority got it wrong. This can serve as an example of what not to do. The Oct 12, 2024 article states in its opening line “Alicia Munnell spent decades trying to improve how Americans retire. Even she made mistakes in her retirement planning.”

First, let me share more about Alicia Munnell. She is an economist who served as an assistant secretary at the Treasury Department under President Bill Clinton. Her time in the Treasury Department was preceded by 20 years at the Federal Reserve Bank of Boston. After her time in the public sector, she established Boston College’s Center for Retirement Research, a think tank in 1998.

Alicia, who is 82 years young, has been steeped in finance for many decades and her work covered everything from improving the 401(k) to whether the U.S. faces a retirement crisis.(Her Answer: Probably yes, since she and her colleagues calculate about 40% of the working population isn’t saving enough to maintain their lifestyle throughout retirement.) And yet despite the focus of her life’s work, she made some basic mistakes about her very own retirement.

Here were some of her mistakes along with my thoughts on how she could have avoided them.

One mistake she repeatedly made was not regularly monitoring her investments. Like many people, she said that she lacked the time and interest to manage money. What she would do would rely on the occasional advice from her son, who works at a financial firm.

In her words “Every now and then, he tells me to send him my asset allocation and then he tells me how to adjust it. If I had to figure out what to invest in, I’d have no clue,” said Munnell. “People have busy lives. Retirement planning should not be something they have to put a lot of effort into.”

This boggles the mind. I am shocked a retirement authority, who highlights the importance of 401ks handles her retirement investments so carelessly. First, she doesn’t have a set schedule to review her investments on a regular basis, instead, she said that “every now and then” she reaches out to her son who works at a financial firm for changes she should make. And because she approached things so haphazardly, she or her son never consider her overall goals or taxable implications regarding her investments as demonstrated by the other mistakes that she had made.

Here’s how Alicia could have avoided this investment management mistake. She should have spent the time with her husband outlining their specific goals for retirement. These goals would then be used to align her investments with those specific goals. She then should have had regularly scheduled meetings to confirm their goals and re-align their investments if necessary. She should have assumed this responsibility herself or delegated it to a financial planning professional who was aware of her goals and could...

Welcome to episode 74 of the One for the Money podcast. I am so very grateful you have taken the time to listen. In this episode, I will share when you should max out your retirement plan such as a 401k, and when you should not.

In the tips, tricks, and strategies portion, I will share a retirement saving tip for those who don’t have access to a retirement plan through their job.

In this episode...

• 1978 Revenue Act [1:05]
• When Not to Max Out Contributions [3:03]
• When You Should Max Out Contributions [6:46]

1978 was a watershed moment in the history of retirement for Americans. That was the year that a Revenue Act was enacted by congress and established 401k and 457b retirement plans. 401k retirement plans are for the private sector and 457b plans are for state and local government employees, as well employees of certain tax-exempt organizations. These plans now allowed employees to defer some of their income and avoid taxes on that income until they take it out later in retirement. This was huge. People could now save for retirement in tax advantaged ways.

Prior to that, most American’s relied on pensions from their employers for income in retirement. With a pension, the employer is committed to providing a specific amount of money to the employee for life during retirement. And that was feasible when people worked for several decades for the same employer and didn’t live that long in retirement. But as individuals started changing jobs more frequently for better opportunities and peoples life expectancy increased significantly, the pension system became untenable for both the public and private sector. 401ks are for companies government employees use 457b plans and public school employees (teachers) and non profits use 403(b) plans.

Specifically regarding 401ks, 68% of private sector American workers currently have access to an employer sponsored retirement plan.

For those Americans who have access to a retirement plan at work be it a 401k, 403b, 457b, SEP IRA or Simple IRA some wonder whether it makes sense to max it out every year. As with any financial planning, it depends upon your unique situation and circumstances.

When you should NOT max out your 401k/403b/457b/SEP or Simple IRA

There are times when you shouldn’t max out your retirement account. One of the most obvious reason is if you have high interest debt that needs to be paid off first. However, I would recommend in this scenario that you at least contribute to the company match as that is free money. No higher contributions should be made until after your high interest debt is paid off. You need to pay down high-interest debt, for example credit card debt. The average credit card currently has an APR of more than 20%, which is well above the amount you could reasonably expect to earn on a diversified portfolio in any given year. That’s why it is always better to funnel extra cash toward paying down high-interest debt instead of maxing out retirement plan contributions.

Another reason not to max out contributions to your work retirement plan is if you don’t have a sufficient emergency fund. As a reminder, you should have 3-6 months of your minimum expenses in savings to cover a potential financial emergency. We learned this first hand a few months ago when our eldest son nearly drowned while surfing. He was rushed to the hospital and was released the next day, but I was glad we had the savings to cover the incredibly high costs we have incurred as a result.

A third reason why you shouldn’t max out your company retirement plan is if you haven’t yet funded a Health Savings Account or HSA. As a reminder, HSAs are available to individuals with qualifying high deductible medical plans. HSAs are incredibly powerful as they are the only triple tax free retirement account and they have the added advantage of early...