Search found 1137 matches

by Ben Mathew
Sun Sep 27, 2020 3:20 pm
Forum: Personal Finance (Not Investing)
Topic: Avoiding Estate Tax
Replies: 39
Views: 2989

Re: Avoiding Estate Tax

You would be surprised how inexpensive a second-to-die permanent policy can be relative to the death benefit. Premiums are commonly in the range of 0.5-1% of the death benefit per year, but of course it depends on age and health of the insureds. What type of permanent life insurance would this be? ...
by Ben Mathew
Sun Sep 27, 2020 3:19 pm
Forum: Personal Finance (Not Investing)
Topic: Avoiding Estate Tax
Replies: 39
Views: 2989

Re: Avoiding Estate Tax

Would this advantage hold even outside of a trust with its unfavorable taxes? i.e. If someone wants to leave a bequest and is willing to hold a permanent life insurance policy for life, can they get a better after-tax return (leave a larger after-tax bequest) through a permanent life insurance poli...
by Ben Mathew
Sun Sep 27, 2020 10:26 am
Forum: Investing - Theory, News & General
Topic: Does the three fund portfolio provide adequate protection from inflation?
Replies: 47
Views: 2996

Re: Does the three fund portfolio provide adequate protection from inflation?

If your allocation is mostly stocks, I would not worry too much about inflation. If it's bond heavy, make sure a good fraction is in TIPS rather than nominals.
by Ben Mathew
Sun Sep 27, 2020 10:13 am
Forum: Personal Finance (Not Investing)
Topic: Avoiding Estate Tax
Replies: 39
Views: 2989

Re: Avoiding Estate Tax

The big advantage of life insurance over a simple investment fund is the favorable tax treatment when you expect to hold the policy until death. In other planning, buy term and invest the difference comes out ahead when you plan to drop the insurance once the growth in your assets and drop in futur...
by Ben Mathew
Sun Sep 27, 2020 10:06 am
Forum: Personal Finance (Not Investing)
Topic: Avoiding Estate Tax
Replies: 39
Views: 2989

Re: Avoiding Estate Tax

You would be surprised how inexpensive a second-to-die permanent policy can be relative to the death benefit. Premiums are commonly in the range of 0.5-1% of the death benefit per year, but of course it depends on age and health of the insureds. What type of permanent life insurance would this be? ...
by Ben Mathew
Sat Sep 26, 2020 6:32 pm
Forum: Personal Finance (Not Investing)
Topic: Avoiding Estate Tax
Replies: 39
Views: 2989

Re: Avoiding Estate Tax

However, the buy term and invest the difference has a problem when one anticipates using the full value of the trust to pay estate taxes. The money in the mutual funds would be taxable when sold to generate cash. These sales would generate taxable capital gains. The trust would be in the top tax br...
by Ben Mathew
Sat Sep 26, 2020 10:54 am
Forum: Personal Finance (Not Investing)
Topic: Avoiding Estate Tax
Replies: 39
Views: 2989

Re: Avoiding Estate Tax

I have read that life insurance can be used to reduce estate tax, but have a hard time understanding how it's supposed to work. Proceeds of a life insurance policy that you own in included in the estate, so that does not seem useful. Proceeds of a life insurance that is held through an irrevocable ...
by Ben Mathew
Sat Sep 26, 2020 10:08 am
Forum: Personal Finance (Not Investing)
Topic: Avoiding Estate Tax
Replies: 39
Views: 2989

Re: Avoiding Estate Tax

A second-to-die life insurance policy can be used to fund the estate tax at a fraction of the cost of paying it out of pocket, depending on their ages and health. Ex: Parents have $50M. Estate tax exemption $22M. They die, tax is owed on $28M. An $11M life insurance policy would cover the cost of t...
by Ben Mathew
Fri Sep 25, 2020 4:24 pm
Forum: Personal Investments
Topic: How to combine finances with your spouse? Recently married/early30s
Replies: 54
Views: 3707

Re: How to combine finances with your spouse? Recently married/early30s

I think there is a huge financial behavioral advantage to working together with your spouse towards your combined life goals. This means commingling funds, having one budget for both of you, viewing income as 'our income', debt as 'our debt', and discussing OUR life goals. I don't think it will tak...
by Ben Mathew
Fri Sep 25, 2020 4:21 pm
Forum: Personal Investments
Topic: How to combine finances with your spouse? Recently married/early30s
Replies: 54
Views: 3707

Re: How to combine finances with your spouse? Recently married/early30s

I think you may be approaching this in the wrong frame of mind. The $250K assets you're seeking to protect is small potatoes compared to your annual income. And it's nothing compared to the benefits of a happy marriage. It would be different if you were older, had accumulated a lot of assets before ...
by Ben Mathew
Fri Sep 25, 2020 10:39 am
Forum: Investing - Theory, News & General
Topic: Does an insurance company pay tax on the earnings of its float?
Replies: 23
Views: 1292

Re: Does an insurance company pay tax on the earnings of its float?

If this is for a book on personal finance, why does it matter what the tax treatment for the the insurance company is? It is largely irrelevant. Give me a investment product and I can talk about tax doges avoidance and their weird incentives all day long. The tax code in interesting and a great sto...
by Ben Mathew
Thu Sep 24, 2020 8:41 pm
Forum: Investing - Theory, News & General
Topic: Does an insurance company pay tax on the earnings of its float?
Replies: 23
Views: 1292

Re: Does an insurance company pay tax on the earnings of its float?

Thanks to everyone who responded and clarified this for me. Some background as to why I asked: I was trying to get a handle on the tax treatment of different life insurance products for a book I'm writing on personal finance. Whole life and universal life are obviously tax advantaged since its cash ...
by Ben Mathew
Thu Sep 24, 2020 1:27 pm
Forum: Personal Investments
Topic: Long Suffering VXUS Holder No More
Replies: 129
Views: 10792

Re: Long Suffering VXUS Holder No More

I think that in part is why the Vanguard reps I have spoken to (more than one) were comfortable with with my decision. In response to a question above, the reps seemed comfortable with us staying in short term bonds funds for now. And as to Vanguard reps simply being "agreeable," I have been the re...
by Ben Mathew
Thu Sep 24, 2020 1:11 pm
Forum: Personal Investments
Topic: Long Suffering VXUS Holder No More
Replies: 129
Views: 10792

Re: Long Suffering VXUS Holder No More

I think that in part is why the Vanguard reps I have spoken to (more than one) were comfortable with with my decision. In response to a question above, the reps seemed comfortable with us staying in short term bonds funds for now. And as to Vanguard reps simply being "agreeable," I have been the re...
by Ben Mathew
Thu Sep 24, 2020 1:05 pm
Forum: Personal Finance (Not Investing)
Topic: Should I go for online Will making software?
Replies: 80
Views: 5064

Re: Should I go for online Will making software?

I think it would be a good idea to read a book on estate planning before using Will making software (or indeed before using a lawyer.) That way, you get a sense of what you need, and can then better evaluate whether the software can deliver it. I recommend Get Your Ducks in a Row by Harry Margolis f...
by Ben Mathew
Thu Sep 24, 2020 12:09 pm
Forum: Investing - Theory, News & General
Topic: Does an insurance company pay tax on the earnings of its float?
Replies: 23
Views: 1292

Re: Does an insurance company pay tax on the earnings of its float?

I'm still seeing some confusion here and maybe getting more technical will clear this up. Yes, a for-profit life insurance company will have investment income included in a federal income tax return. However, because of reserve accounting, the life insurance company will be able to effectively shie...
by Ben Mathew
Wed Sep 23, 2020 8:23 pm
Forum: Investing - Theory, News & General
Topic: Does an insurance company pay tax on the earnings of its float?
Replies: 23
Views: 1292

Re: Does an insurance company pay tax on the earnings of its float?

In most cases, the insurance premiums are segregated in a “segregated” account. The insurance company can only pay itself a dividend from this segregated account if it is above the requirements to meet its obligations. This in normally set by the state regulators. The dividends are treated as incom...
by Ben Mathew
Wed Sep 23, 2020 8:03 pm
Forum: Personal Investments
Topic: Long Suffering VXUS Holder No More
Replies: 129
Views: 10792

Re: Long Suffering VXUS Holder No More

It think this is performance chasing, and one of the most dangerous things an investor can do. You should continue to hold international stocks, remain diversified, and not waver.

Also note that VXUS is selling for 17.7x earnings and VTSAX is selling for 27.5x earnings.
by Ben Mathew
Wed Sep 23, 2020 7:42 pm
Forum: Investing - Theory, News & General
Topic: Does an insurance company pay tax on the earnings of its float?
Replies: 23
Views: 1292

Does an insurance company pay tax on the earnings of its float?

Suppose an insurance company issues a policy for which it expects to pay out $100 twenty years from now. It collects the premium in full today. It will invest the premium in an investment that returns 2% per year. Does the insurance company have to pay tax on the 2% earnings? Or does it grow tax free?
by Ben Mathew
Wed Sep 23, 2020 4:19 pm
Forum: Personal Finance (Not Investing)
Topic: Physicians: Should I leave my job?
Replies: 207
Views: 15752

Re: Physicians: Should I leave my job?

Say I need 10k wRVU to bonus, and my bonus will earn me 50k for every 1k wRVU My bonus is calculated and paid once a year. I have earned 12k wRVU for the year as you say, but when they calculate the bonus in January, they are missing the last two months of the year. So they say I have earned 10k wR...
by Ben Mathew
Wed Sep 23, 2020 4:04 pm
Forum: Personal Finance (Not Investing)
Topic: Physicians: Should I leave my job?
Replies: 207
Views: 15752

Re: Physicians: Should I leave my job?

The wRVU bonus is basically a scam. The hospital is apparently notorious for not paying our this bonus. I tried to audit the records on my own to discover why my wRVU numbers were so low and I discovered that they are not reporting wRVU based on date of service, but to date of billing, which is oft...
by Ben Mathew
Sun Sep 20, 2020 1:36 pm
Forum: Personal Finance (Not Investing)
Topic: Reason not to rent out your old house?
Replies: 58
Views: 4637

Re: Reason not to rent out your old house?

Or is the argument that you could take the profits from the house sale and put it in the market and that would provide a better and more stress-free return? That is one of the reasons. The opportunity cost of your equity in the property, if invested in stocks and compounded over many years, can add...
by Ben Mathew
Fri Sep 18, 2020 5:53 pm
Forum: Investing - Theory, News & General
Topic: So, you want to tilt to growth
Replies: 33
Views: 2747

Re: So, you want to tilt to growth

How are you adding this innovation tilt? Is it through an ETF or just picking up individual stocks that you see as innovative? I like the ARK funds (ETFs), but am looking for others. * way lower market cap; these are micro/small/mid size companies mostly (my indexes/401k funds are large cap heavy) ...
by Ben Mathew
Thu Sep 17, 2020 6:13 pm
Forum: Investing - Theory, News & General
Topic: So, you want to tilt to growth
Replies: 33
Views: 2747

Re: So, you want to tilt to growth

To guard against the urge to chase high flying growth stocks, remember to view stocks as businesses. If an expensive business becomes even more expensive than before, do you want to buy it because of its recent outperformance, or avoid it because it has become even more expensive? I'm tilted to smal...
by Ben Mathew
Thu Sep 17, 2020 1:11 pm
Forum: Personal Finance (Not Investing)
Topic: What one Book to read about personal finance?
Replies: 40
Views: 2462

Re: What one Book to read about personal finance?

That Thing Rich People Do, by Kaye Thomas, founder of Fairmark.

A very good, concise introduction.
by Ben Mathew
Tue Sep 15, 2020 10:33 pm
Forum: Personal Investments
Topic: Whether to lapse term life insurance
Replies: 21
Views: 1377

Re: Whether to lapse term life insurance

You don't really need the insurance. But, with level term premiums, you've already prepaid for much of it because the premiums are higher than actuarially fair early on and lower than actuarially fair towards the end. You've held the policy for the expensive years, might as well hang on to it for th...
by Ben Mathew
Tue Sep 15, 2020 3:19 pm
Forum: Investing - Theory, News & General
Topic: Jane Bryant Quinn, stock allocation before / after retirement
Replies: 40
Views: 6420

Re: Jane Bryant Quinn, stock allocation before / after retirement

I find it useful to look at this through the lens of the Samuelson-Merton lifecycle model, which solves for the optimal portfolio of a person with CRRA utility (the most reasonable of the simple utility functions.) In that model, if a person has all of their wealth in their portfolio at the start of...
by Ben Mathew
Thu Sep 10, 2020 9:58 am
Forum: Non-US Investing
Topic: Bonds - Why do we hedge to local currency?
Replies: 21
Views: 1157

Re: Bonds - Why do we hedge to local currency?

A disadvantage of hedging foreign nominal bonds is that inflation risk becomes concentrated in the home currency. A nominal bond in any currency has the risk that that currency will experience higher than expected inflation. An unhedged position in foreign bonds takes on the risk that the foreign cu...
by Ben Mathew
Sun Sep 06, 2020 2:40 pm
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 2963
Views: 213145

Re: Small Cap Value heads Rejoice !!!

There is another thing that I find really telling--factorheads are almost always tilted towards small and value, and rarely towards large and growth. If this was all really about risk, then there is no reason why factorheads wouldn't be evenly distributed across the factors. So why aren't they? The...
by Ben Mathew
Sun Sep 06, 2020 11:31 am
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 2963
Views: 213145

Re: Small Cap Value heads Rejoice !!!

As indicated – ‘blue chips’ tend to be viewed as ‘safer’ and many people seem more comfortable to hold these than small value stocks because of that reason (even if not explicitly using Fama-French’s research to make that decision – after all, Fama-French’s research was just trying to understand in...
by Ben Mathew
Sat Sep 05, 2020 10:27 pm
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 2963
Views: 213145

Re: Small Cap Value heads Rejoice !!!

There is another thing that I find really telling--factorheads are almost always tilted towards small and value, and rarely towards large and growth. If this was all really about risk, then there is no reason why factorheads wouldn't be evenly distributed across the factors. So why aren't they? The...
by Ben Mathew
Sat Sep 05, 2020 10:20 pm
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 2963
Views: 213145

Re: Small Cap Value heads Rejoice !!!

Aren't large growth and small value opposites? Why would factor heads tilt towards both? I've edited the post to clarify: I'm not saying I would expect the same person to tilt towards both small-value and large-growth. Different people should tilt to different things. The question is why are factor...
by Ben Mathew
Sat Sep 05, 2020 9:01 pm
Forum: Personal Finance (Not Investing)
Topic: College financial advice for undecided rising high school senior
Replies: 71
Views: 3754

Re: College financial advice for undecided rising high school senior

Excellent and extremely helpful responses!I think I’m getting more and more convinced that she should stay open minded and perhaps cast a wider net in terms of applications. We will definitely run several of these ideas and suggestions by her and see what she ends up deciding. Thank you! Keep in mi...
by Ben Mathew
Sat Sep 05, 2020 8:51 pm
Forum: Personal Finance (Not Investing)
Topic: College financial advice for undecided rising high school senior
Replies: 71
Views: 3754

Re: College financial advice for undecided rising high school senior

Some students who could not get into the CS program would enrol at that university then transfer into CS after a year or two since that was easier to do. Sort of a backdoor admission process. I have heard that some universities have really clamped down on that and made it very difficult to transfer...
by Ben Mathew
Sat Sep 05, 2020 8:43 pm
Forum: Investing - Theory, News & General
Topic: Small Cap Value heads Rejoice !!!
Replies: 2963
Views: 213145

Re: Small Cap Value heads Rejoice !!!

I'll just ask the Prof. himself: I should clarify, in case there is any confusion: I worked as a professor for a few years after my PhD, but left that position several years ago. So I'm no longer a professor, except to my kids who sometimes have to listen to my lectures. 1) Ok long story short, I d...
by Ben Mathew
Tue Sep 01, 2020 5:36 pm
Forum: Investing - Theory, News & General
Topic: John Norstad website missing [The Fallacy of Time Diversification]
Replies: 22
Views: 4184

Re: John Norstad website missing [The Fallacy of Time Diversification]

nisiprius wrote: Tue Sep 01, 2020 12:11 pm 1) I just received an email from John Norstad saying "I’m fine. I didn’t renew my web site. There was hardly any traffic."
Good to know. Thanks for the update.
by Ben Mathew
Fri Aug 28, 2020 12:34 am
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio and/or Asset Allocation
Replies: 52
Views: 3302

Re: Liability Matching Portfolio and/or Asset Allocation

Economists will say that the above is a perfect example of Mental Accounting because they view assets/money as completely fungible. Everything should be combined. It's true that they would probably say that they're right and I'm wrong, but I don't view it in a disparaging way because this actually ...
by Ben Mathew
Thu Aug 27, 2020 9:17 pm
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio and/or Asset Allocation
Replies: 52
Views: 3302

Re: Liability Matching Portfolio and/or Asset Allocation

Economists will say that the above is a perfect example of Mental Accounting because they view assets/money as completely fungible. Everything should be combined. It's true that they would probably say that they're right and I'm wrong, but I don't view it in a disparaging way because this actually ...
by Ben Mathew
Thu Aug 27, 2020 11:10 am
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio and/or Asset Allocation
Replies: 52
Views: 3302

Re: Liability Matching Portfolio and/or Asset Allocation

The reason I asked is this thread has lots of esoteric (in my opinion) concepts (CRRA, mean reversion, Fallacy of Time Diversification) that don't seem to have any relevance to the Liability Matching concept. All three concepts you mentioned are central to financial planning in general and relevant...
by Ben Mathew
Thu Aug 27, 2020 9:27 am
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio and/or Asset Allocation
Replies: 52
Views: 3302

Re: Liability Matching Portfolio and/or Asset Allocation

vineviz wrote: Thu Aug 27, 2020 7:14 am Perhaps the danger is in assuming CRRA to begin with.
For the purpose of financial planning, what class of utility functions do you recommend instead of CRRA? Or do you think it is better not to use any utility function at all?
by Ben Mathew
Wed Aug 26, 2020 1:09 pm
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio and/or Asset Allocation
Replies: 52
Views: 3302

Re: Liability Matching Portfolio and/or Asset Allocation

My idea of a liability-matching portfolio (LMP) is to define/decide what liabilities are non-negotiable and match them up with relatively risk-free income (pension, annuity, SS, insurance). (Yes, there is always risk and inflation needs to be taken into account so there are complications. I.E., do ...
by Ben Mathew
Wed Aug 26, 2020 11:51 am
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio and/or Asset Allocation
Replies: 52
Views: 3302

Re: Liability Matching Portfolio and/or Asset Allocation

You've brought in another concept that is a source of much confusion: sequence of returns risk. It's helpful to view all of these issues through the lens of utility functions and optimization. The standard one, Mertons's portfolio problem, does this with CRRA utility--the most reasonable of the sim...
by Ben Mathew
Wed Aug 26, 2020 11:32 am
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio and/or Asset Allocation
Replies: 52
Views: 3302

Re: Liability Matching Portfolio and/or Asset Allocation

You're right that Norstad's result assumes random walk, so no mean reversion. But random walk is not a bad approximation for AA purposes. If you tried to adjust for mean reversion in the 5 year vs 30 year horizon, I bet it would be a very small adjustment--close enough to be negligible. I believe t...
by Ben Mathew
Tue Aug 25, 2020 3:58 pm
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio and/or Asset Allocation
Replies: 52
Views: 3302

Re: Liability Matching Portfolio and/or Asset Allocation

The idea that longer time horizons call for riskier allocations is a myth. See John Norstad's Fallacy of Time Diversification linked to in this thread . “The idea that longer time horizons call for riskier allocations“ isn’t based on “time diversification”. Norstad’s critique, to the extent it was ...
by Ben Mathew
Tue Aug 25, 2020 3:44 pm
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio and/or Asset Allocation
Replies: 52
Views: 3302

Re: Liability Matching Portfolio and/or Asset Allocation

The idea that longer time horizons call for riskier allocations is a myth. See John Norstad's Fallacy of Time Diversification linked to in this thread . “The idea that longer time horizons call for riskier allocations“ isn’t based on “time diversification”. Norstad’s critique, to the extent it was ...
by Ben Mathew
Tue Aug 25, 2020 1:55 pm
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio and/or Asset Allocation
Replies: 52
Views: 3302

Re: Liability Matching Portfolio and/or Asset Allocation

The idea that longer time horizons call for riskier allocations is a myth. See John Norstad's Fallacy of Time Diversification linked to in this thread . “The idea that longer time horizons call for riskier allocations“ isn’t based on “time diversification”. Norstad’s critique, to the extent it was ...
by Ben Mathew
Tue Aug 25, 2020 11:41 am
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio and/or Asset Allocation
Replies: 52
Views: 3302

Re: Liability Matching Portfolio and/or Asset Allocation

Kids college: 11 years away and 15 years away Retirement: At age 55+ - about 11 years away LMP fences off a certain amount of assets that guarantees that you can fund certain areas of consumption. Whether or not it makes sense for you depends on whether or not that matches with your preferences. Ta...
by Ben Mathew
Mon Aug 24, 2020 6:21 pm
Forum: Investing - Theory, News & General
Topic: Liability Matching Portfolio and/or Asset Allocation
Replies: 52
Views: 3302

Re: Liability Matching Portfolio and/or Asset Allocation

Kids college: 11 years away and 15 years away Retirement: At age 55+ - about 11 years away LMP fences off a certain amount of assets that guarantees that you can fund certain areas of consumption. Whether or not it makes sense for you depends on whether or not that matches with your preferences. Ta...
by Ben Mathew
Fri Aug 21, 2020 12:12 pm
Forum: Investing - Theory, News & General
Topic: When comparing CAPEs of different countries, aren't you comparing apples to oranges?
Replies: 21
Views: 886

Re: When comparing CAPEs of different countries, aren't you comparing apples to oranges?

Shouldn't the productivity, long holidays, work ethics and regulations show up in the profit? Yes but shouldn't they affect the growth as well? If people don't work much there will probably be less growth, so I should pay a lower PE. Not necessarily. Suppose there are two factories, a productive on...
by Ben Mathew
Wed Aug 19, 2020 1:57 am
Forum: Personal Finance (Not Investing)
Topic: Did any inheritance make positive effect on your life?
Replies: 229
Views: 19020

Re: Did any inheritance make positive effect on your life?

Without a loan or gift at certain crucial points in my early life, I would have been homeless or without needed healthcare. Having a safety net can make a big difference in allowing someone to leave an abusive marriage or report inappropriate behavior at work. Even in less extreme situations, that ...