"My Financial Toolbox" -- A Gem

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Taylor Larimore
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"My Financial Toolbox" -- A Gem

Post by Taylor Larimore »

Bogleheads:

Harry Sit is a Boglehead who has published an excellent book, titled "My Financial Toolbox." Mr. Sit is a Certified Employee Benefits Specialist (CEBS) and wrote a chapter in "The Bogleheads' Guide to Retirement Planning." His training is evident. I have never read anything more helpful explaining our byzantine U.S. government benefits and how they interact with one another. Mr. Sit is not afraid to use his own personal finance as examples. Below are excerpts:
"A checking account serves as a hub. I use it for receiving deposits, withdrawing cash, writing checks, paying bills, and transferring between accounts."

"Choose a checking account that reimburses ATM fees."

"Choose a savings account that consistently pays good interest."

"Set up autopay for all bills."

"If you work for a government entity or a non-profit organization you may be able to receive student loan forgiveness."

"Paying off the student loan is a great investment with guaranteed return."

"For more information on some of the student loan refinance programs go to this site: www.whitecoatinvestor.com/student-loan refinancing.

"For more information on managing student loans in general: www.benwhite.com/student loans"

"I believe a 15-year fixed-rate mortgage strikes the best balance between a lower rate and the peace of mind in having a fixed rate."

"A law passed in 2018 made it free for anyone to freeze or unfreeze their credit at any time."

"Pay off auto loans unless the rate is 0% APR."

"I had the free life insurance offered by my employer, plus a term life policy I bought on my own. I let the policies expire when my family had sufficient financial resources in case I die."

"The best life insurance is term life insurance."

"The best place to get term life insurance quotes is term4sale.com."

"Some insurance agents trying to earn a fat commission are the masters of creating confusion."

"To see whether an existing policy is worth keeping you can pay $135 to have the policy evaluated by (evaluatelifeinsurance.org).

"In today's litigious society, it's prudent to have good liability coverage."

"Prices for the same healthcare service from different providers can easily vary by 500%. You should shop around, just as you would with any purchase."

"GoodRx (goodrx.com) shows you prescription drug prices at different pharmacies near you."

"Because the money goes in pre-tax, grows tax-free inside the account, and it comes out tax-free, the HSA is said to be "triple tax-free."

"When you're eligible for Medicare, get help from a SHIP counselor on the different options. Don't miss the enrollment deadline."

"Your employer may offer one or more types of retirement plans: 401(k), 403(b), 401(a), 457, Simple IRA, SEP-IRA, pension, cash balance plan, and deferred compensation plan. Participating in these plans is the best way to save for retirement because you get tax benefits."

"When your 401(k) or 403(b) plan offers both a Traditional pre-tax option and a Roth option, consider choosing 100% Traditional by default, unless you have a strong reason for contributing some as Roth."

"If your previous employer's plan is better than your new employer's plan, you can also choose to leave your money in the previous employer's plan."

"I have a solo 401(k) plan for my self-employed business."

"Which type of IRA to use and how you invest in your IRA are secondary to contributing the maximum in the first place."

"Determine which type of IRA you should use. Clear the way for "backdoor Roth" if necessary."

"The best vehicle for a college savings fund is a 529 plan." -- "You choose any 529 plan in the country."

"The financial industry and the media make investing appear very complicated. It's not."

"After the professional managers and their analysts in actively managed funds apply their expertise, experience, and research, the vast majority of them still can't beat the market."

"For the 15 years ended December 31, 2019, 89% of all U.S. equity funds did not beat the market, and 90% of all international equity funds did not beat the market."

"If you invest $10,000 a year for 40 years, and you pay 1% a year versus 0.1% a year, all else being equal, you'll have 20% less at the end of 40 years."

"Target date funds are a great choice for investing in a workplace retirement plan or an IRA." -- "You're less prone to tinkering with your investments when you invest in just one target date fund."

"When you build a 3-fund portfolio, you come up with the percentages for each component by answering these two questions: (1} How much in stocks? (2) Among stocks, how much in international? That's it. You don't have to make it any more complicated than that."

If the menu in your plan isn't as straight-forward, you can post the available investment options to the Bogleheads Investment Forum and ask how to construct a "3-fund portfolio" out of those options. The knowledgeable people on the forum there will help you."

"It doesn't matter much whether you choose index funds or ETFs."

"It's trickier to rebalance in a regular taxable account. Selling may trigger capital gains." -- "I rebalance only when the percentage invested in stocks deviates from my target by more than 5 percentage points."

"Tax-loss harvesting is useful, but its effect is often oversold."

"I don't use a robo-advisor because I buy index funds and ETFs directly and I take on the task of rebalancing myself."

"I think a target date index fund works just as well in automatic rebalancing, and it costs less than a robo-advisor."

"You would buy EE Bonds only if you're sure you'll hold them for 20 years. -- If you redeem your EE Bonds before the 20-year mark, you'll get very little interest."

"All the CDs I own were bought directly from credit unions because CDs that pay the highest rates are predominantly from credit unions." -- "Depositaccounts.com has listings of top-rate CDs." -- "Choose a CD with a smaller early withdrawal penalty when two CDs offer similar rates."

"If you value the convenience of staying within an investment account, simply use a bond fund."

"Participate in the ESPP (Employee Stock Purchase Plan) at the maximum." "Sell ESPP shares as soon as possible and diversify."

"Responsible people don't leave their family a mess when they die"

"To most people, estate planning is quite simple. The most difficult part is having the motivation and taking the time to do it."

"Some banks and investment companies allow you to designate Pay-On-Death (POD) or Transfer-On-Death (TOD) beneficiaries on non-retirement accounts (Vanguard allows)."

"Create a will, a durable power of attorney, and an advance medical directive. Consider a living trust."

"Create a list af all accounts and keep it updated."

"'Software can track your accounts and give you the big picture of where your money is and how your investments are allocated." -- I use Microsoft Money."

"I use the Social Security calculator at ssa.tools to see my expected Social Security benefits."

"If your Adjusted Gross Income is low enough (under $69,000 for 2019 tax year), the IRS offers Free File Online through a partnership with some online tax service companies."

"If you want a financial advisor to help you beat the market, that's the wrong reason to use a financial advisor."

Because bad products usually pay higher commissions, you're more likely to be sold bad products."

"If you need a financial advisor, find someone who only give advice but does not sell any product or manage investments."

"I think working with an Advise-Only advisor is the best way to get financial advice for a fair price."

I'm a member of the Bogleheads online investor community (bogleheads.org/forum). You can find me there under the user name tfb.
Thank you, Harry Sit!
Jack Bogle's Words of Wisdom: "An investment in knowledge always pays the best interest."
"Simplicity is the master key to financial success." -- Jack Bogle
Grt2bOutdoors
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Re: "My Financial Toolbox" -- A Gem

Post by Grt2bOutdoors »

Sound advice. +1.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
JBTX
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Re: "My Financial Toolbox" -- A Gem

Post by JBTX »

Do most or all of those and you are pretty much set.
RJC
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Re: "My Financial Toolbox" -- A Gem

Post by RJC »

Great reminders. Thanks for sharing.
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btq96r
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Re: "My Financial Toolbox" -- A Gem

Post by btq96r »

All of that is solid advice. Trying to justify deviations from more than one or two is either personal opinion, or trying to be too cute by half. The only one I have any questions over is the Traditional vs. Roth IRA, and that's because I make under $100k.
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Taylor Larimore
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Re: "My Financial Toolbox" -- A Gem

Post by Taylor Larimore »

btq96r wrote: Tue Sep 29, 2020 12:43 pm All of that is solid advice. Trying to justify deviations from more than one or two is either personal opinion, or trying to be too cute by half. The only one I have any questions over is the Traditional vs. Roth IRA, and that's because I make under $100k.
btq96r:

I also was surprised by Mr. Sit's recommendation that a Traditional IRA is usually preferable to a Roth IRA.

Harry devotes 21 pages to individual IRAs which are more complicated than most of us realize. His primary reason for choosing a Traditional IRA is that our income is usually lower (with lower taxes) in retirement than when we were working.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "A tax that is deferred is the functional equivalent of an interest-free loan from the U.S. Treasury Department."
"Simplicity is the master key to financial success." -- Jack Bogle
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Barry Barnitz
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Re: "My Financial Toolbox" -- A Gem

Post by Barry Barnitz »

Hi:

Thank you Taylor and Mr. Sit. We have added this topic post to Taylor's Investment Gems in the wiki.

regards,
Additional administrative tasks: Financial Page bogleheads.org. blog; finiki the Canadian wiki; The Bogle Center for Financial Literacy site; La Guía Bogleheads® España site.
Redlion
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Re: "My Financial Toolbox" -- A Gem

Post by Redlion »

Good advice, I agree with everything except for auto pay for bills, I prefer to pay my bills with online banking and identify overcharges and mistakes before any payment is made.
GoldenFinch
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Re: "My Financial Toolbox" -- A Gem

Post by GoldenFinch »

I really don’t agree with him that the benefits of tax loss harvesting are “oversold.” I think it’s more likely that the benefits are often misunderstood. There are many worthwhile benefits.
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Re: "My Financial Toolbox" -- A Gem

Post by Fallible »

Good to see the "gems" as I'm a longtime email subscriber to 'The Finance Buff" blog and have been looking forward to the promised book. It's now on my Kindle and I couldn't resist starting with the chapter on "Investing" in which he provides a simple and straightforward explanation of market timing:
Buy low, sell high. Rinse and repeat. You'll ride with the market on the way up and you'll step to the side on the way down. This strategy is called market timing. You buy or sell based on where you see the market is going.
And then he goes on to explain why it usually doesn't work, even for the pros.

Thanks for posting more great "gems," Taylor, and thanks to Barry Barnitz for adding them to the wiki.
"Yes, investing is simple. But it is not easy, for it requires discipline, patience, steadfastness, and that most uncommon of all gifts, common sense." ~Jack Bogle
life in slices
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Re: "My Financial Toolbox" -- A Gem

Post by life in slices »

Just downloaded - part of kindle unlimited

Look forward to reading it
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